N-CSR 1 d10936dncsr.htm VIRTUS OPPORTUNITIES TRUST Virtus Opportunities Trust
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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, 2015

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. § 3507.

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Item 1. Reports to Stockholders.

The Report to Shareholders is attached herewith.

Table of Contents

LOGO

 

ANNUAL REPORT

 

 

Virtus Bond Fund*

Virtus CA Tax-Exempt Bond Fund*

Virtus Essential Resources Fund

Virtus High Yield Fund*

Virtus Low Volatility Equity Fund*

Virtus Multi-Sector Intermediate Bond Fund

Virtus Senior Floating Rate Fund*

Virtus Wealth Masters Fund*

September 30, 2015

TRUST NAME: VIRTUS OPPORTUNITIES TRUST

* Prospectus supplements applicable to these Funds appear at the back of this annual report.

LOGO

Not FDIC Insured

No Bank Guarantee

May Lose Value

Table of Contents

Table of Contents

 

Message to Shareholders

  

      1   

Disclosure of Fund Expenses

  

      2   

Key Investment Terms

  

      4   
Fund   Fund
Summary		      Schedule
of
Investments		  

Virtus Bond Fund (“Bond Fund”)

    6         25   

Virtus CA Tax-Exempt Bond Fund (“CA Tax-Exempt Bond Fund”)

    8         32   

Virtus Essential Resources Fund (“Essential Resources Fund”)

   
 11
   
      34   

Virtus High Yield Fund (“High Yield Fund”)

    14         36   

Virtus Low Volatility Equity Fund (“Low Volatility Equity Fund”)

    17         41   

Virtus Multi-Sector Intermediate Bond Fund (“Multi-Sector Intermediate Bond Fund”)

    19         42   

Virtus Senior Floating Rate Fund (“Senior Floating Rate Fund”)

    21         51   

Virtus Wealth Masters Fund (“Wealth Masters Fund”)

    23         57   

Statements of Assets and Liabilities

       60   

Statements of Operations

        63   

Statements of Changes in Net Assets

        66   

Financial Highlights

        70   

Notes to Financial Statements

        75   

Report of Independent Registered Public Accounting Firm

        88   

Tax Information Notice

        89   

Fund Management Tables

        90   

 

Proxy Voting Procedures and Voting Record (Form N-PX)

The subadvisers vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Board of Trustees of the Trust (“Trustees,” or the “Board”). 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, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission’s (the “SEC”) website at http://www.sec.gov.

Form N-Q Information

The Trust files a complete schedule of portfolio holdings for each Fund with 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.

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MESSAGE TO SHAREHOLDERS

 

To My Fellow Shareholders of Virtus Mutual Funds:

 

LOGO   

I am pleased to present this annual report that reviews the performance of your fund for the twelve months ended September 30, 2015.

 

During this period, global equity markets were challenged by falling oil prices, China’s economic slowdown, Greece’s debt crisis, and the growing likelihood of an interest rate hike by the Federal Reserve (the “Fed”). Volatility took its toll on major U.S. equity indices for the twelve months ended September 30, 2015. The large-cap S&P 500® Index and Dow Jones Industrial AverageSM moderately declined 0.61% and 2.11%, respectively, while the technology-heavy NASDAQ Composite Index® gained 4.00%. By

comparison, international equities were down even further, with emerging markets hit particularly hard.

 

Against this backdrop, U.S. Treasuries remained an attractive “safe haven” among global investors. The bellwether 10-year U.S. Treasury yield declined from 2.52% at September 30, 2014 to 2.06% at September 30, 2015. Fixed income assets experienced slight losses in anticipation of the Fed’s stated intention to raise interest rates at the end of 2015. The Barclays U.S. Aggregate Bond Index, which tracks Treasuries and other investment-grade debt securities, gained 2.94% for the twelve-month period ended September 30, 2015, while non-investment grade bonds underperformed, with the Barclays U.S. Corporate High Yield Bond Index down 3.43% for the same period.

 

The strength of the global economy is likely to remain a concern for the markets in the months ahead. Actions by the Fed and other global central banks will be watched with great interest. Following the weak start to the year, the U.S. economy exhibited growth over the second and third quarters of 2015 – including stronger jobs, housing, and consumer spending data – and gives investors reason for optimism. Future market direction will be determined largely by the ability of corporations to continue to produce robust earnings.

 

Market uncertainty serves as a constant reminder of the importance of portfolio diversification, including exposure to both traditional and alternative asset classes. While diversification cannot guarantee a profit or prevent a loss, owning a variety of asset classes may provide a cushion against inevitable market fluctuations. Your financial advisor can help you ensure that your portfolio is adequately diversified across asset classes and investment strategies.

 

As always, thank you for entrusting Virtus with your assets. Should you have questions about your account or require assistance, please visit our website at www.Virtus.com or call our customer service team at 1-800-243-1574. We appreciate your business and remain committed to your long-term financial success.

 

Sincerely,

 

LOGO

 

George R. Aylward

President, Virtus Mutual Funds

 

October 2015

 

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

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VIRTUS OPPORTUNITIES TRUST

Disclosure of Fund Expenses (Unaudited)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of a Virtus Opportunities Trust Fund (each, a “Fund”) you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class B and Class C shares; and (2) ongoing costs, including investment advisory fees, distribution and service fees, and other expenses. Class I shares and Class R6 shares are sold without sales charges and do not incur distribution and service fees. For further information regarding applicable sales charges, see Note 1 in the Notes to Financial Statements. These examples are intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your Fund’s costs in two ways.

Actual Expenses

The first section of the accompanying table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes

The second section of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the accompanying table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

Expense Table  
     Beginning
Account Value
April 1, 2015		     Ending
Account Value
September 30, 2015		     Annualized
Expense
Ratio		     Expenses Paid
During
Period*		  

Bond Fund

  

Actual

        

Class A

   $ 1,000.00      $ 988.00        0.85 %    $ 4.24   

Class B

     1,000.00        984.90        1.60        7.96   

Class C

     1,000.00        985.00        1.60        7.96   

Class I

     1,000.00        989.40        0.60        2.99   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,020.75        0.85        4.32   

Class B

     1,000.00        1,016.95        1.60        8.12   

Class C

     1,000.00        1,016.95        1.60        8.12   

Class I

     1,000.00        1,022.02        0.60        3.05   

CA Tax Exempt Bond Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 1,009.30        0.85 %    $ 4.28   

Class I

     1,000.00        1,011.40        0.60        3.03   

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   

Essential Resources Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 821.20        1.65 %    $ 7.53   

Class C

     1,000.00        818.20        2.40        10.94   

Class I

     1,000.00        822.30        1.40        6.40   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,016.69        1.65        8.38   

Class C

     1,000.00        1,012.88        2.40        12.18   

Class I

     1,000.00        1,017.96        1.40        7.11   

High Yield Fund

  

                        

Actual

        

Class A

   $ 1,000.00      $ 963.40        1.15 %    $ 5.66   

Class B

     1,000.00        961.30        1.90        9.34   

Class C

     1,000.00        959.30        1.90        9.33   

Class I

     1,000.00        964.60        0.90        4.43   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,019.23        1.15        5.84   

Class B

     1,000.00        1,015.42        1.90        9.65   

Class C

     1,000.00        1,015.42        1.90        9.65   

Class I

     1,000.00        1,020.50        0.90        4.57   

Low Volatility Equity Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 972.80        1.55 %    $ 7.67   

Class C

     1,000.00        970.00        2.30        11.36   

Class I

     1,000.00        974.60        1.30        6.44   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,017.20        1.55        7.87   

Class C

     1,000.00        1,013.39        2.30        11.68   

Class I

     1,000.00        1,018.47        1.30        6.60   
 

 

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VIRTUS OPPORTUNITIES TRUST

Disclosure of Fund Expenses (Unaudited) (Continued)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

Expense Table  
     Beginning
Account Value
April 1, 2015		     Ending
Account Value
September 30, 2015		     Annualized
Expense
Ratio		     Expenses Paid
During
Period*		  

Multi-Sector Intermediate Bond Fund

  

Actual

        

Class A

   $ 1,000.00      $    974.10        1.11 %    $   5.49   

Class B

     1,000.00        970.40        1.88        9.29   

Class C

     1,000.00        970.70        1.86        9.19   

Class I

     1,000.00        976.30        0.86        3.77   

Class R6

     1,000.00        976.80        0.76        2.84   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,019.43        1.11        5.63   

Class B

     1,000.00        1,015.52        1.88        9.54   

Class C

     1,000.00        1,015.63        1.86        9.44   

Class I

     1,000.00        1,020.70        0.86        4.37   

Class R6

     1,000.00        1,021.21        0.76        3.86   

Senior Floating Rate Fund

  

Actual

        

Class A

   $ 1,000.00      $ 991.40        1.19 %    $ 5.94   

Class C

     1,000.00        986.70        1.94        9.66   

Class I

     1,000.00        992.70        0.94        4.70   

Hypothetical (5% return before expenses)

  

    

Class A

     1,000.00        1,019.03        1.19        6.04   

Class C

     1,000.00        1,015.22        1.94        9.85   

Class I

     1,000.00        1,020.30        0.94        4.77   

Wealth Masters Fund

  

                        

Actual

        

Class A

   $ 1,000.00      $ 873.40        1.45 %    $ 6.81   

Class C

     1,000.00        870.30        2.20        10.31   

Class I

     1,000.00        874.40        1.20        5.64   

Hypothetical (5% return before expenses)

  

    

Class A

     1,000.00        1,017.71        1.45        7.36   

Class C

     1,000.00        1,013.90        2.20        11.17   

Class I

     1,000.00        1,018.98        1.20        6.09   
* Expenses are equal to the relevant Funds’ 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.

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.

 

 

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KEY INVESTMENT TERMS

(Unaudited)

 

American Depositary Receipt (ADR)

Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a U.S. bank or a trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares.

Barclays California Municipal Bond Index

The Barclays California Municipal Bond Index measures long term investment grade, tax-exempt and fixed rate bonds issued in California. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Barclays U.S. Aggregate Bond Index

The Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Barclays U.S. Corporate High Yield Bond Index

The Barclays U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Barclays U.S. High Yield 2% Issuer Capped Bond Index

The Barclays High-Yield 2% Issuer Capped Bond Index is a market capitalization-weighted index that measures fixed rate non-investment grade debt securities of U.S. and non-U.S. corporations. No single issuer accounts for more than 2% of market cap. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Chicago Board Options Exchange (CBOE) Volatility Index®

The Chicago Board Options Exchange (CBOE) Volatility Index (“VIX® Index”) shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500® Index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX® Index is a widely used measure of market risk and is often referred to as the “investor fear gauge.” The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

CBOE S&P 500 Buywrite Index

The CBOE S&P 500 Buywrite Index is a passive total return index based on buying an S&P 500® stock index portfolio and “writing” (or selling) the nearterm S&P 500® Index (SPXSM) “covered” call option. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

Dow Jones Industrial AverageSM

A price weighted average of 30 blue chip stocks. The index is calculated on total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Exchange-Traded Funds (ETF)

A Fund that is traded on a stock exchange. Most ETFs have a portfolio of stocks or bonds that track a specific market index.

Federal Reserve (the “Fed”)

The Central Bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable. Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system.

Gross Domestic Product (“GDP”)

The market value of all officially recognized final goods and services produced within a country in a given period.

 

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Table of Contents

KEY INVESTMENT TERMS (Continued)

(Unaudited)

 

Horizon Kinetics ISE Wealth Index (RCH)

Is a public index published by International Securities Exchange, LLC. The index is composed of companies with wealthy individuals in positions of influence or control who have a substantial amount of their personal wealth invested in the business. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

iShares®

Represents shares of an open-end exchange-traded fund.

NASDAQ Composite Index®

A market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. Unlike other market indexes, the NASDAQ composite is not limited to companies that have U.S. headquarters. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges and it is not available for direct investment.

Organization of the Petroleum Exporting Countries (OPEC)

The Organization of the Petroleum Exporting Countries was originally organized in September 1960 with 5 member countries and there are currently 12 member countries. The organization’s objective is to co-ordinate and unify petroleum policies among member countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.

Payment-in-Kind Security (PIK)

A bond which pays interest in the form of additional bonds, or preferred stock which pays dividends in the form of additional preferred stock.

Real Estate Investment Trust (REIT)

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 100® Index

The S&P 100® Index, a sub-set of the S&P 500®, measures the performance of large-cap U.S. companies, and comprises 100 major, blue chip companies across multiple industry groups.

S&P 500® Index

The S&P 500® 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 index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

S&P Global Natural Resources Index (net)

The S&P Global Natural Resources Index (net) is a free-float market capitalization index calculated on a total return basis with net dividends reinvested. The index consists of 90 of the largest publicly traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified and investable equity exposure across three primary commodity-related sectors: agribusiness, energy, and metals and mining. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

S&P/LSTA Leveraged Loan Index

The S&P/LSTA Leveraged Loan Index is a daily total return index that uses LSTA/LPC Mark-to-Market Pricing (third-party research data on the price movements of senior secured floating rate loans in the secondary loan market) to calculate market value change. On a real-time basis, the Index tracks the current outstanding balance and spread over LIBOR for fully funded term loans. The facilities included in the Index represent a broad cross section of leveraged loans syndicated in the United States, including dollar-denominated loans to overseas issuers. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges and it is not available for direct investment.

When-issued and Forward Commitments (Delayed Delivery)

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.

 

5

Table of Contents

Bond Fund

 

Fund Summary

   

Ticker Symbols:

Class A: SAVAX

Class B: SAVBX

Class C: SAVCX

Class I: SAVYX

 

Portfolio Manager Commentary by Newfleet Asset Management, LLC

 

¢   The Fund is diversified and has an investment objective of high total return from both current income and capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -0.26%, Class B shares returned -0.91%, Class C shares returned -1.00%, and Class I shares returned 0.08%. For the same period, the Barclays U.S. Aggregate Bond Index, which serves as the broad-based and style-specific benchmark index appropriate for comparison, returned 2.94%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the market perform during the Fund’s fiscal year?

 

¢   Most spread sectors underperformed U.S. Treasuries during the fiscal year. Plummeting oil prices dominated market volatility and investor concerns in the first half of the fiscal year, especially during the fourth quarter of 2014. Brent crude, the international benchmark for oil prices, fell about 50% between September 2014 (when the price was roughly $93 a barrel) and September 2015, ending the period at roughly $47 a barrel. Brent crude oil hit a 12-month low of roughly $40 a barrel on August 24, 2015.

 

¢   Globally, concerns over slowing growth in China and the Greek debt crisis weighed on the fixed income markets. A looming U.S. Federal Reserve (“Fed”) rate hike, with negative implications for capital flows and debt financing, added to the turmoil, with some emerging market central banks (unlike the International Monetary Fund and the World Bank) calling for the Fed to raise rates and remove the uncertainty that could prove to be more harmful than the actual impact.

 

¢   The waiting game for the Fed to raise interest rates from their near-zero level maintained since December 2008 continued through the end of the fiscal year. As of its September 17 meeting, the
   

Fed decided to leave its benchmark rate unchanged, balancing relatively strong U.S. growth and labor market conditions against a lack of inflation, a strengthening U.S. dollar, and a shaky global economy.

 

¢   Over the last 12 months, yields increased on the short end of the U.S. Treasury curve and decreased on the intermediate to long end, and the curve flattened overall.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The underperformance of fixed income spread sectors relative to U.S. Treasuries was the key driver of the Fund’s underperformance relative to the benchmark for the fiscal year.

 

¢   Among fixed income sectors, the Fund’s allocation to structured finance, specifically asset-backed securities, contributed to performance.

 

¢   During the fiscal year the Fund’s allocation to corporate high yield and high yield bank loans detracted from performance.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

ABS/MBS: Changes in interest rates can cause both extension and prepayment risks for asset- and mortgage-backed securities. These securities are also

subject to risks associated with the repayment of underlying collateral.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 
Asset Allocation  
 
The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.     

Corporate Bonds and Notes

       49 % 

Financials

     22 %     

Consumer Discretionary

     7       

Health Care

     4       

All other Corporate Bonds and Notes

     16       

Mortgage-Backed Securities

       24   

U.S. Government Securities

       7   

Loan Agreements

       6   

Asset-Backed Securities

       5   

Preferred Stocks

       3   

Other (includes short-term investments)

       6   
     

 

 

  

Total

       100 % 
           

 

 

  

 

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

6

Table of Contents

Bond Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        5 years        10 years  
Class A Shares at NAV2        -0.26 %         3.50 %         4.75 % 
Class A Shares at POP3        -4.00           2.71           4.35   
Class B Shares at NAV2        -0.91           2.73           3.97   
Class B Shares with CDSC4        -4.77           2.73           3.97   
Class C Shares at NAV2 and with CDSC4        -1.00           2.74           3.97   
Class I Shares at NAV        0.08           3.78           5.03   
Barclays U.S. Aggregate Bond Index        2.94           3.10           4.64   

Fund Expense Ratios5: A Shares: Gross 1.10%, Net 0.85%; B Shares: Gross 1.85%, Net 1.60%; C Shares: Gross 1.85%, Net 1.60%; I Shares: Gross 0.85%, 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 3.75% 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 28, 2015, as supplemented and revised, 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 January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on September 30, 2005, 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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

7

Table of Contents

CA Tax-Exempt Bond Fund

 

Fund Summary

   

Ticker Symbols:

Class A: CTESX

Class I: CTXEX

 

Portfolio Manager Commentary by Newfleet Asset Management, LLC

 

¢   The Fund is diversified and has an investment objective of obtaining a high level of current income exempt from California state and local income taxes, as well as federal income tax, consistent with the preservation of capital.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned 3.44% and Class I shares returned 3.71%. For the same period, the Barclays U.S. Aggregate Bond Index, a broad-based fixed income index, returned 2.94%, and the Barclays California Municipal Bond Index, the Fund’s style-specific benchmark appropriate for comparison, returned 3.39%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the market perform during the Fund’s fiscal year?

 

¢   The municipal bond market experienced mixed performance over the 12 months ended September 30, 2015, as tax-free interest declined over the early part of this period, only to reverse course in February and April through June. During the period, 2-year and 5-year municipal yields were 19 and 10 basis points higher, respectively, while 10-year and 30-year yields were 14 and 5 basis point lower. The rise in bond yields in the shorter maturity range was due mostly to the market’s expectation that the Federal Open Market Committee, the committee within the U.S. Federal Reserve that sets domestic monetary policy, would raise the target federal funds rate sometime during the year. However, as the market began to discount the Fed lowering rates in 2015, interest rates started to move lower across the entire yield curve.

 

¢   Municipalities continued to take advantage of generational low interest rates to refinance their higher cost debt. As of the end of the fiscal year, issuance was on pace to exceed $400 billion, a level not seen in quite some time. Additionally, nearly 60% of this municipal bond issuance (compared to the more typical 35%) consisted of
   

the “refunding” of existing debt, causing a dramatic uptick in the overall issuance of municipal bonds. Given that the market’s strong performance in 2014 was due in part to a scarcity of supply, the market softened during the fiscal year as issuance levels increased. At the same time, municipalities remained slow to incur additional debt to fund much needed infrastructure, leaving “new money” issuance mostly in line with levels from 2014.

 

¢   After experiencing very strong flows into open-end mutual funds for the first seven months of the fiscal year, flows reversed over the next five months as expectations increased that the Fed would increase rates in the fall of 2015. While open-end mutual fund flows generally influence overall demand, near-term performance of the municipal bond market and future demand will likely be predicated by the direction of interest rates. In contrast, the market continues to see increased demand from households and banks through the use of separately managed accounts or direct lending by banks. Despite slowing demand from municipal mutual funds, other demand components have resulted in little pricing impact to the municipal market. According to the Investment Company Institute (ICI), open-end municipal bond mutual funds experienced almost $13 billion of inflows during the 12 months ended September 30, 2015. However, should the trend of net outflows that began in May persist over the balance of the calendar year, municipal bond yields could be pressured higher.

 

¢   Setting aside recent headline news out of Puerto Rico and Chicago, the general credit picture for the municipal market improved toward the end of the fiscal year. Tax revenue collections continued to grow, with the latest numbers through June 30, 2015, showing year-over-year growth of 4.2%, marking the 18th consecutive quarter of growth. That said, understanding the fundamental strength of each credit is extremely important as the municipal market is no longer characterized as a commodity, following the demise of the AAA-rated bond insurers. In 2009, more than 50% of the bonds in the municipal market were rated AAA, but that number has dropped more recently to only 11%. While tax collections have grown following the recession, municipalities will continue to deal with challenges surrounding underfunded pensions
   

and their ability to enact meaningful reform, growing capital improvement projects required to meet changing federal regulations and industry changes, and variable economic conditions, which makes credit research very critical in this market. Avoiding credit problems is imperative to portfolio performance.

What factors affected the Fund’s performance during its fiscal year?

 

¢   Relative portfolio performance benefited from exposure to bonds with long maturities, lower-rated investment grade ratings, and having no exposure to bonds issued in Puerto Rico.

 

¢   Relative portfolio performance was impacted by the exposure to short-term maturities, higher coupons, better quality, and pre-refunded bonds.

 

¢   Over the past 12 months, the market’s best performers were longer duration, lower coupon, and lower credit quality bonds as interest rates declined beyond five years, and risk premiums narrowed. While still producing positive performance, bonds with shorter maturities, lower duration, and higher credit quality performed relatively weaker.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

Geographic Concentration: A fund that focuses its investments in a particular geographic location will be highly sensitive to financial, economic, political, and other developments affecting the fiscal stability of that location.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

8

Table of Contents
CA Tax-Exempt Bond Fund (Continued)   

 

Municipal Market: Events negatively impacting a municipal security, or the municipal bond market in general, may cause the fund to decrease in value.

State & AMT Tax: A portion of income may be subject to some state and/or local taxes and, for certain investors, a portion may be subject to the federal alternative minimum tax.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Tax-Exempt Municipal Bonds

       100 % 

General Revenue

     25 %     

General Obligation

     16       

Pre-Refunded

     15       

Development Revenue

     9       

Water & Sewer Revenue

     9       

Medical Revenue

     8       

Transportation Revenue

     7       

Other

     11       
     

 

 

  

Total

       100 % 
           

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

9

Table of Contents

CA Tax-Exempt Bond Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15                      
       1 year        5 years        10 years        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        3.44 %         4.64 %         4.34 %         —           —   
Class A Shares at POP3,4        0.60           4.06           4.04           —           —   
Class I Shares at NAV        3.71           4.89           —           4.62 %         9/29/06   
Barclays U.S. Aggregate Bond Index        2.94           3.10           4.64           4.74 5         —   
Barclays California Municipal Bond Index        3.39           4.87           4.90           4.92 5         —   

Fund Expense Ratios6: A Shares: Gross 1.11%, Net 0.85%; I Shares: Gross 0.86%, 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 2.75% 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 Class I.
6  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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 January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on September 30, 2005 for Class A shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

10

Table of Contents

Essential Resources Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VERAX

Class C: VERCX

Class I: VERIX

 

Portfolio Manager Commentary by Kleinwort Benson Investors International, Ltd.

 

¢   The Fund is diversified and has an investment objective of capital appreciation.

 

¢   For the fiscal period March 24, 2015 (inception of the Fund) through September 30, 2015, the Fund’s Class A shares at NAV returned -19.60%*, Class C shares returned -19.90%*, and Class I shares returned -19.50%*. For the same period, the S&P 500® Index, a broad-based fixed equity index, returned -7.20%* and the S&P Global Natural Resources Index (net) the Fund’s style-specific benchmark appropriate for comparison returned -24.31%*.

 

* Returns less than 1 year are not annualized.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal period?

 

¢   During the period from the Fund’s inception date (March 24, 2015) through September 30, 2015, global equity markets in general were volatile and produced negative returns for investors. The key themes dominating investors’ sentiment were concerns about global growth and capital expenditure which weighed on many stocks, in particular those with industrial exposure. There was very much a risk-off approach from investors as they avoided the most cyclical sectors.

 

¢   Specific issues that caused investors concern included worries about a hard landing in China (i.e., poor GDP, poor manufacturing data, etc.), the Fed agonizing over interest rate rises (thus not sending a sign of confidence in the global economy), the stalemate on the Greek bailout for a time, and currency volatility (especially emerging market currencies).

 

¢   During the period in question, emerging markets significantly underperformed their developed peers. In addition, a number of relevant sectors for the strategy including energy, materials (commodities,
   

both industrial and soft), and infrastructure performed poorly versus the broader market.

What factors affected the Fund’s performance during its fiscal period?

 

¢   The Fund outperformed the S&P Global Natural Resources Index (net), the Fund’s style-specific benchmark, during the period due to the high exposure in the Index to energy and industrial commodity stocks. Both of these types of stocks were negatively impacted by the slump in oil prices and weaker commodity prices on the back of investors’ concerns about global growth (with Chinese growth concerns the dominant topic). The Fund had limited to no direct exposure to oil or industrial commodities.

 

¢   For the period, the Fund’s energy solutions strategy was the worst performing sector versus the S&P Global Natural Resources Index, followed by the agribusiness strategy, with the water strategy the best performer against this index. Within the Fund, the strategies remained broadly equally weighted as of the end of the period (allowing for market movements).

 

¢   In light of the conditions discussed in the general market commentary, the strategy underperformed the broader based U.S. dollar denominated equity index. Some of the underperformance can be attributed to currency translation from local currencies back into U.S. dollars. The rest of the underperformance versus the broad-based equity index can be attributable at a sub-strategy level:

Water: the exposure to water infrastructure stocks and capital expenditure-dependent industrial water stocks impacted performance versus the broad market index. Infrastructure is an important theme within the water strategy as the increasing need for both the rehabilitation of existing aged infrastructure and investment in new infrastructure to meet the growing needs of an expanding population. We are still confident that that the water strategy represents excellent value versus the broader market, with the underlying water stocks trading at valuation levels not seen for a decade. The portfolio is positioned to benefit from spending in the U.S. non-residential and residential construction sectors, global municipal water infrastructure spending, and technological developments to alleviate water scarcity.

Agribusiness: the portfolio has exposure to soft commodity prices, which due to three years of bumper harvest have fallen. This has impacted farmer incomes and also the companies providing many of the inputs necessary for these farmers to produce. While this year’s weather has been more conducive to lower yields (thus supporting soft commodity prices), the yields will still be above historic averages. Also, the agribusiness strategy has the highest exposure to emerging markets of the three strategies underlying the Fund. Given the weakness of emerging markets (and their currencies), this has negatively impacted the performance of the strategy versus the broader market index. We play the full agribusiness value-chain (farm to fork), and thus in the current market environment we position ourselves downstream towards agribusiness infrastructure and processors.

Energy Solutions: declining oil prices negatively impacted sentiment towards renewable energy holdings, the most overweight sector within the energy solutions strategy. This was despite a robust earnings season which saw many solar companies in particular raise their annual guidance. Leveraged renewable energy stocks also struggled as fears over deteriorating financing conditions weighed across the group. We remain positive on the solar sector given the cost reduction for installation and the ever-shortening payback period for solar projects, China’s planned spend on solar capacity over the next five years, and the short-term impetus to invest in renewable due to the expiration of the federal U.S. investment tax credits for this area in 2016. Within energy solutions, we do not limited ourselves to just the renewable sector (wind, solar, etc.), we also invest in energy efficiency (electric grid efficiency, low energy building, and transportation technology, etc.) and utilities (including yield companies).

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results and there is no guarantee market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

11

Table of Contents
Essential Resources Fund (Continued)   

 

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Industrials

     33 % 

Consumer Staples

     14   

Utilities

     14   

Materials

     12   

Information Technology

     11   

Energy

     5   

Financials

     5   

Other (includes short-term investments)

     6   
   

 

 

  

Total

     100 % 
   

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

12

Table of Contents

Essential Resources Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -19.60 %         3/24/15   
Class A Shares at POP3,4        -24.22           3/24/15   
Class C Shares at NAV2        -19.90           3/24/15   
Class C Shares with CDSC4        -20.70           3/24/15   
Class I Shares at NAV2        -19.50           3/24/15   
S&P 500® Index        -7.20 5         —   
S&P Global Natural Resources Index (net)        -24.31 5         —   

Fund Expense Ratios6: A Shares: Gross 2.35%, Net 1.65%; C Shares: Gross 3.10%, Net 2.40%; I Shares: Gross 2.10%, Net 1.40%.

All returns represent past performance which is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The above table and graph below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. Please visit Virtus.com for performance data current to the most recent month-end.

1  Total returns are historical and include changes in share price and the reinvestment of both dividends and capital gains distributions.
2  “NAV” (Net Asset Value) total returns do not include the effect of any sales charge.
3  “POP” (Public Offering Price) total returns include the effect of the maximum front-end 5.75% sales charge.
4  “CDSC” (Contingent Deferred Sales Charge) is applied to redemptions of certain classes of shares that do not have a sales charge applied at the time of purchase. CDSC charges for 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 March 23, 2015, as supplemented and revised 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 a contractual fee waiver in effect through January 31, 2017. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on March 24, 2015 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

13

Table of Contents

High Yield Fund

 

Fund Summary

   

Ticker Symbols:

Class A: PHCHX

Class B: PHCCX

Class C: PGHCX

Class I: PHCIX

 

Portfolio Manager Commentary by Newfleet Asset Management, LLC

 

¢   The Fund is diversified and has a primary investment objective of high current income and a secondary objective of capital growth.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -3.39%, Class B shares returned -3.96%, and Class C shares returned -3.93%. Class I shares returned -3.15%. For the same period, the Barclays U.S. Aggregate Bond Index, a broad-based fixed income index, returned 2.94%, and the Barclays U.S. High-Yield 2% Issuer Capped Bond Index, the Fund‘s style-specific index appropriate for comparison, returned -3.40%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the market perform during the Fund’s fiscal year?

 

¢   The U.S. high yield market, as measured by the Barclays U.S. High-Yield 2% Issuer Capped Bond Index, delivered a -3.40% return for the fiscal year ended September 30, 2015. Volatility crept back into the high yield market along with the market becoming more bifurcated over the year. The watershed event was when OPEC decided in late November 2014 not to cut oil production, and from that point on energy credits behaved completely differently than the rest of the market. Up to that point energy credits traded right on top of the high yield universe based on price/yield/spread, but from that point on issuers traded more on idiosyncratic factors as the underlying commodity plunged more than 50% in price. The energy complex was down more than 21% over the past year with independent (exploration and production) and oil field services industries hit the hardest.

 

¢   Returns, across the ratings spectrum, displayed further proof that investors were searching for ways to reduce beta and move up in credit quality over the past year. Higher quality outperformed over the year as BB-rated credits led the way by delivering an almost flat return of -0.04%. As you
   

move down in credit quality, the returns worsen: B-rated credits returned -4.08%, CCCs -8.75%, and Distressed -57.00%. Even within each rating tier, returns were diverse, indicating that idiosyncratic risk has risen considerably and credit picking to be imperative to delivering alpha.

 

¢   Outside of the energy and metals & mining industries, fundamentals remained strong yet there was some slight slippage as top-line revenue growth was anemic. Leverage ticked up slightly, as companies looked to raise capital for M&A transactions or other shareholder-friendly activities like stock buybacks or dividends. That said, leverage ratios were still below levels seen just prior to the onset of the 2008 financial crisis and interest coverage rates remained very strong. From a technical perspective, flows were very directional and volatile over the fiscal year. For the full fiscal year outflows dominated, yet within the year itself there were long periods where strong inflows were the norm. New issuance was very strong up until this past summer when volumes considerably slowed. A more recent trend was for issuers to use new issuance proceeds primarily for M&A transactions, although secondarily we saw more shareholder-friendly actions.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The weak performance of the high yield sector significantly contributed to the Fund’s negative return for the year. The Fund was overweight the energy space prior to OPEC’s announcement in the fourth quarter of 2014, which was very detrimental to the Fund’s performance. The Fund scaled back its exposure to the energy complex over the fiscal year, helping to mitigate the earlier damage.

 

¢   Positive contributors to Fund performance during the year were issue selection within high yield, along with some of our conscientious overweights/underweights within certain industries. The Fund benefited from strong issue selection within the gaming, paper, technology, and other industrial industries; these are all industries in which the Fund held overweight positions. The Fund continued its conscious bet to be significantly underweight the metals & mining industry, which added alpha to the portfolio as that industry continued to underperform due to the weak economic data flowing out of China.
¢   Detractors from Fund performance were poor issue selection within the electric utilities, supermarkets, and the energy complex. Portfolio management had negative views on each of these industries, believing there were limited catalysts to lift performance to the upside, and so was underweight all three industries.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

Foreign Investing: Investing internationally involves additional risks such as currency, political, accounting, economic, and market risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

14

Table of Contents
High Yield Fund (Continued)   

 

 

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors as a percentage of total investments as of September 30, 2015.

 

    

Corporate Bonds and Notes

       82 % 

Consumer Discretionary

     23 %     

Health Care

     15       

Financials

     9       

Telecommunication Services

     8       

Energy

     8       

Industrials

     7       

Materials

     6       

All other Corporate Bonds and Notes

     6       

Loan Agreements

       11   

Other (includes short-term investments)

       7   
     

 

 

  

Total

       100 % 
           

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

15

Table of Contents

High Yield Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15                                
       1 year        5 years        10 years       

Since

Inception

       

Inception

Date

  
Class A Shares at NAV2        -3.39 %         5.41 %         4.78 %         —           —   
Class A Shares at POP3,4        -7.01           4.61           4.38           —           —   
Class B Shares at NAV2        -3.96           4.63           4.02           —           —   
Class B Shares with CDSC4        -7.62           4.63           4.02           —           —   
Class C Shares at NAV2 and with CDSC4        -3.93           4.63           4.03           —           —   
Class I Shares at NAV2        -3.15           —           —           4.13 %         8/8/12   
Barclays U.S. Aggregate Bond Index        2.94           3.10           4.64           1.85 5         —   
Barclays U.S. High-Yield 2% Issuer Capped Bond Index        -3.40           6.14           7.26           3.97 5         —   

Fund Expense Ratios6: A Shares: Gross 1.31%, Net 1.15% B Shares: Gross 2.06%, Net 1.90% C Shares: Gross 2.06%, Net 1.90% Class I: Gross 1.06% Net 0.90%.

All returns represent past performance which is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The above table and graph below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. Please visit Virtus.com for performance data current to the most recent month-end.

1  Total returns are historical and include changes in share price and the reinvestment of both dividends and capital gains distributions.
2  “NAV” (Net Asset Value) total returns do not include the effect of any sales charge.
3  “POP” (Public Offering Price) total returns include the effect of the maximum front-end 3.75% 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 28, 2015, as supplemented and revised, 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 January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on September 30, 2005, 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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

16

Table of Contents

Low Volatility Equity Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VLVAX

Class C: VLVCX

Class I: VLVIX

 

Portfolio Manager Commentary by Rampart Investment Management Company, LLC

 

¢   The Fund is diversified and has an investment objective of capital appreciation with lower volatility than U.S. equity markets over a full market cycle.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -1.88%, Class C shares returned -2.61%, and Class I shares returned -1.57%. For the same period, the CBOE S&P 500 Buywrite Index, a broad-based fixed equity index returned 0.36%, and S&P 500® Index the Fund’s style-specific benchmark appropriate for comparison returned -0.61%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the Markets perform during the Fund’s fiscal year?

 

¢   During the Fund’s fiscal year, the U.S. equity markets were down slightly. For the majority of the year, the market continued to grind higher but there were a few weeks where it experienced sharp drawdowns. The largest drawdown over the period occurred August 17-25, 2015. During these days the market lost over 11% in value.

 

¢   Since the Fund compares its performance to the S&P 500® Index, U.S. and global macro risks will affect how both the Fund and its benchmark perform. In December 2014, there were several worrisome factors affecting the markets from political turmoil in Greece and China’s move to tighten lending requirements. Then, throughout 2015 there was constant chatter on the Fed outlook and potential path of raising interest rates and how that will affect a global economy which has had a growing concern of slowing. Finally, as we got midway through August, it appeared as if a large number of potential risks ultimately came to a head. There were currency sell-offs in multiple countries, anxiety over emerging market performance, weak inflation numbers, and the Fed signaled additional uncertainty of its forecast on the U.S. and global economic outlook.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The Fund’s performance was negatively impacted from its allocation to the larger-capitalization stocks in the S&P 500® Index. The equity portion was invested in the S&P 100® Index, which incurred a loss of 1.78% over the fiscal year ended September 30, 2015, while the S&P 500® Index incurred a loss of 0.61%.

 

¢   One of the strategies the Fund utilizes is selling calls on the S&P 500® Index to generate income. Some or all of this income is then used to purchase a negatively correlated investment, which can rise in value when the S&P 500® Index falls. Over the past 12 months, the Fund’s participation in this strategy was able to help its overall performance by 0.40%.

 

¢   The primary defensive investment for this Fund is done by purchasing call options on the futures contract of the CBOE Volatility Index® (VIX®). The VIX® options that the Fund purchases are meant to protect the Fund if the market experiences a sudden and violent move down. The Fund bought VIX® options for each month, and of the 12 VIX® option purchases, three of the 12 expiration periods realized gains. These gains created a net gain for the Fund of 2.10%.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results and there is no guarantee market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Call Options: Selling call options may limit a fund’s opportunity to profit from the increase in price of its underlying portfolio. Buying call options risks the loss of the premium paid for those options.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Exchange Traded Funds

     99 % 

Other (includes short-term investments)

     1   
   

 

 

  

Total

     100 % 
   

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

17

Table of Contents

Low Volatility Equity Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15            
       1 year        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -1.88 %         6.57 %         6/11/13   
Class A Shares at POP3,4        -7.52           3.86           6/11/13   
Class C Shares at NAV2 and with CDSC4        -2.61           5.78           6/11/13   
Class I Shares at NAV2        -1.57           6.84           6/11/13   
CBOE S&P 500 Buywrite Index        0.36           5.91 5         —   

S&P 500® Index

        -0.61           9.72 5         —   

Fund Expense Ratios6: A Shares: Gross 6.35%, Net 1.55%; C Shares: Gross 7.10%, Net 2.30%; I Shares: Gross 6.10%, Net 1.30%.

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 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 28, 2015, as supplemented and revised 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 a contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on June 11, 2013 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

18

Table of Contents

Multi-Sector Intermediate Bond Fund

 

Fund Summary

   

Ticker Symbols:

Class A: NAMFX Class B: NBMFX Class C: NCMFX Class I: VMFIX

Class R6: VMFRX

 

Portfolio Manager Commentary by Newfleet Asset Management, LLC

 

¢   The Fund is diversified and has an investment objective of maximizing current income while preserving capital.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -3.41%, Class B shares returned -4.14%, Class C shares returned -4.11%, and Class I shares returned -3.17%. Class R6 shares from November 12, 2014 (inception date) through September 30, 2015, returned -3.31%*. For the fiscal year, the Barclays U.S. Aggregate Bond Index, which is both the Fund’s broad-based and style-specific fixed income index, returned 2.94%.

 

* Returns less than 1 year are not annualized.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the market perform during the Fund’s fiscal year?

 

¢   Most spread sectors underperformed U.S. Treasuries during the fiscal year. Plummeting oil prices dominated market volatility and investor concerns in the first half of the fiscal year, especially during the fourth quarter of 2014. Brent crude, the international benchmark for oil prices, fell about 50% between September 2014 (when the price was roughly $93 a barrel) and September 2015, ending the period at roughly $47 a barrel. Brent crude oil hit a 12-month low of roughly $40 a barrel on August 24, 2015.

 

¢   Globally, concerns over slowing growth in China and the Greek debt crisis weighed on the fixed income markets. A looming U.S. Federal Reserve (“Fed”) rate hike, with negative implications for capital flows and debt financing, added to the turmoil, with some emerging market central banks (unlike the International Monetary Fund and the World Bank) calling for the Fed to raise rates and remove the uncertainty that could prove to be more harmful than the actual impact.
¢   The waiting game for the Fed to raise interest rates from their near-zero level maintained since December 2008 continued through the end of the fiscal year. As of its September 17 meeting, the Fed decided to leave its benchmark rate unchanged, balancing relatively strong U.S. growth and labor market conditions against a lack of inflation, a strengthening U.S. dollar, and a shaky global economy.

 

¢   Over the last 12 months, yields increased on the short end of the U.S. Treasury curve and decreased on the intermediate to long end, and the curve flattened overall.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The outperformance of U.S. Treasuries and agency mortgages relative to most fixed income spread sectors was the key driver of the Fund’s underperformance for the fiscal year.

 

¢   Among fixed income sectors, the Fund’s allocation to structured products – asset-backed securities, commercial mortgage-backed securities, and non-agency residential mortgages – were positive contributors to performance for the fiscal year.

 

¢   During the fiscal year, the Fund’s allocation to non-U.S. dollar, corporate high yield, and emerging markets debt detracted from performance.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets,

involves additional risks such as currency, political, accounting, economic, and market risk.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

ABS/MBS: Changes in interest rates can cause both extension and prepayment risks for asset- and mortgage-backed securities. These securities are also subject to risks associated with the repayment of underlying collateral.

Bank Loans: Loans may be unsecured or not fully collateralized, may be subject to restrictions on resale and/or trade infrequently on the secondary market. Loans can carry significant credit and call risk, can be difficult to value and have longer settlement times than other investments, which can make loans relatively illiquid at times.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Corporate Bonds and Notes

       54 % 

Financials

     16 %     

Energy

     9       

Consumer Discretionary

     8       

Industrials

     5       

All other Corporate Bonds and Notes

     16       

Mortgage-Backed Securities

       16   

Loan Agreements

       11   

Asset-Backed Securities

       5   

Foreign Government Securities

       4   

Other (includes short-term investments)

       10   
     

 

 

  

Total

       100 % 
           

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

19

Table of Contents

Multi-Sector Intermediate Bond Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15                                
       1 year        5 years        10 years       

Since

Inception

       

Inception

Date

  
Class A Shares at NAV2        -3.41 %         4.30 %         5.36 %         —           —   
Class A Shares at POP3,4        -7.03           3.51           4.96           —           —   
Class B Shares at NAV2        -4.14           3.52           4.57           —           —   
Class B Shares with CDSC4        -7.79           3.52           4.57           —           —   
Class C Shares at NAV2 and with CDSC4        -4.11           3.53           4.59           —           —   
Class I Shares at NAV        -3.17           4.60           —           6.33 %         10/1/09   
Class R6 Shares at NAV        —           —           —           -3.31           11/12/14   
Barclays U.S. Aggregate Bond Index        2.94           3.10           4.64           — 5         —   

Fund Expense Ratios6: A Shares: 1.11%, B Shares: 1.86%, C Shares: 1.86%, I Shares: 0.86%, R6 Shares: 0.79%.

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 3.75% 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 index returned 3.86 for Class I shares and 2.03% for Class R6 shares since the inception date of the respective share class.
6  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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, 2005, 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.

 

LOGO

The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with active management of an actual portfolio.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

20

Table of Contents

Senior Floating Rate Fund

 

Fund Summary

   

Ticker Symbols:

Class A: PSFRX

Class C: PFSRX

Class I: PSFIX

 

Portfolio Manager Commentary by Newfleet Asset Management, LLC

 

¢   The Fund is diversified and has an investment objective of high total return from both current income and capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned 0.53%, Class C shares returned -0.22%, and Class I shares returned 0.78%. For the same period, the Barclays U.S. Aggregate Bond Index, a fixed income index, returned 2.94%, and the S&P/LSTA Leveraged Loan Index, the Fund’s style-specific benchmark, returned 0.92%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   Bank loans generated positive but modest returns over the past year with a total return of 0.92% according to the S&P/LSTA Leveraged Loan Index, as performance was uneven over the past year on a quarterly basis mainly due to oil and commodity concerns. The loan market posted solid returns in the middle two quarters of the past year on strong technicals. This was due to strong collateralized loan obligation (“CLO”) issuance and limited net supply being partially offset by losses in the first and last quarter of the past year due to energy and commodity-related issues. Bank loans outperformed most other higher beta fixed income sectors (high yield and emerging market debt) due to strong technicals that insulated the asset class from the broader market volatility. This was evident in the much lower return volatility within the asset class over the past year relative to high yield. Bank loans underperformed most higher quality and longer duration fixed income sectors, as rates fell over the past year.

 

¢   Higher quality loans outperformed over the past year in light of the increased volatility, with BB and single B-rated credit tiers leading the way. The distressed sector and CCC/Split CCC-rated loans underperformed.

 

¢   Technicals remained solid throughout the year on strong institutional demand and low net new loan
   

issuance, although we have seen some recent weakening in these trends. CLO issuance totaled over $100 billion over the last four quarters and provided a solid bid for higher quality loans. CLO issuance fell in the third quarter of 2015 to the lowest quarterly volume since 2013; however, FY15 issuance remains on track to be the second largest year behind 2014. Retail mutual fund outflows generally ebbed over the past year while remaining negative but manageable in the context of strong CLO demand and limited new supply. The recent uptick in loan outflows due to increased market volatility bears monitoring but could turn when the Fed eventually raises rates and as investors refocus on rate risk.

 

¢   Despite some pockets of weakness in certain industries including the energy and metals & mining industries, fundamentals in the bank loan market remain strong as defaults, by number of Issuers, increased modestly to 0.77% as of the end of September 2015, from 0.64% at of the end of September 2014. Defaults remained below the long-term average of approximately 2.8%. We would expect defaults to increase over the next year given stress in the energy industry, the more restrictive regulatory environment, and growing lower-rated issuance as the credit cycle ages.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The positive return of the U.S. leveraged loan market contributed to the Fund’s positive return during the year.

 

¢   Overall, positive issue selection and industry allocation relative to the Fund’s benchmark benefited performance. Performance was strong in the utility, healthcare, and gaming industries, while performance lagged in the energy, broadcasting, and technology industries.

 

¢   Overall, a modest overweight to higher quality tiers with an underweight to the lower quality and distressed credit tiers contributed positively to performance relative to the Index. Remaining nearly fully invested also added to performance. The Fund’s out-of-index sector allocation to high yield, which is part of the Fund’s liquidity strategy, negatively contributed to performance as high yield underperformed loans over the past year.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other

conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

Bank Loans: Loans may be unsecured or not fully collateralized, may be subject to restrictions on resale and/or trade infrequently on the secondary market. Loans can carry significant credit and call risk, can be difficult to value and have longer settlement times than other investments, which can make loans relatively illiquid at times.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

Leverage: When a fund leverages its portfolio, the value of its shares may be more volatile and all other risks may be compounded.

Liquidity: Certain securities may be difficult to sell at a time and price beneficial to the fund.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Loan Agreements

       94 % 

Consumer Discretionary

     29 %     

Health Care

     16       

Industrials

     12       

Information Technology

     9       

Materials

     8       

Financials

     6       

All Other Loan Agreements

     14       

Corporate Bonds and Notes

       5   

Affiliated Mutual Fund

       1   
     

 

 

  

Total

       100 % 
           

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

21

Table of Contents

Senior Floating Rate Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        5 years       

Since

Inception

       

Inception

Date

  
Class A Shares at NAV2        0.53 %         4.10 %         4.92 %         1/31/08   
Class A Shares at POP3,4        -2.23           3.53           4.54           1/31/08   
Class C Shares at NAV2 and with CDSC4        -0.22           3.32           4.15           1/31/08   
Class I Shares at NAV        0.78           4.35           5.17           1/31/08   
Barclays U.S. Aggregate Bond Index        2.94           3.10           4.27 5         —   
S&P/LSTA Leveraged Loan Index        0.92           4.51           5.22 5         —   

Fund Expense Ratios6: A Shares: 1.18%, C Shares: 1.93%, I Shares: 0.93%.

All returns represent past performance which is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The above table and graph below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. Please visit Virtus.com for performance data current to the most recent month-end.

1  Total returns are historical and include changes in share price and the reinvestment of both dividends and capital gains distributions.
2  “NAV” (Net Asset Value) total returns do not include the effect of any sales charge.
3  “POP” (Public Offering Price) total returns include the effect of the maximum front-end 2.75% 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 28, 2015, as supplemented and revised, 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 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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

22

Table of Contents

Wealth Masters Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VWMAX

Class C: VWMCX

Class I: VWMIX

 

Portfolio Manager Commentary by Horizon Asset Management, LLC

 

¢   The Fund is diversified and has an investment objective of capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -6.74%, Class C shares returned -7.41%, and Class I shares returned -6.53%. For the same period, the S&P 500® Index, a broad-based equity index, and the Fund’s style-specific benchmark, returned -0.61%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   During the 12-month period ended September 30, 2015, the broader equity markets were down slightly, with the S&P 500® Index returning -0.61% during the fiscal year. Markets fell in late 2014, as falling oil prices dominated headlines. The S&P 500® Index then appreciated through the first half of 2015, only to fall again in August 2015. In the latter part of the 12-month period, investors weighed a variety of headwinds facing the markets: oil prices remained low, concerns continued to grow regarding the strength of the Chinese economy, and the U.S. Federal Reserve did not raise interest rates.

 

¢   Domestic equity mutual funds continued to experience net outflows, while exchange-traded funds (ETFs) continued to gather assets. Given the float-adjusted, market cap-weighted methodology used by most of the major indexes, the lion’s share of flows into ETFs tend to support the stock prices of the largest, most liquid companies. However, in our opinion, the business results of these companies have not necessarily improved. Many of the largest companies have experienced slowing revenue growth, and have been returning capital to investors via share buybacks and dividends rather than reinvesting in their businesses. Over the long term, we believe that this will constrain future growth.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The Fund is designed to track the Horizon Kinetics ISE Wealth Index (the “Wealth Index”). The Wealth Index is composed of publicly-listed companies owned and operated by the wealthiest, most successful investors, business executives, and entrepreneurs in the United States (“owner-operators”). The Fund allows investors to readily leverage the business acumen of the highly-skilled individuals represented in the Wealth Index.

 

¢   The underperformance of the Fund is attributable, in part, to the continued outflows from actively managed domestic mutual funds and consequent inflows into passively managed ETFs, as noted above. These flows provide a floor valuation to the largest constituents of the largest indexes – the prices of these stocks appear to be driven by demand for the indexed products that hold them as much as by company fundamentals. While some of these companies are also held in the Fund, as a result of the equal-weighted methodology used to construct the Wealth Index, their results do not dominate Fund returns.

 

¢   At the sector level, stock selection within the consumer discretionary and industrials sectors were the largest detractors from relative returns, while the health care and telecommunications services sectors contributed positively.

 

¢   At the stock level, the five largest contributors to relative performance (and their owner-operators) were Pharmacyclics, Inc. (Robert Duggan), Cablevision Systems Corp. (Charles Dolan). Halozyme Therapeutics, Inc. (Randal Kirk), Papa John’s International, Inc. (John Schnattner), and AmTrust Financial Services Inc. (Michael Karfunkel). The five largest detractors from relative performance were Halcon Resources Corporation (David Hunt), TimkenSteel Corp. (Ward Timken, Jr.), Ocwen Financial Corp. (William Erbey), W&T Offshore, Inc. (Tracy Krohn), and Wynn Resorts, Limited (Stephen Wynn). It is worth noting that of the top and bottom contributors, only two were also held in the benchmark S&P 500® Index.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based on market or other

conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee the Fund will meet its objective.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Consumer Discretionary

     34 % 

Financials

     19   

Information Technology

     12   

Industrials

     10   

Energy

     6   

Consumer Staples

     5   

Other (includes short-term investments and securities lending collateral)

     14   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

23

Table of Contents

Wealth Masters Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -6.74 %         10.86 %         9/5/12   
Class A Shares at POP3,4        -12.10           8.74           9/5/12   
Class C Shares at NAV2 and with CDSC4        -7.41           10.04           9/5/12   
Class I Shares at NAV        -6.53           11.12           9/5/12   
S&P 500® Index        -0.61           13.12 5         —   

Fund Expense Ratios6: A Shares: Gross 1.46%, Net 1.45%; C Shares: Gross 2.21%, Net 2.20%; I Shares: Gross 1.21%, 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 28, 2015, as supplemented and revised 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 January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on September 5, 2012 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

24

Table of Contents

VIRTUS BOND FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
U.S. GOVERNMENT SECURITIES—6.8%   

U.S. Treasury Note

    

1.375%, 4/30/20

   $ 1,990      $ 1,995   

2.000%, 2/15/25

     3,065        3,054   
TOTAL U.S. GOVERNMENT SECURITIES
(Identified Cost $5,008)		         5,049   
MUNICIPAL BONDS—1.7%   
Georgia—0.4%    

Rockdale County Water & Sewerage Authority Revenue Taxable
3.060%, 7/1/24

     255        262   
   

 

 

  
Massachusetts—0.3%    

Commonwealth of Massachusetts, Series C, Taxable
5.000%, 8/1/25

     155        193   
   

 

 

  
Michigan—0.0%    

City of Flat Rock Finance Authority, Series A, Taxable
6.750%, 10/1/16

     35        36   
   

 

 

  
Texas—1.0%    

University of Texas System (The) Series B, Taxable
5.000%, 8/15/25

     600        748   
TOTAL MUNICIPAL BONDS
(Identified Cost $1,241)		         1,239   
FOREIGN GOVERNMENT SECURITIES—1.2%   

Kingdom of Morocco 144A
4.250%, 12/11/22(3)

     270        273   

Mongolia 144A
5.125%, 12/5/22(3)

     200        165   

Republic of Chile
5.500%, 8/5/20

     84,000 CLP      125   

Republic of El Salvador 144A
6.375%, 1/18/27(3)

     155        137   

Republic of Romania 144A
4.875%, 1/22/24(3)

     210        226   
TOTAL FOREIGN GOVERNMENT SECURITIES   
(Identified Cost $994)        926   
MORTGAGE-BACKED SECURITIES—23.6%   
Agency—9.7%    

Fannie Mae Pool
3.500%, 8/1/45

     715        747   

FHLMC

    

7.000%, 4/1/16

     1        1   

5.000%, 12/1/35

     36        40   

4.000%, 2/1/45

     574        612   

3.500%, 3/1/45

     390        407   

FNMA

    

6.500%, 6/1/16

     5        5   

6.000%, 7/1/17

     6        7   

5.500%, 9/1/17

     12        12   
    PAR
VALUE		     VALUE  
Agency—continued   

5.000%, 4/1/20

   $ 81      $ 86   

5.000%, 8/1/21

     29        30   

6.000%, 5/1/29

     36        41   

6.500%, 5/1/30

     1        1   

7.000%, 7/1/31

     17        19   

5.500%, 4/1/36

     56        64   

5.500%, 9/1/36

     213        240   

6.000%, 9/1/37

     26        30   

6.000%, 8/1/38

     280        322   

6.000%, 8/1/38

     15        17   

5.000%, 6/1/39

     706        790   

5.000%, 9/1/39

     186        209   

5.500%, 9/1/39

     357        399   

4.500%, 9/1/40

     288        320   

3.500%, 12/1/42

     319        334   

3.000%, 3/1/43

     532        541   

3.000%, 5/1/43

     161        164   

4.000%, 9/1/44

     168        179   

3.000%, 8/1/45

     607        616   

3.500%, 8/1/45

     757        791   

Freddie Mac Gold Pool
3.000%, 5/1/45

     148        150   

GNMA
6.500%, 9/15/28

     31        35   
   

 

 

  
      7,209   
   

 

 

  
Non-Agency—13.9%    

A-10 Securitization LLC

    

13-1, B 144A
4.120%, 11/15/25(3)

     260        261   

14-1, A1 144A
1.720%, 4/15/33(3)

     232        232   

Access Point Financial, Inc. 15-A, A 144A
2.610%, 4/15/20(3)

     212        212   

American Homes 4 Rent

    

14-SFR2, C 144A
4.705%, 10/17/36(3)

     195        199   

15-SFR1, A 144A
3.467%, 4/17/52(3)

     223        222   

Ameriquest Mortgage Securities, Inc.
03-AR3, M4
4.691%, 10/17/45

     125        126   

03-AR3, M4
6.04%, 6/25/33(2)

     130        126   

Aventura Mall Trust 13-AVM, C 144A
3.867%, 12/5/32(2)(3)

     205        213   

B2R Mortgage Trust 15-1, A1 144A
2.524%, 5/15/48(3)

     109        109   

Banc of America Funding Trust

    

04-B, 2A1
2.568%, 11/20/34(2)

     101        100   

05-1, 1A1
5.500%, 2/25/35

     117        119   

Banc of America Mortgage Trust 05-3, 1A15
5.500%, 4/25/35

     106        108   

Bank of America (Merrill Lynch – Countrywide) Asset-Backed Certificates 05-1 AF5A
5.211%, 7/25/35(2)

     316        313   
    PAR
VALUE		     VALUE  
Non-Agency—continued   

Bank of America (Merrill Lynch – Countrywide) Home Loan Mortgage Pass-Through-Trust 04-6, 1A2
2.610%, 5/25/34(2)

   $ 318      $ 316   

Citigroup Commercial Mortgage Trust 07-C6, A4
5.900%, 12/10/49(2)

     350        370   

CSAIL Commercial Mortgage Trust 15-C2, AS
3.849%, 6/15/57

     375        386   

Deutsche Bank-UBS Mortgage Trust 11-LC3A, D 144A
5.583%, 8/10/44(2)(3)

     180        192   

Goldman Sachs Mortgage Securities Trust II 07-GG10, A4
5.989%, 8/10/45(2)

     852        899   

GSAA Home Equity Trust 05-12, AF3W
4.999%, 9/25/35(2)

     77        79   

Jefferies Resecuritization Trust 14-R1, 1A1 144A
4.000%, 12/27/37(3)

     94        94   

JPMorgan Chase (Bear Stearns) Commercial Mortgage Securities, Inc.

    

06-PWR13, AM
5.582%, 9/11/41(2)

     385        397   

07- PW15, AM
5.363%, 2/11/44

     140        144   

JPMorgan Chase (WaMu) Mortgage Pass-Through Certificates 03-S11, 3A5
5.950%, 11/25/33

     214        220   

JPMorgan Chase Commercial Mortgage Securities Trust

    

10-CNTR, D 144A 6.390%, 8/5/32(2)(3)

     200        226   

14-1, 1A1 144A 4.000%, 1/25/44(2)(3)

     138        144   

06-LDP9, A3
5.336%, 5/15/47(2)

     124        128   

JPMorgan Chase Mortgage Trust 04-A4, 2A1
2.545%, 9/25/34(2)

     257        261   

MASTR Specialized Loan Trust 05-3, A2 144A
5.704%, 11/25/35(2)(3)

     174        177   

Morgan Stanley Bank of America (Merrill Lynch) Trust 15-C22, AS
3.561%, 5/15/48(2)

     310        312   

Morgan Stanley Capital I Trust

    

07-T27, A4
5.821%, 6/11/42(2)

     560        596   

08-T29, A4
6.461%, 1/11/43(2)

     577        626   

07-IQ14, A4
5.692%, 4/15/49(2)

     300        313   

07-IQ14, AM
5.865%, 4/15/49(2)

     190        197   
 

 

See Notes to Financial Statements

 

 

 

25

Table of Contents

VIRTUS BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Non-Agency—continued   

Morgan Stanley Capital I, Inc. 15-MS1, AS
4.163%, 5/15/48(2)

   $ 250      $ 261   

Motel 6 Trust 15-MTL6, B 144A
3.298%, 2/5/30(3)

     210        212   

New Residential Mortgage Loan Trust 14-1A, A 144A
3.750%, 1/25/54(2)(3)

     145        150   

Residential Asset Securitization Trust 05-A1, A3
5.500%, 4/25/35

     178        180   

Sequoia Mortgage Trust 14-2, A1 144A
4.000%, 7/25/44(2)(3)

     149        154   

Vericrest Opportunity Loan Trust

    

15-NP11, A1
3.625%, 7/25/45

     148        148   

15-NPL4, A1 144A
3.500%, 2/25/55(2)(3)

     206        205   

Wells Fargo (Royal Bank of Scotland plc) Commercial Mortgage Trust 11-C5, C 144A
5.822%, 11/15/44(2)(3)

     205        226   

Wells Fargo (Wachovia Bank) Commercial Mortgage Trust 15-LC20, B
3.719%, 4/15/50

     300        291   

WinWater Mortgage Loan Trust 14-1, A1 144A
3.992%, 6/20/44(2)(3)

     109        113   
   

 

 

  
              10,357   
TOTAL MORTGAGE-BACKED SECURITIES
(Identified Cost $17,197)		         17,566   
ASSET-BACKED SECURITIES—4.8%   

AmeriCredit Automobile Receivables Trust 14-1, D
2.540%, 6/8/20

     235        237   

Avis Budget Rental Car Funding LLC (AESOP) 12-3A, A 144A
2.100%, 3/20/19(3)

     375        378   

CarMax Auto Owner Trust 15-2, C
2.390%, 3/15/21

     235        236   

Centre Point Funding LLC 12-2A, 1 144A
2.610%, 8/20/21(3)

     277        276   

Drug Royalty LP II 14-1, A2 144A
3.484%, 7/15/23(3)

     217        220   

Exeter Automobile Receivables Trust 13-1A, C 144A
3.520%, 2/15/19(3)

     235        239   

Fairway Outdoor Funding LLC 12-1A, A2 144A
4.212%, 10/15/42(3)

     147        148   

Orange Lake Timeshare Trust 12-AA, A 144A
3.450%, 3/10/27(3)

     64        66   
    PAR
VALUE		     VALUE  
ASSET-BACKED SECURITIES—continued   

Santander Drive Auto Receivables Trust

    

12-2, D
3.870%, 2/15/18

   $ 500      $ 509   

13-1, D
2.270%, 1/15/19

     215        216   

Sierra Timeshare Receivables Funding LLC 12-3A, A 144A
1.870%, 8/20/29(3)

     127        127   

Silverleaf Finance LLC XV 12-D, A 144A
3.000%, 3/17/25(3)

     64        64   

SoFi Professional Loan Program LLC 15-A, A2 144A
2.420%, 3/25/30(3)

     159        159   

TAL Advantage V LLC

    

13-1A A 144A
2.830%, 2/22/38(3)

     223        224   

14-3A, A 144A
3.270%, 11/21/39(3)

     174        177   

Tidewater Auto Receivables Trust 12-AA, B 144A
2.430%, 4/15/19(3)

     97        97   

U-Haul S Fleet LLC 10-BT1A, 1 144A
4.899%, 10/25/23(3)

     168        174   

Westgate Resorts LLC 12-2A, A 144A
3.000%, 1/20/25(3)

     49        49   
TOTAL ASSET-BACKED SECURITIES
(Identified Cost $3,574)		         3,596   
CORPORATE BONDS AND NOTES—48.8%   
Consumer Discretionary—7.3%   

Argos Merger Sub, Inc. 144A
7.125%, 3/15/23(3)

     135        137   

Boyd Gaming Corp.

    

9.000%, 7/1/20

     100        107   

6.875%, 5/15/23

     75        76   

Caesars Entertainment Operating Co., Inc.
9.000%, 2/15/20(5)

     100        82   

Caesars Growth Properties Holdings LLC (Caesars Growth Properties Finance, Inc.)
9.375%, 5/1/22

     70        55   

CCO Safari II LLC 144A
4.908%, 7/23/25(3)

     80        80   

CCO Holdings LLC

    

5.250%, 3/15/21

     75        74   

144A 5.125%, 5/1/23(3)

     80        74   

Cequel Communications Holdings I LLC (Cequel Capital Corp.)

    

144A 5.125%, 12/15/21(3)

     45        40   

144A 5.125%, 12/15/21(3)

     110        97   

Clear Channel Worldwide Holdings, Inc. Series B
7.625%, 3/15/20

     175        176   

Columbus International, Inc. 144A
7.375%, 3/30/21(3)

     200        208   

Intelsat Jackson Holdings SA
5.500%, 8/1/23

     185        153   

International Game Technology plc 144A
6.250%, 2/15/22(3)

     200        187   
    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

Isle of Capri Casinos, Inc.
5.875%, 3/15/21

   $ 107      $ 111   

Landry’s, Inc. 144A
9.375%, 5/1/20(3)

     260        278   

MDC Holdings, Inc.
5.500%, 1/15/24

     180        183   

Meritor, Inc.
6.750%, 6/15/21

     170        172   

MGM Resorts International
6.000%, 3/15/23

     85        83   

Mohegan Tribal Gaming Authority
9.750%, 9/1/21

     75        77   

MPG Holdco I, Inc.
7.375%, 10/15/22

     145        152   

New York University
4.142%, 7/1/48

     70        67   

Numericable Group SA 144A
6.000%, 5/15/22(3)

     200        193   

Omega US Sub LLC 144A
8.750%, 7/15/23(3)

     155        138   

Party City Holdings, Inc. 144A
6.125%, 8/15/23(3)

     20        20   

Penn National Gaming, Inc.
5.875%, 11/1/21

     110        111   

Pinnacle Entertainment, Inc.
6.375%, 8/1/21

     175        186   

Priceline Group, Inc. (The)
3.650%, 3/15/25

     195        194   

QVC, Inc.
4.375%, 3/15/23

     265        258   

Scientific Games International, Inc.

    

6.625%, 5/15/21

     160        116   

144A 7.000%, 1/1/22(3)

     120        119   

Signet UK Finance plc
4.700%, 6/15/24

     210        212   

Station Casinos LLC
7.500%, 3/1/21

     230        240   

Tempur Sealy International Inc 144A
5.625%, 10/15/23(3)

     60        60   

Toll Brothers Finance Corp.

    

4.000%, 12/31/18

     40        41   

6.750%, 11/1/19

     220        251   

TRI Pointe Holdings, Inc.
5.875%, 6/15/24

     155        153   

UPCB Finance IV Ltd. 144A
5.375%, 1/15/25(3)

     200        189   

Wyndham Worldwide Corp.
5.625%, 3/1/21

     235        256   
   

 

 

  
      5,406   
   

 

 

  
Consumer Staples—1.1%   

Flowers Foods, Inc.
4.375%, 4/1/22

     275        291   

Pilgrim’s Pride Corp. 144A
5.750%, 3/15/25(3)

     60        59   

Reynolds American, Inc.
3.250%, 11/1/22

     295        293   

Rite Aid Corp. 144A
6.125%, 4/1/23(3)

     40        40   

Tops Holding LLC (Tops Markets II Corp.) 144A
8.000%, 6/15/22(3)

     155        156   
   

 

 

  
      839   
   

 

 

  
 

 

See Notes to Financial Statements

 

 

 

26

Table of Contents

VIRTUS BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Energy—2.6%   

Antero Resources Corp. 144A
5.625%, 6/1/23(3)

   $ 80      $ 71   

Blue Racer Midstream LLC (Blue Racer Finance Corp.) 144A
6.125%, 11/15/22(3)

     45        43   

CONSOL Energy, Inc.
5.875%, 4/15/22

     105        71   

FTS International, Inc.
6.250%, 5/1/22

     60        19   

Helmerich & Payne International Drilling Co.
4.650%, 3/15/25

     115        114   

Kinder Morgan Energy Partners LP
7.500%, 11/15/40

     245        257   

MarkWest Energy Partners LP (MarkWest Energy Finance Corp.)
4.875%, 12/1/24

     255        235   

Newfield Exploration Co.
5.375%, 1/1/26

     150        137   

NGL Energy Partners LP (NGL Energy Finance Corp.)
5.125%, 7/15/19

     155        142   

Sabine Pass Liquefaction LLC
6.250%, 3/15/22

     140        131   

Sunoco LP (Sunoco Finance Corp.) 144A
6.375%, 4/1/23(3)

     215        211   

Weatherford International Ltd.
4.500%, 4/15/22

     310        251   

Williams Cos., Inc. (The)

    

3.700%, 1/15/23

     200        155   

4.550%, 6/24/24

     170        135   
   

 

 

  
      1,972   
   

 

 

  
Financials—20.9%    

Air Lease Corp.
2.625%, 9/4/18

     70        70   

Akbank TAS 144A
7.500%, 2/5/18(3)

     375 TRY      108   

Allstate Corp. (The)
5.750%, 8/15/53(2)(7)

     310        321   

Ally Financial, Inc.
4.125%, 3/30/20

     105        104   

American Campus Communities Operating Partnership Lp
3.350%, 10/1/20

     25        25   

Apollo Management Holdings LP 144A
4.000%, 5/30/24(3)

     190        192   

Ares Capital Corp.
3.875%, 1/15/20

     95        98   

Ares Finance Co., LLC Finance Co., LLC 144A
4.000%, 10/8/24(3)

     270        263   

Banco de Credito del Peru 144A
6.125%, 4/24/27(2)(3)

     240        247   

Banco de Credito e Inversiones 144A
4.000%, 2/11/23(3)

     275        273   

Banco Inbursa SA Institucion de Banca Multiple 144A
4.125%, 6/6/24(3)

     160        155   
    PAR
VALUE		     VALUE  
Financials—continued   

Banco Internacional del Peru SAA 144A
6.625%, 3/19/29(2)(3)

   $ 300      $ 298   

Banco Santander Chile 144A
3.875%, 9/20/22(3)

     450        448   

Bancolombia S.A.
5.125%, 9/11/22

     260        246   

Bank of America Corp.
5.625%, 7/1/20

     235        265   

Bank of Baroda 144A
4.875%, 7/23/19(3)

     200        213   

Bank of India 144A
3.250%, 4/18/18(3)

     265        270   

Barclays Bank plc 144A
6.050%, 12/4/17(3)

     250        270   

Brixmor Operating Partnership LP
3.875%, 8/15/22

     55        56   

Citizens Financial Group, Inc. 144A
5.500%(2)(3)(6)

     160        156   

Compass Bank
3.875%, 4/10/25

     250        233   

Corporate Office Properties LP
3.600%, 5/15/23

     265        249   

Corrections Corp of America
5.000%, 10/15/22

     325        327   

CTR Partnership LP (Caretrust Capital Corp.)
5.875%, 6/1/21

     130        133   

CyrusOne LP (CyrusOne Finance Corp.) 144A
6.375%, 11/15/22(3)

     160        163   

Developers Diversified Realty Corp.

    

7.875%, 9/1/20

     155        189   

3.500%, 1/15/21

     130        132   

Development Bank of Kazakhstan OJSC 144A
4.125%, 12/10/22(3)

     290        248   

Digital Realty Trust LP
5.250%, 3/15/21

     165        180   

Discover Financial Services, Inc.
3.950%, 11/6/24

     190        187   

Education Realty Operating Partnership LP
4.600%, 12/1/24

     205        206   

ESH Hospitality, Inc. 144A
5.250%, 5/1/25(3)

     155        153   

Excel Trust LP
4.625%, 5/15/24

     85        84   

First Cash Financial Services, Inc.
6.750%, 4/1/21

     100        100   

Ford Motor Credit Co. LLC
5.750%, 2/1/21

     235        264   

FS Investment Corp.

    

4.250%, 1/15/20

     165        168   

4.750%, 5/15/22

     60        59   

General Motors Financial Co., Inc.

    

4.750%, 8/15/17

     175        182   

3.450%, 4/10/22

     30        29   

Genworth Holdings, Inc.
4.900%, 8/15/23

     205        160   

GLP Capital LP (GLP Financing II, Inc.)

    

4.875%, 11/1/20

     155        157   

5.375%, 11/1/23

     5        5   
    PAR
VALUE		     VALUE  
Financials—continued   

Goldman Sachs Group, Inc. (The)
5.750%, 1/24/22

   $ 500      $ 574   

Healthcare Realty Trust, Inc.

    

3.875%, 5/1/25

     125        122   

4.000%, 6/1/25

     200        200   

Hutchison Whampoa International Ltd. Series 12,
144A 6.000%,(2)(3)(6)(7)

     310        322   

ICAHN Enterprises LP (ICAHN Enterprises Finance Corp.)

    

4.875%, 3/15/19

     15        15   

5.875%, 2/1/22

     150        151   

ING Groep NV
6.000%(2)(6)(7)

     200        197   

Intesa San Paolo S.p.A
3.125%, 1/15/16

     215        216   

iStar Financial, Inc.
5.000%, 7/1/19

     90        86   

Jefferies Group LLC
6.875%, 4/15/21

     85        96   

JPMorgan Chase & Co.
Series Z, 5.300%,(2)(6)(7)

     45        44   

Kazakhstan Temir Zholy Finance BV 144A
6.950%, 7/10/42(3)

     215        169   

Kilroy Realty Lp
4.375%, 10/1/25

     190        192   

Leucadia National Corp.
5.500%, 10/18/23

     150        151   

Liberty Mutual Group, Inc. 144A
4.250%, 6/15/23(3)

     245        253   

Lincoln National Corp.
4.200%, 3/15/22

     250        260   

Macquarie Bank Ltd. 144A
6.625%, 4/7/21(3)

     15        17   

Macquarie Group Ltd. 144A
6.250%, 1/14/21(3)

     210        239   

Morgan Stanley

    

5.550%, 4/27/17

     330        350   

4.100%, 5/22/23

     155        158   

6.375%, 7/24/42

     435        538   

MPT Operating Partnership LP
5.500%, 5/1/24

     90        92   

Navient LLC
5.500%, 1/25/23

     200        159   

Nordea Bank AB 144A
4.250%, 9/21/22(3)

     265        271   

PKO Finance AB 144A
4.630%, 9/26/22(3)(8)

     255        263   

Prudential Financial, Inc.

    

5.875%, 9/15/42(2)

     190        201   

5.625%, 6/15/43(2)(7)

     280        289   

Retail Opportunity Investments Partnership LP
4.000%, 12/15/24

     155        152   

Select Income REIT
4.500%, 2/1/25

     190        183   

Teachers Insurance & Annuity Association of America 144A
4.375%, 9/15/54(2)(3)

     160        162   

Turkiye Garanti Bankasi AS 144A
5.250%, 9/13/22(3)

     305        293   

UBS AG
7.625%, 8/17/22

     500        575   
 

 

See Notes to Financial Statements

 

 

 

27

Table of Contents

VIRTUS BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Financials—continued   

Ventas Realty LP (Ventas Capital Corp.)
3.250%, 8/15/22

   $ 250      $ 245   

Voya Financial, Inc.
5.650%, 5/15/53(2)

     280        284   

Walter Investment Management Corp.
7.875%, 12/15/21

     135        116   

WP Carey, Inc.
4.600%, 4/1/24

     160        163   

York Risk Services Holding Corp. 144A
8.500%, 10/1/22(3)

     105        90   
   

 

 

  
      15,574   
   

 

 

  
Health Care—4.4%   

AbbVie, Inc.
3.600%, 5/14/25

     65        64   

Acadia Healthcare Co., Inc.
5.125%, 7/1/22

     65        64   

144A 5.625%, 2/15/23(3)

     10        10   

Alere, Inc. 144A
6.375%, 7/1/23(3)

     60        61   

Capsugel SA PIK Interest Capitalization 144A
7.000%, 5/15/19(2)(3)(10)

     35        35   

Cardinal Health, Inc.

    

3.200%, 3/15/23

     130        129   

3.750%, 9/15/25

     165        167   

Community Health Systems, Inc.
5.125%, 8/1/21

     45        46   

Concordia Healthcare Corp. 144A
7.000%, 4/15/23(3)

     10        9   

Crimson Merger Sub, Inc. 144A
6.625%, 5/15/22(3)

     120        103   

DaVita Healthcare Partners, Inc.
5.000%, 5/1/25

     90        87   

Emdeon, Inc. 144A
6.000%, 2/15/21(3)

     105        102   

Endo Finance LLC (Endo Finco, Inc.) 144A
6.000%, 7/15/23(3)

     110        109   

Forest Laboratories, Inc. 144A
4.875%, 2/15/21(3)

     160        173   

Fresenius US Finance II, Inc. 144A
4.500%, 1/15/23(3)

     35        35   

HCA, Inc.

    

6.500%, 2/15/20

     160        174   

5.375%, 2/1/25

     80        80   

Healthsouth Corp.

    

144A 5.750%, 11/1/24(3)

     15        15   

144A 5.750%, 9/15/25(3)

     120        117   

Hill-Rom Holdings, Inc. 144A
5.750%, 9/1/23(3)

     105        106   

Hologic, Inc. 144A
5.250%, 7/15/22(3)

     10        10   

IASIS Healthcare LLC
8.375%, 5/15/19

     80        82   

Jaguar Holding Co. II (Pharmaceutical Product Development LLC) 144A
6.375%, 8/1/23(3)

     95        93   
    PAR
VALUE		     VALUE  
Health Care—continued   

JLL Delta Dutch Pledgeco BV PIK Interest Capitalization, 8.75% interest, 0.75% capitalization 144A 5/1/20(2)(3)(9)

   $ 85      $ 86   

Mallinckrodt International Finance S.A.

    

144A 5.750%, 8/1/22(3)

     60        58   

144A 5.625%, 10/15/23(3)

     165        151   

144A 5.500%, 4/15/25(3)

     5        4   

Owens & Minor, Inc.
3.875%, 9/15/21

     35        35   

Quintiles Transnational Corp. 144A
4.875%, 5/15/23(3)

     75        74   

Select Medical Corp.
6.375%, 6/1/21

     205        201   

Sterigenics-Nordion Holdings LLC 144A
6.500%, 5/15/23(3)

     55        55   

Surgical Care Affiliates, Inc. 144A
6.000%, 4/1/23(3)

     160        159   

Tenet Healthcare Corp.

    

144A 3.837%, 6/15/20(2)(3)

     75        75   

4.500%, 4/1/21

     160        158   

8.125%, 4/1/22

     115        123   

Valeant Pharmaceuticals International, Inc.

    

144A 6.750%, 8/15/18(3)

     140        143   

144A 7.500%, 7/15/21(3)

     25        26   

144A 5.500%, 3/1/23(3)

     50        47   
   

 

 

  
      3,266   
   

 

 

  
Industrials—3.5%   

ADT Corp. (The)
6.250%, 10/15/21

     260        269   

Ahern Rentals, Inc. 144A
7.375%, 5/15/23(3)

     150        131   

Air Canada Pass-Through-Trust, 13-1, B 144A
5.375%, 5/15/21(3)

     89        92   

Bombardier, Inc. 144A
4.750%, 4/15/19(3)

     110        89   

Carpenter Technology Corp.
4.450%, 3/1/23

     250        245   

Continental Airlines Pass-Through-Trust

    

99-1, A 6.545%, 2/2/19

     342        368   

00-1, A1 8.048%, 11/1/20

     297        335   

Delta Air Lines Pass-Through-Trust 12-1, A
4.750%, 5/7/20

     287        303   

Masco Corp.

    

5.950%, 3/15/22

     180        196   

4.450%, 4/1/25

     55        56   

Northwest Airlines Pass-Through-Trust 02-1, G2
6.264%, 11/20/21

     171        178   

Penske Truck Leasing Co. LP 144A
3.375%, 2/1/22(3)

     75        73   

TransDigm, Inc.

    

6.000%, 7/15/22

     115        108   

144A 6.500%, 5/15/25(3)

     45        42   
    PAR
VALUE		     VALUE  
Industrials—continued   

United Rentals North America, Inc.
5.500%, 7/15/25

   $ 155      $ 146   
   

 

 

  
      2,631   
   

 

 

  
Information Technology—2.1%   

Dun & Bradstreet Corp. (The)
4.375%, 12/1/22

     270        267   

First Data Corp.
11.750%, 8/15/21

     338        376   

Flextronics International Ltd. 144A
4.750%, 6/15/25(3)

     200        194   

Hewlett Packard Enterprise Co.

    

144A 4.400%, 10/15/22(3)

     55        55   

144A 4.900%, 10/15/25(3)

     55        55   

KLA-Tencor Corp.
4.650%, 11/1/24

     190        190   

McGraw Hill Financial, Inc. 144A
4.000%, 6/15/25(3)

     195        194   

Riverbed Technology, Inc. 144A
8.875%, 3/1/23(3)

     70        64   

Verisk Analytics, Inc.
4.000%, 6/15/25

     190        187   
   

 

 

  
      1,582   
   

 

 

  
Materials—3.1%   

Alpek SA de C.V. 144A
5.375%, 8/8/23(3)

     310        319   

ArcelorMittal
6.125%, 6/1/25

     155        126   

Berry Plastics Corp.
5.125%, 7/15/23

     145        137   

Braskem America Finance Co. RegS
7.125%, 7/22/41(4)

     210        147   

Cemex SAB de CV 144A
7.250%, 1/15/21(3)

     265        265   

Eldorado Gold Corp. 144A
6.125%, 12/15/20(3)

     95        84   

Fibria Overseas Finance Ltd.
5.250%, 5/12/24

     150        145   

Fortescue Metals Group (FMG) Resources August 2006 Pty Ltd. 144A
9.750%, 3/1/22(3)

     25        23   

Hexion U.S. Finance Corp.
6.625%, 4/15/20

     130        111   

Inversiones CMPC S.A. 144A
4.375%, 5/15/23(3)

     375        367   

Methanex Corp.
4.250%, 12/1/24

     190        183   

NewMarket Corp.
4.100%, 12/15/22

     288        295   

Owens-Brockway Glass Container, Inc. 144A
5.875%, 8/15/23(3)

     10        10   

United States Steel Corp.
6.875%, 4/1/21

     110        84   
   

 

 

  
      2,296   
   

 

 

  
Telecommunication Services—1.8%   

AT&T, Inc.
3.875%, 8/15/21

     425        442   
 

 

See Notes to Financial Statements

 

 

 

28

Table of Contents

VIRTUS BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Telecommunication Services—continued   

Empresa Nacional de Telecomunicaciones S.A. 144A
4.875%, 10/30/24(3)

   $ 215      $ 214   

Frontier Communications Corp.

    

6.250%, 9/15/21

     100        84   

144A 10.500%, 9/15/22(3)

     25        24   

Level 3 Financing, Inc.
7.000%, 6/1/20

     160        166   

Telefonica Emisiones SAU
4.570%, 4/27/23

     225        235   

Windstream Corp.
7.750%, 10/15/20

     200        171   
   

 

 

  
      1,336   
   

 

 

  
Utilities—2.0%    

AmeriGas Partners LP
7.000%, 5/20/22

     140        144   

Calpine Corp.
5.375%, 1/15/23

     121        113   

Electricite de France SA 144A
5.250%,(2)(3)(6)(7)

     280        269   

FirstEnergy Transmission LLC 144A
4.350%, 1/15/25(3)

     210        215   

Israel Electric Corp. Ltd. 144A
5.625%, 6/21/18(3)

     250        267   

NRG Yield Operating LLC
5.375%, 8/15/24

     60        53   

State Grid Overseas Investment Ltd.
144A 4.125%, 5/7/24(3)

     200        211   

Talen Energy Supply LLC 144A
4.625%, 7/15/19(3)

     90        82   

TerraForm Power Operating LLC 144A

    

5.875%, 2/1/23(3)

     145        129   
   

 

 

  
              1,483   
TOTAL CORPORATE BONDS AND NOTES (Identified Cost $37,131)         36,385   
CONVERTIBLE BOND—0.5%   

General Electric Capital Corp. Series A
7.125%, 12/15/49(2)

     290        335   
TOTAL CONVERTIBLE BOND
(Identified Cost $290)		         335   
LOAN AGREEMENTS(2)—6.1%   
Consumer Discretionary—1.7%   

Brickman Group Ltd. LLC (The) Second Lien,
7.500%, 12/17/21

     78        76   

Caesars Entertainment Operating Co., Inc. Tranche B-7,
11.500%, 1/28/18

     50        45   

Caesars Growth Properties Holdings LLC Tranche B, First Lien,
6.250%, 5/8/21

     60        53   

CBAC Borrower LLC Tranche B,
8.250%, 7/2/20

     75        71   
    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

Cirque Du Soleil
5.000%, 7/8/22

   $ 40      $ 40   

El Dorado Resorts, Inc.
4.250%, 7/25/22

     35        35   

Laureate Education, Inc. 2018 Extended,
5.000%, 6/15/18

     80        67   

Life Time Fitness, Inc.
4.250%, 6/10/22

     95        95   

Marina District Finance Co., Inc.
6.500%, 8/15/18

     76        77   

Peppermill Casinos, Inc. Tranche B,
7.250%, 11/9/18

     211        212   

PetSmart, Inc. Tranche B-1
4.250%, 3/11/22

     21        21   

Shingle Springs Tribal Gaming Authority
6.250%, 8/29/19

     96        96   

Staples, Inc. First Lien,
0.000%, 4/23/21(11)

     148        147   

TWCC Holding Corp. Second Lien,
7.000%, 6/26/20

     145        136   

U.S. Farathane Corp.
6.750%, 12/23/21

     77        77   
   

 

 

  
      1,248   
   

 

 

  
Consumer Staples—0.5%    

Albertson’s LLC Tranche B-4,
5.500%, 8/25/21

     112        112   

Hostess Brands LLC Tranche B Second Lien,
8.500%, 8/3/23

     150        151   

Rite Aid Corp.

    

Tranche 1 5.750%, 8/21/20

     14        14   

Tranche 2, Second Lien,
4.875%, 6/21/21

     80        80   
   

 

 

  
      357   
   

 

 

  
Energy—0.6%    

Arch Coal, Inc.
6.250%, 5/16/18

     158        90   

Chelsea Petroleum I LLC
0.000%, 7/22/22(11)

     95        94   

Chief Exploration & Development LLC Second Lien,
7.500%, 5/16/21

     117        97   

Drillships Ocean Ventures, Inc.
5.500%, 7/25/21

     99        67   

Jonah Energy LLC Second Lien,
7.500%, 5/12/21

     94        76   
   

 

 

  
      424   
   

 

 

  
Financials—0.1%    

Capital Automotive LP Second Lien,
6.000%, 4/30/20

     71        72   
   

 

 

  
Health Care—1.1%    

AMAG Pharmaceuticals, Inc.
4.750%, 8/17/21

     26        26   
    PAR
VALUE		     VALUE  
Health Care—continued   

Amneal Pharmaceuticals LLC Tranche B,
5.750%, 11/1/19

   $ 57      $ 57   

Ardent Legacy Acquisitions, Inc.
6.500%, 8/4/21

     80        80   

Concentra, Inc. First Lien, Tranche B
5.250%, 6/1/22

     9        9   

InVentiv Health, Inc. Tranche B-4,
7.750%, 5/15/18

     110        110   

MMM Holdings, Inc.
9.750%, 12/12/17(13)

     52        39   

MSO of Puerto Rico, Inc.
9.750%, 12/12/17(13)

     37        29   

NVA Holdings, Inc.
Second Lien
8.000%, 8/14/22

     74        73   

Regional Care, Inc. (RCHP, Inc.)
First Lien,
5.250%, 4/23/19

     134        133   

Schumacher Group
0.000%, 7/31/22(11)

     80        80   

Surgery Center Holdings, Inc.

    

First Lien, 5.250%, 11/3/20

     100        101   

Second Lien,
8.500%, 11/3/21

     63        64   
   

 

 

  
      801   
   

 

 

  
Industrials—0.5%   

Landmark U.S. Member LLC (Landmark U.S. Corp Acquisition, Inc.) Second Lien
8.250%, 1/25/21

     120        120   

Navistar, Inc.
6.500%, 8/7/20

     149        146   

Sedgwick Claims Management Services, Inc. Second Lien,
6.750%, 2/28/22

     120        114   
   

 

 

  
      380   
   

 

 

  
Information Technology—1.1%   

Allflex Holdings III, Inc.
Second Lien,
8.000%, 7/19/21

     109        108   

Applied Systems, Inc.
Second Lien,
7.500%, 1/24/22

     81        81   

Deltek, Inc.

    

First Lien 5.000%, 6/25/22

     5        5   

Second Lien
9.500%, 6/26/23

     51        51   

Epicor Software Corp.
Tranche B,
4.750%, 6/1/22

     58        57   

First Data Corp.
3.946%, 7/8/22

     35        35   

Infinity Acquisition Ltd.
4.000%, 8/6/21

     76        75   
 

 

See Notes to Financial Statements

 

 

 

29

Table of Contents

VIRTUS BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Information Technology—continued   

Kronos Acquisition Intermediate, Inc. (KIK Custom Products, Inc.) Second Lien,
9.750%, 4/30/20

   $ 195      $ 199   

Mitchell International, Inc. Second Lien,
8.500%, 10/11/21

     108        108   

Riverbed Technologies, Inc.
6.000%, 4/25/22

     68        68   

SS&C Technologies, Inc.

    

Tranche B-1,
4.000%, 7/8/22

     48        48   

Tranche B-2,
4.000%, 7/8/22

     8        7   
   

 

 

  
      842   
   

 

 

  
Materials—0.2%   

CPI Acquisition, Inc.
First Lien,
6.750%, 8/17/22

     75        75   

Houghton International, Inc. Holding Corp. Second Lien,
9.750%, 12/21/20

     110        109   

INEOS U.S. Finance LLC 2022 Dollar
4.250%, 3/31/22

     9        9   
   

 

 

  
      193   
   

 

 

  
Utilities—0.3%   

Atlantic Power LP
4.750%, 2/24/21

     31        30   

NRG Energy, Inc.
2.750%, 7/1/18

     199        196   
   

 

 

  
              226   
TOTAL LOAN AGREEMENTS (Identified Cost $4,745)             4,543   
    SHARES        
PREFERRED STOCKS—3.2%   
Energy—0.3%   

PTT Exploration & Production PCL 144A, 4.875%(2)(3)

     200 (12)      193   
   

 

 

  
Financials—2.9%    

Bank of New York Mellon Corp. (The)
Series E, 4.950%(2)

     150 (12)      148   

Citigroup, Inc.
Series J, 7.125%

     8,000        215   

Citigroup, Inc.
Series N, 5.800%(2)

     155 (12)      153   

General Electric Capital Corp.
Series C, 5.25%(2)

     300 (12)      309   

Goldman Sachs Group, Inc. (The) Series L, 5.700%(2)

     115 (12)      115   

JPMorgan Chase & Co.
Series V, 5.000%(2)

     315 (12)      306   
    SHARES     VALUE  
Financials—continued   

PNC Financial Services Group, Inc. (The)
Series R, 4.850%(2)

     215 (12)    $ 201   

SunTrust Bank, Inc.
5.625%(2)(7)

     45 (12)      45   

Wells Fargo & Co.
Series K, 7.980%(2)

     230 (12)      243   

XLIT Ltd. Group plc
6.500%(2)

     240 (12)      190   

Zions Bancorp
6.950%(2)

     8,800        247   
   

 

 

  
              2,172   
TOTAL PREFERRED STOCKS
(Identified Cost $2,419)		         2,365   
AFFILIATED MUTUAL FUND—1.5%   

Virtus Credit Opportunities Fund(15)

     116,984        1,143   
TOTAL AFFILIATED MUTUAL FUND
(Identified Cost $1,170)		         1,143   
TOTAL LONG TERM INVESTMENTS—98.2%
  
(Identified Cost $73,769)             73,147 (14) 
SHORT-TERM INVESTMENT—1.4%   
Money Market Mutual Fund—1.4%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     1,061,676        1,062   
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $1,062)		         1,062   
TOTAL INVESTMENTS—99.6%
(Identified Cost $74,831)		         74,209 (1) 

Other assets and liabilities, net—0.4%

  

     290   
   

 

 

  
NET ASSETS—100.0%     $ 74,499   
   

 

 

  

Abbreviations:

FHLMC Federal Home Loan Mortgage Corporation (“Freddie Mac”).
FNMA Federal National Mortgage Association (“Fannie Mae”).
GNMA Government National Mortgage Association (“Ginnie Mae”)
PIK Payment-in-Kind Security
REIT Real Estate Investment Trust

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Variable or step coupon security; interest rate shown reflects the rate in effect at September 30, 2015.
(3)  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, 2015, these securities amounted to a value of $19,993 or 26.8% of net assets.
(4)  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.
(5)  Security in default.
(6)  No contractual maturity date.
(7)  Interest payments may be deferred.
(8)  This Note was issued for the sole purpose of funding a loan agreement between the issuer and the borrower. As the credit risk for this security lies solely with the borrower, the name represented here is that of the borrower.
(9)  92.1% of the income received was in cash and 7.9% in PIK.
(10)  100% of the income received was in cash.
(11)  This loan will settle after September 30, 2015, at which time the interest rate, based on the London Interbank Offered Rate (“LIBOR”) and the agreed upon spread on trade date, will be reflected.
(12)  Value shown as par value.
(13)  Illiquid security.
(14)  All or a portion of the Fund’s assets have been segregated for delayed delivery security.
(15)  This fund is a public fund and the prospectus and annual report are publicly available.

Foreign Currencies:

CLP Chilean Peso
TRY Turkish Lira

 

Country Weightings (Unaudited)†       

United States

     84 % 

Chile

     2   

Canada

     1   

Mexico

     1   

Peru

     1   

Switzerland

     1   

United Kingdom

     1   

Other

     9   

Total

     100 % 

† % of total investments as of September 30, 2015

   

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

30

Table of Contents

VIRTUS BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

       Total
Value at
September 30,
2015		        Level 1
Quoted
Prices		        Level 2
Significant
Observable
Inputs		  

Debt Securities:

               

Asset-Backed Securities

      $ 3,596         $ —         $ 3,596   

Convertible Bond

        335           —           335   

Corporate Bonds And Notes

        36,385           —           36,385   

Foreign Government Securities

        926           —           926   

Loan Agreements

        4,543           —           4,543   

Mortgage-Backed Securities

        17,566           —           17,566   

Municipal Bonds

        1,239           —           1,239   

U.S. Government Securities

        5,049           —           5,049   

Equity Securities:

               

Affiliated Mutual Fund

        1,143           1,143           —   

Preferred Stocks

        2,365           215           2,150   

Short-Term Investment

        1,062           1,062           —   
    

 

 

       

 

 

       

 

 

  

Total Investments

      $ 74,209         $ 2,420         $ 71,789   
    

 

 

       

 

 

       

 

 

  

Securities held by the Fund with an end of period value of $247 were transferred from Level 1 to Level 2 since an exchange price was no longer available.

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
And Notes		  

Investments in Securities

   

Balance as of September 30, 2014:

    $ 5   

Accrued discount/(premium)

      — (c) 

Realized gain (loss)

      — (c) 

Change in unrealized appreciation (depreciation)

      — (c) 

Purchases

      —   

Sales(b)

      (5 ) 

Transfers into Level 3(a)

      —   

Transfers from Level 3(a)

      —   
  

 

 

  

Balance as of September 30, 2015

    $ —   
  

 

 

  

 

(a)  “Transfers into and/or from” represent the ending value as of September 30, 2015, for any investment security where a change in the pricing level occurred from the beginning to the end of the period.
(b)  Includes paydowns on securities.
(c)  Amount is less than $500.

 

See Notes to Financial Statements

 

31

Table of Contents

VIRTUS CA TAX-EXEMPT BOND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
MUNICIPAL TAX-EXEMPT BONDS(2)—98.4%   
Development Revenue—9.0%   

Los Angeles County Redevelopment Refunding Authority, Long Beach Project,
5.000%, 8/1/34

   $ 215      $ 245   

Milpitas Redevelopment Agency Successor Agency Redevelopment Project Area #1
5.000%, 9/1/30

     250        296   

Sacramento Redevelopment Agency Successor Agency
5.000%, 12/1/33

     75        85   

5.000%, 12/1/34

     75        84   

San Diego Redevelopment Agency, Center City Redevelopment Project (AMBAC Insured)
5.350%, 9/1/24

     500        502   

Center City Redevelopment Project
(AMBAC Insured) 4.750%, 9/1/30

     500        514   

San Marcos Redevelopment Agency Successor Agency
5.000%, 10/1/33

     250        287   

San Mateo Redevelopment Agency Successor Agency,
5.000%, 8/1/30

     250        283   

Santa Clara Redevelopment Agency, Bayshore North Project (NATL Insured)
5.000%, 6/1/22

     500        502   
   

 

 

  
      2,798   
   

 

 

  
General Obligation—16.0%   

Cajon Valley Union School District Union School District 5.000%, 8/1/31

     250        286   

California, State of
5.500%, 3/1/26

     250        278   

(AMBAC Insured) 5.000%, 2/1/27

     290        361   

5.000%, 9/1/32

     300        339   

5.000%, 12/1/37

     275        297   

6.000%, 4/1/38

     250        291   

Contra Costa Community College District,
4.000%, 8/1/28

     45        48   

Grossmont Health Care District
5.000%, 7/15/25

     350        435   

Los Alamitos Unified School District, School Facilities Improvement District #1, 2008 Election
5.250%, 8/1/39

     250        285   

Los Angeles Unified School District,
5.000%, 7/1/24

     250        309   

Oakland Unified School District Alameda County, (AGM Insured) 5.000%, 8/1/24

     200        238   

5.000%, 8/1/33

     300        336   

Placer Union High School District (AGM Insured)
0.000%, 8/1/32

     35        18   
    PAR
VALUE		     VALUE  
General Obligation—continued   

Riverside Unified School District, (AGM Insured)
5.000%, 8/1/32

   $ 275      $ 296   

Ross Valley School District,
5.000%, 8/1/37

     350        402   

San Diego Community College District,
5.000%, 8/1/43

     150        169   

San Diego Unified School District, (AGM Insured)
5.500%, 7/1/25

     225        289   

Sequoia Union High School District,
4.000%, 7/1/26

     250        276   
   

 

 

  
      4,953   
   

 

 

  
General Revenue—24.3%    

Anaheim Public Financing Authority, Public Improvement Projects, (AGM Insured)
6.000%, 9/1/16

     390        410   

California Infrastructure & Economic Development Bank,
5.000%, 10/1/23

     200        247   

California State Municipal Finance Authority, Bowles Hall Foundation
4.000%, 6/1/22

     100        106   

Chula Vista Municipal Financing Authority,
5.000%, 9/1/27

     200        233   

Contra Costa Transportation Authority,
5.000%, 3/1/29

     220        256   

Golden State Tobacco Securitization Corp.,

    

5.000%, 6/1/29

     350        396   

5.125%, 6/1/47

     950        780   

Imperial County Local Transportation Authority,
4.000%, 6/1/20

     300        331   

Midpeninsula Regional Open Space District,
5.000%, 9/1/23

     120        148   

North City West School Facilities Financing Authority,
(AMBAC Insured)
5.250%, 9/1/19

     750        859   

Pomona, City of, Certificates of Participation (AMBAC Insured) 5.500%, 6/1/28

     700        709   

Sacramento Area Flood Control Agency, Consololidated Capital Assessment District (BHAC Insured)
5.500%, 10/1/28

     250        282   

South Bay Regional Public Communications Authority, Hawthorne Projects, (ACA Insured)
4.750%, 1/1/31

     435        439   
    PAR
VALUE		     VALUE  
General Revenue—continued    

State of California Public Works Board, Department of General Services, Buildings 8&9
6.125%, 4/1/29

   $ 500      $ 582   

Capital Projects,
5.750%, 10/1/30

     550        643   

Department of Forestry & Fire Protection,
5.000%, 11/1/32

     500        540   

Tustin Unified School District, Community Facilities, District #97-1, (BAM Insured)
5.000%, 9/1/33

     250        282   

Ventura County Public Financing Authority,
5.000%, 11/1/25

     250        296   
   

 

 

  
      7,539   
   

 

 

  
Higher Education Revenue—4.7%   

California Educational Facilities Authority, Pomona College,
5.000%, 7/1/45

     500        501   

California State University,
5.250%, 11/1/38

     500        560   

University of California,

    

5.000%, 5/15/23

     100        123   

5.000%, 5/15/23

     225        276   
   

 

 

  
      1,460   
   

 

 

  
Medical Revenue—8.0%   

California State Health Facilities Financing Authority, El Camino Hospital,
5.000%, 2/1/26

     100        119   

Cedars-Sinai Medical Center,
5.000%, 11/15/34

     400        402   

Kaiser Permanente,
5.250%, 4/1/39

     400        407   

Lucille Salter Packard Children Hospital at Stanford,
5.000%, 8/15/43

     100        112   

California State Municipal Finance Authority, Community Medical Centers,
5.000%, 2/1/27

     100        114   

California Statewide Communities Development Authority, Sutter Health, (AMBAC Insured)
5.000%, 11/15/38

     205        216   

Cottage Health System
5.000%, 11/1/43

     250        277   

St. Joseph Health System, (FGIC Insured)
5.750%, 7/1/47

     350        385   

San Benito Health Care District (CHFCLIF Insured)
4.000%, 3/1/18

     140        149   

University of California, Regents Medical, (NATL Insured)
4.750%, 5/15/31

     300        303   
   

 

 

  
      2,484   
   

 

 

  
 

 

See Notes to Financial Statements

 

 

 

32

Table of Contents

VIRTUS CA TAX-EXEMPT BOND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Natural Gas Revenue—2.3%   

Roseville Natural Gas Financing Authority,

    

5.000%, 2/15/24

   $ 450      $ 501   

5.000%, 2/15/27

     195        217   
   

 

 

  
      718   
   

 

 

  
Power Revenue—3.6%   

Northern California Power Agency, Hydroelectric Project No. 1,
5.000%, 7/1/32

     200        229   

Sacramento Municipal Utility District,

    

5.000%, 8/15/26

     350        411   

5.000%, 8/15/29

     150        177   

Southern California Public Power Authority, Windy Point Project
5.000%, 7/1/28

     250        290   
   

 

 

  
      1,107   
   

 

 

  
Pre-Refunded—14.9%   

Bay Area Toll Authority, (Pre-refunded 4/1/19 @100)
5.125%, 4/1/39

     400        459   

California State Department of Water Resources, Central Valley Project (Pre-refunded 6/1/18 @100)
5.000%, 12/1/28

     35        39   

California State Health Facilities Financing Authority,

    

Providence Health & Services, (Pre-refunded 10/1/18 @100)
6.500%, 10/1/18

     5        6   

Providence Health & Services, (Pre-refunded 10/1/18 @100)
6.500%, 10/1/38

     195        228   

California State Infrastructure & Economic Development Bank, Bay Area Toll Bridges (Pre-refunded 7/1/26 @100) (AMBAC Insured)
5.125%, 7/1/37

     755        974   

Los Angeles Unified School District, (Pre-refunded 7/1/17 @100)(AGM Insured)
5.000%, 7/1/24

     300        323   

Northern California Power Agency, (Pre-refunded 7/1/21 @ 100) (AMBAC Insured)
7.500%, 7/1/23

     195        244   

Riverside County Single Family, (Pre-refunded 11/1/15 @ 100) (GNMA Collateralized)
7.800%, 5/1/21

     1,085        1,439   

Stockton Housing Facilities Revenue, O’Connors Woods Project, (Pre-refunded 9/20/17 @ 100) (GNMA Collateralized)
5.600%, 3/20/28

     155        162   

University of California,
(Pre-refunded 5/15/16 @100) (NATL Insured)
5.000%, 5/15/28

     710        738   
   

 

 

  
      4,612   
   

 

 

  
    PAR
VALUE		     VALUE  
Transportation Revenue—6.9%   

Los Angeles Department of Airports Department of Airports,
5.000%, 5/15/32

   $ 200      $ 235   

Los Angeles Harbor Department,
5.000%, 8/1/35

     235        270   

San Diego County Regional Airport Authority,

    

5.000%, 7/1/40

     250        274   

5.000%, 7/1/40

     500        549   

San Diego Unified Port District,
5.000%, 9/1/28

     200        232   

San Francisco City & County Airports Community, San Francisco International Airport,
5.000%, 5/1/43

     150        167   

San Francisco Municipal Transportation Agency,

    

5.000%, 3/1/31

     125        143   

5.000%, 3/1/33

     250        288   
   

 

 

  
      2,158   
   

 

 

  
Water & Sewer Revenue—8.7%   

Los Angeles County Sanitation District #14
5.000%, 10/1/25

     300        372   

Los Angeles Department of Water & Power,
5.000%, 7/1/35

     295        341   

Manteca, City of, Water Revenue,
5.000%, 7/1/27

     300        346   

Oakland, City of, Sewer Revenue,
5.000%, 6/15/29

     200        237   

Ross Valley Public Financing Authority, Sanitary District #1 (AGM Insured)
5.000%, 10/1/33

     225        263   

San Diego County Water Authority,
5.000%, 5/1/31

     250        289   

Santa Margarita-Dana Point Authority, Water Improvements Districts #‘s 2,3,4,
5.125%, 8/1/38

     630        693   

Silicon Valley Clean Water, Sewer Improvement
5.000%, 2/1/34

     150        171   
   

 

 

  
              2,712   
TOTAL MUNICIPAL TAX-EXEMPT BONDS (Identified Cost $28,913)         30,541   
TOTAL LONG TERM INVESTMENTS—98.4%   
(Identified Cost $28,913)        30,541   
TOTAL INVESTMENTS—98.4%
(Identified Cost $28,913)		         30,541 (1) 

Other assets and liabilities, net—1.6%

  

     496   
   

 

 

  
NET ASSETS—100.0%     $ 31,037   
   

 

 

  

Abbreviations:

ACA American Capital Access Financial Guarantee Corp.
AGM Assured Guaranty Municipal Corp.
AMBAC American Municipal Bond Assurance Corp.
BAM Build America Municipal Insured.
BHAC Berkshire Hathaway Assurance Corp.
CHFCLIF California Health Facility Construction Loan Insurance Fund.
FGIC Financial Guaranty Insurance Company
GNMA Government National Mortgage Association (“Ginnie Mae”)
NATL National Public Finance Guarantee Corp.

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  At September 30, 2015, the concentration of the Fund’s investments by state or territory determined as a percentage of net assets is as follows: California 100%. At September 30, 2015, 38.5% 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: AMBAC 14.3%.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total
Value at
September 30,
2015		      Level 2
Significant
Observable
Inputs		  

Debt Securities:

      

Municipal Tax-Exempt Bonds

    $ 30,541       $ 30,541   
  

 

 

     

 

 

  

Total Investments

    $ 30,541       $ 30,541   
  

 

 

     

 

 

  

There are no Level 1 (quoted Prices) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

33

Table of Contents

VIRTUS ESSENTIAL RESOURCES FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—96.7%   
Consumer Discretionary—4.0%   

Delphi Automotive plc (United Kingdom)

     395      $ 30   

EnerCare, Inc. (Canada)

     7,572        80   

Johnson Controls, Inc. (United States)

     1,253        52   
   

 

 

  
      162   
   

 

 

  
Consumer Staples—13.9%   

Adecoagro SA (Brazil)(2)

     5,844        47   

AG Growth International, Inc. (Canada)

     684        18   

Andersons, Inc. (The) (United States)

     754        26   

Archer-Daniels-Midland Co. (United States)

     1,295        54   

Aryzta AG (Switzerland)

     477        20   

Bunge Ltd. (United States)

     1,027        75   

Golden Agri-Resources Ltd. (Singapore)

     133,000        31   

Greencore Group plc (Ireland)

     5,558        23   

Indofood Agri Resources Ltd. (Singapore)

     56,000        20   

JBS SA (Brazil)

     3,900        16   

KWS SAAT AG (Germany)

     78        26   

Marine Harvest ASA (Norway)

     1,984        25   

Minerva Sa/Brazil (Brazil)

     6,600        22   

Origin Enterprises plc (Ireland)

     6,560        47   

Purecircle Ltd. (United Kingdom)(2)

     4,295        28   

SLC Agricola SA (Brazil)

     10,800        49   

SunOpta, Inc. (Canada)(2)

     5,449        26   

United Natural Foods, Inc. (United States)(2)

     292        14   
   

 

 

  
      567   
   

 

 

  
Energy—5.0%   

Cosan Ltd. (Brazil)

     21,100        61   

Energy Development Corp. (Philippines)

     188,300        22   

Greenko Group plc (India)(2)

     10,255        12   

Infinis Energy plc (United Kingdom)

     10,446        21   

Innergex Renewable Energy, Inc. (Canada)

     3,498        28   

Newalta Corp. (Canada)

     2,657        18   

Pattern Energy Group, Inc. (United States)

     1,267        24   

TransAlta Renewables, Inc. (Canada)

     2,336        18   
   

 

 

  
      204   
   

 

 

  
Financials—4.7%   

Capital Stage AG (Germany)

     3,900        38   

Gladstone Land Corp. (United States)

     2,310        21   

Hannon Armstrong Sustainable Infrastructure Capital, Inc. (United States)

     1,049        18   

Metro Pacific Investments Corp. (Philippines)

     62,400        7   

PICO Holdings, Inc. (United States)(2)

     3,524        34   
    SHARES     VALUE  
Financials—continued   

Renewables Infrastructure Group Ltd. (The) (United Kingdom)

     30,209      $ 46   

Saeta Yield SA (Spain)

     3,111        29   
   

 

 

  
      193   
   

 

 

  
Health Care—0.6%   

Genus plc (United Kingdom)

     1,180        25   
   

 

 

  
Industrials—32.3%   

Aegion Corp. (United States)(2)

     1,611        27   

AGCO Corp. (United States)

     500        23   

Ameresco, Inc. (United States)(2)

     3,866        23   

Amiad Water Systems Ltd. (Israel)

     3,414        8   

Arcadis NV (Netherlands)

     2,422        57   

BayWa AG (Germany)

     1,635        53   

Canadian National Railway Co. (Canada)

     432        25   

China Everbright International Ltd. (Hong Kong)(2)

     8,000        11   

Covanta Holding Corp. (United States)

     2,876        50   

CSX Corp. (United States)

     2,038        55   

Danaher Corp. (United States)

     525        45   

Deere & Co. (United States)

     246        18   

Dialight plc (United Kingdom)

     840        8   

DIRTT Environmental Solutions (Canada)(2)

     1,683        7   

Eaton Corp. plc (United States)

     774        40   

Ebara Corp. (Japan)

     6,000        22   

Empresas ICA Sab de CV (Mexico)(2)

     42,700        18   

Flowserve Corp. (United States)

     433        18   

Franklin Electric Co., Inc. (United States)

     596        16   

FuelCell Energy, Inc.
(United States)(2)

     7,477        5   

Gamesa Corp Tecnologica SA (Spain)

     1,425        20   

GEA Group AG (Germany)

     1,328        51   

Georg Fisher AG Registered Shares (Switzerland)

     65        37   

HD Supply Holdings, Inc. (United States)(2)

     1,887        54   

Lumenpulse, Inc. (Canada)(2)

     1,425        13   

MasTec, Inc. (United States)(2)

     435        7   

Mueller Water Products, Inc. Class A (United States)

     6,231        48   

Noble Group Ltd. (Singapore)

     35,000        10   

Pentair plc (United States)

     1,302        66   

PNE Wind AG (Germany)(2)

     8,693        20   

Prysmian SpA (Italy)

     814        17   

Quanta Services, Inc. (United States)

     657        16   

Regal-Beloit Corp. (United States)

     496        28   

Rexnord Corp. (United States)(2)

     4,103        70   

Rotork plc. (United Kingdom)

     3,167        8   

Rumo Logistica Operadora Multimodal SA (Brazil)(2)

     5,930        9   

SIG plc (United Kingdom)

     13,438        35   

SPX Corp. (United States)

     1,613        19   

SPX Flow, Inc. (United States)(2)

     2,599        89   

Tetra Tech, Inc. (United States)

     1,621        39   

Toro Co. (The) (United States)

     424        30   

Xylem, Inc. (United States)

     1,690        56   

Zumtobel Group AG (Austria)

     2,094        46   
   

 

 

  
      1,317   
   

 

 

  
    SHARES     VALUE  
Information Technology—11.2%    

Canadian Solar, Inc. (Canada)(2)

     2,574      $ 43   

Daqo New Energy Corp. ADR (China)(2)

     421        7   

First Solar, Inc. (United States)(2)

     1,116        48   

GCL-Poly Energy Holdings Ltd. (China)(2)

     88,000        17   

Itron, Inc. (United States)(2)

     2,426        77   

JinkoSolar Holding Co.Ltd. ADR (China)(2)

     2,120        46   

PSI AG Gesellschaft Fuer Produkte Und Systeme Der Informationstechnologie (Germany)(2)

     992        13   

Pure Technologies Ltd. (Canada)

     6,960        27   

SolarEdge Technologies, Inc. (United States)(2)

     615        14   

SunEdison, Inc. (United States)(2)

     1,210        9   

SunPower Corp. (United States)(2)

     4,173        84   

Trimble Navigation Ltd. (United States)(2)

     1,464        24   

Trina Solar Ltd. ADR (China)(2)

     5,452        49   
   

 

 

  
      458   
   

 

 

  
Materials—11.6%    

Agrium, Inc. (Canada)

     550        49   

Calgon Carbon Corp. (United States)

     3,400        53   

CF Industries Holdings, Inc. (United States)

     313        14   

Ecolab, Inc. (United States)

     254        28   

FMC Corp. (United States)

     481        16   

Israel Chemicals Ltd. (Israel)

     3,593        18   

Johnson Matthey plc (United Kingdom)

     1,104        41   

Monsanto Co. (United States)

     463        40   

Mosaic Co. (The) (United States)

     1,301        40   

PhosAgro OAO GDR Registered Shares (Russia)

     3,093        43   

Plant Health Care plc (United Kingdom)(2)

     10,774        15   

Potash Corp. of Saskatchewan, Inc. (Canada)

     1,515        31   

Syngenta AG Registered Shares (Switzerland)

     172        55   

Yara International ASA (Norway)

     746        30   
   

 

 

  
      473   
   

 

 

  
Utilities—13.4%    

American Water Works Co., Inc. (United States)

     648        36   

Aqua America, Inc. (United States)

     1,169        31   

Beijing Enterprises Water Group Ltd. Class H (Hong Kong)

     22,000        15   

Beijing Jingneng Clean Energy Co., Ltd. (China)

     96,000        29   

California Water Service Group (United States)

     1,750        39   

Capstone Infrastructure Corp. (Canada)

     26,054        60   

China Everbright Water Ltd. (China)(2)

     18,800        8   

Companhia de Saneamento Basico do Estado de Sao Paulo ADR (Brazil)

     3,695        14   
 

 

See Notes to Financial Statements

 

 

 

34

Table of Contents

VIRTUS ESSENTIAL RESOURCES FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
Utilities—continued   

Companhia de Saneamento de Minas Gerais (Brazil)

     2,500      $ 8   

CT Environmental Group (Cayman Islands)

     24,000        8   

EDP Renovaveis SA (Spain)

     4,004        26   

Huaneng Renewables Corp. Ltd. Class H (China)

     100,000        37   

Manila Water Co, Inc. (Philippines)

     24,600        11   

National Grid plc (United Kingdom)

     1,990        28   

NextEra Energy, Inc. (United States)

     280        27   

Northland Power, Inc. (Canada)

     2,138        28   

SevernTrent plc (United Kingdom)

     608        20   

Suez Environnement SA (France)

     3,883        70   

United Utilities Group plc (United Kingdom)

     2,130        30   

Veolia Environnement SA (France)

     911        21   
   

 

 

  
              546   
TOTAL COMMON STOCKS
(Identified Cost $4,918)		         3,945   
CLOSED END FUNDS—0.8%   
Financials—0.3%     

Greencoat UK Wind plc Fund (United Kingdom)

     8,453        14   
   

 

 

  
    SHARES     VALUE  
Industrials—0.5%     

Chemtrade Logistics Income Fund (Canada)

     1,460      $ 19   
TOTAL CLOSED END FUNDS
(Identified Cost $39)		         33   
TOTAL LONG TERM INVESTMENTS—97.5%   
(Identified Cost $4,957)        3,978   
SHORT-TERM INVESTMENT—1.8%   
Money Market Mutual Fund—1.8%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     72,144        72   
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $72)		         72   
TOTAL INVESTMENTS—99.3%
(Identified Cost $5,029)		         4,050 (1) 

Other assets and liabilities, net—0.7%

  

     27   
   

 

 

  
NET ASSETS—100.0%     $ 4,077   
   

 

 

  

Abbreviation:

ADR American Depositary Receipt

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.

 

Country Weightings (Unaudited)†       

United States

     45 % 

Canada

     12   

United Kingdom

     9   

Brazil

     5   

China

     5   

Germany

     5   

Switzerland

     3   

Other

     16   

Total

     100 % 

† % of total investments as of September 30, 2015

   

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total
Value at
September 30, 2015		      Level 1
Quoted
Prices		      Level 2
Significant
Observable
Inputs		  

Equity Securities:

         

Closed End Funds

    $ 33       $ 33       $ —   

Common Stocks

      3,945         3,696         249   

Short-Term Investment

      72         72         —   
  

 

 

     

 

 

     

 

 

  

Total Investments

    $ 4,050       $ 3,801       $ 249   
  

 

 

     

 

 

     

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

See Notes to Financial Statements

 

 

 

35

Table of Contents

VIRTUS HIGH YIELD FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
MORTGAGE-BACKED SECURITIES—1.7%   
Non-Agency—1.7%   

Citigroup Mortgage Loan Trust, Inc. 05-5, 2A3
5.000%, 8/25/35

   $ 124      $ 123   

Goldman Sachs Residential Mortgage Loan Trust 05-5F, B1
5.752%, 6/25/35(2)

     273        265   

Home Equity Loan Trust 07-HSA3, AI4
6.110%, 6/25/37(2)

     415        421   

MASTR Reperforming Loan Trust 05-1, 1A5 144A
8.000%, 8/25/34(3)

     240        257   

Residential Accredit Loans, Inc. 05-QS1, A5
5.500%, 1/25/35

     137        139   
TOTAL MORTGAGE-BACKED SECURITIES
(Identified Cost $1,182)		         1,205   
ASSET-BACKED SECURITIES—0.6%   

Greater Capital Association of Realtors 15-1A, C
9.790%, 10/15/25

     250        250   

LEAF Receivables Funding 10 LLC 15-1, E2 144A
6.000%, 6/15/23(3)

     160        154   
TOTAL ASSET-BACKED SECURITIES
(Identified Cost $407)		         404   
CORPORATE BONDS AND NOTES—80.2%   
Consumer Discretionary—22.6%   

Argos Merger Sub, Inc. 144A
7.125%, 3/15/23(3)

     700        710   

Boyd Gaming Corp.

    

9.000%, 7/1/20

     275        294   

6.875%, 5/15/23

     265        270   

Brookfield Residential Properties, Inc. 144A
6.125%, 7/1/22(3)

     35        34   

Caesars Entertainment Operating Co., Inc.
9.000%, 2/15/20(4)

     450        371   

Caesars Entertainment Resort Properties LLC
8.000%, 10/1/20

     300        287   

Caesars Growth Properties Holdings LLC (Caesars Growth Properties Finance, Inc.)
9.375%, 5/1/22

     260        205   

CCO Holdings LLC

    

(CCO Holdings Capital Corp.) 6.500%, 4/30/21

     500        503   

144A 5.125%, 5/1/23(3)

     215        198   

CCO Safari II LLC 144A
4.908%, 7/23/25(3)

     110        110   

Cequel Communications
Holdings I LLC 144A
6.375%, 9/15/20(3)

     400        379   
    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

Clear Channel Worldwide Holdings, Inc.
Series A
7.625%, 3/15/20

   $ 150      $ 150   

Series B
7.625%, 3/15/20

     1,495        1,504   

Columbus International, Inc. series B,144A
7.375%, 3/30/21(3)

     245        254   

CSC Holdings LLC
5.250%, 6/1/24

     450        356   

Dana Holding Corp.
5.500%, 12/15/24

     100        97   

DISH DBS Corp.
5.000%, 3/15/23

     475        399   

Fiat Chrysler Automobiles NV
5.250%, 4/15/23

     250        234   

Hilton Worldwide Finance LLC / Hilton Worldwide Finance Corp.
5.625%, 10/15/21

     550        571   

iHeartCommunications, Inc.
10.000%, 1/15/18

     250        133   

9.000%, 3/1/21

     600        503   

Intelsat Jackson Holdings SA
5.500%, 8/1/23

     425        352   

Landry’s Holdings II, Inc. 144A
10.250%, 1/1/18(3)

     175        180   

Landry’s, Inc. 144A
9.375%, 5/1/20(3)

     425        455   

Lennar Corp.
4.500%, 11/15/19

     215        218   

MDC Holdings, Inc.
5.500%, 1/15/24

     325        330   

Meritor, Inc.
6.750%, 6/15/21

     500        505   

MGM Resorts International
6.750%, 10/1/20

     650        674   

Mohegan Tribal Gaming Authority
144A 9.750%, 9/1/21(3)

     65        66   

9.750%, 9/1/21

     100        102   

MPG Holdco I, Inc.
7.375%, 10/15/22

     225        235   

Numericable Group SA 144A
6.000%, 5/15/22(3)

     465        449   

Omega US Sub LLC 144A
8.750%, 7/15/23(3)

     650        579   

Party City Holdings, Inc. 144A
6.125%, 8/15/23(3)

     35        35   

Penn National Gaming, Inc.
5.875%, 11/1/21

     490        497   

Pinnacle Entertainment, Inc.
6.375%, 8/1/21

     300        319   

RCN Telecom Services LLC (RCN Capital Corp.) 144A
8.500%, 8/15/20(3)

     670        694   

Scientific Games International, Inc.
6.625%, 5/15/21

     250        181   

144A 7.000%, 1/1/22(3)

     350        347   

Standard Pacific Corp.
6.250%, 12/15/21

     120        129   

5.875%, 11/15/24

     150        155   
    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

Tempur Sealy International Inc 144A
5.625%, 10/15/23(3)

   $ 110      $ 110   

TRI Pointe Holdings, Inc.
5.875%, 6/15/24

     400        394   

Univision Communications, Inc. 144A
5.125%, 5/15/23(3)

     475        454   

UPCB Finance IV Ltd. 144A
5.375%, 1/15/25(3)

     200        189   

UPCB Finance Ltd. Series V 144A
7.250%, 11/15/21(3)

     44        47   

VTR Finance B.V. 144A
6.875%, 1/15/24(3)

     450        410   
   

 

 

  
      15,668   
   

 

 

  
Consumer Staples—2.0%     

Dole Food Co., Inc. 144A
7.250%, 5/1/19(3)

     250        250   

Pilgrim’s Pride Corp. 144A
5.750%, 3/15/25(3)

     105        103   

Rite Aid Corp.

    

6.750%, 6/15/21

     475        488   

144A 6.125%, 4/1/23(3)

     65        65   

Roundy’s Supermarkets, Inc. 144A
10.250%, 12/15/20(3)

     250        171   

Tops Holding LLC (Tops Markets II Corp.) 144A
8.000%, 6/15/22(3)

     275        276   
   

 

 

  
      1,353   
   

 

 

  
Energy—8.0%    

Antero Resources Corp. 144A
5.625%, 6/1/23(3)

     275        243   

Blue Racer Midstream LLC (Blue Racer Finance Corp.) 144A
6.125%, 11/15/22(3)

     340        325   

CONSOL Energy, Inc.
5.875%, 4/15/22

     200        135   

Crestwood Midstream Partners LP (Crestwood Midstream Finance Corp.) 144A
6.250%, 4/1/23(3)

     295        252   

Denbury Resources, Inc.
5.500%, 5/1/22

     150        90   

Energy Transfer Partners LP
5.875%, 1/15/24

     400        362   

EnQuest plc 144A
7.000%, 4/15/22(3)

     250        156   

EP Energy LLC (Everest Acquisition Finance, Inc.)

    

9.375%, 5/1/20

     215        186   

6.375%, 6/15/23

     230        171   

Exterran Partners LP (EXLP Finance Corp.)
6.000%, 10/1/22

     300        253   

FTS International, Inc.

    

144A 7.837%, 6/15/20(2)(3)

     230        170   

6.250%, 5/1/22

     190        60   
 

 

See Notes to Financial Statements

 

 

 

36

Table of Contents

VIRTUS HIGH YIELD FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Energy—continued    

Gulfport Energy, Corp.
7.750%, 11/1/20

   $ 250      $ 247   

Halcon Resources Corp. 144A 8.625%, 2/1/20(3)

     160        134   

Helmerich & Payne International Drilling Co.
4.650%, 3/15/25

     150        149   

Linn Energy LLC (Linn Energy Finance Corp.)
7.750%, 2/1/21

     200        47   

MarkWest Energy Partners LP (MarkWest Energy Finance Corp.)
4.875%, 12/1/24

     325        299   

Newfield Exploration Co.
5.375%, 1/1/26

     300        274   

NGL Energy Partners LP (NGL Energy Finance Corp.)
5.125%, 7/15/19

     200        183   

Pacific Exploration and Production Corp. 144A
5.375%, 1/26/19(3)

     100        38   

Parker Drilling Co. (The)
7.500%, 8/1/20

     200        165   

Regency Energy Partners LP
5.875%, 3/1/22

     235        241   

Sabine Oil & Gas Corp.
7.250%, 6/15/19(4)

     329        48   

Sabine Pass Liquefaction LLC
5.625%, 2/1/21

     380        354   

SM Energy Co.
6.125%, 11/15/22

     200        186   

Sunoco LP (Sunoco Finance Corp.)

    

144A 5.500%, 8/1/20(3)

     220        218   

144A 6.375%, 4/1/23(3)

     425        418   

Whiting Petroleum Corp.
6.250%, 4/1/23

     125        109   
   

 

 

  
      5,513   
   

 

 

  
Financials—9.3%    

Aircastle Ltd.
5.125%, 3/15/21

     550        553   

Ally Financial, Inc.
3.250%, 2/13/18

     95        94   

Corrections Corp of America
5.000%, 10/15/22

     255        257   

CTR Partnership LP (Caretrust Capital Corp.)
5.875%, 6/1/21

     300        307   

CyrusOne LP (CyrusOne Finance Corp.) 144A
6.375%, 11/15/22(3)

     350        357   

DuPont Fabros Technology LP
5.875%, 9/15/21

     350        360   

Dycom Investments, Inc.
7.125%, 1/15/21

     300        316   

ESH Hospitality, Inc. 144A
5.250%, 5/1/25(3)

     225        222   

First Cash Financial Services, Inc.
6.750%, 4/1/21

     250        251   
    PAR
VALUE		     VALUE  
Financials—continued    

Genworth Holdings, Inc.
4.900%, 8/15/23

   $ 350      $ 274   

GLP Capital LP (GLP Financing II, Inc.)

    

4.875%, 11/1/20

     215        218   

5.375%, 11/1/23

     5        5   

Hertz Corp. (The)
6.250%, 10/15/22

     350        353   

ICAHN Enterprises LP (ICAHN Enterprises Finance Corp.)
5.875%, 2/1/22

     300        302   

ING Groep NV
6.000%(2)(5)

     200        197   

iStar Financial, Inc.
5.000%, 7/1/19

     500        477   

Nationstar Mortgage LLC
6.500%, 7/1/21

     250        208   

Navient LLC
5.500%, 1/25/23

     200        158   

Springleaf Finance Corp.
5.250%, 12/15/19

     550        539   

Sprint Capital Corp.
6.900%, 5/1/19

     325        287   

Voya Financial, Inc.
5.650%, 5/15/53

     205        208   

Walter Investment Management Corp.
7.875%, 12/15/21

     300        258   

York Risk Services Holding Corp. 144A
8.500%, 10/1/22(3)

     275        235   
   

 

 

  
      6,436   
   

 

 

  
Health Care—14.3%   

Acadia Healthcare Co., Inc.

    

5.125%, 7/1/22

     145        143   

144A 5.625%, 2/15/23(3)

     30        30   

Alere, Inc.

    

6.500%, 6/15/20

     350        357   

144A 6.375%, 7/1/23(3)

     115        117   

Capsugel SA PIK Interest Capitalization 144A
7.000%, 5/15/19(2)(3)(7)

     275        275   

Community Health Systems, Inc.

    

5.125%, 8/1/21

     300        306   

6.875%, 2/1/22

     145        148   

Concordia Healthcare Corp. 144A
7.000%, 4/15/23(3)

     450        394   

Crimson Merger Sub, Inc. 144A
6.625%, 5/15/22(3)

     225        194   

DaVita Healthcare Partners, Inc.

    

5.125%, 7/15/24

     310        305   

5.000%, 5/1/25

     100        96   

DJO Finco, Inc. (DJO Finance
LLC / DJO Finance Corp.) 144A
8.125%, 6/15/21(3)

     210        205   

Emdeon, Inc. 144A
6.000%, 2/15/21(3)

     340        331   
    PAR
VALUE		     VALUE  
Health Care—continued   

Endo Finance LLC (Endo Finco, Inc.) 144A
5.375%, 1/15/23(3)

   $ 250      $ 241   

Envision Healthcare Corp. 144A
5.125%, 7/1/22(3)

     300        298   

Fresenius US Finance II, Inc. 144A
4.500%, 1/15/23(3)

     60        60   

HCA, Inc.

    

6.500%, 2/15/20

     425        463   

5.375%, 2/1/25

     600        597   

Healthsouth Corp.

    

144A 5.750%, 11/1/24(3)

     40        40   

144A 5.750%, 9/15/25(3)

     275        267   

Hill-Rom Holdings, Inc. 144A
5.750%, 9/1/23(3)

     375        378   

Hologic, Inc. 144A
5.250%, 7/15/22(3)

     55        56   

inVentiv Health, Inc. 144A
9.000%, 1/15/18(3)

     130        134   

Jaguar Holding Co. II (Pharmaceutical Product Development LLC) 144A
6.375%, 8/1/23(3)

     230        224   

JLL Delta Dutch Pledgeco BV PIK Interest Capitalization, 8.75% interest,
0.75% capitalization
144A, 5/1/20(3)(8)

     245        247   

Mallinckrodt International Finance S.A.

    

144A 4.875%, 4/15/20(3)

     10        10   

144A 5.750%, 8/1/22(3)

     105        102   

144A 5.625%, 10/15/23(3)

     435        397   

144A 5.500%, 4/15/25(3)

     20        18   

Pinnacle Merger Sub, Inc. (PRA Holdings, Inc.) 144A
9.500%, 10/1/23(3)

     225        249   

Quintiles Transnational Corp. 144A
4.875%, 5/15/23(3)

     300        298   

Select Medical Corp.
6.375%, 6/1/21

     350        343   

Sterigenics-Nordion Holdings LLC 144A
6.500%, 5/15/23(3)

     325        323   

Surgical Care Affiliates, Inc. 144A
6.000%, 4/1/23(3)

     400        398   

Tenet Healthcare Corp.

    

6.000%, 10/1/20

     375        397   

4.500%, 4/1/21

     275        272   

Valeant Pharmaceuticals International, Inc.

    

144A 6.750%, 8/15/18(3)

     155        158   

144A 5.375%, 3/15/20(3)

     800        780   

144A 7.250%, 7/15/22(3)

     250        258   
   

 

 

  
      9,909   
   

 

 

  
Industrials—6.7%   

ADS Waste Holdings, Inc.
8.250%, 10/1/20

     300        301   
 

 

See Notes to Financial Statements

 

 

 

37

Table of Contents

VIRTUS HIGH YIELD FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Industrials—continued   

ADT Corp. (The)
6.250%, 10/15/21

   $ 400      $ 414   

Ahern Rentals, Inc. 144A
7.375%, 5/15/23(3)

     274        240   

American Airlines Group, Inc. 144A
4.625%, 3/1/20(3)

     160        156   

Bombardier, Inc. 144A
6.125%, 1/15/23(3)

     200        148   

Builders FirstSource, Inc.

    

144A 7.625%, 6/1/21(3)

     300        314   

144A 10.750%, 8/15/23(3)

     150        151   

Building Materials Corp. of America 144A
5.375%, 11/15/24(3)

     170        169   

CEB, Inc. 144A
5.625%, 6/15/23(3)

     150        150   

Garda World Security Corp. 144A
7.250%, 11/15/21(3)

     410        378   

Harland Clarke Holdings Corp.

    

144A 6.875%, 3/1/20(3)

     150        136   

144A 9.250%, 3/1/21(3)

     300        250   

HD Supply, Inc. 144A
5.250%, 12/15/21(3)

     400        404   

JBS Investments GmbH 144A
7.250%, 4/3/24(3)

     200        193   

NCI Building Systems, Inc. 144A
8.250%, 1/15/23(3)

     290        305   

TransDigm, Inc.

    

6.000%, 7/15/22

     300        281   

144A 6.500%, 5/15/25(3)

     230        217   

United Rentals North America, Inc.
5.500%, 7/15/25

     500        469   
   

 

 

  
      4,676   
   

 

 

  
Information Technology—1.8%   

First Data Corp.
11.750%, 8/15/21

     675        751   

Interactive Data Corp. 144A
5.875%, 4/15/19(3)

     300        302   

Riverbed Technology, Inc. 144A
8.875%, 3/1/23(3)

     215        196   
   

 

 

  
      1,249   
   

 

 

  
Materials—6.0%   

ArcelorMittal
6.125%, 6/1/25

     150        122   

Ardagh Packaging Finance plc

    

144A 6.250%, 1/31/19(3)

     145        145   

144A 9.125%, 10/15/20(3)

     275        287   

144A 6.750%, 1/31/21(3)

     295        297   

Berry Plastics Corp.
5.125%, 7/15/23

     400        379   

Beverage Packaging Holdings Luxembourg II SA 144A
6.000%, 6/15/17(3)

     180        177   

Cascades, Inc.

    

144A 5.500%, 7/15/22(3)

     575        548   

144A 5.750%, 7/15/23(3)

     225        215   
    PAR
VALUE		     VALUE  
Materials—continued   

Cemex SAB de CV 144A
7.250%, 1/15/21(3)

   $ 245      $ 245   

Eldorado Gold Corp. 144A
6.125%, 12/15/20(3)

     150        132   

Fortescue Metals Group (FMG) Resources August 2006 Pty Ltd. 144A
9.750%, 3/1/22(3)

     185        173   

Hexion U.S. Finance Corp.
6.625%, 4/15/20

     260        222   

INEOS Group Holdings SA

    

144A 6.125%, 8/15/18(3)

     235        222   

144A 5.875%, 2/15/19(3)

     305        285   

Owens-Brockway Glass Container, Inc. 144A
5.875%, 8/15/23(3)

     20        20   

Reynolds Group Issuer, Inc.
8.250%, 2/15/21

     190        191   

Sappi Papier Holding GmbH 144A
6.625%, 4/15/21(3)

     300        305   

United States Steel Corp.
6.875%, 4/1/21

     100        77   

Vedanta Resources plc 144A
9.500%, 7/18/18(3)

     100        84   
   

 

 

  
      4,126   
   

 

 

  
Telecommunication Services—7.0%   

Altice Financing SA

    

144A 6.625%, 2/15/23(3)

     480        462   

Luxemborg, 144A
7.625%, 2/15/25(3)

     480        422   

US II Corp. 144A
7.750%, 7/15/25(3)

     200        178   

CenturyLink, Inc. Series V
5.625%, 4/1/20

     375        348   

Digicel Group Ltd. 144A
8.250%, 9/30/20(3)

     310        288   

Frontier Communications Corp.

    

8.500%, 4/15/20

     425        414   

144A 8.875%, 9/15/20(3)

     40        39   

6.250%, 9/15/21

     125        105   

144A 10.500%, 9/15/22(3)

     45        44   

Level 3 Financing, Inc.
7.000%, 6/1/20

     250        259   

Millicom International Cellular SA 144A
6.625%, 10/15/21(3)

     300        298   

Neptune Finco Corp.

    

144A 10.125%, 1/15/23(3)

     210        212   

144A 6.625%, 10/15/25(3)

     210        212   

Sprint Capital Corp.
6.875%, 11/15/28

     250        182   

Sprint Corp.
7.875%, 9/15/23

     325        264   

T-Mobile USA, Inc.

    

6.625%, 11/15/20

     150        153   

6.125%, 1/15/22

     240        232   

6.836%, 4/28/23

     250        248   

6.500%, 1/15/24

     275        267   

Windstream Corp.
7.750%, 10/1/21

     300        234   
   

 

 

  
      4,861   
   

 

 

  
    PAR
VALUE		     VALUE  
Utilities—2.5%   

Abengoa Yield plc 144A
7.000%, 11/15/19(3)

   $ 230      $ 203   

AmeriGas Partners LP
7.000%, 5/20/22

     325        335   

Calpine Corp.
5.375%, 1/15/23

     350        328   

NRG Yield Operating LLC
5.375%, 8/15/24

     190        168   

Talen Energy Supply LLC 144A
4.625%, 7/15/19(3)

     325        297   

TerraForm Power Operating LLC 144A
5.875%, 2/1/23(3)

     250        222   

Texas Competitive Electric Holdings Co. LLC 144A
11.500%, 10/1/20(3)(10)

     500        195   
   

 

 

  
              1,748   
TOTAL CORPORATE BONDS AND NOTES (Identified Cost $59,515)         55,539   
LOAN AGREEMENTS(2)—10.4%   
Consumer Discretionary—2.6%   

Brickman Group Ltd. LLC (The) Second Lien,
7.500%, 12/17/21

     225        220   

Caesars Entertainment Operating Co., Inc. Tranche B-7,
11.500%, 1/28/18(4)

     165        150   

CBAC Borrower LLC Tranche B,
8.250%, 7/2/20

     95        90   

Cirque Du Soleil
5.000%, 7/8/22

     179        179   

Graton Resort & Casino Tranche B,
4.750%, 9/1/22

     116        116   

Mohegan Tribal Gaming Authority Tranche B,
5.500%, 6/15/18

     114        114   

Peppermill Casinos, Inc. Tranche B,
7.250%, 11/9/18

     374        375   

Transtar Holding Co. Second Lien,
10.000%, 10/9/19

     200        194   

TWCC Holding Corp. Second Lien,
7.000%, 6/26/20

     239        224   

U.S. Farathane Corp.
6.750%, 12/23/21

     149        150   
   

 

 

  
      1,812   
   

 

 

  
Consumer Staples—0.9%     

Crossmark Holdings, Inc. Second Lien,
8.750%, 12/21/20

     190        149   

Hostess Brands LLC Tranche B Second Lien,
8.500%, 8/3/23

     430        432   
   

 

 

  
      581   
   

 

 

  
 

 

See Notes to Financial Statements

 

 

 

38

Table of Contents

VIRTUS HIGH YIELD FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Energy—0.7%    

Arch Coal, Inc.
6.250%, 5/16/18

   $ 150      $ 85   

Chief Exploration & Development LLC Second Lien,
7.500%, 5/16/21

     183        152   

Drillships Ocean Ventures, Inc.
5.500%, 7/25/21

     136        91   

Jonah Energy LLC Second Lien,
7.500%, 5/12/21

     125        101   

Sabine Oil & Gas LLC Second Lien,
8.750%, 12/31/18(4)

     285        51   
   

 

 

  
      480   
   

 

 

  
Health Care—2.3%   

21st Century Oncology, Inc. Tranche B
6.500%, 4/30/22

     224        214   

American Renal Holdings, Inc. Second Lien,
8.500%, 3/20/20

     292        292   

Ardent Legacy Acquisitions, Inc.
6.500%, 8/4/21

     130        130   

InVentiv Health, Inc. Tranche B-4,
7.750%, 5/15/18

     159        160   

MMM Holdings, Inc.
9.750%, 12/12/17(12)

     82        63   

MSO of Puerto Rico, Inc.
9.750%, 12/12/17(12)

     60        45   

NVA Holdings, Inc. Second Lien
8.000%, 8/14/22

     175        174   

Regional Care, Inc. (RCHP, Inc.) First Lien,
5.250%, 4/23/19

     249        247   

Schumacher Group
0.000%, 7/31/22(9)

     152        152   

Surgery Center Holdings, Inc. Second Lien,
8.500%, 11/3/21

     103        104   
   

 

 

  
      1,581   
   

 

 

  
Industrials—1.0%   

Filtration Group Corp. Second Lien,
8.250%, 11/22/21

     81        81   

Landmark U.S. Member LLC (Landmark U.S. Corp Acquisition, Inc.) Second Lien
8.250%, 1/25/21

     250        249   

Sedgwick Claims Management Services, Inc. Second Lien,
6.750%, 2/28/22

     390        370   
   

 

 

  
      700   
   

 

 

  
Information Technology—2.4%   

Allflex Holdings III, Inc. Second Lien,
8.000%, 7/19/21

     193        191   
    PAR
VALUE		     VALUE  
Information Technology—continued   

Applied Systems, Inc. Second Lien,
7.500%, 1/24/22

   $ 200      $ 199   

Deltek, Inc. Second Lien
9.500%, 6/26/23

     181        181   

Kronos Acquisition Intermediate, Inc. (KIK Custom Products, Inc.) Second Lien,
9.750%, 4/30/20

     450        459   

Mitchell International, Inc. Second Lien,
8.500%, 10/11/21

     500        500   

Presidio, Inc. Refinancing Term
5.250%, 2/2/22

     147        147   
   

 

 

  
      1,677   
   

 

 

  
Materials—0.5%   

Houghton International, Inc. Holding Corp. Second Lien, 9.750%, 12/21/20

     370        368   
TOTAL LOAN AGREEMENTS
(Identified Cost $7,719)		         7,199   
    SHARES        
PREFERRED STOCKS—1.2%     
Financials—1.4%    

Ally Financial, Inc.
Series A, 8.500%

     11,530        299   

Goldman Sachs Group, Inc. (The) Series L, 5.700%(2)

     215 (11)      214   

JPMorgan Chase & Co.
Series V, 5.000%(2)

     250 (11)      243   

SunTrust Bank, Inc. 5.625%(2)

     95 (11)      95   
TOTAL PREFERRED STOCKS
(Identified Cost $870)		         851   
AFFILIATED MUTUAL FUND—0.5%   

Virtus Credit Opportunities Fund(14)

     35,000        342   
TOTAL AFFILIATED MUTUAL FUND
(Identified Cost $350)		         342   
TOTAL LONG TERM INVESTMENTS—94.6%
  
(Identified Cost $70,043)        65,540 (13) 
SHORT-TERM INVESTMENT—3.6%   
Money Market Mutual Fund—3.6%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     2,503,270        2,503   
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $2,503)		         2,503   
TOTAL INVESTMENTS—98.2%
(Identified Cost $72,546)		         68,043 (1) 

Other assets and liabilities, net—1.8%

  

     1,279   
   

 

 

  
NET ASSETS—100.0%      $ 69,322   
   

 

 

  

Abbreviations:

ADS American Depositary Share
PIK Payment-in-Kind Security

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Variable or step coupon security; interest rate shown reflects the rate in effect at September 30, 2015.
(3)  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, 2015, these securities amounted to a value of $26,141 or 37.7% of net assets.
(4)  Security in default.
(5)  No contractual maturity date.
(6)  Interest payments may be deferred.
(7)  100% of the income received was in cash.
(8)  92.1% of the income received was in cash and 7.9% in PIK.
(9)  This loan will settle after September 30, 2015, at which time the interest rate, based on the London Interbank Offered Rate (“LIBOR”) and the agreed upon spread on trade date, will be reflected.
(10)  Security in default, interest payments are being received during the bankruptcy proceedings.
(11)  Value shown as par value.
(12)  Illiquid security.
(13)  All or a portion of the Fund’s assets have been segregated for delayed delivery security.
(14)  This fund is a public fund and the prospectus and annual report are publicly available.

 

Country Weightings (Unaudited)†       

United States

     84 % 

Luxembourg

     5   

Canada

     4   

Austria

     1   

Bermuda

     1   

Ireland

     1   

Netherlands

     1   

Other

     3   

Total

     100 % 

† % of total investments as of September 30, 2015.

   

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

39

Table of Contents

VIRTUS HIGH YIELD FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

       Total
Value at
September 30,
2015		        Level 1
Quoted
Prices		        Level 2
Significant
Observable
Inputs		        Level 3
Significant
Unobservable
Inputs		  

Debt Securities:

                    

Asset-Backed Securities

      $ 404         $ —         $ 154         $ 250   

Corporate Bonds And Notes

        55,539           —           55,539           —   

Loan Agreements

        7,199           —           7,005           194   

Mortgage-Backed Securities

        1,205           —           1,205           —   

Equity Securities:

                    

Affiliated Mutual Fund

        342           342           —           —   

Preferred Stocks

        851           299           552           —   

Short-Term Investment

        2,503           2,503           —           —   
    

 

 

       

 

 

       

 

 

       

 

 

  

Total Investments

      $ 68,043         $ 3,144         $ 64,455         $ 444   
    

 

 

       

 

 

       

 

 

       

 

 

  

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

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.

 

       Total      Asset-Backed
Securities		        Corporate
Bonds
And Notes		        Loan
Agreements		  

Investments in Securities

                  

Balance as of September 30, 2014:

      $ 125       $ —         $ 125         $ —   

Accrued discount/(premium)

        9         — (c)         9           —   

Realized gain (loss)

        8         —           8           —   

Change in unrealized appreciation (depreciation)

        (18 )       — (c)         (18 )         —   

Purchases

        250         250           —           —   

Sales(b)

        (124 )       —           (124 )         —   

Transfers into Level 3(a)

        194 (d)       —           —           194 (d) 

Transfers from Level 3(a)

        —         —           —           —   
    

 

 

     

 

 

       

 

 

       

 

 

  

Balance as of September 30, 2015

      $ 444       $ 250         $ —         $ 194   
    

 

 

     

 

 

       

 

 

       

 

 

  

 

(a)  “Transfers into and/or from” represent the ending value as of September 30, 2015, for any investment security where a change in the pricing level occurred from the beginning to the end of the period.
(b)  Includes paydowns on securities.
(c)  Amount less than $500.
(d)  The transfer is due to increase and/or decrease in trading activities at period end.

None of the securities in this table are internally fair valued.

 

See Notes to Financial Statements

 

40

Table of Contents

VIRTUS LOW VOLATILITY EQUITY FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
EXCHANGE-TRADED FUND—98.2%   

iShares S&P 100 Index Fund(2)(3)

     58,580      $ 4,966   
TOTAL EXCHANGE-TRADED FUND
(Identified Cost $4,961)		         4,966   
    CONTRACTS        
PURCHASED OPTION—0.3%   
Call Option—0.3%   

CBOE Volatility Index expiration 10/21/15 strike price $26

     100        15   
TOTAL PURCHASED OPTION—0.3%
(Premiums Paid $13)		         15   
TOTAL LONG TERM INVESTMENTS—98.5%   
(Identified Cost $4,974)        4,981 (1) 
    SHARES        
SHORT-TERM INVESTMENT—1.4%   
Money Market Mutual Fund—1.4%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     72,747        73   
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $73)		         73   
TOTAL INVESTMENTS, BEFORE WRITTEN OPTION—99.9%    
(Identified Cost $5,047)        5,054 (1) 
    CONTRACTS     VALUE  
WRITTEN OPTION—(0.8)%     
Call Option—(0.8)%     

S&P 500® Index expiration 10/23/15 strike price $1,970

     25      $ (39 ) 
TOTAL WRITTEN OPTION—(0.8)%
(Premiums Received $92)		         (39 ) 
TOTAL INVESTMENTS, NET OF WRITTEN OPTION—99.1%
(Identified Cost $4,955)		          5,015 (1) 

Other assets and liabilities, net—0.9%

  

     44   
   

 

 

  
NET ASSETS—100.0%     $ 5,059   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  All or a portion segregated as collateral for written options.
(3)  This fund is a public fund and the prospectus and annual report are publicly available.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total
Value at
September 30,
2015		     Level 1
Quoted
Prices		  

Equity Securities:

     

Exchange-Traded Fund

    $ 4,966      $ 4,966   

Purchased Option

      15        15   

Short-Term Investment

      73        73   
  

 

 

    

 

 

  

Total Investments before Written Option

    $ 5,054      $ 5,054   
  

 

 

    

 

 

  

Written Option

      (39 )      (39 ) 
  

 

 

    

 

 

  

Total Investments Net of Written Option

    $ 5,015      $ 5,015   
  

 

 

    

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

See Notes to Financial Statements

 

 

 

41

Table of Contents

VIRTUS MULTI-SECTOR INTERMEDIATE BOND FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
U.S. GOVERNMENT SECURITIES—1.1%   

U.S. Treasury Note

    

1.875%, 8/31/22

   $ 835      $ 842   

2.250%, 11/15/24

     2,600        2,650   
TOTAL U.S. GOVERNMENT SECURITIES
(Identified Cost $3,448)		         3,492   
MUNICIPAL BONDS—0.1%   
Michigan—0.0%   

Tobacco Settlement Finance Authority Taxable Series A,
7.309%, 6/1/34

     145        126   
   

 

 

  
Virginia—0.1%   

Tobacco Settlement Financing Corp. Series A-1, Taxable
6.706%, 6/1/46

     325        249   
TOTAL MUNICIPAL BONDS
(Identified Cost $456)		         375   
FOREIGN GOVERNMENT SECURITIES—4.4%   

Argentine Republic Series NY,
8.280%, 12/31/33(14)

     1,570        1,606   

Bolivarian Republic of Venezuela

    

RegS 5.750%, 2/26/16(4)

     295        249   

RegS 7.000%, 12/1/18(4)

     216        80   

RegS 7.750%, 10/13/19(4)

     202        70   

RegS 8.250%, 10/13/24(4)

     1,110        377   

7.650%, 4/21/25

     1,500        503   

9.250%, 9/15/27

     360        142   

9.375%, 1/13/34

     2,145        756   

Kingdom of Morocco 144A
4.250%, 12/11/22(3)

     1,030        1,040   

Mongolia 144A
5.125%, 12/5/22(3)

     825        680   

Republic of Azerbaijan 144A
4.750%, 3/18/24(3)

     880        823   

Republic of Chile
5.500%, 8/5/20

     474,000 CLP      705   

Republic of Colombia
4.375%, 3/21/23

     1,867,000 COP      495   

Republic of Costa Rica 144A
4.375%, 4/30/25(3)

     795        670   

Republic of Cote d’Ivoire 144A
6.375%, 3/3/28(3)

     905        803   

Republic of El Salvador 144A
6.375%, 1/18/27(3)

     1,405        1,240   

Republic of Iraq RegS
5.800%, 1/15/28(4)

     610        423   

Republic of Panama
3.750%, 3/16/25

     700        677   

Republic of Romania 144A
4.875%, 1/22/24(3)

     498        537   

Republic of South Africa

    

Series R203,
8.250%, 9/15/17

     3,690 ZAR      271   

Series R208,
6.750%, 3/31/21

     6,720 ZAR      456   
    PAR
VALUE		     VALUE  
FOREIGN GOVERNMENT SECURITIES—continued   

Russian Federation 144A
7.850%, 3/10/18(3)

   $ 60,000 RUB    $ 856   

United Mexican States Series M,
6.500%, 6/9/22

     17,764 MXN      1,090   
TOTAL FOREIGN GOVERNMENT SECURITIES   
(Identified Cost $19,227)        14,549   
MORTGAGE-BACKED SECURITIES—16.4%   
Agency—2.8%   

FHLMC

    

4.000%, 2/1/45

     794        846   

3.500%, 3/1/45

     2,038        2,127   

FNMA

    

3.000%, 6/1/43

     2,354        2,394   

4.000%, 10/1/44

     1,510        1,612   

3.500%, 9/1/45

     2,428        2,536   
   

 

 

  
      9,515   
   

 

 

  
Non-Agency—13.6%   

A-10 Securitization LLC

    

13-1, B 144A
4.120%, 11/15/25(3)

     1,100        1,103   

American Homes 4 Rent

    

14-SFR2, C 144A
4.705%, 10/17/36(3)

     915        933   

15-SFR1, A 144A
3.467%, 4/17/52(3)

     695        691   

Ameriquest Mortgage Securities, Inc.
03-AR3, M4
4.582%, 6/25/33(2)

     660        640   

03-AR3, M4 144A
6.040%, 10/17/45(2)

     805        814   

Aventura Mall Trust
13-AVM, C 144A
3.743%, 12/5/32(2)(3)

     845        879   

Banc of America Alternative Loan Trust 03-2, CB3
5.750%, 4/25/33

     840        870   

Bank of America (Merrill Lynch – Countrywide) Asset-Backed Certificates

    

05-1 AF5A
5.211%, 7/25/35(2)

     1,216        1,203   

05-12, 2A4
5.575%, 2/25/36(2)

     540        538   

Banc of America Funding Trust

    

05-1, 1A1
5.500%, 2/25/35

     541        546   

06-2, 3A1
6.000%, 3/25/36

     316        322   

Bank of America (Merrill Lynch – Countrywide) Alternative Loan Trust

    

04-22CB, 1A1
6.000%, 10/25/34

     519        547   

04-24CB, 1A1
6.000%, 11/25/34

     114        116   
    PAR
VALUE		     VALUE  
Non-Agency—continued   

Bank of America (Merrill Lynch – Countrywide) Mortgage Trust
06-C1, AM
5.865%, 5/12/39(2)

   $ 715      $ 729   

Bank of America (Merrill Lynch) Mortgage Investors Trust 98-C1, C
6.750%, 11/15/26(2)

     1,260        1,374   

Barclays (Lehman Brothers) – UBS Commercial Mortgage Trust 07-C7, A3
5.866%, 9/15/45

     448        483   

Citigroup Mortgage Loan Trust, Inc.

    

05-5, 2A3 5.000%, 8/25/35

     347        345   

15-A, A1 3.500%, 6/25/58(2)

     900        918   

Commercial Mortgage Trust 07-GG11, AM
5.867%, 12/10/49(2)

     1,200        1,267   

Credit Suisse Commercial Mortgage Trust
07-C5, A1AM
5.870%, 9/15/40(2)

     939        955   

CSAIL Commercial Mortgage Trust 15-C2, AS
3.849%, 6/15/57

     489        503   

Deutsche Bank-UBS Mortgage Trust
11-LC3A, D 144A
5.583%, 8/10/44(2)(3)

     860        918   

Fannie Mae Connecticut Avenue Securities
14-C02, 2M2
2.799%, 5/25/24(2)

     1,080        970   

GAHR Commercial Mortgage Trust 15-NRF, CFX 144A
3.495%, 12/15/19(2)(3)

     600        598   

GMAC Mortgage Corp. Loan Trust

    

06-HLTV, A4
5.810%, 10/25/29

     165        166   

05-AR2, 2A
3.157%, 5/25/35(2)

     729        687   

Goldman Sachs Mortgage Securities Trust II 07-GG10, A4
5.989%, 8/10/45(2)

     673        710   

Goldman Sachs Residential Mortgage Loan Trust 05-5F, B1
5.752%, 6/25/35(2)

     1,334        1,297   

GSAA Home Equity Trust
05-12, AF3W
4.999%, 9/25/35(2)

     346        355   

Hilton USA Trust
13-HLT, EFX 144A
4.602%, 11/5/30(2)(3)

     720        727   

Home Equity Loan Trust

    

03-HS3, AI4
5.550%, 9/25/33(2)

     316        325   

07-HI1, A3
5.720%, 3/25/37

     98        99   

07-HSA3, AI4
6.110%, 6/25/37(2)

     1,481        1,499   
 

 

See Notes to Financial Statements

 

 

 

42

Table of Contents

VIRTUS MULTI-SECTOR INTERMEDIATE BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Non-Agency—continued   

Jefferies Resecuritization Trust 14-R1, 2A1 144A
4.000%, 12/27/37(3)

   $ 697      $ 696   

JPMorgan Chase (Bear Stearns) Commercial Mortgage Securities, Inc.

    

07- PW15, AM
5.363%, 2/11/44

     645        663   

07-PW18, AM
6.084%, 6/11/50(2)

     1,525        1,645   

JPMorgan Chase Commercial Mortgage Securities Trust

    

14-1, 1A1 144A
3.917%, 1/25/44(2)(3)

     792        830   

07-LDPX, AM
5.464%, 1/15/49(2)

     1,341        1,378   

MASTR Alternative Loan Trust

    

04-6, 7A1
6.000%, 7/25/34

     1,309        1,333   

05-2, 2A1
6.000%, 1/25/35

     521        553   

MASTR Reperforming Loan Trust 05-1, 1A5 144A
8.000%, 8/25/34(3)

     639        684   

MASTR Specialized Loan Trust 05-3, A2 144A
5.704%, 11/25/35(2)(3)

     454        462   

Morgan Stanley Bank of America (Merrill Lynch) Trust 15-C22, AS
3.561%, 4/15/48

     965        972   

Morgan Stanley Capital I Trust 07-IQ14, AM
5.865%, 4/15/49(2)

     925        961   

Motel 6 Trust 15-MTL6, B 144A
3.298%, 2/5/30(3)

     1,080        1,088   

Nomura Asset Acceptance Corp. 04-R3, A1 144A
6.500%, 2/25/35(3)

     273        278   

Resecuritization Pass-Through Trust 05-BR, A5
6.000%, 10/25/34

     541        547   

Residential Asset Mortgage Trust 04-RZ1, M1
4.820%, 3/25/34(2)

     1,081        1,101   

Residential Asset Securitization Trust
05-A1, A3
5.500%, 4/25/35

     827        836   

Residential Funding Mortgage Securities I, Inc. 05-S1, 1A2
5.500%, 2/25/35

     566        570   

Sequoia Mortgage Trust

    

14-2, A1 144A
4.000%, 7/25/44(2)(3)

     380        392   

15-1, A1 144A
3.500%, 1/25/45(2)(3)

     959        967   
    PAR
VALUE		     VALUE  
Non-Agency—continued   

Vericrest Opportunity Loan Trust

    

15-NP11, A1 144A
3.625%, 7/25/45(2)(3)

   $ 691      $ 689   

15-NPL2, A1 144A
3.375%, 2/25/55(2)(3)

     723        721   

15-NPL3, A1 144A
3.375%, 10/25/58(2)(3)

     686        684   

VFC LLC 15-3, B 144A
4.750%, 12/20/31(3)

     1,000        999   

Wells Fargo (Royal Bank of Scotland plc) Commercial Mortgage Trust 11-C5, C 144A
5.822%, 11/15/44(2)(3)

     645        713   

Wells Fargo (Wachovia Bank) Commercial Mortgage Trust

    

07-C32, A3
5.901%, 6/15/49(2)

     360        377   

15-LC20, B
3.719%, 4/15/50

     875        850   
   

 

 

  
              45,116   
TOTAL MORTGAGE-BACKED SECURITIES
(Identified Cost $54,249)		         54,630   
ASSET-BACKED SECURITIES—4.8%   

Applebee’s LLC 14-1, A2 144A
4.277%, 9/5/44(3)

     1,260        1,289   

CarFinance Capital Auto Trust

    

14-1A, D 144A
4.900%, 4/15/20(3)

     1,316        1,326   

15-1A, C 144A
3.580%, 6/15/21(3)

     2,160        2,188   

Cheesecake Restaurant Holdings, Inc. 13-1A, A2 144A
4.474%, 3/20/43(3)

     934        967   

Conseco Financial Corp. 01-3, A4
6.910%, 5/1/33(2)

     346        381   

DB Master Finance LLC 15-A1, A2II 144A
3.980%, 2/20/45(3)

     381        384   

Domino’s Pizza Master Issuer LLC 12-1A, A2 144A
5.216%, 1/25/42(3)

     604        622   

Drive Auto Receivables Trust 15-AA, D 144A
4.120%, 6/15/22(3)

     1,080        1,097   

Exeter Automobile Receivables Trust

    

15-A1, C 144A
4.100%, 12/15/20(3)

     900        917   

15-2A, C 144A
3.900%, 3/15/21(3)

     925        938   

Fairway Outdoor Funding LLC 12-1A, A2 144A
4.212%, 10/15/42(3)

     546        552   

Foursight Capital Automobile Receivables Trust 15-1, B 144A
4.120%, 9/15/22(3)

     1,110        1,123   
    PAR
VALUE		     VALUE  
ASSET-BACKED SECURITIES—continued   

Greater Capital Association of Realtors 15-1A, C
9.790%, 10/15/25

   $ 545      $ 544   

IndyMac Manufactured Housing Contract 98-1, A3
6.370%, 9/25/28

     243        249   

LEAF Receivables Funding 10 LLC 15-1, E2 144A
6.000%, 6/15/23(3)

     555        536   

Origen Manufactured Housing Contract Trust 04-B, M1
5.730%, 11/15/35(2)

     445        462   

SolarCity LMC Series III LLC 14-2, A 144A
4.020%, 7/20/44(3)

     961        947   

Trip Rail Master Funding LLC 11-1A, A1A 144A
4.370%, 7/15/41(3)

     220        228   

Wendy’s Funding LLC 15-1A, A2II 144A
4.080%, 6/15/45(3)

     1,110        1,120   
TOTAL ASSET-BACKED SECURITIES
(Identified Cost $15,697)		         15,871   
CORPORATE BONDS AND NOTES—54.6%   
Consumer Discretionary—7.9%   

Argos Merger Sub, Inc. 144A
7.125%, 3/15/23(3)

     775        786   

Boyd Gaming Corp.

    

9.000%, 7/1/20

     435        464   

6.875%, 5/15/23

     415        423   

Brookfield Residential Properties, Inc. 144A
6.125%, 7/1/22(3)

     185        177   

Caesars Entertainment Operating Co., Inc.
9.000%, 2/15/20(14)

     535        441   

Caesars Entertainment Resort Properties LLC
8.000%, 10/1/20

     320        306   

Caesars Growth Properties Holdings LLC (Caesars Growth Properties Finance, Inc.)
9.375%, 5/1/22

     495        390   

CCO Holdings LLC
5.250%, 3/15/21

     467        461   

144A 5.125%, 5/1/23(3)

     390        360   

CCO Safari II LLC 144A
4.908%, 7/23/25(3)

     260        259   

Cequel Communications Holdings I LLC (Cequel Capital Corp.)

    

144A 5.125%, 12/15/21(3)

     275        243   

144A 5.125%, 12/15/21(3)

     655        579   

Clear Channel Worldwide Holdings, Inc.

    

Series A
7.625%, 3/15/20

     320        320   

Series B
7.625%, 3/15/20

     1,465        1,474   
 

 

See Notes to Financial Statements

 

 

 

43

Table of Contents

VIRTUS MULTI-SECTOR INTERMEDIATE BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

Columbus International, Inc. series B,144A
7.375%, 3/30/21(3)

   $ 200      $ 208   

iHeartCommunications, Inc.
10.000%, 1/15/18

     230        123   

Intelsat Jackson Holdings SA
5.500%, 8/1/23

     760        629   

International Game Technology plc

    

7.500%, 6/15/19

     580        612   

144A 6.250%, 2/15/22(3)

     340        318   

Isle of Capri Casinos, Inc.
5.875%, 3/15/21

     667        690   

Landry’s Holdings II, Inc. 144A
10.250%, 1/1/18(3)

     425        437   

Landry’s, Inc. 144A
9.375%, 5/1/20(3)

     475        509   

MDC Holdings, Inc.
5.500%, 1/15/24

     860        873   

Meritor, Inc.
6.750%, 6/15/21

     960        970   

MGM Resorts International
6.000%, 3/15/23

     490        476   

Mohegan Tribal Gaming Authority 144A
9.750%, 9/1/21(3)

     305        312   

MPG Holdco I, Inc.
7.375%, 10/15/22

     830        867   

Myriad International Holdings BV 144A
5.500%, 7/21/25(3)

     995        975   

New York University
4.142%, 7/1/48

     545        522   

Numericable Group SA 144A
6.000%, 5/15/22(3)

     305        295   

Omega US Sub LLC 144A
8.750%, 7/15/23(3)

     925        823   

Party City Holdings, Inc. 144A
6.125%, 8/15/23(3)

     125        127   

Penn National Gaming, Inc.
5.875%, 11/1/21

     490        497   

Pinnacle Entertainment, Inc.
6.375%, 8/1/21

     1,035        1,100   

QVC, Inc.
5.125%, 7/2/22

     240        247   

RCN Telecom Services LLC (RCN Capital Corp.) 144A
8.500%, 8/15/20(3)

     510        528   

Scientific Games International, Inc.

    

6.625%, 5/15/21

     910        660   

144A 7.000%, 1/1/22(3)

     590        586   

Signet UK Finance plc
4.700%, 6/15/24

     895        904   

Standard Pacific Corp.
5.875%, 11/15/24

     545        561   

Station Casinos LLC
7.500%, 3/1/21

     970        1,014   

Tempur Sealy International Inc 144A
5.625%, 10/15/23(3)

     360        361   
    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

Toll Brothers Finance Corp.

    

4.000%, 12/31/18

   $ 375      $ 386   

6.750%, 11/1/19

     940        1,072   

TRI Pointe Holdings, Inc.
5.875%, 6/15/24

     890        877   

UPCB Finance IV Ltd. 144A
5.375%, 1/15/25(3)

     425        402   

VTR Finance B.V. 144A
6.875%, 1/15/24(3)

     600        546   
   

 

 

  
      26,190   
   

 

 

  
Consumer Staples—0.6%   

Dole Food Co., Inc. 144A
7.250%, 5/1/19(3)

     545        545   

Kronos Acquisition Intermediate, Inc. (KIK Custom Products, Inc.) Second Lien,
9.750%, 4/30/20

     1,241        1,267   

Pilgrim’s Pride Corp. 144A
5.750%, 3/15/25(3)

     340        335   

Rite Aid Corp. 144A
6.125%, 4/1/23(3)

     250        249   

Tops Holding LLC (Tops Markets II Corp.) 144A
8.000%, 6/15/22(3)

     925        930   
   

 

 

  
      3,326   
   

 

 

  
Energy—9.7%    

Afren plc 144A
11.500%, 2/1/16(3)(14)

     475        12   

Antero Resources Corp. 144A
5.625%, 6/1/23(3)

     490        432   

Blue Racer Midstream LLC (Blue Racer Finance Corp.) 144A
6.125%, 11/15/22(3)

     305        291   

CNOOC Finance USA LLC
3.500%, 5/5/25

     995        947   

Compagnie Generale de Geophysique-Veritas
6.500%, 6/1/21

     725        418   

CONSOL Energy, Inc.
5.875%, 4/15/22

     650        440   

Denbury Resources, Inc.
5.500%, 5/1/22

     440        263   

Ecopetrol SA
5.375%, 6/26/26

     910        794   

Energy Transfer Partners LP
5.875%, 1/15/24

     885        801   

EnQuest plc 144A
7.000%, 4/15/22(3)

     885        553   

EP Energy LLC (Everest Acquisition Finance, Inc.)
9.375%, 5/1/20

     840        727   

Exterran Partners LP (EXLP Finance Corp.)
6.000%, 10/1/22

     740        623   

FTS International, Inc.
6.250%, 5/1/22

     450        142   
    PAR
VALUE		     VALUE  
Energy—continued   

Gazprom Neft OAO (GPN Capital SA) 144A
6.000%, 11/27/23(3)(7)

   $ 255      $ 237   

Gazprom OAO (Gaz Capital SA) 144A
3.850%, 2/6/20(3)(7)

     1,115        1,030   

Gulfmark Offshore, Inc.
6.375%, 3/15/22

     960        578   

Gulfport Energy, Corp.
7.750%, 11/1/20

     885        874   

Helmerich & Payne International Drilling Co.
4.650%, 3/15/25

     540        538   

Kinder Morgan, Inc.
7.750%, 1/15/32

     890        936   

Laredo Petroleum, Inc.
7.375%, 5/1/22

     830        807   

6.250%, 3/15/23

     145        133   

Linn Energy LLC

    

6.500%, 5/15/19

     512        143   

6.500%, 9/15/21

     155        33   

Lukoil International Finance BV

    

144A 7.250%, 11/5/19(3)

     525        554   

144A 4.563%, 4/24/23(3)

     495        439   

MarkWest Energy Partners LP (MarkWest Energy Finance Corp.)
4.875%, 12/1/24

     1,390        1,279   

Newfield Exploration Co.

    

5.750%, 1/30/22

     160        155   

5.625%, 7/1/24

     785        746   

5.375%, 1/1/26

     550        503   

NGL Energy Partners LP (NGL Energy Finance Corp.)
5.125%, 7/15/19

     925        846   

Novatek OAO (Novatek Finance Ltd.) 144A
4.422%, 12/13/22(3)(7)

     1,105        958   

Odebrecht Offshore Drilling Finance Ltd. 144A
6.750%, 10/1/22(3)

     1,110        292   

Pacific Exploration and Production Corp. 144A
5.375%, 1/26/19(3)

     610        233   

Parker Drilling Co. (The)
7.500%, 8/1/20

     1,075        887   

Pertamina Persero PT

    

144A 4.300%, 5/20/23(3)

     600        550   

144A 6.000%, 5/3/42(3)

     400        333   

Petrobras Global Finance BV

    

3.000%, 1/15/19

     795        574   

5.375%, 1/27/21

     830        606   

Petroleos de Venezuela SA

    

RegS 8.500%, 11/2/17(4)

     485        326   

144A 6.000%, 5/16/24(3)

     1,580        513   

RegS 6.000%, 11/15/26(4)

     790        255   

Petroleos Mexicanos
5.500%, 6/27/44

     650        522   

PHI, Inc.
5.250%, 3/15/19

     360        311   

QEP Resources, Inc.
6.875%, 3/1/21

     1,105        1,022   
 

 

See Notes to Financial Statements

 

 

 

44

Table of Contents

VIRTUS MULTI-SECTOR INTERMEDIATE BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Energy—continued   

QGOG Constellation SA 144A
6.250%, 11/9/19(3)

   $ 1,000      $ 445   

Regency Energy Partners LP
4.500%, 11/1/23

     1,160        1,073   

Sabine Oil & Gas Corp.
7.250%, 6/15/19(14)

     935        136   

Sabine Pass Liquefaction LLC
5.625%, 2/1/21

     915        853   

SM Energy Co.
6.125%, 11/15/22

     1,160        1,080   

Sunoco LP (Sunoco Finance Corp.)

    

144A 5.500%, 8/1/20(3)

     700        693   

144A 6.375%, 4/1/23(3)

     1,075        1,056   

Transcanada Trust
5.625%, 5/20/75(2)

     940        900   

Transocean, Inc.
4.300%, 10/15/22

     1,050        648   

Whiting Petroleum Corp.
6.250%, 4/1/23

     910        792   
   

 

 

  
      31,332   
   

 

 

  
Financials—16.5%   

Aercap Ireland Capital Ltd.
4.250%, 7/1/20

     165        165   

Akbank TAS 144A
7.500%, 2/5/18(3)

     1,565 TRY      449   

Allstate Corp. (The)
5.750%, 8/15/53(2)(6)

     1,455        1,506   

ALROSA Finance S.A. 144A
7.750%, 11/3/20(3)

     1,065        1,116   

Ares Finance Co. II LLC 144A
5.250%, 9/1/25(3)

     930        947   

Avis Budget Car Rental LLC (Avis Budget Finance, Inc.) 144A
5.250%, 3/15/25(3)

     785        729   

Banco Bilbao Vizcaya Argentaria Bancomer S.A.

    

144A 6.500%, 3/10/21(3)

     425        454   

144A 6.750%, 9/30/22(3)

     1,000        1,082   

Banco de Credito del Peru

    

144A 4.250%, 4/1/23(3)

     657        634   

144A 6.125%, 4/24/27(2)(3)

     1,095        1,128   

Banco Internacional del Peru SAA

    

144A 5.750%, 10/7/20(3)

     1,060        1,137   

144A 6.625%, 3/19/29(3)

     395        393   

Banco Santander Brasil SA 144A
8.000%, 3/18/16

     900 BRL      216   

Bancolombia S.A.
5.125%, 9/11/22

     1,015        959   

Bank of America Corp.
4.200%, 8/26/24

     1,140        1,138   

Bank of China Ltd. 144A
5.000%, 11/13/24(3)

     875        889   

Bank of Georgia JSC 144A
7.750%, 7/5/17(3)

     1,015        1,055   

Block Financial LLC
4.125%, 10/1/20

     490        490   
    PAR
VALUE		     VALUE  
Financials—continued   

Brixmor Operating Partnership LP
3.875%, 8/15/22

   $ 245      $ 247   

Citizens Financial Group, Inc. 144A 5.500%(2)(3)(5)

     920        897   

Compass Bank
3.875%, 4/10/25

     900        839   

Corporate Office Properties LP
3.600%, 5/15/23

     950        892   

Corrections Corp of America
5.000%, 10/15/22

     1,465        1,476   

CTR Partnership LP (Caretrust Capital Corp.)
5.875%, 6/1/21

     720        738   

CyrusOne LP (CyrusOne Finance Corp.) 144A
6.375%, 11/15/22(3)

     945        964   

Development Bank of Kazakhstan OJSC 144A
4.125%, 12/10/22(3)

     1,090        931   

Discover Financial Services, Inc.
3.950%, 11/6/24

     1,250        1,233   

Drawbridge Special Opportunities Fund LP 144A
5.000%, 8/1/21(3)

     915        894   

ESH Hospitality, Inc. 144A
5.250%, 5/1/25(3)

     925        913   

Eurasian Development Bank 144A
4.767%, 9/20/22(3)

     925        876   

Excel Trust LP
4.625%, 5/15/24

     230        228   

First Cash Financial Services, Inc.
6.750%, 4/1/21

     530        533   

First Niagara Financial Group, Inc.
7.250%, 12/15/21

     1,160        1,306   

FS Investment Corp.

    

4.250%, 1/15/20

     785        799   

4.750%, 5/15/22

     285        281   

Genworth Holdings, Inc.
4.900%, 8/15/23

     1,170        916   

GLP Capital LP (GLP Financing II, Inc.)
5.375%, 11/1/23

     25        25   

Healthcare Realty Trust, Inc.
3.875%, 5/1/25

     395        384   

HSBC Finance Corp.
6.676%, 1/15/21

     500        585   

Hutchison Whampoa International Ltd. Series 12,
144A 6.000%(3)(5)(6)

     1,130        1,175   

ICAHN Enterprises LP (ICAHN Enterprises Finance Corp.)

    

4.875%, 3/15/19

     65        65   

6.000%, 8/1/20

     370        381   

5.875%, 2/1/22

     755        760   
    PAR
VALUE		     VALUE  
Financials—continued   

ING Groep NV
6.000%(2)(5)(6)

   $ 865      $ 853   

iStar Financial, Inc.
5.000%, 7/1/19

     940        897   

Itau Unibanco Holding S.A. 144A
5.125%, 5/13/23(3)

     715        620   

Jefferies Group LLC
6.875%, 4/15/21

     410        461   

JPMorgan Chase & Co. Series Z, 5.300%(2)(5)(6)

     175        172   

Kazakhstan Temir Zholy Finance BV 144A
6.950%, 7/10/42(3)

     795        625   

Kilroy Realty Lp
4.375%, 10/1/25

     830        838   

Leucadia National Corp.
5.500%, 10/18/23

     575        578   

Lincoln National Corp.
6.050%, 4/20/67(2)(6)

     300        252   

Macquarie Bank Ltd. 144A
6.625%, 4/7/21(3)

     189        212   

McGraw Hill Financial, Inc. 144A 4.000%, 6/15/25(3)

     295        294   

144A 4.400%, 2/15/26(3)

     485        492   

Morgan Stanley 144A
10.090%, 5/3/17(3)

     2,400 BRL      563   

MPT Operating Partnership LP
5.500%, 5/1/24

     455        465   

Navient LLC
5.500%, 1/25/23

     850        674   

Nordea Bank AB 144A
4.250%, 9/21/22(3)

     1,360        1,393   

Phosagro OAO (Phosagro Bond Funding Ltd.)
144A
4.204%, 2/13/18(3)(7)

     875        868   

PKO Finance AB 144A
4.630%, 9/26/22(3)(7)

     1,315        1,356   

Prudential Financial, Inc.

    

5.875%, 9/15/42(2)

     2,155        2,279   

5.625%, 6/15/43(2)(6)

     450        464   

Royal Bank of Scotland Group plc (The)
6.400%, 10/21/19

     370        416   

Santander Bank NA
8.750%, 5/30/18

     400        457   

Select Income REIT
4.500%, 2/1/25

     900        866   

Springleaf Finance Corp.
5.250%, 12/15/19

     950        931   

SunTrust Bank, Inc.
5.400%, 4/1/20

     250        272   

Teachers Insurance & Annuity Association of America 144A
4.375%, 9/15/54(2)(3)

     740        749   

Turkiye Garanti Bankasi AS 144A
5.250%, 9/13/22(3)

     1,285        1,234   

Ukreximbank Via Biz Finance plc 144A
9.625%, 4/27/22(3)(7)

     950        837   
 

 

See Notes to Financial Statements

 

 

 

45

Table of Contents

VIRTUS MULTI-SECTOR INTERMEDIATE BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Financials—continued   

Voya Financial, Inc.
5.650%, 5/15/53(2)

   $ 870      $ 881   

Walter Investment Management Corp.
7.875%, 12/15/21

     695        597   

York Risk Services Holding Corp. 144A
8.500%, 10/1/22(3)

     685        585   
   

 

 

  
      55,006   
   

 

 

  
Health Care—4.6%    

Acadia Healthcare Co., Inc.

    

5.125%, 7/1/22

     300        296   

144A 5.625%, 2/15/23(3)

     65        66   

Alere, Inc. 144A
6.375%, 7/1/23(3)

     345        351   

Capsugel SA PIK Interest Capitalization 144A
7.000%, 5/15/19(3)(13)

     200        200   

Community Health Systems, Inc.
6.875%, 2/1/22

     525        537   

Concordia Healthcare Corp. 144A
7.000%, 4/15/23(3)

     65        57   

Crimson Merger Sub, Inc. 144A
6.625%, 5/15/22(3)

     710        612   

DaVita Healthcare Partners, Inc.
5.125%, 7/15/24

     935        920   

Emdeon, Inc. 144A
6.000%, 2/15/21(3)

     625        608   

Endo Finance LLC (Endo Finco, Inc.) 144A
5.375%, 1/15/23(3)

     660        636   

HCA, Inc.

    

6.500%, 2/15/20

     990        1,079   

5.375%, 2/1/25

     720        716   

HealthSouth Corp.

    

144A 5.750%, 11/1/24(3)

     95        94   

144A 5.750%, 9/15/25(3)

     835        812   

Hill-Rom Holdings, Inc. 144A
5.750%, 9/1/23(3)

     535        539   

Hologic, Inc. 144A
5.250%, 7/15/22(3)

     70        71   

IASIS Healthcare LLC
8.375%, 5/15/19

     545        562   

Jaguar Holding Co. II (Pharmaceutical Product Development LLC) 144A
6.375%, 8/1/23(3)

     530        517   

JLL Delta Dutch Pledgeco BV PIK Interest Capitalization,
8.75% interest,
0.75% capitalization
144A, 5/1/20(3)(11)

     545        550   

Mallinckrodt International Finance S.A.

    

144A 5.750%, 8/1/22(3)

     360        349   

144A 5.625%, 10/15/23(3)

     815        745   

144A 5.500%, 4/15/25(3)

     60        54   
    PAR
VALUE		     VALUE  
Health Care—continued   

Quintiles Transnational Corp. 144A
4.875%, 5/15/23(3)

   $ 435      $ 432   

Select Medical Corp.
6.375%, 6/1/21

     455        446   

Sterigenics-Nordion Holdings LLC 144A
6.500%, 5/15/23(3)

     325        323   

Surgical Care Affiliates, Inc. 144A
6.000%, 4/1/23(3)

     912        907   

Tenet Healthcare Corp.

    

4.750%, 6/1/20

     575        583   

6.000%, 10/1/20

     180        190   

4.500%, 4/1/21

     470        465   

8.125%, 4/1/22

     440        469   

Valeant Pharmaceuticals International, Inc.

    

144A 7.500%, 7/15/21(3)

     130        134   

144A 5.625%, 12/1/21(3)

     140        133   

144A 5.500%, 3/1/23(3)

     220        209   

144A 5.875%, 5/15/23(3)

     705        678   
   

 

 

  
      15,340   
   

 

 

  
Industrials—5.0%    

ADT Corp. (The)
6.250%, 10/15/21

     1,130        1,171   

Ahern Rentals, Inc. 144A
7.375%, 5/15/23(3)

     930        814   

Air Canada 144A
6.750%, 10/1/19(3)

     1,050        1,103   

Pass-Through-Trust,
13-1, B 144A
5.375%, 5/15/21(3)

     1,364        1,403   

American Airlines Group, Inc. 144A
4.625%, 3/1/20(3)

     210        205   

American Airlines Pass-Through-Trust 14-1, B
4.375%, 10/1/22

     859        860   

AWAS Aviation Capital Ltd. 144A
7.000%, 10/17/16(3)

     649        651   

Bombardier, Inc. 144A
6.125%, 1/15/23(3)

     740        548   

Builders FirstSource, Inc. 144A
10.750%, 8/15/23(3)

     480        482   

Carpenter Technology Corp.
5.200%, 7/15/21

     600        632   

CEB, Inc. 144A
5.625%, 6/15/23(3)

     365        365   

Continental Airlines Pass-Through-Trust
00-1, A1 8.048%, 11/1/20

     552        622   

01-1, A1 6.703%, 6/15/21

     235        246   

DP World Ltd. 144A
6.850%, 7/2/37(3)

     400        423   

Harland Clarke Holdings Corp. 144A
6.875%, 3/1/20(3)

     600        543   
    PAR
VALUE		     VALUE  
Industrials—continued   

Hawaiian Airlines Pass-Through Certificates 13-1, B
4.950%, 1/15/22

   $ 808      $ 781   

JBS Investments GmbH 144A
7.250%, 4/3/24(3)

     665        642   

Lender Processing Services, Inc.
5.750%, 4/15/23

     655        693   

Masco Corp.
5.950%, 3/15/22

     640        698   

4.450%, 4/1/25

     320        324   

Northwest Airlines Pass-Through-Trust 02-1, G2
6.264%, 11/20/21

     413        430   

Pelabuhan Indonesia II PT 144A
4.250%, 5/5/25(3)

     925        808   

Penske Truck Leasing Co. LP 144A
3.375%, 2/1/22(3)

     350        342   

TransDigm, Inc.
6.000%, 7/15/22

     630        591   

144A 6.500%, 5/15/25(3)

     270        255   

United Rentals North America, Inc.

    

5.500%, 7/15/25

     930        873   
   

 

 

  
      16,505   
   

 

 

  
Information Technology—1.4%   

First Data Corp.
11.750%, 8/15/21

     1,854        2,062   

Flextronics International Ltd. 144A
4.750%, 6/15/25(3)

     930        901   

Hewlett Packard Enterprise Co.

    

144A 4.400%, 10/15/22(3)

     200        200   

144A 4.900%, 10/15/25(3)

     200        199   

KLA-Tencor Corp.
4.650%, 11/1/24

     905        905   

Riverbed Technology, Inc. 144A 8.875%, 3/1/23(3)

     540        493   
   

 

 

  
      4,760   
   

 

 

  
Materials—4.2%    

Alpek SA de C.V. 144A
5.375%, 8/8/23(3)

     1,460        1,504   

ArcelorMittal
6.125%, 6/1/25

     945        768   

Berry Plastics Corp.
5.125%, 7/15/23

     870        824   

Braskem America Finance Co. RegS
7.125%, 7/22/41(4)

     1,300        907   

Cascades, Inc. 144A
5.500%, 7/15/22(3)

     1,100        1,049   

Corp Nacional del Cobre de Chile 144A
4.500%, 9/16/25(3)

     820        788   
 

 

See Notes to Financial Statements

 

 

 

46

Table of Contents

VIRTUS MULTI-SECTOR INTERMEDIATE BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Materials—continued   

Eldorado Gold Corp. 144A
6.125%, 12/15/20(3)

   $ 455      $ 400   

EuroChem Mineral & Chemical Co. OJSC 144A
5.125%, 12/12/17(3)(7)

     550        548   

Fibria Overseas Finance Ltd.
5.250%, 5/12/24(3)

     910        878   

Fortescue Metals Group (FMG) Resources August 2006 Pty Ltd. 144A
9.750%, 3/1/22(3)

     550        514   

Gerdau Holdings, Inc. 144A
7.000%, 1/20/20(3)

     735        690   

Gerdau Trade, Inc. 144A
5.750%, 1/30/21(3)

     150        130   

Hexion U.S. Finance Corp.
6.625%, 4/15/20

     580        496   

INEOS Group Holdings SA 144A
5.875%, 2/15/19(3)

     920        859   

Owens-Brockway Glass Container, Inc. 144A
5.875%, 8/15/23(3)

     50        51   

Sappi Papier Holding GmbH 144A
6.625%, 4/15/21(3)

     850        864   

Severstal OAO (Steel Capital SA) 144A
6.700%, 10/25/17(3)(7)

     425        447   

Tronox Finance LLC
6.375%, 8/15/20

     650        416   

Union Andina de Cementos SAA 144A
5.875%, 10/30/21(3)

     155        150   

United States Steel Corp.
6.875%, 4/1/21

     550        421   

Vedanta Resources plc

    

144A 9.500%, 7/18/18(3)

     745        626   

144A 6.000%, 1/31/19(3)

     720        525   
   

 

 

  
      13,855   
   

 

 

  
Telecommunication Services—3.0%   

Altice Financing SA

    

144A 6.625%, 2/15/23(3)

     720        693   

US II Corp. 144A
7.750%, 7/15/25(3)

     400        356   

America Movil SAB de C.V. Series 12
6.450%, 12/5/22

     5,000 MXN      282   

Bharti Airtel International Netherlands BV 144A
5.125%, 3/11/23(3)

     880        932   

CenturyLink, Inc. Series V
5.625%, 4/1/20

     570        529   

Comcel Trust 144A
6.875%, 2/6/24(3)

     475        469   

Digicel Group Ltd. 144A
8.250%, 9/30/20(3)

     1,100        1,023   

Empresa Nacional de Telecomunicaciones S.A. 144A
4.875%, 10/30/24(3)

     430        428   
    PAR
VALUE		     VALUE  
Telecommunication Services—continued   

Frontier Communications Corp.

    

6.250%, 9/15/21

   $ 670      $ 561   

144A 10.500%, 9/15/22(3)

     210        205   

Level 3 Financing, Inc.
7.000%, 6/1/20

     935        970   

Neptune Finco Corp.

    

144A 10.125%, 1/15/23(3)

     340        344   

144A 6.625%, 10/15/25(3)

     650        655   

Sprint Communications, Inc.
6.000%, 11/15/22

     935        706   

T-Mobile USA, Inc.
6.500%, 1/15/24

     380        369   

Verizon Communications, Inc.
4.400%, 11/1/34

     895        833   

Windstream Corp.
7.750%, 10/15/20

     780        666   
   

 

 

  
      10,021   
   

 

 

  
Utilities—1.7%    

AmeriGas Partners LP
7.000%, 5/20/22

     770        793   

Calpine Corp.
5.375%, 1/15/23

     586        549   

Electricite de France SA 144A
5.250%(2)(3)(5)(6)

     1,360        1,309   

Enel SpA 144A
8.750%, 9/24/73(2)(3)(6)

     375        432   

Lamar Funding Ltd. 144A
3.958%, 5/7/25(3)

     910        851   

Majapahit Holding BV 144A
7.750%, 1/20/20(3)

     795        886   

NRG Yield Operating LLC
5.375%, 8/15/24

     345        304   

Talen Energy Supply LLC 144A
4.625%, 7/15/19(3)

     625        572   

TerraForm Power Operating LLC 144A
5.875%, 2/1/23(3)

     860        763   

Texas Competitive Electric Holdings Co. LLC Series A
10.250%, 11/1/15(12)

     200        26   
   

 

 

  
              6,485   
TOTAL CORPORATE BONDS AND NOTES
(Identified Cost $197,404)		         181,553   
LOAN AGREEMENTS(2)—11.5%   
Consumer Discretionary—3.4%   

Advantage Sales & Marketing, Inc. Second Lien,
7.500%, 7/25/22

     740        710   

Affinity Gaming LLC
5.250%, 11/9/17

     541        544   

Aristocrat Leisure Ltd.
4.750%, 10/20/21

     537        539   

Brickman Group Ltd. LLC (The) Second Lien,
7.500%, 12/17/21

     344        336   
    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

Caesars Entertainment Operating Co., Inc.

    

Tranche B-6,
9.500%, 3/1/17(14)

   $ 512      $ 477   

Tranche B-7,
11.500%, 1/28/18(14)

     102        93   

Caesars Growth Properties Holdings LLC Tranche B, First Lien,
6.250%, 5/8/21

     353        311   

CBAC Borrower LLC Tranche B,
8.250%, 7/2/20

     480        454   

Cirque Du Soleil
5.000%, 7/8/22

     254        254   

El Dorado Resorts, Inc.
4.250%, 7/25/22

     204        205   

Graton Resort & Casino Tranche B,
4.750%, 9/1/22

     268        268   

iHeartCommunications, Inc. (Clear Channel Communications, Inc.) Tranche D,
6.944%, 1/30/19

     808        673   

Key Safety Systems, Inc.
4.750%, 8/29/21

     440        430   

Landry’s, Inc. (Landry’s Restaurants, Inc.) Tranche B,
4.000%, 4/24/18

     902        904   

Laureate Education, Inc. 2018 Extended,
5.000%, 6/15/18

     577        485   

Life Time Fitness, Inc.
4.250%, 6/10/22

     564        562   

Marina District Finance Co., Inc.
6.500%, 8/15/18

     264        267   

Peppermill Casinos, Inc. Tranche B,
7.250%, 11/9/18

     1,042        1,045   

PetSmart, Inc. Tranche B-1
4.250%, 3/11/22

     154        153   

Shingle Springs Tribal Gaming Authority
6.250%, 8/29/19

     549        553   

Staples, Inc. First Lien,
0.000%, 4/23/21(8)

     697        694   

Transtar Holding Co. Second Lien,
10.000%, 10/9/19

     380        369   

TWCC Holding Corp. Second Lien,
7.000%, 6/26/20

     784        734   

U.S. Farathane Corp.
6.750%, 12/23/21

     364        366   
   

 

 

  
      11,426   
   

 

 

  
Consumer Staples—0.9%   

Albertson’s LLC Tranche B-4,
5.500%, 8/25/21

     667        668   
 

 

See Notes to Financial Statements

 

 

 

47

Table of Contents

VIRTUS MULTI-SECTOR INTERMEDIATE BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Consumer Staples—continued   

Hostess Brands LLC Tranche B Second Lien,
8.500%, 8/3/23

   $ 890      $ 893   

Rite Aid Corp. Tranche 2,
Second Lien,
4.875%, 6/21/21

     550        551   
   

 

 

  
      2,112   
   

 

 

  
Energy—0.9%   

Arch Coal, Inc.
6.250%, 5/16/18

     1,101        629   

Chelsea Petroleum I LLC
0.000%, 7/22/22(8)

     783        776   

Chief Exploration & Development LLC Second Lien,
7.500%, 5/16/21

     649        539   

Drillships Ocean Ventures, Inc.
5.500%, 7/25/21

     564        379   

Jonah Energy LLC Second Lien,
7.500%, 5/12/21

     520        421   

Seadrill Operating LP
4.000%, 2/21/21

     502        308   
   

 

 

  
      3,052   
   

 

 

  
Financials—0.1%   

Capital Automotive LP Second Lien,
6.000%, 4/30/20

     450        454   
   

 

 

  
Health Care—1.7%   

21st Century Oncology, Inc. Tranche B
6.500%, 4/30/22

     227        216   

AMAG Pharmaceuticals, Inc.
4.750%, 8/17/21

     149        149   

American Renal Holdings, Inc. Second Lien,
8.500%, 3/20/20

     909        909   

Amneal Pharmaceuticals LLC Tranche B,
5.125%, 11/1/19

     330        331   

Ardent Legacy Acquisitions, Inc.
6.500%, 8/4/21

     459        461   

Concentra, Inc. First Lien,
Tranche B
4.625%, 6/1/22

     60        60   

Horizon Pharma, Inc.
4.500%, 5/7/21

     195        190   

InVentiv Health, Inc. Tranche B-4,
7.750%, 5/15/18

     583        585   

MMM Holdings, Inc.
9.750%, 12/12/17(15)

     253        193   

MSO of Puerto Rico, Inc.
9.750%, 12/12/17(15)

     184        140   

NVA Holdings, Inc. Second Lien
8.000%, 8/14/22

     509        506   
    PAR
VALUE		     VALUE  
Health Care—continued   

PharMEDium Healthcare Corp. Second Lien,
7.750%, 1/28/22

   $ 187      $ 185   

Regional Care, Inc. (RCHP, Inc.) First Lien,
5.250%, 4/23/19

     827        820   

Surgery Center Holdings, Inc.

    

First Lien, 5.250%, 11/3/20

     647        647   

Second Lien,
8.500%, 11/3/21

     288        291   
   

 

 

  
      5,683   
   

 

 

  
Industrials—1.3%   

Ceridian HCM Holding, Inc.
4.500%, 9/15/20

     736        700   

DynCorp International, Inc.
6.250%, 7/7/16

     386        378   

Filtration Group Corp. Second Lien,
8.250%, 11/22/21

     194        194   

Husky Injection Molding Systems Ltd.
4.250%, 6/30/21

     532        526   

Landmark U.S. Member LLC (Landmark U.S. Corp Acquisition, Inc.) Second Lien
8.250%, 1/25/21

     725        723   

Navistar, Inc.
6.500%, 8/7/20

     729        714   

Sedgwick Claims Management Services, Inc. Second Lien,
6.750%, 2/28/22

     1,105        1,047   
   

 

 

  
      4,282   
   

 

 

  
Information Technology—2.4%   

Allflex Holdings III, Inc. Second Lien,
8.000%, 7/19/21

     599        592   

Applied Systems, Inc. Second Lien,
7.500%, 1/24/22

     660        656   

Blue Coat Systems, Inc.
4.500%, 5/20/22

     195        194   

Deltek, Inc.

    

First Lien
5.000%, 6/25/22

     23        23   

Second Lien 9.500%, 6/26/23

     408        409   

Epicor Software Corp. Tranche B,
4.750%, 6/1/22

     364        362   

First Data Corp.

    

2018 Term Loan
3.696%, 3/23/18

     1,349        1,340   

3.946%, 7/8/22

     225        224   

Infinity Acquisition Ltd.
4.000%, 8/6/21

     354        351   
    PAR
VALUE		     VALUE  
Information Technology—continued   

Kronos Acquisition Intermediate, Inc. (KIK Custom Products)
6.000%, 8/26/22

  

$

865

  

  

$

849

  

Mitchell International, Inc. Second Lien,
8.500%, 10/11/21

     1,323        1,322   

Presidio, Inc. Refinancing Term
5.250%, 2/2/22

     676        676   

Riverbed Technologies, Inc.
6.000%, 4/25/22

     407        408   
   

 

 

  
      7,406   
   

 

 

  
Materials—0.4%   

CPI Acquisition, Inc. First Lien,
6.750%, 8/17/22

     500        497   

Fortescue Metals Group (FMG) Resources Property Ltd.
3.750%, 6/30/19

     318        261   

Houghton International, Inc. Holding Corp. Second Lien,
9.750%, 12/21/20

     630        627   

INEOS U.S. Finance LLC 2022 Dollar
4.250%, 3/31/22

     57        55   
   

 

 

  
      1,440   
   

 

 

  
Utilities—0.4%   

Atlantic Power LP
4.750%, 2/24/21

     173        172   

NRG Energy, Inc.
2.750%, 7/1/18

     903        885   

Texas Competitive Electric Holdings Co. LLC 2017 Extended,
4.683%, 10/10/17(12)

     375        145   
   

 

 

  
              1,202   
TOTAL LOAN AGREEMENTS
(Identified Cost $40,125)		         38,324   
    SHARES        
PREFERRED STOCKS—3.3%   
Energy—0.3%   

PTT Exploration & Production PCL 144A,
4.875%(2)(3)

     905 (10)      872   
   

 

 

  
Financials—2.8%   

Ally Financial, Inc. Series A,
8.500%(2)

     20,000        519   

Ally Financial, Inc. Series G, 144A
7.000%(3)

     161        162   
 

 

See Notes to Financial Statements

 

 

 

48

Table of Contents

VIRTUS MULTI-SECTOR INTERMEDIATE BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
Financials—continued   

Banco Bilbao Vizcaya Argentaria S.A. International S.A. Unipersonal
5.919%(2)

     265 (10)    $ 268   

Bank of New York Mellon Corp. (The) Series E,
4.950%(2)

     705 (10)      694   

Citigroup, Inc. Series J,
7.125%(2)

     46,600        1,254   

Citigroup, Inc. Series N,
5.800%(2)

     1,065 (10)      1,050   

General Electric Capital Corp. Series B,
6.25%(2)

     700 (10)      760   

General Electric Capital Corp. Series C,
5.25%(2)

     600 (10)      617   

Goldman Sachs Group, Inc. (The) Series L,
5.700%(2)

     635 (10)      633   

JPMorgan Chase & Co. Series V,
5.000%(2)

     285 (10)      277   

PNC Financial Services Group, Inc. (The) Series R,
4.850%(2)

     965 (10)      903   

SunTrust Bank, Inc.
5.625%(2)

     260 (10)      260   

Wells Fargo & Co. Series K,
7.980%(2)

     950 (10)      1,003   

Zions Bancorp
6.950%(2)

     38,525        1,083   
   

 

 

  
      9,483   
   

 

 

  
Industrials—0.2%   

Seaspan Corp. Series C,
9.500%

     20,000        508   
TOTAL PREFERRED STOCKS
(Identified Cost $10,578)		         10,863   
COMMON STOCK—0.0%   
Consumer Discretionary—0.0%   

Mark IV Industries

     446        16   
TOTAL COMMON STOCK
(Identified Cost $4)		         16   
EXCHANGE-TRADED FUND—0.5%   

SPDR S&P 500 (R) ETF Trust

     9,500        1,820   
TOTAL EXCHANGE-TRADED FUND
(Identified Cost $1,799)		         1,820   
    SHARES     VALUE  
AFFILIATED MUTUAL FUND—2.7%   

Virtus Credit Opportunities Fund(16)

     927,131      $ 9,058   
TOTAL AFFILIATED MUTUAL FUND
(Identified Cost $9,270)		         9,058   
TOTAL LONG TERM INVESTMENTS—99.4%   
(Identified Cost $352,257)        330,551 (9) 
SHORT-TERM INVESTMENT—1.1%   
Money Market Mutual Fund—1.1%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     3,669,575        3,670   
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $3,670)		         3,670   
TOTAL INVESTMENTS—100.5%
(Identified Cost $355,927)		         334,221 (1) 

Other assets and liabilities, net—(0.5)%

  

     (1,687 ) 
   

 

 

  
NET ASSETS—100.0%     $ 332,534   
   

 

 

  

Abbreviations:

ETF Exchange-Traded Fund
FHLMC Federal Home Loan Mortgage Corporation (“Freddie Mac”).
FNMA Federal National Mortgage Association (“Fannie Mae”).
PIK Payment-in-Kind Security
REIT Real Estate Investment Trust
SPDR S&P Depositary Receipt

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Variable or step coupon security; interest rate shown reflects the rate in effect at September 30, 2015.
(3)  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, 2015, these securities amounted to a value of $122,366 or 36.8% of net assets.
(4)  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.
(5)  No contractual maturity date.
(6)  Interest payments may be deferred.
(7)  This Note was issued for the sole purpose of funding a loan agreement between the issuer and the borrower. As the credit risk for this security lies solely with the borrower, the name represented here is that of the borrower.
(8)  This loan will settle after September 30, 2015, at which time the interest rate, based on the London Interbank Offered Rate (“LIBOR”) and the agreed upon spread on trade date, will be reflected.
(9)  All or a portion of the Fund’s assets have been segregated as collateral for delayed delivery security.
(10)  Value shown as par value.
(11)  92.1% of the income received was in cash and 7.9% in PIK.
(12)  Security in default, portion of the interest payments are being received during the bankruptcy proceedings.
(13)  100% of the income received was in cash.
(14)  Security in default.
(15)  Illiquid security.
(16)  This fund is a public fund and the prospectus and annual report are publicly available.

Foreign Currencies:

BRL Brazilian Real
CLP Chilean Peso
COP Colombian Peso
MXN Mexican Peso
RUB Russian Ruble
TRY Turkish Lira
ZAR South African Rand

 

Country Weightings (Unaudited)†       

United States

     76 % 

Canada

     2   

Luxembourg

     2   

Mexico

     2   

Netherlands

     2   

Cayman Islands

     1   

United Kingdom

     1   

Other

     14   

Total

     100 % 

† % of total investments as of September 30, 2015.

   

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

49

Table of Contents

VIRTUS MULTI-SECTOR INTERMEDIATE BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

       Total
Value at
September 30,
2015		        Level 1
Quoted
Prices		        Level 2
Significant
Observable
Inputs		        Level 3
Significant
Unobservable
Inputs		  

Debt Securities:

                    

Asset-Backed Securities

      $ 15,871         $ —         $ 15,327         $ 544   

Corporate Bonds and Notes

        181,553           —           181,553           —   

Foreign Government Securities

        14,549           —           14,549           —   

Loan Agreements

        38,324           —           37,955           369   

Mortgage-Backed Securities

        54,630           —           54,630           —   

Municipal Bonds

        375           —           375           —   

U.S. Government Securities

        3,492           —           3,492           —   

Equity Securities:

                    

Affiliated Mutual Fund

        9,058           9,058           —           —   

Common Stock

        16           —           —           16   

Exchange-Traded Fund

        1,820           1,820           —           —   

Preferred Stocks

        10,863           2,281           8,582           —   

Short-Term Investment

        3,670           3,670           —           —   
    

 

 

       

 

 

       

 

 

       

 

 

  

Total Investments

      $ 334,221         $ 16,829         $ 316,463         $ 929   
    

 

 

       

 

 

       

 

 

       

 

 

  

Securities held by the Fund with an end of period value of $1,083 were transferred from Level 1 to Level 2 since an exchange price is no longer available.

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.

 

       Total        Asset-Backed
Securities		        Common
Stocks		        Loan
Agreements		  

Investments in Securities

                    

Balance as of September 30, 2014:

      $ 24         $ —         $ 24         $ —   

Accrued discount/(premium)

        — (d)         — (d)         —           —   

Realized gain (loss)

        —           — (d)         —           —   

Change in unrealized appreciation (depreciation)(c)

        (9 )         (1 )         (8 )         —   

Purchases

        545           545           —           —   

Sales(b)

        —           —           —           —   

Transfers into Level 3(a)

        369 (e)         —           —           369 (e) 

Transfers from Level 3(a)

        —           —           —           —   
    

 

 

       

 

 

       

 

 

       

 

 

  

Balance as of September 30, 2015

      $ 929         $ 544         $ 16         $ 369   
    

 

 

       

 

 

       

 

 

       

 

 

  

 

(a)  “Transfers into and/or from” represent the ending value as of September 30, 2015, for any investment security where a change in the pricing level occurred from the beginning to the end of the period.
(b)  Includes paydowns on securities.
(c)  Included in the related net change in unrealized appreciation/(depreciation) in the Statements of Operations on investments still held as of September 30, 2015. The change in unrealized appreciation (depreciation) on investments still held on September 30, 2015 was $(8).
(d)  Amount less than $500.
(e)  The transfer is due to increase and/or decrease in trading activities at period end.

None of the securities in this table are internally fair valued.

 

See Notes to Financial Statements

 

50

Table of Contents

VIRTUS SENIOR FLOATING RATE FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
ASSET-BACKED SECURITIES—0.2%   

Home Equity Loan Trust
07-HSA3, AI4
6.110%, 6/25/37(2)

   $ 1,146      $ 1,160   
TOTAL ASSET-BACKED SECURITIES
(Identified Cost $1,131)		         1,160   
CORPORATE BONDS AND NOTES—4.9%   
Consumer Discretionary—0.8%   

American Axle & Manufacturing, Inc.
5.125%, 2/15/19

     835        838   

Argos Merger Sub, Inc. 144A
7.125%, 3/15/23(3)

     905        918   

Boyd Gaming Corp.
6.875%, 5/15/23

     365        372   

iHeartCommunications, Inc.
10.000%, 1/15/18

     1,365        729   

International Game Technology plc 144A
5.625%, 2/15/20(3)

     600        585   

Isle of Capri Casinos, Inc.
5.875%, 3/15/21

     179        185   

Landry’s, Inc. 144A
9.375%, 5/1/20(3)

     950        1,018   

Numericable Group SA 144A
4.875%, 5/15/19(3)

     755        732   

Univision Communications, Inc. 144A
5.125%, 5/15/23(3)

     445        425   
   

 

 

  
      5,802   
   

 

 

  
Consumer Staples—0.2%     

Dole Food Co., Inc. 144A
7.250%, 5/1/19(3)

     880        880   

Spectrum Brands, Inc.
6.375%, 11/15/20

     715        760   
   

 

 

  
      1,640   
   

 

 

  
Energy—0.3%     

FTS International, Inc. 144A
7.837%, 6/15/20(2)(3)

     1,120        830   

6.250%, 5/1/22

     825        260   

Halcon Resources Corp. 144A
8.625%, 2/1/20(3)

     435        363   

PHI, Inc.
5.250%, 3/15/19

     450        389   
   

 

 

  
      1,842   
   

 

 

  
Financials—0.9%     

Aercap Ireland Capital Ltd.
4.250%, 7/1/20

     335        335   

Aircastle Ltd.
4.625%, 12/15/18

     580        592   

Banco Santander Brasil SA 144A
8.000%, 3/18/16(3)

     1,300 BRL      312   

iStar Financial, Inc.

    

4.875%, 7/1/18

     1,415        1,374   

5.000%, 7/1/19

     865        826   
    PAR
VALUE		     VALUE  
Financials—continued     

Springleaf Finance Corp.
5.250%, 12/15/19

   $ 2,510      $ 2,460   
   

 

 

  
      5,899   
   

 

 

  
Health Care—0.7%     

Capsugel SA PIK Interest Capitalization 144A
7.000%, 5/15/19(3)(4)

     350        350   

Community Health Systems, Inc.
5.125%, 8/15/18

     1,055        1,081   

Quintiles Transnational Corp. 144A
4.875%, 5/15/23(3)

     385        382   

Tenet Healthcare Corp.
5.000%, 3/1/19

     415        403   

144A 3.837%, 6/15/20(2)(3)

     730        726   

6.000%, 10/1/20

     435        460   

Valeant Pharmaceuticals International, Inc.
144A 6.750%, 8/15/18(3)

     965        984   

144A 5.375%, 3/15/20(3)

     750        731   
   

 

 

  
      5,117   
   

 

 

  
Industrials—0.2%     

Air Canada 144A
6.750%, 10/1/19(3)

     965        1,013   

American Airlines Group, Inc.
144A
4.625%, 3/1/20(3)

     460        450   
   

 

 

  
      1,463   
   

 

 

  
Information Technology—0.4%     

Avaya, Inc. 144A
7.000%, 4/1/19(3)

     1,090        869   

Blue Coat Holdings, Inc. 144A
8.375%, 6/1/23(3)

     430        431   

First Data Corp.
11.750%, 8/15/21

     1,331        1,481   
   

 

 

  
      2,781   
   

 

 

  
Materials—0.9%     

Ardagh Packaging Finance plc 144A
6.250%, 1/31/19(3)

     400        400   

Beverage Packaging Holdings Luxembourg II SA 144A
6.000%, 6/15/17(3)

     1,465        1,439   

Fortescue Metals Group (FMG) Resources August 2006 Pty Ltd. 144A
9.750%, 3/1/22(3)

     160        150   

Hexion U.S. Finance Corp.
6.625%, 4/15/20

     2,745        2,347   

INEOS Group Holdings SA 144A
5.875%, 2/15/19(3)

     1,130        1,055   

Vedanta Resources plc 144A
9.500%, 7/18/18(3)

     685        576   
   

 

 

  
      5,967   
   

 

 

  
    PAR
VALUE		     VALUE  
Telecommunication Services—0.3%     

Frontier Communications Corp. 144A
8.875%, 9/15/20(3)

   $ 215      $ 211   

6.250%, 9/15/21

     1,085        909   

Level 3 Financing, Inc.
7.000%, 6/1/20

     1,105        1,146   
   

 

 

  
      2,266   
   

 

 

  
Utilities—0.2%     

Talen Energy Supply LLC 144A
4.625%, 7/15/19(3)

     1,510        1,382   
TOTAL CORPORATE BONDS AND NOTES   
(Identified Cost $37,105)             34,159   
LOAN AGREEMENTS(2)—97.0%   
Consumer Discretionary—29.7%   

Acosta Holdco, Inc. Tranche B-1
4.250%, 9/26/21

     1,876        1,851   

Advantage Sales & Marketing, Inc. First Lien,
4.250%, 7/23/21

     2,086        2,053   

Second Lien,
7.500%, 7/25/22

     1,780        1,709   

Affinity Gaming LLC
5.250%, 11/9/17

     971        977   

Allison Transmission
Tranche B-3,
3.500%, 8/23/19

     645        646   

Aristocrat Leisure Ltd.
4.750%, 10/20/21

     3,346        3,354   

Boyd Gaming Corp. Tranche B,
4.000%, 8/14/20

     4,367        4,370   

Brickman Group Ltd. LLC (The) Second Lien,
7.500%, 12/17/21

     1,971        1,927   

Caesars Entertainment Operating Co., Inc.

    

Tranche B-4,
6.375%, 10/31/16(8)

     943        886   

Tranche B-6,
5.500%, 3/1/17(8)

     2,558        2,381   

Tranche B-7,
7.500%, 1/28/18(8)

     2,220        2,018   

Caesars Entertainment Resort Properties LLC Tranche B,
7.000%, 10/11/20

     3,054        2,861   

Caesars Growth Properties Holdings LLC Tranche B, First Lien,
6.250%, 5/8/21

     3,493        3,083   

CBAC Borrower LLC Tranche B,
8.250%, 7/2/20

     2,523        2,384   

Cequel Communications LLC
3.500%, 2/14/19

     1,646        1,629   

Charter Communications Operations LLC

    

Tranche F, 3.000%, 1/3/21

     6,180        6,089   

Tranche H, 3.250%, 8/24/21

     1,104        1,100   

Tranche I, 3.500%, 1/24/23

     1,348        1,343   
 

 

See Notes to Financial Statements

 

 

 

51

Table of Contents

VIRTUS SENIOR FLOATING RATE FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

Chrysler Group LLC Tranche B,
3.250%, 12/31/18

   $ 2,573      $ 2,555   

Cirque Du Soleil
5.000%, 7/8/22

     1,613        1,616   

CityCenter Holdings LLC Tranche B,
4.250%, 10/16/20

     2,560        2,556   

Cooper-Standard Automotive, Inc.
4.000%, 4/4/21

     2,988        2,974   

CSC Holdings, Inc.

    

Tranche B, 2.694%, 4/17/20

     2,066        2,054   

0.000%, 9/23/22(7)

     5,060        5,038   

Cumulus Media Holdings, Inc.
4.250%, 12/23/20

     1,756        1,484   

Delta 2 (Lux) S.A.R.L. Tranche B-3,
4.750%, 7/30/21

     3,813        3,752   

El Dorado Resorts, Inc.
4.250%, 7/25/22

     1,042        1,043   

Federal-Mogul Corp. Tranche C,
4.750%, 4/15/21

     2,308        2,196   

Golden Nugget, Inc.
5.500%, 11/21/19

     1,000        1,004   

Delayed Draw
5.500%, 11/21/19

     429        430   

Graton Resort & Casino Tranche B,
4.750%, 9/1/22

     1,146        1,145   

Hilton Worldwide Finance LLC
3.500%, 10/26/20

     13,756        13,743   

Hudson’s Bay Co.
0.000%, 8/12/27(7)

     1,980        1,991   

iHeartCommunications, Inc. (Clear Channel Communications, Inc.) Tranche D,
6.944%, 1/30/19

     13,633        11,343   

Infiltrator Systems Tranche B,
5.250%, 5/27/22

     723        724   

Intelsat Jackson Holdings S.A. Tranche B-2,
3.750%, 6/30/19

     2,838        2,767   

Jarden

    

Tranche B-1,
2.944%, 9/30/20

     198        199   

Tranche B-2
2.944%, 7/30/22

     1,393        1,394   

KAR Auction Services, Inc. Tranche B-2,
3.500%, 3/11/21

     2,563        2,564   

Key Safety Systems, Inc.
4.750%, 8/29/21

     2,030        1,989   

Laureate Education, Inc. 2018 Extended,
5.000%, 6/15/18

     4,201        3,529   

Leslie’s Poolmart Tranche B,
4.250%, 10/16/19

     3,210        3,149   

Libbey Glass, Inc.
3.750%, 4/9/21

     3,510        3,505   

Life Time Fitness, Inc.
4.250%, 6/10/22

     2,790        2,783   
    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

Marina District Finance Co., Inc.
6.500%, 8/15/18

   $ 814      $ 821   

MCC LLC (Mediacom Broadband Group)

    

Tranche H, 3.250%, 1/29/21

     2,293        2,263   

Tranche G, 3.500%, 6/30/21

     2,319        2,303   

Tranche J, 3.750%, 6/30/21

     925        924   

Media General, Inc.
4.000%, 7/31/20

     4,108        4,082   

Metaldyne LLC 3.
7.50%, 10/20/21

     2,606        2,596   

MGM Resort International Tranche B
3.500%, 12/20/19

     5,726        5,691   

Michaels Stores, Inc. Tranche B,
3.750%, 1/28/20

     2,918        2,917   

Mohegan Tribal Gaming Authority Tranche B,
5.500%, 6/15/18

     2,448        2,441   

Numericable SFR

    

Tranche B-1,
4.500%, 5/21/20

     1,302        1,297   

Tranche B-2,
4.500%, 5/21/20

     1,136        1,132   

Party City Holdings, Inc.
4.250%, 8/19/22

     687        687   

Peninsula Gaming LLC Tranche B,
4.250%, 11/20/17

     796        796   

Penn National Gaming, Inc. Tranche B,
3.250%, 10/30/20

     2,948        2,946   

Peppermill Casinos, Inc. Tranche B,
7.250%, 11/9/18

     2,266        2,272   

PetSmart, Inc. Tranche B-1
4.250%, 3/11/22

     1,117        1,117   

Pinnacle Entertainment, Inc. Tranche B-2,
3.750%, 8/13/20

     1,858        1,859   

Scientific Games International, Inc. Tranche B-2,
6.000%, 10/1/21

     2,786        2,755   

ServiceMaster Co. LLC (The)
4.250%, 7/1/21

     6,545        6,549   

Shingle Springs Tribal Gaming Authority
6.250%, 8/29/19

     1,450        1,459   

Sinclair Television Group, Inc. Tranche B-1,
3.500%, 7/30/21

     3,756        3,730   

Six Flags Theme Parks, Inc. Tranche B,
3.500%, 6/30/22

     1,354        1,356   

SRAM LLC First Lien,
4.417%, 4/10/20

     2,461        2,332   

Staples, Inc. First Lien,
0.000%, 4/23/21(7)

     2,412        2,403   

Station Casinos LLC Tranche B,
4.250%, 3/2/20

     3,008        3,006   
    PAR
VALUE		     VALUE  
Consumer Discretionary—continued   

TI Group Auto Systems LLC
4.500%, 6/30/22

   $ 290      $ 287   

Transtar Holding Co.

    

First Lien, 5.750%, 10/9/18

     1,427        1,384   

Second Lien,
10.000%, 10/9/19

     460        446   

Tribune Media Co. Tranche B,
3.750%, 12/28/20

     3,988        3,960   

TWCC Holding Corp. Second Lien,
7.000%, 6/26/20

     2,142        2,004   

U.S. Farathane Corp.
6.750%, 12/23/21

     1,210        1,217   

Univision Communications, Inc. First Lien,
4.000%, 3/1/20

     4,396        4,374   

4.000%, 3/1/20

     7,586        7,548   

Virgin Media Investment Holdings Ltd. Tranche F,
3.500%, 6/30/23

     2,590        2,556   

Ziggo B.V.

    

Tranche B-3,
3.125%, 1/15/22

     1,482        1,457   

Tranche B-1,
3.500%, 1/15/22

     1,398        1,375   

Tranche B-2,
3.500%, 1/15/22

     901        886   
   

 

 

  
      205,416   
   

 

 

  
Consumer Staples—4.5%     

Albertson’s LLC Tranche B-4,
5.500%, 8/25/21

     2,263        2,267   

ARAMARK Corp.

    

Tranche E, 3.250%, 9/7/19

     3,823        3,821   

Tranche F, 3.250%, 2/24/21

     983        981   

Charger OpCo B.V. (Oak Tea, Inc.) Tranche B-1,
4.250%, 7/2/22

     1,083        1,085   

Crossmark Holdings, Inc.

    

First Lien,
4.500%, 12/20/19

     1,968        1,738   

Second Lien,
8.750%, 12/21/20

     520        408   

Del Monte Corp. First Lien,
4.875%, 2/18/21

     946        898   

Dole Food Co., Inc. Tranche B,
4.639%, 11/1/18

     2,179        2,177   

Hostess Brands LLC

    

Tranche B, First Lien,
4.500%, 8/3/22

     2,570        2,577   

Tranche B Second Lien,
8.500%, 8/3/23

     1,900        1,906   

Kronos Acquisition Intermediate, Inc. (KIK Custom Products, Inc.)

    

Second Lien,
9.750%, 4/30/20

     4,447        4,541   

6.000%, 8/26/22

     2,227        2,186   

Prestige Brands, Inc. Tranche B-3,
4.250%, 9/3/21

     263        263   

Reynolds Group Holdings, Inc. 4.500%, 12/1/18

     3,988        3,995   
 

 

See Notes to Financial Statements

 

 

 

52

Table of Contents

VIRTUS SENIOR FLOATING RATE FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Consumer Staples—continued     

Rite Aid Corp.

    

Tranche 1
5.750%, 8/21/20

   $ 101      $ 102   

Tranche 2, Second Lien,
4.875%, 6/21/21

     1,417        1,421   

Spectrum Brands, Inc.
4.125%, 6/23/22

     740        743   
   

 

 

  
      31,109   
   

 

 

  
Energy—2.7%     

Arch Coal, Inc.
6.250%, 5/16/18

     3,326        1,900   

Azure Midstream
7.500%, 11/15/18

     1,364        1,173   

Chelsea Petroleum I LLC
0.000%, 7/22/22(7)

     1,634        1,620   

Chief Exploration & Development LLC Second Lien,
7.500%, 5/16/21

     2,739        2,273   

Drillships Ocean Ventures, Inc.
5.500%, 7/25/21

     1,510        1,015   

Fieldwood Energy LLC
3.875%, 10/1/18

     847        724   

Second Lien, 8.375%, 9/30/20

     2,613        742   

FTS International, Inc.
5.750%, 4/16/21

     791        247   

Jonah Energy LLC Second Lien,
7.500%, 5/12/21

     2,045        1,657   

MEG Energy Corp.
3.750%, 3/31/20

     1,921        1,801   

Ocean Rig Tranche B-1,
6.000%, 3/31/21

     2,940        1,755   

Paragon Offshore Finance Co. 3.750%, 7/16/21

     1,716        699   

Sabine Oil & Gas LLC Second Lien,
8.750%, 12/31/18(8)

     1,290        229   

Seadrill Operating LP
4.000%, 2/21/21

     5,278        3,237   
   

 

 

  
      19,072   
   

 

 

  
Financials—6.0%   

Alix Partners LLP
4.500%, 7/28/22

     4,146        4,141   

Asurion LLC Tranche B-1,
5.000%, 5/24/19

     1,069        1,023   

Tranche B-2,
4.250%, 7/8/20

     731        687   

Tranche B-4,
5.000%, 8/4/22

     1,071        1,016   

Capital Automotive LP Tranche B-1,
4.000%, 4/10/19

     1,502        1,503   

Second Lien,
6.000%, 4/30/20

     1,828        1,845   

Clipper Acquisitions Corp.
Tranche B,
3.000%, 2/6/20

     986        971   

Delos Finance S.A.R.L.
3.500%, 3/6/21

     4,026        4,022   
    PAR
VALUE		     VALUE  
Financials—continued   

DtTZ U.S. Borrower, LLC (DTZ AUS Holdco PTY Ltd.)
First Lien,
4.250%, 11/4/21

   $ 2,993      $ 2,967   

iStar Financial, Inc. Tranche A-2,
7.000%, 3/19/17

     362        371   

National Financial Partners LLC 4.500%, 7/1/20

     2,799        2,757   

Realogy Corp.
Extended LOC,
2.415%, 10/10/16

     204        203   

Tranche B,
3.750%, 3/5/20

     7,377        7,369   

Starwood Property Trust, Inc. First Lien,
3.500%, 4/17/20

     3,296        3,253   

TransUnion LLC Tranche B-2,
3.500%, 4/9/21

     5,214        5,170   

Walter Investment Management Corp. Tranche B,
4.750%, 12/18/20

     4,303        3,998   
   

 

 

  
      41,296   
   

 

 

  
Health Care—16.3%    

21st Century Oncology, Inc. Tranche B
6.500%, 4/30/22

     1,905        1,815   

Accellent, Inc. First Lien,
4.500%, 3/12/21

     1,749        1,749   

Air Medical
4.500%, 4/28/22

     184        174   

Akorn, Inc.
5.500%, 4/16/21

     2,711        2,709   

Alere, Inc. Tranche B,
4.250%, 6/20/22

     1,684        1,686   

AMAG Pharmaceuticals, Inc.
4.750%, 8/17/21

     1,057        1,054   

American Renal Holdings, Inc. Tranche B, First Lien,
4.500%, 8/20/19

     2,429        2,416   

Second Lien,
8.500%, 3/20/20

     2,390        2,390   

Amneal Pharmaceuticals LLC Tranche B,
5.125%, 11/1/19

     3,385        3,388   

AmSurg Corp.
3.500%, 7/16/21

     1,192        1,194   

Ardent Legacy Acquisitions, Inc.
6.500%, 8/4/21

     1,559        1,565   

Beacon Health Strategies
4.750%, 12/23/21

     2,279        2,252   

Capsugel Holdings US, Inc.
3.500%, 8/1/18

     3,953        3,947   

CHG Healthcare Services, Inc. First Lien,
4.250%, 11/19/19

     4,302        4,298   

Community Health Systems, Inc. (CHS)

    

Incremental 2018, Tranche F, 3.575%, 12/31/18

     1,291        1,292   

Incremental 2019, Tranche G, 3.750%, 12/31/19

     1,332        1,332   
    PAR
VALUE		     VALUE  
Health Care—continued    

Incremental 2021, Tranche H, 4.000%, 1/27/21

   $ 2,451      $ 2,454   

Concentra, Inc. First Lien, Tranche B
4.625%, 6/1/22

     289        289   

Convatec, Inc.
4.250%, 6/15/20

     100        100   

DaVita HealthCare Partners, Inc. Tranche B,
3.500%, 6/24/21

     3,116        3,116   

DJO Finance
4.250%, 6/8/20

     1,462        1,459   

Emdeon, Inc.
Tranche B-3,
3.750%, 11/2/18

     495        493   

Tranche B-2,
3.750%, 11/2/18

     4,050        4,035   

Endo Luxembourg Finance Co. I S.A.R.L.
Tranche B,
3.750%, 6/24/22

     2,251        2,248   

Envision Healthcare Corp. (F/K/A Emergency Medical Services Corp.)
4.000%, 5/25/18

     3,645        3,649   

Hill-Rom Tranche B,
3.500%, 9/8/22

     145        145   

Horizon Pharma, Inc.
4.500%, 5/7/21

     1,220        1,196   

Iasis Healthcare LLC Tranche B-2,
4.500%, 5/3/18

     1,971        1,975   

IMS Health, Inc. Tranche B,
3.500%, 3/17/21

     5,278        5,263   

InVentiv Health, Inc. Tranche B-4,
7.750%, 5/15/18

     2,887        2,896   

Kinetic Concepts, Inc.
Tranche E-2,
4.000%, 11/4/16

     928        928   

Tranche E-1,
4.500%, 5/4/18

     571        571   

Mallinckrodt International Finance S.A. Tranche B,
3.250%, 3/19/21

     2,747        2,703   

Tranche B-1,
3.500%, 3/19/21

     289        286   

MMM Holdings, Inc.
9.750%, 12/12/17(10)

     377        287   

MSO of Puerto Rico, Inc.
9.750%, 12/12/17(10)

     274        209   

Multiplan, Inc. Tranche B-1,
3.750%, 3/31/21

     3,065        3,032   

National Mentor Holdings, Inc. Tranche B,
4.250%, 1/31/21

     1,067        1,061   

National Surgical Hospitals First Lien,
4.500%, 6/1/22

     1,085        1,088   

NBTY, Inc. Tranche B-2,
3.500%, 10/1/17

     2,782        2,768   

NVA Holdings
0.000%, 8/14/21(7)

     117        117   

NVA Holdings, Inc.
First Lien,
4.750%, 8/14/21

     772        773   
 

 

See Notes to Financial Statements

 

 

 

53

Table of Contents

VIRTUS SENIOR FLOATING RATE FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Health Care—continued    

Second Lien
8.000%, 8/14/22

   $ 986      $ 980   

Ortho-Clinical Diagnostics, Inc.
4.750%, 6/30/21

     3,310        3,259   

Pharmaceutical Product Development
4.250%, 8/18/22

     2,480        2,456   

PharMEDium Healthcare Corp.
First Lien,
4.250%, 1/28/21

     1,636        1,621   

Second Lien,
7.750%, 1/28/22

     540        535   

PRA Holdings, Inc. Tranche B-1,
4.500%, 9/23/20

     2,322        2,328   

Quintiles Transnational Corp. Tranche B,
3.250%, 5/12/22

     1,127        1,129   

Regional Care, Inc. (RCHP, Inc.) First Lien,
5.250%, 4/23/19

     3,895        3,864   

RPI Finance Trust Tranche B-4,
3.500%, 11/9/20

     1,134        1,132   

Schumacher Group
0.000%, 7/31/22(7)

     1,840        1,835   

Sterigenics-Nordion
4.250%, 5/16/22

     1,086        1,081   

Surgery Center Holdings, Inc.
First Lien,
5.250%, 11/3/20

     651        652   

Second Lien,
8.500%, 11/3/21

     1,693        1,711   

Surgical Care Affiliates, Inc.
4.250%, 3/17/22

     729        729   

U.S. Renal Care, Inc. Tranche B-2, First Lien,
4.250%, 7/3/19

     2,981        2,980   

Valeant Pharmaceuticals International, Inc.
Series D-2, Tranche B,
3.500%, 2/13/19

     2,158        2,128   

Series C-2, Tranche B,
3.750%, 12/11/19

     2        2   

Series E1, Tranche B,
3.750%, 8/5/20

     3,981        3,929   

Series F-1, Tranche B,
4.000%, 4/1/22

     3,930        3,896   
   

 

 

  
      112,649   
   

 

 

  
Industrials—12.3%   

Air Canada
4.000%, 9/26/19

     2,232        2,235   

Allied Security Holdings LLC
First Lien,
4.250%, 2/12/21

     1,377        1,364   

Second Lien,
8.000%, 8/13/21

     688        680   

American Airlines, Inc.
3.250%, 6/27/20

     9,047        8,971   

3.500%, 10/10/21

     2,015        2,011   

Beacon Roofing Supply
0.000%, 9/23/22(7)

     423        423   
    PAR
VALUE		     VALUE  
Industrials—continued   

Brickman Group Holdings, Inc. First Lien,
4.000%, 12/18/20

   $ 3,821      $ 3,771   

Brock Holdings III, Inc. First Lien,
6.000%, 3/16/17

     2,580        2,506   

Builders FirstSource
6.000%, 7/29/22

     2,045        2,032   

Ceridian HCM Holding, Inc.
4.500%, 9/15/20

     2,361        2,244   

DynCorp International, Inc.
6.250%, 7/7/16

     2,372        2,323   

Filtration Group Corp.
First Lien,
4.250%, 11/23/20

     1,425        1,427   

Second Lien,
8.250%, 11/22/21

     543        544   

Harland Clarke Holdings Corp. Tranche B-3,
7.000%, 5/22/18

     2,112        2,110   

Tranche B-4,
6.000%, 8/4/19

     658        657   

HD Supply
3.750%, 8/13/21

     2,971        2,963   

Headwaters, Inc. Tranche B,
4.500%, 3/24/22

     149        149   

Husky Injection Molding Systems Ltd.
4.250%, 6/30/21

     3,287        3,249   

Landmark U.S. Member LLC (Landmark U.S. Corp Acquisition, Inc.)
4.750%, 10/25/19

     112        111   

First Lien,
4.750%, 10/25/19

     2,818        2,806   

Second Lien
8.250%, 1/25/21

     970        967   

McJunkin Red Man Corp.
4.750%, 11/8/19

     1,037        1,015   

Navistar, Inc.
6.500%, 8/7/20

     1,319        1,292   

Nortek, Inc. Incremental-1,
3.500%, 10/30/20

     4,268        4,244   

Quikrete Co., Inc. First Lien,
4.000%, 9/28/20

     2,829        2,818   

Rexnord LLC Tranche B,
4.000%, 8/21/20

     4,900        4,862   

Science Applications Tranche B,
3.750%, 5/4/22

     3,082        3,085   

Sedgwick Claims Management Services, Inc.
First Lien,
3.750%, 3/1/21

     4,807        4,742   

Second Lien,
6.750%, 2/28/22

     1,760        1,668   

Spin Holdco, Inc. First Lien,
4.250%, 11/14/19

     2,280        2,240   

TransDigm, Inc.
Tranche C,
3.750%, 2/28/20

     6,993        6,919   

Tranche D, 3.750%, 6/4/21

     2,642        2,613   

United Airlines, Inc. (Continental Airlines, Inc.) Tranche B-1,
3.500%, 9/15/21

     4,255        4,250   
    PAR
VALUE		     VALUE  
Industrials—continued   

Waste Industries USA, Inc.
4.250%, 2/27/20

   $ 2,185      $ 2,197   
   

 

 

  
      85,488   
   

 

 

  
Information Technology—10.2%   

Allflex Holdings III, Inc.
First Lien,
4.250%, 7/17/20

     4,150        4,108   

Second Lien,
8.000%, 7/19/21

     789        780   

Applied Systems, Inc. First Lien,
4.250%, 1/25/21

     569        568   

Second Lien,
7.500%, 1/24/22

     1,878        1,866   

Avago Technologies Cayman Ltd.
3.750%, 5/6/21

     3,047        3,049   

Blue Coat Systems, Inc.
4.500%, 5/20/22

     1,651        1,640   

CCC Information Services
4.000%, 12/20/19

     2,876        2,867   

CDW LLC
3.250%, 4/29/20

     8,152        8,094   

Deltek, Inc.
First Lien
5.000%, 6/25/22

     194        194   

Second Lien
9.500%, 6/26/23

     858        861   

Ellucian, Inc.
0.000%, 9/16/22(7)

     2,580        2,578   

Epicor Software Corp. Tranche B,
4.750%, 6/1/22

     1,440        1,433   

Evergreen Skills Lux S.A.R.L.
First Lien,
5.750%, 4/28/21

     2,767        2,502   

Excelitas Technologies Corp. Tranche B,
6.000%, 11/2/20

     2,142        2,080   

First Data Corp.
2018 Term Loan
3.696%, 3/23/18

     11,620        11,542   

Second Lien 2018
3.696%, 9/24/18

     1,156        1,147   

3.946%, 7/8/22

     354        353   

Infinity Acquisition Ltd.
4.000%, 8/6/21

     2,572        2,548   

Infor (U.S.), Inc.
Tranche B-5,
3.750%, 6/3/20

     3,508        3,402   

Tranche B-3,
3.750%, 6/3/20

     4,374        4,239   

Interactive Data Corp.
4.750%, 5/2/21

     3,168        3,162   

Mitchell International, Inc.
4.500%, 10/13/20

     3,329        3,322   

Second Lien,
8.500%, 10/11/21

     3,057        3,054   

Presidio, Inc. Refinancing Term 5.250%, 2/2/22

     1,419        1,419   

Riverbed Technologies, Inc. 6.000%, 4/25/22

     2,164        2,170   
 

 

See Notes to Financial Statements

 

 

 

54

Table of Contents

VIRTUS SENIOR FLOATING RATE FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Information Technology—continued   

SS&C Technologies, Inc.
Tranche A-1,
2.944%, 7/8/20

   $ 188      $ 188   

Tranche A-2,
2.944%, 7/8/20

     292        292   

Tranche B-1,
4.000%, 7/8/22

     1,237        1,241   

Tranche B-2,
4.000%, 7/8/22

     196        196   
   

 

 

  
      70,895   
   

 

 

  
Materials—8.1%    

American Builders & Contractors Supply Co., Inc.
Tranche B,
3.500%, 4/16/20

     5,880        5,846   

Anchor Glass Container Tranche B,
4.500%, 7/1/22

     4,834        4,846   

Ardagh Packaging Finance plc
4.000%, 12/17/19

     863        861   

AZ Chem US, Inc. First Lien,
5.125%, 6/11/21

     1,532        1,533   

Berlin Packaging, Inc. S.A.R.L.
First Lien,
4.500%, 10/1/21

     1,828        1,823   

Berry Plastics Groups, Inc. Tranche D,
3.500%, 2/8/20

     4,532        4,497   

Tranche E,
3.750%, 1/6/21

     1,843        1,833   

0.000%, 9/16/22(7)

     736        736   

CPG International
4.750%, 9/30/20

     758        751   

Fortescue Metals Group (FMG) Resources Property Ltd.
3.750%, 6/30/19

     4,909        4,027   

Huntsman International LLC
3.750%, 10/1/21

     3,970        3,848   

Ineos US Finance LLC
3.750%, 12/15/20

     9,000        8,747   

Owens-Illinois Tranche B,
3.500%, 9/1/22

     559        561   

Royal Holdings, Inc. First Lien,
4.500%, 6/20/22

     2,134        2,121   

Solenis International LP
First Lien,
4.250%, 7/31/21

     2,321        2,295   

Summit Materials
4.250%, 7/18/22

     3,545        3,543   

Univar, Inc.
4.250%, 7/1/22(7)

     3,562        3,502   

W.R. Grace & Co.
Delayed Draw,
2.750%, 2/3/21

     1,238        1,228   

2.750%, 2/3/21

     3,440        3,414   
   

 

 

  
      56,012   
   

 

 

  
Telecommunication Services—4.0%   

Crown Castle Operating Co.
Tranche B-2,
3.000%, 1/31/21

     2,630        2,625   

Global Tel*Link Corp. First Lien,
5.000%, 5/23/20

     1,822        1,790   
    PAR
VALUE		     VALUE  
Telecommunication Services—continued   

Level 3 Financing, Inc. Tranche B-III,
4.000%, 8/1/19

   $ 3,875      $ 3,880   

Tranche B, 2020
4.000%, 1/15/20

     3,388        3,383   

Tranche B-II,
3.500%, 5/31/22

     3,343        3,322   

SBA Senior Finance II LLC
Tranche B-1,
3.250%, 3/24/21

     3,739        3,698   

Securus Technologies Holdings, Inc. First Lien,
4.750%, 4/30/20

     2,352        2,284   

Tranche B-2,
5.250%, 4/30/20

     765        749   

West Corp. Tranche B-10,
3.250%, 6/30/18

     2,203        2,178   

XO Communications LLC
4.250%, 3/20/21

     3,564        3,543   
   

 

 

  
      27,452   
   

 

 

  
Utilities—3.2%    

Atlantic Power LP
4.750%, 2/24/21

     1,023        1,018   

Calpine Construction Finance Co. LP Tranche B-1,
3.000%, 5/3/20

     4,697        4,591   

Tranche B-2,
3.250%, 1/31/22

     3,818        3,735   

3.500%, 5/27/22

     941        927   

Granite Acquisition, Inc.

    

Tranche B, First Lien,
5.000%, 12/17/21

     2,827        2,776   

Tranche C, First Lien,
5.000%, 12/17/21

     125        123   

NRG Energy, Inc.
2.750%, 7/1/18

     5,293        5,192   

Texas Competitive Electric Holdings Co. LLC 2017 Extended,
4.683%, 10/10/17(5)

     9,165        3,532   
   

 

 

  
              21,894   
TOTAL LOAN AGREEMENTS
(Identified Cost $694,116)		         671,283   
    SHARES        
AFFILIATED MUTUAL FUND—1.1%   

Virtus Credit Opportunities Fund(9)

     767,836        7,502   
TOTAL AFFILIATED MUTUAL FUND (Identified Cost $7,677)         7,502   
TOTAL LONG TERM INVESTMENTS—103.2%   
(Identified Cost $740,029)        714,104 (6) 
TOTAL INVESTMENTS—103.2% (Identified Cost $740,029)         714,104 (1) 

Other assets and liabilities,net—(3.2)%

  

     (22,295 ) 
   

 

 

  
NET ASSETS—100.0%      $ 691,809   
   

 

 

  

Abbreviations:

PIK Payment-in-Kind Security

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Variable or step coupon security; interest rate shown reflects the rate in effect at September 30, 2015.
(3)  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, 2015, these securities amounted to a value of $17,212 or 2.5% of net assets.
(4)  100% of the interest income received was in cash.
(5)  Security in default, interest payments are being received during the bankruptcy proceedings.
(6)  All or a portion of the Fund’s assets have been segregated as collateral for delayed delivery settlements and leverage.
(7)  This loan will settle after September 30, 2015, at which time the interest rate, based on the London Interbank Offered Rate (“LIBOR”) and the agreed upon spread on trade date, will be reflected.
(8)  Security in default.
(9)  This fund is a public fund and the prospectus and annual report are publicly available.
(10)  Illiquid security

Foreign Currencies:

BRL Brazilian Real

 

Country Weightings (Unaudited)†       

United States

     93 % 

Luxembourg

     3   

Australia

     1   

Canada

     1   

Netherlands

     1   

Other

     1   

Total

     100 % 

† % of total investments as of September 30, 2015

   

 

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

55

Table of Contents

VIRTUS SENIOR FLOATING RATE FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total
Value at
September 30, 2015		        Level 1
Quoted
Prices		      Level 2
Significant
Observable
Inputs		      Level 3
Significant
Unobservable
Inputs		  

Debt Securities:

              

Asset-Backed Securities

    $ 1,160         $ —       $ 1,160       $ —   

Corporate Bonds And Notes

      34,159           —         34,159         —   

Loan Agreements

      671,283           —         670,837         446   

Equity Securities:

              

Affiliated Mutual Fund

      7,502           7,502         —         —   
  

 

 

       

 

 

     

 

 

     

 

 

  

Total Investments

    $ 714,104         $ 7,502       $ 706,156       $ 446   
  

 

 

       

 

 

     

 

 

     

 

 

  

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

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.

 

     Loan
Agreements		  

Investments in Securities

   

Balance as of September 30, 2014:

    $ —   

Accrued discount/(premium)

      —   

Realized gain (loss)

      —   

Change in unrealized appreciation (depreciation)

      —   

Purchases

      —   

Sales(b)

      —   

Transfers into Level 3(a)

      446 (c) 

Transfers from Level 3(a)

      —   
  

 

 

  

Balance as of September 30, 2015

    $ 446   
  

 

 

  

 

(a)  “Transfers into and/or from” represent the ending value as of September 30, 2015, for any investment security where a change in the pricing level occurred from the beginning to the end of the period.
(b)  Includes paydowns on securities.
(c)  The transfer is due to increase and/or decrease in trading activities at period end.

None of the securities in this table are internally fair valued.

 

See Notes to Financial Statements

 

56

Table of Contents

VIRTUS WEALTH MASTERS FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—99.4%   
Consumer Discretionary—35.4%   

Amazon.com, Inc.(2)

     1,309      $ 670   

AMC Networks, Inc. Class A(2)

     9,404        688   

American Eagle Outfitters, Inc.

     43,344        677   

Apollo Group, Inc. Class A

     59,554        659   

AutoNation, Inc.(2)

     11,787        686   

Buckle, Inc. (The)

     18,483        683   

Cabela’s, Inc.(2)

     14,628        667   

Carnival Corp.

     14,156        704   

CBS Corp. Class B

     16,553        660   

Choice Hotels International, Inc.

     14,375        685   

Columbia Sportswear Co.

     11,242        661   

Comcast Corp. Class A

     12,220        695   

Dick’s Sporting Goods, Inc.

     14,306        710   

Dillard’s, Inc. Class A

     7,832        684   

Discovery Communications, Inc. Class C(2)

     27,142        659   

DISH Network Corp. Class A(2)

     11,388        664   

DreamWorks Animation SKG, Inc. Class A(2)(3)

     39,550        690   

DSW, Inc. Class A

     24,822        628   

Expedia, Inc.

     5,642        664   

Federal-Mogul Corp.(2)

     94,431        645   

Fossil Group, Inc.(2)

     12,034        672   

Gap, Inc. (The)

     22,238        634   

Garmin Ltd.

     19,647        705   

Horton (D.R.), Inc.

     23,564        692   

Hyatt Hotels Corp. Class A(2)

     14,458        681   

International Speedway Corp. Class A

     22,065        700   

Jarden Corp.(2)

     13,569        663   

L Brands, Inc.

     7,690        693   

Lands’ End, Inc.(2)(3)

     26,220        708   

Las Vegas Sands Corp.

     16,238        617   

Lennar Corp. Class A

     14,259        686   

Liberty Broadband Corp.(2)

     12,842        657   

Liberty Global plc Class C(2)

     15,661        642   

Liberty Global plc(2)

     20,435        700   

Liberty Interactive Corp. Class A(2)

     25,854        678   

Liberty Media Corp.(2)

     19,761        681   

Liberty Tripadvisor Holdings, Class A(2)

     29,175        647   

Liberty Ventures Class A(2)

     16,976        685   

Lions Gate Entertainment Corp.

     18,278        673   

Madison Square Garden Co. (The)

     9,605        693   

Marriott International, Inc. Class A

     10,373        707   

Marriott Vacations Worldwide Corp.

     10,242        698   

Mohawk Industries, Inc.(2)

     3,558        647   

Morningstar, Inc.

     8,636        693   

News Corp. Class A

     55,115        696   

NIKE, Inc. Class B

     6,084        748   

Nordstrom, Inc.

     9,571        686   

Papa John’s International, Inc.

     10,149        695   

Penn National Gaming, Inc.(2)

     40,710        683   

Penske Automotive Group, Inc.

     13,926        675   

Ralph Lauren Corp.

     6,389        755   

Restaurant Brands International, Inc.

     18,729        673   

Sears Holdings Corp.(2)

     27,570        623   

Sears Hometown and Outlet Stores, Inc.(2)

     87,734        703   

Starbucks Corp.

     12,347        702   
    SHARES     VALUE  
Consumer Discretionary—continued   

Starz – Liberty Capital Class A(2)

     17,704      $ 661   

Tesla Motors, Inc.(2)

     2,704        672   

Twenty-First Century Fox, Inc. Class A

     26,772        722   

Under Armour, Inc. Class A(2)

     6,921        670   

Urban Outfitters, Inc.(2)

     24,120        709   

Viacom, Inc. Class B

     16,003        691   

Wendy’s Co. (The)

     77,893        674   

Wynn Resorts Ltd.

     11,032        586   
   

 

 

  
      42,755   
   

 

 

  
Consumer Staples—5.2%    

Boston Beer Co., Inc. (The) Class A(2)

     3,122        657   

Brown-Forman Corp. Class B

     7,121        690   

Estee Lauder Cos., Inc. (The) Class A

     9,120        736   

HRG Group, Inc.(2)

     57,471        674   

Kraft Heinz Co.(The)

     9,496        670   

Lancaster Colony Corp.

     7,085        691   

Monster Beverage Corp.(2)

     5,243        709   

PriceSmart, Inc.

     8,864        686   

Tootsie Roll Industries, Inc.

     22,515        704   
   

 

 

  
      6,217   
   

 

 

  
Energy—6.5%    

Cheniere Energy, Inc.(2)

     13,978        675   

Chesapeake Energy Corp.(3)

     88,092        646   

Clayton Williams Energy, Inc.(2)

     14,323        556   

Continental Resources, Inc.(2)

     24,271        703   

CVR Energy, Inc.

     17,170        705   

Exterran Holdings, Inc.

     34,473        620   

Hess Corp.

     13,780        690   

Par Petroleum Corp.(2)

     35,383        737   

RPC, Inc.(3)

     68,211        603   

Transocean Ltd.(3)

     48,587        628   

W&T Offshore, Inc.(3)

     199,236        598   

Western Refining, Inc.

     16,594        732   
   

 

 

  
      7,893   
   

 

 

  
Financials—20.2%   

Altisource Portfolio Solutions SA(2)

     27,680        660   

American Financial Group, Inc.

     10,239        706   

American Homes 4 Rent Class A

     42,912        690   

AmTrust Financial Services, Inc.

     11,639        733   

Berkley (W.R.) Corp.

     13,048        709   

Berkshire Hathaway, Inc.
Class B(2)

     5,454        711   

BOK Financial Corp.

     11,336        734   

Boston Properties, Inc.

     6,050        716   

Brown & Brown, Inc.

     22,460        696   

Charles Schwab Corp. (The)

     24,919        712   

Cohen & Steers, Inc.

     24,778        680   

Credit Acceptance Corp.(2)

     3,510        691   

Equity Lifestyle Properties, Inc.

     12,236        717   

Equity Residential

     9,733        731   

Erie Indemnity Co. Class A

     8,731        724   

First Citizens BancShares, Inc. Class A

     3,159        714   

Franklin Resources, Inc.

     18,555        691   
    SHARES     VALUE  
Financials—continued   

Gaming and Leisure Properties, Inc.

     23,289      $ 692   

Greenlight Capital Re Ltd.
Class A(2)

     30,303        675   

Hilltop Holdings, Inc.(2)

     35,402        701   

Host Hotels & Resorts, Inc.

     43,918        694   

Howard Hughes Corp. (The)(2)

     5,825        668   

Leucadia National Corp.

     34,838        706   

Loews Corp.

     19,675        711   

Mercury General Corp.

     13,696        692   

Ocwen Financial Corp.(2)(3)

     101,026        678   

Raymond James Financial, Inc.

     14,167        703   

Seritage Growth Properties(2)

     17,157        639   

Simon Property Group, Inc.

     3,850        707   

Taubman Centers, Inc.

     10,158        702   

Third Point Reinsurance Ltd(2)

     51,194        689   

Urban Edge Properties

     33,034        713   

Vornado Realty Trust

     7,755        701   

WisdomTree Investments, Inc.

     40,169        648   

WP GLIMCHER, Inc.

     58,945        687   
   

 

 

  
      24,421   
   

 

 

  
Health Care—3.6%   

Akorn, Inc.(2)

     18,866        538   

Bruker Corp.(2)

     39,774        653   

Cerner Corp.(2)

     11,210        672   

Halozyme Therapeutics, Inc.(2)

     40,441        543   

Hologic, Inc.(2)

     17,042        667   

MannKind Corp.(2)(3)

     217,452        698   

OPKO Health, Inc.(2)(3)

     72,268        608   
   

 

 

  
      4,379   
   

 

 

  
Industrials—11.0%   

Air Lease Corp.

     21,448        663   

American Railcar Industries, Inc.(3)

     18,268        661   

Cintas Corp.

     8,206        704   

Colfax Corp.(2)

     21,749        650   

Covanta Holding Corp.

     37,681        658   

Danaher Corp.

     8,245        703   

FedEx Corp.

     4,904        706   

Grainger (W.W.), Inc.

     3,324        715   

Heartland Express, Inc.

     34,538        689   

Hertz Global Holdings, Inc.(2)

     40,421        676   

Illinois Tool Works, Inc.

     8,464        697   

Manitowoc Co., Inc. (The)(3)

     45,232        678   

MasTec, Inc.(2)

     40,553        642   

MSC Industrial Direct Co., Inc. Class A

     11,062        675   

Navistar International Corp.(3)

     47,188        600   

Rollins, Inc.

     25,187        677   

Solarcity Corp.(2)(3)

     14,851        634   

Timken Co. (The)

     24,780        681   

Werner Enterprises, Inc.

     25,913        650   

XPO Logistics, Inc.(2)(3)

     23,991        572   
   

 

 

  
      13,331   
   

 

 

  
Information Technology—12.6%   

Amkor Technology, Inc.

     154,952        696   

Anixter International, Inc.

     11,775        680   

eBay, Inc.(2)

     27,530        673   

EchoStar Corp. Class A(2)

     16,180        696   

Facebook, Inc. Class A(2)

     7,584        682   
 

 

See Notes to Financial Statements

 

 

 

57

Table of Contents

VIRTUS WEALTH MASTERS FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
Information Technology—continued   

Google, Inc. Class C(2)

     1,131      $ 688   

IAC/InterActiveCorp.

     10,378        677   

Intuit, Inc.

     8,123        721   

Marvell Technology Group Ltd.

     79,606        721   

National Instruments Corp.

     25,527        709   

Nuance Communications, Inc.(2)

     41,340        677   

Oracle Corp.

     19,503        705   

Paychex, Inc.

     15,323        730   

PayPal Holdings, Inc.(2)

     21,181        658   

Pegasystems, Inc.

     28,495        701   

Rackspace Hosting, Inc.(2)

     24,159        596   

RealPage, Inc.(2)

     40,375        671   

salesforce.com, Inc.(2)

     9,839        683   

SS&C Technologies Holdings, Inc.

     9,715        681   

Syntel, Inc.(2)

     16,009        725   

TeleTech Holdings, Inc.

     26,481        709   

Yahoo!, Inc.(2)

     23,185        670   
   

 

 

  
      15,149   
   

 

 

  
Materials—4.9%    

Airgas, Inc.

     7,637        682   

Huntsman Corp.

     47,916        464   

LyondellBasell Industries N.V. Class A

     8,302        692   

NewMarket Corp.

     1,835        655   

Novagold Resources, Inc.(3)

     200,359        723   

Scotts Miracle-Gro Co. (The) Class A

     11,596        705   

Silgan Holdings, Inc.

     13,617        709   

Timkensteel Corp.

     61,319        621   
    SHARES     VALUE  
Materials—continued    

Westlake Chemical Corp.

     12,887      $ 669   
   

 

 

  
              5,920   
TOTAL COMMON STOCKS
(Identified Cost $122,120)		         120,065   
TOTAL LONG TERM INVESTMENTS—99.4%   
(Identified Cost $122,120)             120,065   
SECURITIES LENDING COLLATERAL—5.7%   

INVESCO Trust Short-Term Investments Liquid Assets Portfolio (The) Institutional Shares (seven-day effective yield 0.160%)(4)

     6,922,260        6,922   
TOTAL SECURITIES LENDING COLLATERAL   
(Identified Cost $6,922)        6,922   
TOTAL INVESTMENTS—105.1%
(Identified Cost $129,042)		         126,987 (1) 

Other assets and liabilities, net—(5.1)%

  

     (6,212 ) 
   

 

 

  
NET ASSETS—100.0%     $ 120,775   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
(3)  All or a portion of security is on loan.
(4)  Represents security purchased with cash collateral received for securities on loan.
 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

       Total
Value at
September 30, 2015		        Level 1
Quoted
Prices		  

Equity Securities:

          

Common Stocks

      $ 120,065         $ 120,065   

Securities Lending Collateral

        6,922           6,922   
    

 

 

       

 

 

  

Total Investments

      $ 126,987         $ 126,987   
    

 

 

       

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

See Notes to Financial Statements

 

 

 

58

Table of Contents

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Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES

SEPTEMBER 30, 2015

(Reported in thousands except shares and per share amounts)

 

  

 

 

    

 

 

    

 

 

  
     Bond Fund     CA Tax-Exempt
Bond		     Essential
Resources
Fund		  
             
Assets       

Investment in unaffiliated securities at value(1)

    $ 73,066      $ 30,541      $ 4,050   

Investments in affiliated securities at value(2)

      1,143        —        —   

Foreign currency at value(3)

      —        —        13   

Cash

      32        358        —   

Receivables

       

Investment securities sold

      588        —        54   

Fund shares sold

      8        1        — (5) 

Receivable from adviser

      —        —        28   

Dividends and interest receivable

      693        383        6   

Tax reclaims

      —        —        2   

Prepaid expenses

      36        19        13   

Prepaid trustee retainer

      — (5)      — (5)      — (5) 
  

 

 

    

 

 

    

 

 

  

Total assets

      75,566        31,302        4,166   
  

 

 

    

 

 

    

 

 

  
Liabilities       

Payables

       

Fund shares repurchased

      139        26        —   

Investment securities purchased

      819        166        61   

Dividend distributions

      23        15        —   

Investment advisory fees

      6        1        —   

Distribution and service fees

      17        4        — (5) 

Administration fees

      8        3        — (5) 

Transfer agent fees and expenses

      19        4        — (5) 

Trustees’ fees and expenses

      — (5)      — (5)      — (5) 

Professional fees

      30        44        26   

Other accrued expenses

      6        2        2   
  

 

 

    

 

 

    

 

 

  

Total liabilities

      1,067        265        89   
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 74,499      $ 31,037      $ 4,077   
  

 

 

    

 

 

    

 

 

  
Net Assets Consist of:       

Capital paid in on shares of beneficial interest

    $ 79,591      $ 28,734      $ 5,058   

Accumulated undistributed net investment income (loss)

      (8 )      9        23   

Accumulated undistributed net realized gain (loss)

      (4,462 )      666        (26 ) 

Net unrealized appreciation (depreciation) on investments

      (622 )      1,628        (978 ) 
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 74,499      $ 31,037      $ 4,077   
  

 

 

    

 

 

    

 

 

  
Class A       

Net asset value (net assets/shares outstanding) per share

    $ 11.02      $ 12.14      $ 8.04   

Maximum offering price per share NAV/(1–2.75%)

    $ —      $ 12.48      $ —   

Maximum offering price per share NAV/(1–3.75%)

    $ 11.45      $ —      $ —   

Maximum offering price per share NAV/(1–5.75%)

    $ —      $ —      $ 8.53   

Shares of beneficial interest outstanding, par value(4), unlimited authorization

      4,360,230        1,644,997        10,385   

Net Assets

    $ 48,064      $ 19,978      $ 84   
Class B       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 10.74      $ —      $ —   

Shares of beneficial interest outstanding, par value(4), unlimited authorization

      11,698        —        —   

Net Assets

    $ 126      $ —      $ —   
Class C       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 10.78      $ —      $ 8.01   

Shares of beneficial interest outstanding, par value(4), unlimited authorization

      821,045        —        12,936   

Net Assets

    $ 8,853      $ —      $ 104   
Class I       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 11.19      $ 12.12      $ 8.05   

Shares of beneficial interest outstanding, par value(4), unlimited authorization

      1,559,765        912,562        482,964   

Net Assets

    $ 17,456      $ 11,059      $ 3,889   

(1) Investment in unaffiliated securities at cost

    $ 73,661      $ 28,913      $ 5,029   

(2) Investment in affiliated securities at cost

    $ 1,170      $ —      $ —   

(3) Foreign currency at cost

    $ —      $ —      $ 13   

(4) All Funds with the exception of the Bond Fund have no par value. Bond Fund has a par value of $1.00.

       

(5) Amount is less than $500.

       

 

See Notes to Financial Statements

 

60

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES (Continued)

SEPTEMBER 30, 2015

(Reported in thousands except shares and per share amounts)

 

  

 

 

    

 

 

    

 

 

  
     High Yield
Fund		     Low Volatility
Equity Fund		     Multi-Sector
Intermediate
Bond Fund		  
             
Assets       

Investment in unaffiliated securities at value(1)

    $ 67,701      $ 5,054      $ 325,163   

Investments in affiliated securities at value(2)

      342        —        9,058   

Foreign currency at value(3)

      —        —        — (5) 

Cash

      68        — (5)      288   

Deposits with prime broker

      —        14        —   

Receivables

       

Investment securities sold

      1,052        —        1,197   

Fund shares sold

      5        — (5)      342   

Receivable from adviser

      —        1        —   

Dividends and interest receivable

      1,146        28        4,182   

Tax reclaims

      — (5)      —        1   

Prepaid expenses

      31        25        55   

Prepaid trustee retainer

      1        — (5)      3   
  

 

 

    

 

 

    

 

 

  

Total assets

      70,346        5,122        340,289   
  

 

 

    

 

 

    

 

 

  
Liabilities       

Written options(4)

      —        39        —   

Payables

       

Fund shares repurchased

      122        —        537   

Investment securities purchased

      742        —        6,572   

Dividend distributions

      49        —        231   

Investment advisory fees

      23        —        147   

Distribution and service fees

      16        2        95   

Administration fees

      7        1        33   

Transfer agent fees and expenses

      23        1        81   

Trustees’ fees and expenses

      — (5)      —        1   

Professional fees

      37        19        38   

Other accrued expenses

      5        1        20   
  

 

 

    

 

 

    

 

 

  

Total liabilities

      1,024        63        7,755   
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 69,322      $ 5,059      $ 332,534   
  

 

 

    

 

 

    

 

 

  
Net Assets Consist of:       

Capital paid in on shares of beneficial interest

    $ 98,817      $ 4,961      $ 361,122   

Accumulated undistributed net investment income (loss)

      (30 )      16        (249 ) 

Accumulated undistributed net realized gain (loss)

      (24,962 )      22        (6,625 ) 

Net unrealized appreciation (depreciation) on investments

      (4,503 )      60        (21,714 ) 
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 69,322      $ 5,059      $ 332,534   
  

 

 

    

 

 

    

 

 

  
Class A       

Net asset value (net assets/shares outstanding) per share

    $ 3.98      $ 11.45      $ 9.76   

Maximum offering price per share NAV/(1–3.75%)

    $ 4.14      $ —      $ 10.14   

Maximum offering price per share NAV/(1–5.75%)

    $ —      $ 12.15      $ —   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      15,304,383        179,400        10,738,969   

Net Assets

    $ 60,951      $ 2,055      $ 104,833   
Class B       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 3.88      $ —      $ 9.73   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      10,462        —        294,724   

Net Assets

    $ 41      $ —      $ 2,868   
Class C       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 3.92      $ 11.32      $ 9.85   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      945,098        125,704        8,538,762   

Net Assets

    $ 3,705      $ 1,423      $ 84,099   
Class I       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 3.98      $ 11.50      $ 9.77   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      1,161,409        137,527        14,225,456   

Net Assets

    $ 4,625      $ 1,581      $ 138,956   
Class R6       

Net asset value (net assets/shares outstanding) and offering price per share

    $ —      $ —      $ 9.77   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      —        —        182,048   

Net Assets

    $ —      $ —      $ 1,778   

(1) Investment in unaffiliated securities at cost

    $ 72,196      $ 5,047      $ 346,657   

(2) Investments in affiliated securities at cost

    $ 350      $ —      $ 9,270   

(3) Foreign currency at cost

    $ —      $ —      $ — (5) 

(4) Written options premiums received

    $ —      $ 92      $ —   

(5) Amount is less than $500.

    $ —      $ —      $ —   

 

See Notes to Financial Statements

 

61

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES (Continued)

SEPTEMBER 30, 2015

(Reported in thousands except shares and per share amounts)

 

  

 

 

    

 

 

  
     Senior Floating
Rate Fund		     Wealth Masters
Fund		  
         
Assets     

Investment in unaffiliated securities at value(1)(2)

    $ 706,602      $ 126,987   

Investment in affiliated securities at value(3)

      7,502        —   

Cash

      7,733        —   

Receivables

     

Investment securities sold

      11,974        15,244   

Fund shares sold

      1,003        443   

Dividends and interest receivable

      3,369        99   

Securities Lending Receivable

      —        45   

Prepaid expenses

      30        40   

Prepaid trustee retainer

      6        1   
  

 

 

    

 

 

  

Total assets

      738,219        142,859   
  

 

 

    

 

 

  
Liabilities     

Cash overdraft

      —        4,483   

Payables

     

Fund shares repurchased

      2,972        150   

Investment securities purchased

      16,696        10,329   

Borrowings (Note 13)

      25,500        —   

Collateral on securities loaned

      —        6,922   

Dividend distributions

      374        —   

Investment advisory fees

      345        77   

Distribution and service fees

      172        41   

Administration fees

      71        13   

Transfer agent fees and expenses

      139        35   

Trustees’ fees and expenses

      9        1   

Professional fees

      36        28   

Interest payable on line of credit

      — (4)      —   

Other accrued expenses

      96        5   
  

 

 

    

 

 

  

Total liabilities

      46,410        22,084   
  

 

 

    

 

 

  
Net Assets    $ 691,809      $ 120,775   
  

 

 

    

 

 

  
Net Assets Consist of:     

Capital paid in on shares of beneficial interest

    $ 728,026      $ 125,955   

Accumulated undistributed net investment income (loss)

      (347 )      229   

Accumulated undistributed net realized gain (loss)

      (9,947 )      (3,354 ) 

Net unrealized appreciation (depreciation) on investments

      (25,923 )      (2,055 ) 
  

 

 

    

 

 

  
Net Assets    $ 691,809      $ 120,775   
  

 

 

    

 

 

  
Class A     

Net asset value (net assets/shares outstanding) per share

    $ 9.36      $ 13.25   

Maximum offering price per share NAV/(1–2.75%)

    $ 9.62      $ —   

Maximum offering price per share NAV/(1–5.75%)

    $ —      $ 14.06   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      28,696,639        4,084,080   

Net Assets

    $ 268,596      $ 54,109   
Class C     

Net asset value (net assets/shares outstanding) and offering price per share

    $ 9.37      $ 13.02   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      14,777,304        2,624,952   

Net Assets

    $ 138,478      $ 34,171   
Class I     

Net asset value (net assets/shares outstanding) and offering price per share

    $ 9.35      $ 13.30   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      30,451,148        2,442,915   

Net Assets

    $ 284,735      $ 32,495   

(1) Investment in unaffiliated securities at cost

    $ 732,352      $ 129,042   

(2) Market value of securities on loan

    $ —      $ 6,889   

(3) Investment in affiliated securities at cost

    $ 7,677      $ —   

(4) Amount is less than $500.

     

 

See Notes to Financial Statements

 

62

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

  

 

 

     

 

 

     

 

 

  
     Bond
Fund		      CA Tax-Exempt
Bond		      Essential
Resources
Fund(2)		  
Investment Income         

Dividends

    $ 29       $ —       $ 63   

Dividends from affiliated funds

      6         —         —   

Interest

      3,330         1,355         —   

Foreign taxes withheld

      (1 )       —         (5 ) 
  

 

 

     

 

 

     

 

 

  

Total investment income

      3,364         1,355         58   
  

 

 

     

 

 

     

 

 

  
Expenses         

Investment advisory fees

      345         152         27   

Service fees, Class A

      127         56         — (1) 

Distribution and service fees, Class B

      2         —         —   

Distribution and service fees, Class C

      85         —         1   

Administration fees

      92         40         3   

Transfer agent fees and expenses

      116         34         1   

Registration fees

      56         29         21   

Printing fees and expenses

      9         5         56   

Custodian fees

      5         1         2   

Professional fees

      31         49         35   

Trustees’ fees and expenses

      3         1         — (1) 

Miscellaneous expenses

      8         3         2   
  

 

 

     

 

 

     

 

 

  

Total expenses

      879         370         148   

Less expenses reimbursed and/or waived by investment adviser

      (206 )       (110 )       (113 ) 
  

 

 

     

 

 

     

 

 

  

Net expenses

      673         260         35   
  

 

 

     

 

 

     

 

 

  

Net investment income (loss)

      2,691         1,095         23   
  

 

 

     

 

 

     

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments         

Net realized gain (loss) on unaffiliated investments

      (1,798 )       672         (24 ) 

Net realized gain (loss) on foreign currency transactions

      (3 )       —         (2 ) 

Net change in unrealized appreciation (depreciation) on unaffiliated investments

      (1,052 )       (606 )       (978 ) 

Net change in unrealized appreciation (depreciation) on affiliated investments

      (27 )       —         —   
  

 

 

     

 

 

     

 

 

  
Net gain (loss) on investments      (2,880 )       66         (1,004 ) 
  

 

 

     

 

 

     

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ (189 )     $ 1,161       $ (981 ) 
  

 

 

     

 

 

     

 

 

  

(1) Amount is less than $500.

(2) From inception date March 24, 2015.

 

See Notes to Financial Statements

 

63

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS (Continued)

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

 

  

 

 

     

 

 

    

 

 

  
     High Yield
Fund		      Low Volatility
Equity Fund		     Multi-Sector
Intermediate
Bond Fund		  
Investment Income        

Dividends

    $ 74       $ 100      $ 272   

Dividends from affiliated fund

      5         —        45   

Interest

      5,549         —        21,031   

Foreign taxes withheld

      —         —        (14 ) 
  

 

 

     

 

 

    

 

 

  

Total investment income

      5,628         100        21,334   
  

 

 

     

 

 

    

 

 

  
Expenses        

Investment advisory fees

      571         44        1,986   

Service fees, Class A

      193         4        295   

Distribution and service fees, Class B

      1         —        40   

Distribution and service fees, Class C

      40         12        928   

Administration fees

      105         5        433   

Transfer agent fees and expenses

      137         5        446   

Registration fees

      57         37        85   

Printing fees and expenses

      10         1        31   

Custodian fees

      5         1        13   

Professional fees

      37         19        41   

Trustees’ fees and expenses

      4         — (1)      15   

Miscellaneous expenses

      10         3        34   
  

 

 

     

 

 

    

 

 

  

Total expenses

      1,170         131        4,347   

Less expenses reimbursed and/or waived by investment adviser

      (148 )       (55 )      (16 ) 
  

 

 

     

 

 

    

 

 

  

Net expenses

      1,022         76        4,331   
  

 

 

     

 

 

    

 

 

  

Net investment income (loss)

      4,606         24        17,003   
  

 

 

     

 

 

    

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments        

Net realized gain (loss) on unaffiliated investments

      (2,033 )       54        (9,937 ) 

Net realized gain (loss) on affiliated investments

      (16 )       —        —   

Net realized gain (loss) on foreign currency transactions

      —         —        (89 ) 

Net realized gain (loss) on written options

      —         20        —   

Net increase from payments by affiliates(2)

      —         — (1)     
 1
   

Net change in unrealized appreciation (depreciation) on unaffiliated investments

      (4,606 )       (325 )      (19,458 ) 

Net change in unrealized appreciation (depreciation) affiliated investments

      (8 )       —        (212 ) 

Net change in unrealized appreciation (depreciation) on foreign currency translations

      —         —        (8 ) 

Net change in unrealized appreciation (depreciation) on written options

      —         53        —   
  

 

 

     

 

 

    

 

 

  
Net gain (loss) on investments      (6,663 )       (198 )      (29,703 ) 
  

 

 

     

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ (2,057 )     $ (174 )    $ (12,700 ) 
  

 

 

     

 

 

    

 

 

  

(1) Amount is less than $500.

(2) See Note 4I in the Notes to Financial Statements.

 

See Notes to Financial Statements

 

64

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS (Continued)

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

  

 

 

    

 

 

  
     Senior Floating
Rate Fund		     Wealth Masters
Fund		  
Investment Income     

Dividends

    $ 1      $ 2,010   

Dividends from affiliated funds

      37        —   

Interest

      40,122        —   

Security lending

      —        664   

Foreign taxes withheld

      —        (4 ) 
  

 

 

    

 

 

  

Total investment income

      40,160        2,670   
  

 

 

    

 

 

  
Expenses     

Investment advisory fees

      4,689        1,249   

Service fees, Class A

      701        157   

Distribution and service fees, Class C

      1,547        372   

Administration fees

      937        176   

Transfer agent fees and expenses

      787        221   

Interest expense and fees

      449        —   

Registration fees

      74        61   

Printing fees and expenses

      58        22   

Custodian fees

      23        3   

Professional fees

      53        30   

Trustees’ fees and expenses

      42        5   

Miscellaneous expenses

      291        10   
  

 

 

    

 

 

  

Total expenses

      9,651        2,306   

Less expenses reimbursed and/or waived by investment adviser

      (14 )      (14 ) 
  

 

 

    

 

 

  

Total expenses

      9,637        2,292   
  

 

 

    

 

 

  

Net investment income (loss)

      30,523        378   
  

 

 

    

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments     

Net realized gain (loss) on unaffiliated investments

      (9,939 )      (563 ) 

Net realized gain (loss) on foreign currency transactions

      (3 )      —   

Net increase from payments by affiliates(1)

      4        —   

Net change in unrealized appreciation (depreciation) on unaffiliated investments

      (16,579 )      (10,130 ) 

Net change in unrealized appreciation (depreciation) on affiliated investments

      (175 )      —   
  

 

 

    

 

 

  
Net gain (loss) on investments      (26,692 )      (10,693 ) 
  

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ 3,831      $ (10,315 ) 
  

 

 

    

 

 

  

(1) See Note 4I in the Notes to Financial Statements.

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS

($ reported in thousands)

 

  

 

 

       

 

 

  
     Bond Fund        CA Tax-Exempt Bond  
     Year Ended
September 30,
2015		        Year Ended
September 30,
2014		        Year Ended
September 30,
2015		        Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ 2,691         $ 3,270         $ 1,095         $ 1,502   

Net realized gain (loss)

      (1,801 )         386           672           1,095   

Net change in unrealized appreciation (depreciation)

      (1,079 )         1,221           (606 )         1,137   
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets resulting from operations

      (189 )         4,877           1,161           3,734   
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (1,481 )         (2,272 )         (736 )         (757 ) 

Net investment income, Class B

      (4 )         (11 )         —           —   

Net investment income, Class C

      (188 )         (214 )         —           —   

Net investment income, Class I

      (533 )         (759 )         (396 )         (724 ) 

Net realized short-term gains, Class A

      —           —           (21 )         (7 ) 

Net realized short-term gains, Class I

      —           —           (10 )         (8 ) 

Net realized long-term gains, Class A

      —           —           (706 )         (437 ) 

Net realized long-term gains, Class I

      —           —           (354 )         (501 ) 

Return of capital Class A

      (253 )         —           —           —   

Return of capital Class B

      (1 )         —           —           —   

Return of capital Class C

      (41 )         —           —           —   

Return of capital Class I

      (84 )         —           —           —   
  

 

 

       

 

 

       

 

 

       

 

 

  

Decrease in net assets from distributions to shareholders

      (2,585 )         (3,256 )         (2,223 )         (2,434 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 6)                  

Change in net assets from share transactions, Class A

      (3,738 )         (4,781 )         (1,030 )         (1,622 ) 

Change in net assets from share transactions, Class B

      (102 )         (175 )         —           —   

Change in net assets from share transactions, Class C

      2,882           (620 )         —           —   

Change in net assets from share transactions, Class I

      1,612           (5,975 )         (53 )         (15,134 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets from share transactions

      654           (11,551 )         (1,083 )         (16,756 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Net increase (decrease) in net assets

      (2,120 )         (9,930 )         (2,145 )         (15,456 ) 
Net Assets                  

Beginning of period

      76,619           86,549           33,182           48,638   
  

 

 

       

 

 

       

 

 

       

 

 

  

End of period

    $ 74,499         $ 76,619         $ 31,037         $ 33,182   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ (8 )       $ (4 )       $ 9         $ 46   

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

       

 

 

  
     Essential Resources        High Yield Fund  
     From Inception
March 24, 2015
to September 30,
2015		        Year Ended
September 30,
2015		        Year Ended
September 30,
2014		  
             
INCREASE/(DECREASE) IN NET ASSETS             
From Operations             

Net investment income (loss)

    $ 23         $ 4,606         $ 5,019   

Net realized gain (loss)

      (26 )         (2,049 )         2,456   

Net change in unrealized appreciation (depreciation)

      (978 )         (4,614 )         (680 ) 
  

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets resulting from operations

      (981 )         (2,057 )         6,795   
  

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders             

Net investment income, Class A

      —           (4,183 )         (4,402 ) 

Net investment income, Class B

      —           (4 )         (5 ) 

Net investment income, Class C

      —           (189 )         (170 ) 

Net investment income, Class I

      —           (376 )         (333 ) 
  

 

 

       

 

 

       

 

 

  

Decrease in net assets from distributions to shareholders

      —           (4,752 )         (4,910 ) 
  

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 6)             

Change in net assets from share transactions, Class A

      103           (4,168 )         (10,859 ) 

Change in net assets from share transactions, Class B

      —           (59 )         (28 ) 

Change in net assets from share transactions, Class C

      129           21           697   

Change in net assets from share transactions, Class I

      4,826           (969 )         211   
  

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets from share transactions

      5,058           (5,175 )         (9,979 ) 
  

 

 

       

 

 

       

 

 

  

Net increase (decrease) in net assets

      4,077           (11,984 )         (8,094 ) 
Net Assets             

Beginning of period

      —           81,306           89,400   
  

 

 

       

 

 

       

 

 

  

End of period

    $ 4,077         $ 69,322         $ 81,306   
  

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ 23         $ (30 )        $ 113   

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

       

 

 

  
     Low Volatility Equity Fund        Multi-Sector Intermediate Bond Fund  
     Year Ended
September 30,
2015		        Year Ended
September 30,
2014		        Year Ended
September 30,
2015		        Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ 24         $ 12         $ 17,003         $ 17,646   

Net realized gain (loss)

      74           (44 )         (10,025 )         4,281   

Net change in unrealized appreciation (depreciation)

      (272 )         297           (19,678 )         (614 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets resulting from operations

      (174 )         265           (12,700 )         21,313   
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (7 )         (1 )         (4,622 )         (7,869 ) 

Net investment income, Class B

      —           —           (127 )         (260 ) 

Net investment income, Class C

      (2 )         (1 )         (2,903 )         (3,889 ) 

Net investment income, Class I

      (6 )         (13 )         (6,036 )         (4,673 ) 

Net investment income, Class R6

      —           —           (32 )         —   

Net realized short-term gains, Class A

      —           —           (226 )         (1,570 ) 

Net realized short-term gains, Class B

      —           —           (8 )         (63 ) 

Net realized short-term gains, Class C

      —           —           (178 )         (905 ) 

Net realized short-term gains, Class I

      —           —           (278 )         (823 ) 

Net realized short-term gains, Class R6

      —           —           (2 )         —   

Net realized long-term gains, Class A

      —           —           (1,292 )         (1,696 ) 

Net realized long-term gains, Class B

      —           —           (50 )         (68 ) 

Net realized long-term gains, Class C

      —           —           (1,037 )         (968 ) 

Net realized long-term gains, Class I

      —           —           (1,595 )         (865 ) 

Net realized long-term gains, Class R6

      —           —           (— )(1)         —   

Return of capital Class A

      —           —           (625 )         —   

Return of capital Class B

      —           —           (21 )         —   

Return of capital Class C

      —           —           (491 )         —   

Return of capital Class I

      —           —           (770 )         —   

Return of capital Class R6

      —           —           (5 )         —   
  

 

 

       

 

 

       

 

 

       

 

 

  

Decrease in net assets from distributions to shareholders

      (15 )         (15 )         (20,298 )         (23,649 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 6)                  

Change in net assets from share transactions, Class A

      1,668           316           (3,826 )         (65,126 ) 

Change in net assets from share transactions, Class B

      —           —           (2,133 )         (2,224 ) 

Change in net assets from share transactions, Class C

      1,188           138           (3,590 )         (7,973 ) 

Change in net assets from share transactions, Class I

      77           13           8,043           59,707   

Change in net assets from share transactions, Class R6

      —           —           1,885           —   
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets from share transactions

      2,933           467           379           (15,616 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Net increase (decrease) in net assets

      2,744           717           (32,619 )         (17,952 ) 
Net Assets                  

Beginning of period

      2,315           1,598           365,153           383,105   
  

 

 

       

 

 

       

 

 

       

 

 

  

End of period

    $ 5,059         $ 2,315         $ 332,534         $ 365,153   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ 16         $ 7         $ (249 )       $ (55 ) 

(1) Amount less than $500.

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

       

 

 

  
     Senior Floating Rate Fund        Wealth Masters Fund  
     Year Ended
September 30,
2015		        Year Ended
September 30,
2014		        Year Ended
September 30,
2015		        Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ 30,523         $ 38,225         $ 378         $ 103   

Net realized gain (loss)

      (9,938 )         2,023           (563 )         51   

Net change in unrealized appreciation (depreciation)

      (16,754 )         (9,946 )         (10,130 )         7,065   
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets resulting from operations

      3,831           30,302           (10,315 )         7,219   
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (11,297 )         (14,890 )         (184 )         —   

Net investment income, Class C

      (5,079 )         (5,719 )         —           —   

Net investment income, Class I

      (14,848 )         (17,118 )         (252 )         (35 ) 

Net realized short-term gains, Class A

      (394 )         —           (1,046 )         (13 ) 

Net realized short-term gains, Class C

      (231 )         —           (622 )         (4 ) 

Net realized short-term gains, Class I

      (540 )         —           (869 )         (38 ) 

Net realized long-term gains, Class A

      (341 )         —           (20 )         (1 ) 

Net realized long-term gains, Class C

      (199 )         —           (12 )         (— )(1) 

Net realized long-term gains, Class I

      (463 )         —           (17 )         (1 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Decrease in net assets from distributions to shareholders

      (33,392 )         (37,727 )         (3,022 )         (92 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 6)                  

Change in net assets from share transactions, Class A

      (15,274 )         (89,707 )         4,094           48,771   

Change in net assets from share transactions, Class C

      (33,299 )         (3,743 )         7,353           28,200   

Change in net assets from share transactions, Class I

      (159,653 )         79,900           (12,645 )         (512 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets from share transactions

      (208,226 )         (13,550 )         (1,198 )         76,459   
  

 

 

       

 

 

       

 

 

       

 

 

  

Net increase (decrease) in net assets

      (237,787 )         (20,975 )         (14,535 )         83,586   
Net Assets                  

Beginning of period

      929,596           950,571           135,310           51,724   
  

 

 

       

 

 

       

 

 

       

 

 

  

End of period

    $ 691,809         $ 929,596         $ 120,775         $ 135,310   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ (347 )       $ 350         $ 229         $ 152   

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

69

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VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Return of Capital   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total
Return(1)		   Net Assets, End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(8)		   Ratio of Gross
Expenses to
Average    
Net Assets
(before waivers
and
reimburse
ments)(8)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate

Bond Fund

                                                                                                                                                                  

Class A

                                                                  

10/1/14 to 9/30/15

       $ 11.43         0.40         (0.43 )       (0.03 )       (0.32 )       —         (0.06 )       (0.38 )       (0.41 )     $ 11.02         (0.26 )%     $ 48,064         0.85 %       1.12 %       3.55 %       64 %

10/1/13 to 9/30/14

         11.21         0.47         0.22         0.69         (0.47 )       —         —         (0.47 )       0.22         11.43         6.18         53,603         0.85         1.10         4.08         38  

10/1/12 to 9/30/13

         11.61         0.43         (0.41 )       0.02         (0.42 )       —         —         (0.42 )       (0.40 )       11.21         0.17         57,286         0.85         1.07         3.75         107  

10/1/11 to 9/30/12

         10.96         0.35         0.67         1.02         (0.37 )       —         —         (0.37 )       0.65         11.61         9.34         67,804         0.85         1.02         3.12         210  

10/1/10 to 9/30/11

         11.18         0.46         (0.21 )       0.25         (0.47 )       —         —         (0.47 )       (0.22 )       10.96         2.39         64,449         0.85         1.04         4.16         169  

Class B

                                                                  

10/1/14 to 9/30/15

       $ 11.14         0.31         (0.41 )       (0.10 )       (0.24 )       —         (0.06 )       (0.30 )       (0.40 )     $ 10.74         (0.91 )%     $ 126         1.60 %       1.86 %       2.82 %       64 %

10/1/13 to 9/30/14

         10.95         0.37         0.20         0.57         (0.38 )       —         —         (0.38 )       0.19         11.14         5.27         233         1.60         1.84         3.34         38  

10/1/12 to 9/30/13

         11.34         0.33         (0.38 )       (0.05 )       (0.34 )       —         —         (0.34 )       (0.39 )       10.95         (0.50 )       401         1.60         1.82         2.95         107  

10/1/11 to 9/30/12

         10.71         0.27         0.64         0.91         (0.28 )       —         —         (0.28 )       0.63         11.34         8.48         727         1.60         1.77         2.43         210  

10/1/10 to 9/30/11

         10.93         0.37         (0.20 )       0.17         (0.39 )       —         —         (0.39 )       (0.22 )       10.71         1.64         1,171         1.60         1.80         3.38         169  

Class C

                                                                  

10/1/14 to 9/30/15

       $ 11.19         0.30         (0.41 )       (0.11 )       (0.24 )       —         (0.06 )       (0.30 )       (0.41 )     $ 10.78         (1.00 )%     $ 8,853         1.60 %       1.87 %       2.74 %       64 %

10/1/13 to 9/30/14

         10.99         0.37         0.21         0.58         (0.38 )       —         —         (0.38 )       0.20         11.19         5.34         6,315         1.60         1.85         3.33         38  

10/1/12 to 9/30/13

         11.38         0.34         (0.39 )       (0.05 )       (0.34 )       —         —         (0.34 )       (0.39 )       10.99         (0.51 )       6,825         1.60         1.82         2.99         107  

10/1/11 to 9/30/12

         10.75         0.26         0.65         0.91         (0.28 )       —         —         (0.28 )       0.63         11.38         8.55         8,756         1.60         1.77         2.36         210  

10/1/10 to 9/30/11

         10.96         0.37         (0.19 )       0.18         (0.39 )       —         —         (0.39 )       (0.21 )       10.75         1.63         7,984         1.60         1.79         3.41         169  

Class I

                                                                  

10/1/14 to 9/30/15

       $ 11.59         0.43         (0.42 )       0.01         (0.35 )       —         (0.06 )       (0.41 )       (0.40 )     $ 11.19         0.08 %     $ 17,456         0.60 %       0.87 %       3.78 %       64 %

10/1/13 to 9/30/14

         11.37         0.50         0.21         0.71         (0.49 )       —         —         (0.49 )       0.22         11.59         6.35         16,468         0.60         0.85         4.33         38  

10/1/12 to 9/30/13

         11.76         0.47         (0.41 )       0.06         (0.45 )       —         —         (0.45 )       (0.39 )       11.37         0.49         22,037         0.60         0.82         3.98         107  

10/1/11 to 9/30/12

         11.10         0.39         0.66         1.05         (0.39 )       —         —         (0.39 )       0.66         11.76         9.64         29,527         0.60         0.77         3.39         210  

10/1/10 to 9/30/11

         11.30         0.49         (0.19 )       0.30         (0.50 )       —         —         (0.50 )       (0.20 )       11.10         2.67         76,169         0.60         0.79         4.39         169  

CA Tax-Exempt

                                                                  

Bond Fund

                                                                  

Class A

                                                                  

10/1/14 to 9/30/15

       $ 12.51         0.39         0.03         0.42         (0.40 )       (0.39 )       —         (0.79 )       (0.37 )     $ 12.14         3.44 %     $ 19,978         0.85 %       1.18 %       3.16 %       24 %

10/1/13 to 9/30/14

         12.10         0.43         0.64         1.07         (0.42 )       (0.24 )       —         (0.66 )       0.41         12.51         9.16         21,729         0.85         1.11         3.49         7  

10/1/12 to 9/30/13

         12.96         0.43         (0.68 )       (0.25 )       (0.43 )       (0.18 )       —         (0.61 )       (0.86 )       12.10         (2.12 )       22,612         0.85         1.04         3.39         22  

10/1/11 to 9/30/12

         12.30         0.46         0.68         1.14         (0.48 )       —         —         (0.48 )       0.66         12.96         9.40         28,803         0.85         1.04         3.65         16  

10/1/10 to 9/30/11

         12.34         0.48         (0.04 )       0.44         (0.48 )       —         —         (0.48 )       (0.04 )       12.30         3.75         29,688         0.85         1.05         4.04         12  

Class I

                                                                  

10/1/14 to 9/30/15

       $ 12.49         0.42         0.03         0.45         (0.43 )       (0.39 )       —         (0.82 )       (0.37 )     $ 12.12         3.71 %     $ 11,059         0.60 %       0.93 %       3.41 %       24 %

10/1/13 to 9/30/14

         12.09         0.45         0.64         1.09         (0.45 )       (0.24 )       —         (0.69 )       0.40         12.49         9.36         11,453         0.60         0.83         3.74         7  

10/1/12 to 9/30/13

         12.95         0.46         (0.68 )       (0.22 )       (0.46 )       (0.18 )       —         (0.64 )       (0.86 )       12.09         (1.88 )       26,026         0.60         0.79         3.65         22  

10/1/11 to 9/30/12

         12.29         0.49         0.68         1.17         (0.51 )       —         —         (0.51 )       0.66         12.95         9.68         28,639         0.60         0.79         3.90         16  

10/1/10 to 9/30/11

         12.33         0.51         (0.04 )       0.47         (0.51 )       —         —         (0.51 )       (0.04 )       12.29         4.01         27,417         0.60         0.80         4.29         12  

The footnote legend is at the end of the Financial Highlights.

 

See Notes to Financial Statements

 

70

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income    		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total
Return(1)		   Net Assets, End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(8)		   Ratio of Gross Expenses to Average    
Net Assets (before waivers and
reimburse
ments)(8)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate
Essential Resources                                                                                                                                              

Fund

                                                          

Class A

                                                          

3/24/15(6) to 9/30/15

       $ 10.00         0.03         (1.99 )       (1.96 )       —         —         (1.96 )     $ 8.04         (19.60 )%(4)     $ 84         1.65 %(3)       6.26 %(3)       0.66 %(3)       48 %(4)

Class C

                                                          

3/24/15(6) to 9/30/15

       $ 10.00         (— )(5)       (1.99 )       (1.99 )       —         —         (1.99 )     $ 8.01         (19.90 )%(4)     $ 104         2.40 %(3)       7.26 %(3)       (0.10 )%(3)       48 %(4)

Class I

                                                          

3/24/15(6) to 9/30/15

       $ 10.00         0.05         (2.00 )       (1.95 )       —         —         (1.95 )     $ 8.05         (19.50 )%(4)     $ 3,889         1.40 %(3)       5.98 %(3)       0.93 %(3)       48 %(4)

High Yield Fund

                                                          

Class A

                                                          

10/1/14 to 9/30/15

       $ 4.35         0.22         (0.36 )       (0.14 )       (0.23 )       (0.23 )       (0.37 )     $ 3.98         (3.39 )%     $ 60,951         1.15 %       1.32 %       5.26 %       94 %

10/1/13 to 9/30/14

         4.27         0.24         0.08         0.32         (0.24 )       (0.24 )       0.08         4.35         7.53         71,042         1.15         1.31         5.55         82  

10/1/12 to 9/30/13

         4.28         0.26         (0.01 )       0.25         (0.26 )       (0.26 )       (0.01 )       4.27         5.98         80,155         1.15         1.31         6.05         100  

10/1/11 to 9/30/12

         3.85         0.28         0.44         0.72         (0.29 )       (0.29 )       0.43         4.28         19.19         98,701         1.15         1.31         6.82         92  

10/1/10 to 9/30/11

         4.17         0.29         (0.32 )       (0.03 )       (0.29 )       (0.29 )       (0.32 )       3.85         (0.82 )       86,530         1.21 (7)       1.35         6.93         106  

Class B

                                                          

10/1/14 to 9/30/15

       $ 4.24         0.19         (0.35 )       (0.16 )       (0.20 )       (0.20 )       (0.36 )     $ 3.88         (3.96 )%     $ 41         1.90 %       2.07 %       4.54 %       94 %

10/1/13 to 9/30/14

         4.17         0.21         0.07         0.28         (0.21 )       (0.21 )       0.07         4.24         6.68         106         1.90         2.07         4.80         82  

10/1/12 to 9/30/13

         4.19         0.23         (0.02 )       0.21         (0.23 )       (0.23 )       (0.02 )       4.17         5.06         131         1.90         2.05         5.31         100  

10/1/11 to 9/30/12

         3.77         0.24         0.44         0.68         (0.26 )       (0.26 )       0.42         4.19         18.46         307         1.90         2.06         6.07         92  

10/1/10 to 9/30/11

         4.08         0.25         (0.31 )       (0.06 )       (0.25 )       (0.25 )       (0.31 )       3.77         (1.66 )       404         1.96 (7)       2.10         6.17         106  

Class C

                                                          

10/1/14 to 9/30/15

       $ 4.28         0.19         (0.35 )       (0.16 )       (0.20 )       (0.20 )       (0.36 )     $ 3.92         (3.93 )%     $ 3,705         1.90 %       2.07 %       4.52 %       94 %

10/1/13 to 9/30/14

         4.21         0.21         0.07         0.28         (0.21 )       (0.21 )       0.07         4.28         6.60         4,038         1.90         2.07         4.79         82  

10/1/12 to 9/30/13

         4.23         0.23         (0.02 )       0.21         (0.23 )       (0.23 )       (0.02 )       4.21         5.00         3,302         1.90         2.06         5.31         100  

10/1/11 to 9/30/12

         3.80         0.25         0.44         0.69         (0.26 )       (0.26 )       0.43         4.23         18.59         2,944         1.90         2.07         6.07         92  

10/1/10 to 9/30/11

         4.11         0.25         (0.31 )       (0.06 )       (0.25 )       (0.25 )       (0.31 )       3.80         (1.65 )       2,028         1.95 (7)       2.10         6.18         106  

Class I

                                                          

10/1/14 to 9/30/15

       $ 4.35         0.23         (0.36 )       (0.13 )       (0.24 )       (0.24 )       (0.37 )     $ 3.98         (3.15 )%     $ 4,625         0.90 %       1.07 %       5.53 %       94 %

10/1/13 to 9/30/14

         4.27         0.26         0.07         0.33         (0.25 )       (0.25 )       0.08         4.35         7.80         6,120         0.90         1.07         5.80         82  

10/1/12 to 9/30/13

         4.28         0.27         (0.01 )       0.26         (0.27 )       (0.27 )       (0.01 )       4.27         6.25         5,812         0.90         1.05         6.37         100  

8/8/12(6) to 9/30/12

         4.23         0.04         0.06         0.10         (0.05 )       (0.05 )       0.05         4.28         2.37 (4)       102         0.90 (3)       1.08 (3)       6.86 (3)       92 (4)

Low Volatility Equity Fund

                                                          

Class A

                                                          

10/1/14 to 9/30/15

       $ 11.71         0.08         (0.30 )       (0.22 )       (0.04 )       (0.04 )       (0.26 )     $ 11.45         (1.88 )%     $ 2,055         1.55 %       2.70 %       0.64 %       1 %

10/1/13 to 9/30/14

         10.24         0.06         1.50         1.56         (0.09 )       (0.09 )       1.47         11.71         15.23         485         1.55         6.15         0.56         3  

6/11/13(6) to 9/30/13

         10.00         0.06         0.18         0.24         —         —         0.24         10.24         2.40 (4)       136         1.55 (3)       7.66 (3)       2.00 (3)       0  

The footnote legend is at the end of the Financial Highlights.

 

See Notes to Financial Statements

 

71

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Return of Capital   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total
Return(1)		   Net Assets, End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(8)		   Ratio of Gross
Expenses to
Average    
Net Assets
(before waivers
and
reimburse
ments)(8)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate
Low Volatility
Equity Fund		                                                                                                                                                                  

(Continued)

                                                                  

Class C

                                                                  

10/1/14 to 9/30/15

       $ 11.64         0.01         (0.31 )       (0.30 )       (0.02 )       —         —         (0.02 )       (0.32 )     $ 11.32         (2.61 )%     $ 1,423         2.30 %       3.47 %       0.04 %       1 %

10/1/13 to 9/30/14

         10.21         (0.02 )       1.50         1.48         (0.05 )       —         —         (0.05 )       1.43         11.64         14.47         291         2.30         6.72         (0.19 )       3  

6/11/13(6) to 9/30/13

         10.00         0.03         0.18         0.21         —         —         —         —         0.21         10.21         2.10 (4)       130         2.30 (3)       8.49 (3)       0.99 (3)       0  

Class I

                                                                  

10/1/14 to 9/30/15

       $ 11.73         0.09         (0.27 )       (0.18 )       (0.05 )       —         —         (0.05 )       (0.23 )     $ 11.50         (1.57 )%     $ 1,581         1.30 %       2.62 %       0.79 %       1 %

10/1/13 to 9/30/14

         10.25         0.07         1.51         1.58         (0.10 )       —         —         (0.10 )       1.48         11.73         15.45         1,539         1.30         5.32         0.67         3  

6/11/13(6) to 9/30/13

         10.00         0.07         0.18         0.25         —         —         —         —         0.25         10.25         2.50 (4)       1,332         1.30 (3)       7.51 (3)       2.23 (3)       0  
Multi-Sector
Intermediate		                                                                  

Bond Fund

                                                                  

Class A

                                                                  

10/1/14 to 9/30/15

       $ 10.70         0.49         (0.85 )       (0.36 )       (0.40 )       (0.13 )       (0.05 )       (0.58 )       (0.94 )     $ 9.76         (3.41 )%     $ 104,833         1.10 %       1.10 %       4.81 %       66 %

10/1/13 to 9/30/14

         10.77         0.54         0.11         0.65         (0.52 )       (0.20 )       —         (0.72 )       (0.07 )       10.70         6.18         119,423         1.11         1.11         5.00         54  

10/1/12 to 9/30/13

         11.15         0.57         (0.28 )       0.29         (0.55 )       (0.12 )       —         (0.67 )       (0.38 )       10.77         2.59         184,524         1.10         1.10         5.13         77  

10/1/11 to 9/30/12

         10.24         0.62         0.93         1.55         (0.64 )       —         —         (0.64 )       0.91         11.15         15.51         196,554         1.13         1.13         5.73         76  

10/1/10 to 9/30/11

         10.77         0.66         (0.47 )       0.19         (0.72 )       —         —         (0.72 )       (0.53 )       10.24         1.58         137,395         1.16         1.16         6.07         45  

Class B

                                                                  

10/1/14 to 9/30/15

       $ 10.67         0.41         (0.84 )       (0.43 )       (0.33 )       (0.13 )       (0.05 )       (0.51 )       (0.94 )     $ 9.73         (4.14 )%     $ 2,868         1.85 %       1.85 %       4.01 %       66 %

10/1/13 to 9/30/14

         10.74         0.46         0.11         0.57         (0.44 )       (0.20 )       —         (0.64 )       (0.07 )       10.67         5.40         5,360         1.86         1.86         4.26         54  

10/1/12 to 9/30/13

         11.12         0.49         (0.28 )       0.21         (0.47 )       (0.12 )       —         (0.59 )       (0.38 )       10.74         1.83         7,603         1.85         1.85         4.39         77  

10/1/11 to 9/30/12

         10.22         0.54         0.92         1.46         (0.56 )       —         —         (0.56 )       0.90         11.12         14.59         9,974         1.88         1.88         5.02         76  

10/1/10 to 9/30/11

         10.75         0.58         (0.47 )       0.11         (0.64 )       —         —         (0.64 )       (0.53 )       10.22         0.82         10,685         1.91         1.91         5.31         45  

Class C

                                                                  

10/1/14 to 9/30/15

       $ 10.79         0.42         (0.85 )       (0.43 )       (0.33 )       (0.13 )       (0.05 )       (0.51 )       (0.94 )     $ 9.85         (4.11 )%     $ 84,099         1.85 %       1.85 %       4.06 %       66 %

10/1/13 to 9/30/14

         10.86         0.47         0.10         0.57         (0.44 )       (0.20 )       —         (0.64 )       (0.07 )       10.79         5.33         96,072         1.86         1.86         4.25         54  

10/1/12 to 9/30/13

         11.23         0.49         (0.27 )       0.22         (0.47 )       (0.12 )       —         (0.59 )       (0.37 )       10.86         1.90         104,591         1.85         1.85         4.39         77  

10/1/11 to 9/30/12

         10.31         0.54         0.94         1.48         (0.56 )       —         —         (0.56 )       0.92         11.23         14.65         108,595         1.88         1.88         4.98         76  

10/1/10 to 9/30/11

         10.84         0.58         (0.47 )       0.11         (0.64 )       —         —         (0.64 )       (0.53 )       10.31         0.80         70,735         1.91         1.91         5.32         45  

Class I

                                                                  

10/1/14 to 9/30/15

       $ 10.71         0.52         (0.85 )       (0.33 )       (0.43 )       (0.13 )       (0.05 )       (0.61 )       (0.94 )     $ 9.77         (3.17 )%     $ 138,956         0.85 %       0.85 %       5.06 %       66 %

10/1/13 to 9/30/14

         10.77         0.57         0.12         0.69         (0.55 )       (0.20 )       —         (0.75 )       (0.06 )       10.71         6.54         144,298         0.86         0.86         5.24         54  

10/1/12 to 9/30/13

         11.15         0.60         (0.28 )       0.32         (0.58 )       (0.12 )       —         (0.70 )       (0.38 )       10.77         2.85         86,387         0.85         0.85         5.38         77  

10/1/11 to 9/30/12

         10.24         0.64         0.93         1.57         (0.66 )       —         —         (0.66 )       0.91         11.15         15.80         74,847         0.88         0.88         5.93         76  

10/1/10 to 9/30/11

         10.76         0.69         (0.46 )       0.23         (0.75 )       —         —         (0.75 )       (0.52 )       10.24         1.93         22,408         0.91         0.91         6.32         45  

Class R6

                                                                  

11/14/14(6) to 9/30/15

       $ 10.67         0.46         (0.81 )       (0.35 )       (0.37 )       (0.13 )       (0.05 )       (0.55 )       (0.90 )     $ 9.77         (3.31 )%(4)     $ 1,778         0.76 %       0.77 %(3)       5.12 %(3)       66 %

The footnote legend is at the end of the Financial Highlights.

 

See Notes to Financial Statements

 

72

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Total Return of Capital   Total Distributions   Payment from Affiliate   Change in Net Asset Value   Net Asset Value, End of Period   Total
Return(1)		   Net Assets, End of Period
(in thousands)		   Ratio of
Net
Expenses to
Average
Net Assets(8)		   Ratio of Gross Expenses to Average    
Net Assets(8)		   Ratio of Net Investment Income to
Average Net Assets		   Portfolio Turnover Rate
Senior Floating                                                                                                                                                                            

Rate Fund

                                                                      

Class A

                                                                      

10/1/14 to 9/30/15

       $ 9.72         0.38         (0.32 )       0.06         (0.39 )       (0.03 )       —         (0.42 )       — (5)       (0.36 )     $ 9.36         0.53 %     $ 268,596         1.20 %(9)       1.20 %       3.94 %       34 %

10/1/13 to 9/30/14

         9.79         0.37         (0.07 )       0.30         (0.37 )       —         —         (0.37 )       —         (0.07 )       9.72         3.08         294,617         1.18 (9)       1.18         3.79         77  

10/1/12 to 9/30/13

         9.79         0.42         0.04         0.46         (0.46 )       (— )(5)       —         (0.46 )       —         —         9.79         4.84         386,113         1.21 (9)       1.21         4.29         68  

10/1/11 to 9/30/12

         9.28         0.49         0.49         0.98         (0.47 )       —         —         (0.47 )       —         0.51         9.79         10.75         256,397         1.23 (9)       1.23         5.06         56  

10/1/10 to 9/30/11

         9.80         0.45         (0.27 )       0.18         (0.49 )       (0.07 )       (0.14 )       (0.70 )       —         (0.52 )       9.28         1.62         215,427         1.20 (10)       1.19         4.58         69  

Class C

                                                                      

10/1/14 to 9/30/15

       $ 9.73         0.31         (0.33 )       (0.02 )       (0.31 )       (0.03 )       —         (0.34 )       — (5)       (0.36 )     $ 9.37         (0.22 )%     $ 138,478         1.95 %(9)       1.95 %       3.19 %       34 %

10/1/13 to 9/30/14

         9.81         0.30         (0.08 )       0.22         (0.30 )       —         —         (0.30 )       —         (0.08 )       9.73         2.20         177,485         1.93 (9)       1.93         3.04         77  

10/1/12 to 9/30/13

         9.80         0.35         0.05         0.40         (0.39 )       (— )(5)       —         (0.39 )       —         0.01         9.81         4.15         182,667         1.96 (9)       1.96         3.51         68  

10/1/11 to 9/30/12

         9.29         0.41         0.50         0.91         (0.40 )       —         —         (0.40 )       —         0.51         9.80         9.92         95,078         1.98 (9)       1.98         4.31         56  

10/1/10 to 9/30/11

         9.81         0.36         (0.26 )       0.10         (0.41 )       (0.07 )       (0.14 )       (0.62 )       —         (0.52 )       9.29         0.85         92,623         1.95 (10)       1.94         3.69         69  

Class I

                                                                      

10/1/14 to 9/30/15

       $ 9.71         0.40         (0.32 )       0.08         (0.41 )       (0.03 )       —         (0.44 )       — (5)       (0.36 )     $ 9.35         0.78 %     $ 284,735         0.95 %(9)       0.95 %       4.20 %       34 %

10/1/13 to 9/30/14

         9.79         0.40         (0.09 )       0.31         (0.39 )       —         —         (0.39 )       —         (0.08 )       9.71         3.23         457,494         0.93 (9)       0.93         4.06         77  

10/1/12 to 9/30/13

         9.78         0.43         0.07         0.50         (0.49 )       (— )(5)       —         (0.49 )       —         0.01         9.79         5.21         381,791        
 0.96
 (9)
       0.96         4.41         68  

10/1/11 to 9/30/12

         9.27         0.51         0.49         1.00         (0.49 )       —         —         (0.49 )       —         0.51         9.78         11.04         94,193         0.98 (9)       0.98         5.31         56  

10/1/10 to 9/30/11

         9.80         0.46         (0.27 )       0.19         (0.51 )       (0.07 )       (0.14 )       (0.72 )       —         (0.53 )       9.27         1.78         71,584         0.95 (10)       0.93         4.67         69  

Wealth Masters

                                                                      

Fund

                                                                      

Class A

                                                                      

10/1/14 to 9/30/15

       $ 14.50         0.05         (0.98 )       (0.93 )       (0.05 )       (0.27 )       —         (0.32 )       —         (1.25 )     $ 13.25         (6.74 )%     $ 54,109         1.45 %       1.46 %       0.36 %       51 %

10/1/13 to 9/30/14

         13.12         0.02         1.37         1.39         —         (0.01 )       —         (0.01 )       —         1.38         14.50         10.67         55,881         1.45         1.46         0.11         62  

10/1/12 to 9/30/13

         10.22         (0.01 )       3.05         3.04         (0.09 )       (0.05 )       —         (0.14 )       —         2.90         13.12         30.09         5,169         1.45         3.29         (0.10 )       22  

9/5/12(6) to 9/30/12

         10.00         0.01         0.21         0.22         —         —         —         —         —         0.22         10.22         2.20 (4)       106         1.45 (3)       44.72 (3)       0.78 (3)       26 (4)

Class C

                                                                      

10/1/14 to 9/30/15

       $ 14.32         (0.06 )       (0.97 )       (1.03 )       —         (0.27 )       —         (0.27 )       —         (1.30 )     $ 13.02         (7.41 )%     $ 34,171         2.20 %       2.21 %       (0.39 )%       51 %

10/1/13 to 9/30/14

         13.04         (0.09 )       1.38         1.29         —         (0.01 )       —         (0.01 )       —         1.28         14.32         9.90         30,511         2.20         2.22         (0.65 )       62  

10/1/12 to 9/30/13

         10.21         (0.08 )       3.03         2.95         (0.07 )       (0.05 )       —         (0.12 )       —         2.83         13.04         29.11         1,742         2.20         4.41         (0.66 )       22  

9/5/12(6) to 9/30/12

         10.00         (— )(5)       0.21         0.21         —         —         —         —         —         0.21         10.21         2.10 (4)       107         2.20 (3)       45.67 (3)       0.04 (3)       26 (4)

Class I

                                                                      

10/1/14 to 9/30/15

       $ 14.56         0.09         (1.00 )       (0.91 )       (0.08 )       (0.27 )       —         (0.35 )       —         (1.26 )     $ 13.30         (6.53 )%     $ 32,495         1.20 %       1.21 %       0.62 %       51 %

10/1/13 to 9/30/14

         13.14         0.05         1.39         1.44         (0.01 )       (0.01 )       —         (0.02 )       —         1.42         14.56         10.96         48,918         1.20         1.20         0.33         62  

10/1/12 to 9/30/13

         10.22         0.06         3.01         3.07         (0.10 )       (0.05 )       —         (0.15 )       —         2.92         13.14         30.37         44,813         1.20         4.64         0.52         22  

9/5/12(6) to 9/30/12

         10.00         0.01         0.21         0.22         —         —         —         —         —         0.22         10.22         2.20 (4)       818         1.20 (3)       44.40 (3)       1.04 (3)       26 (4)

The footnote legend is at the end of the Financial Highlights.

 

See Notes to Financial Statements

 

73

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

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 per share.
(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 Fund is currently under its expense limitation.
(10)  See Note 4D in the Notes to Financial Statements for information on recapture of expenses previously waived.

 

See Notes to Financial Statements

 

74

Table of Contents

VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

Note 1. Organization

Virtus Opportunities Trust (the “Trust”) is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company.

As of the date of this report, 32 funds of the Trust are offered for sale, of which eight (each a “Fund”) are reported in this annual report.

The Fund’s investment objective is outlined in each Fund’s Summary page.

 

  There is no guarantee that a Fund will achieve its objective.

All of the Funds offer Class A shares and Class C shares with the exception of the CA Tax-Exempt Bond Fund which does not offer Class C shares. All of the Funds offer Class I shares. Class B shares are no longer available for purchase by new or existing shareholders, except for existing shareholders through Qualifying Transactions. For information regarding Qualifying Transactions, refer to each Fund’s prospectus. The Multi-Sector Intermediate Bond Fund also offers Class R6 shares.

Class A shares of the CA Tax-Exempt Bond Fund and Senior Floating Rate Fund are sold with a front-end sales charge of up to 2.75% with some exceptions. Class A shares of the Bond Fund, High Yield Fund, and Multi-Sector Intermediate Bond Fund are sold with a front-end sales charge of up to 3.75% with some exceptions. Class A shares of the Essential Resources, Low Volatility Equity and Wealth Masters 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. The period for which such CDSC applies for the Funds is 18 months. 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% CDSC, applicable if redeemed within one year of purchase. Class R6 and Class I shares are sold without a front-end sales charge or CDSC.

Class R6 shares are only available to participants in employer-sponsored retirement plans, such as 401(k) plans, profit-sharing plans, defined benefit plans and other employer-directed plans. Class R6 shares do not carry sales commissions or pay Rule 12b-1 fees.

Virtus Mutual Funds may impose an annual fee on accounts having balances of less than $2,500. The small account fee may be waived in certain circumstances, as disclosed in the prospectuses and/or statements of additional information. The fees collected will be used to offset certain expenses of the Funds.

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 Rule 12b-1 and/or shareholder servicing plan (“12b-1 plan”) and has exclusive voting rights with respect to such plans. Class I shares and Class R6 shares are not subject to a 12b-1 plan. Income and other expenses as well as realized and unrealized gains and losses of each Fund are borne pro rata by the holders of each class of shares.

 

Note 2. Significant Accounting Policies

The significant accounting policies consistently followed by the Trust in the preparation of its financial statements are summarized below and for derivatives, included in Note 3 below. 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 amounts 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

Security valuation procedures for each Fund, which include nightly price variance as well as back-testing such as bi-weekly unchanged price, monthly secondary source and transaction analysis, have been approved by the Board of Trustees (the “Board”, or the “Trustees”). All internally fair valued securities are approved by a valuation committee (the “Valuation Committee”) appointed by the Board. The Valuation Committee is comprised of certain members of management as identified to the Board and convenes independently from portfolio management. All internally fair valued securities, referred to below, are updated daily and reviewed in detail by the Valuation Committee monthly unless changes occur within the period. The Valuation Committee reviews the validity of the model inputs and any changes to the model. Quarterly fair valuations are reviewed by the Board.

Each Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The Funds’ policy is to recognize transfers between levels at the end of the reporting period.

 

  •    Level 1 – quoted prices in active markets for identical securities (security types generally include listed equities).

 

  •    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 Valuation Committee’s own assumptions in determining the fair value of investments).

A description of the valuation techniques applied to a 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 Valuation Committee, are generally categorized as Level 3 in the hierarchy.

 

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Certain non-U.S. 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 non-U.S. markets close (where the security is principally traded) and the time that a Fund calculates its net asset value (“NAV”) (at the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4 p.m. Eastern time) that may impact the value of securities traded in these non-U.S. markets. In such cases the Fund fair values non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. security to the intraday trading in the U.S. markets for investments such as ADRs, financial futures, ETFs, 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 non-U.S. 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 that 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 such as mortgage-backed and asset-backed securities 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 Valuation Committee, are generally categorized as Level 3 in the hierarchy.

Listed derivatives, such as treasury futures, 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 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 NAV. Investments in closed-end funds are valued as of the close of regular trading on the NYSE each business day. Both are categorized as Level 1 in the hierarchy.

A summary of the inputs used to value a Fund’s net assets by each major security type is disclosed at the end of the Schedule of Investments for each Fund. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The significant unobservable inputs used in the fair value measurement of these corporate bonds are based on comparable liquid assets adjusted for accretion/amortization rate, current yield, current swap rates, and discount rates related to differences in capital structure and liquidity. Significant changes in any of these inputs in isolation would result in a significantly lower or higher fair value measurement. Generally, a change in the observable market assumptions would have direct impacts to the discount rates used related to capital structure and/or liquidity discounts.

 

  B. Security Transactions and Investment Income

Security transactions are recorded on the trade date. Realized gains and losses from sales of securities are determined on the identified cost basis. Dividend income is recognized on the ex-dividend date or, in the case of certain foreign securities, as soon as a Fund is notified. Interest income is recorded on the accrual basis. Each Fund amortizes premiums and accretes discounts using the effective interest method. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.

Dividend income from REIT investments 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 intention 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.

Certain Funds 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.

Management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. As of September 30, 2015, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2012 forward (with limited exceptions).

 

  D. Distributions to Shareholders

Distributions are recorded by each Fund on the ex-dividend date. For the Bond Fund, CA Tax-Exempt Fund, High Yield Fund, Multi-Sector Intermediate Bond Fund and Senior Floating Rate Fund income distributions are declared and recorded daily and distributed monthly. Income and capital gain distributions are determined in accordance with income tax regulations that 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.

 

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SEPTEMBER 30, 2015

 

 

  E. Expenses

Expenses incurred together by a Fund and other affiliated mutual funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately used.

In addition to the net annual operating expenses that a Fund bears directly, the shareholders of a Fund indirectly bear the pro rata expenses of the underlying mutual funds in which the Fund invests.

 

  F. Foreign Currency Translation

Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at 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 Funds do not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

 

  G. When-issued Purchases and Forward Commitments (Delayed Delivery)

Certain Funds may engage in when-issued or forward commitment 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. 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.

 

  H. 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. Loan agreements are generally non-investment grade and often involve borrowers that are highly leveraged. The Funds may invest in obligations of borrowers who are in bankruptcy proceedings. Loan agreements are typically senior in the corporate capital structure of the borrower. 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. A 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. When investing in loan participations, a 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 participation and only upon receipt by the lender of payments from the borrower. A Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, a Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When a Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan.

A Fund may invest in multiple series or tranches of a loan, which may have varying terms and carry different associated risks. Loan agreements may involve foreign borrowers, and investments may be denominated in foreign currencies. 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 loan agreements have floating rate loan interests which generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally LIBOR (London Interbank Offered Rate), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. When a loan agreement is purchased a Fund may pay an assignment fee. On an ongoing basis, a Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan agreement. Prepayment penalty fees are received upon the prepayment of a loan agreement by a borrower. Prepayment penalty, facility, commitment, consent and amendment fees are recorded to income as earned or paid.

At September 30, 2015, all loan agreements held by the Funds are assignment loans.

 

  I. Securities Lending

($ reported in thousands)

Certain Funds may loan securities to qualified brokers through an agreement with Brown Brothers Harriman (“BBH”), as a third party lending agent. Under the terms of agreement, a Fund doing so 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 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 a Fund net of fees and rebates charged by BBH 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 declining value of the collateral.

At September 30, 2015, the Wealth Masters Fund had securities on loan with a market value of $6,889 and cash collateral of $6,922.

 

Note 3. Derivative Financial Instruments and Transactions

($ reported in thousands)

Disclosures about derivative instruments and hedging activities are intended to enable 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 such disclosures and accounting policies for each specific type of derivative instrument used by certain Funds.

 

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SEPTEMBER 30, 2015

 

 

  A. Options contracts

An options contract provides the purchaser with the right, but not the obligation, to buy (call option) or sell (put option) a financial instrument at an agreed upon price. Certain Funds may purchase or write both put and call options on portfolio securities. The Fund is subject to equity price risk in the normal course of pursuing its investment objectives. The Fund uses options contracts to hedge against changes in the values of equities.

When a Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When a Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. Holdings of the Fund designated to cover outstanding written options are noted in the Schedules of Investments. Purchased options are reported as an asset within “Investment securities at value” in the Statement of Assets and Liabilities. Options written are reported as a liability within “Written options outstanding at value”. Changes in value of the purchased option is included in “Net change in unrealized appreciation/(depreciation) on investments” in the Statement of Operations. Changes in value of written options is included in “Net change in unrealized appreciation/(depreciation) on written options”.

If an option expires unexercised, the Fund realizes a gain or loss to the extent of the premium received or paid. If an option is exercised, the premium received or paid is recorded as an adjustment to the proceeds from the sale or the cost basis of the purchase. The difference between the premium and the amount received or paid on affecting a closing purchase or sale transaction is also treated as a realized gain or loss. Gain or loss on purchased options is included in “Net realized gain/(loss) on investments” in the Statement of Operations. Gain or loss on written options is presented separately as “Net realized gain/(loss) on written options” in the Statement of Operations.

The risk in writing call options is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing put options is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying options is that the Fund pays a premium whether or not the option is exercised. The use of such instruments may involve certain additional risks as a result of unanticipated movements in the market. Writers (sellers) of options are subject to unlimited risk of loss, as the seller will be obligated to deliver or take delivery of the security at a predetermined price which may, upon exercise of the option, be significantly different from the then-market value.

The Low Volatility Equity Fund invested in writing index call options and buying call options on VIX futures. Both are used as techniques for limiting the volatility of the Fund’s portfolio.

The Fund had transactions in written call options for the period ended September 30, 2015 as follows:

 

Written call options

     

Number of
contracts

       

Premium
received

  

Written Options outstanding at September 30, 2014

        11         $ 1   

Options written

        337           200   

Options closed

        (323 )         (109 ) 

Options expired

        —           —   

Options exercised

        —           —   
    

 

 

       

 

 

  

Written Options outstanding at September 30, 2015

        25         $ 92   
    

 

 

       

 

 

  

The following is a summary of the Fund’s option contracts which have a primary risk exposure to equity contracts as of September 30, 2015:

 

Statements of Assets and Liabilities

  

Assets: Purchased call options at value

    $ 15 (1) 

Liabilities: Written options

      (39 ) 
  

 

 

  

Net asset (liability) balance

    $ (24 ) 
  

 

 

  

Statements of Operations

  
Net realized gain (loss) on purchased options    $ 53 (2) 

Net realized gain (loss) on written options

      20   

Net change in unrealized appreciation (depreciation) on purchased options

      (2 )(3) 

Net change in unrealized appreciation (depreciation) on written options

      52   
  

 

 

  

Total realized and unrealized gain (loss) on purchased and written options

   $ 123   
  

 

 

  
 

 

  (1)  Amount included in Investment in unaffiliated securities at value.
  (2)  Amount included in Net realized gain (loss) on unaffiliated investments.
  (3)  Amount included in net change in unrealized appreciation (depreciation) on unaffiliated investments.
 

 

For the period ended September 30, 2015, the average daily premiums paid by the Fund for purchased call options were $9, and the average daily premiums received for written call options by the Fund were $(8).

 

Note 4. Investment Advisory Fees and Related Party Transactions

($ reported in thousands except as noted)

 

  A. Adviser

Virtus Investment Advisers, Inc. (the “Adviser”), an indirect wholly-owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the adviser to the Trust. The Adviser manages the Funds’ investment programs and general operations of the Funds, including oversight of the Funds’ subadvisers.

 

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As compensation for its services to the Funds, 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:

 

Essential Resources Fund

      1.10 % 

 

       First $1 Billion        $1+ Billion  

Bond Fund

        0.45 %         0.40 % 

Wealth Masters Fund

        0.85           0.80   

 

       First $1 Billion      $1+ Billion through $2 Billion      $2+ Billion  

CA Tax-Exempt Bond Fund

        0.45 %       0.40 %       0.35 % 

High Yield Fund

        0.65         0.60         0.55   

Multi-Sector Intermediate Bond Fund

        0.55         0.50         0.45   

Senior Floating Rate Fund

        0.60         0.55         0.50   
       First $2 Billion      $2+ Billion through $4 Billion      $4+ Billion  

Low Volatility Equity Fund

        0.95 %       0.90 %       0.85 % 

During the period covered by these financial statements, the Bond Fund, High Yield Fund, Multi-Sector Intermediate Fund, and the Senior Floating Rate Fund invested a portion of its assets in Virtus Credit Opportunities Fund, an affiliated mutual fund. In order to avoid any duplication of advisory fees, the Adviser has voluntarily waived its advisory fees in an amount equal to that which would otherwise be paid by the Fund on the assets invested in the Credit Opportunities Fund. For the period covered by these financial statements, the waiver amounted to $2, $2, $16, and $14, respectively. These waivers are in addition to the expense limitation and/or fee waiver covered elsewhere in these financial statements and are included in the Statements of Operations in “expenses reimbursed and/or waived by the investment adviser”.

 

  B. Subadvisers

The subadvisers manage the investments of each Fund for which they are paid a fee by the Adviser. The subadvisers and the Fund(s) they serve are as follows:

 

Fund

  

Subadviser

   

Fund

  

Subadviser

Bond Fund   NF(1)    Low Volatility Equity Fund   Rampart(4)
CA Tax-Exempt Bond Fund   NF(1)   

Multi-Sector Intermediate Bond Fund

  

NF(1)

Essential Resources Fund   KBI(3)    Senior Floating Rate Fund   NF(1)

High Yield Fund

  

NF(1)

    Wealth Masters Fund   Horizon(2)

 

  (1) Newfleet Asset Management, LLC, an indirect wholly-owned subsidiary of Virtus (“NF”)
  (2)  Horizon Asset Management, LLC (“Horizon”)
  (3)  Kleinwort Benson Investors International, Ltd. (“KBI”)
  (4)  Rampart Investment Management Company, LLC (“Rampart”)
 

 

  C. Expense Limits and Fee Waivers

Effective September 1, 2015, the Adviser has contractually agreed to limit certain Funds’ total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses), so that such expenses do not exceed the percentages of the Fund’s average daily net asset values as listed below. For the period of October 1, 2014 through August 31, 2015, for all the Funds except for Essential Resources the waiver was voluntary.

 

       Class A      Class B      Class C      Class I      Through
Date		  

Bond Fund

        0.85 %       1.60 %       1.60 %       0.60 %       1/31/17   

CA Tax-Exempt Bond Fund

        0.85         —         —         0.60         1/31/17   

Essential Resources Fund

        1.65         —         2.40         1.40         1/31/17   

High Yield Fund

        1.15         1.90         1.90         0.90         1/31/17   

Low Volatility Equity Fund

        1.55         —         2.30         1.30         1/31/17   

Senior Floating Rate Fund(1)

        1.20         —         1.95         0.95         1/31/17   

Wealth Masters Fund

        1.45         —         2.20         1.20         1/31/17   

 

  (1) Excluding leverage expenses, if any.

 

  D. Expense Recapture

For certain Funds, the Adviser may recapture operating expenses waived or reimbursed under these arrangements within three fiscal years following the end of the fiscal year in which such waiver or reimbursement occurred. A 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 or, if none, the expense limitation in effect at the time of the waiver or reimbursement. All or a portion of the following Adviser reimbursed expenses may be recaptured as follows:

 

       Fiscal Year Ended  
       2016        2017        2018        Total  

Bond Fund

      $ 222         $ 197         $ 204         $ 623   

CA Tax-Exempt Bond Fund

        100           103           110           313   

Essential Resources Fund

        —           —           113           113   

High Yield Fund

        161           150           146           457   

Low Volatility Equity Fund

        29           81           55           165   

Wealth Masters Fund

        96           8           14           118   

 

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  E. Distributor

VP Distributors, LLC (“VP Distributors”), an indirect wholly-owned subsidiary of Virtus, serves as the distributor of each Fund’s shares and has advised the Funds that for the fiscal year (the “period”) ended September 30, 2015, it retained net commissions of $61 for Class A shares and deferred sales charges of $66, $— and $41 for Class A shares, Class B shares, and Class C shares respectively.

In addition, each Fund pays VP Distributors distribution and/or service fees under a 12b-1 plan as a percentage of the average daily net assets of each respective class at the annual rates of 0.25% for Class A shares, 1.00% for Class B shares and 1.00% for Class C shares; Class I shares and Class R6 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 NAV 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.

 

  F. Administrator and Transfer Agent

Virtus Fund Services, LLC, an indirect wholly-owned subsidiary of Virtus, serves as the administrator and transfer agent to the Funds.

For the period ended September 30, 2015, the Funds incurred administration fees totaling $1,433 which are included in the Statements of Operations.

For the period ended September 30, 2015, the Funds incurred transfer agent fees totaling $1,583 which are included in the Statements of Operations. A portion of these fees are paid to outside entities that also provide services to the Trust.

 

  G. Affiliated Shareholders

At September 30, 2015, Virtus and its affiliates and the retirement plans of Virtus and its affiliates held shares of certain Funds which may be redeemed at any time that aggregated to the following:

 

       Shares        Aggregate Net
Asset Value		  
Essential Resources Fund          

Class A

        10,000         $ 80   

Class C

        10,000           80   

Class I

        480,000           3,864   
Low Volatility Equity Fund          

Class A

        10,112           116   

Class C

        10,055           114   

Class I

        131,671           1,514   
Multi-Sector Intermediate Bond Fund          

Class R6

        9,897           96   
Senior Floating Rate Fund          

Class I

        1,300,941           12,164   

 

  H. Investments in Affiliates

A summary of total long-term and short-term purchases and sales of the affiliated underlying fund, Virtus Credit Opportunities Fund during the period ended September 30, 2015 is as follows:

 

     Value,
beginning of
period		      Purchases      Sales
Proceeds		     Value, end
of period		      Dividend
Income		      Distributions
of Realized
Gains		  

Bond Fund

    $ —       $ 1,170       $ —      $ 1,143       $ 6       $ —   

High Yield Fund

      —         1,050         (684 )      342         5         —   

Multi-Sector Intermediate Bond Fund

      —         9,270         —        9,058         45         —   

Senior Floating Rate Fund

      —         7,677         —        7,502         37         —   

 

  I. Payment from Affiliate

During the period the Adviser reimbursed certain funds for losses. These amounts are included in payments by affiliates in the Statements of Operations. There was no impact on the total return.

 

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SEPTEMBER 30, 2015

 

 

Note 5. Purchases and Sales of Securities

($ reported in thousands)

Purchases and sales of securities (excluding U.S. Government and agency securities, short-term securities and written options) during the period ended September 30, 2015, were as follows:

 

       Purchases        Sales  

Bond Fund

      $ 29,996         $ 34,553   

CA Tax-Exempt Bond

        7,875           9,734   

Essential Resources Fund

        7,179           2,199   

High Yield Fund

        79,410           88,587   

Low Volatility Equity Fund

        3,108           62   

Multi-Sector Intermediate Bond Fund

        193,860           206,426   

Senior Floating Rate Fund

        282,842           526,182   

Wealth Masters Fund

        73,350           77,314   

Purchases and sales of long term U.S. Government and agency securities for the Funds during the period ended September 30, 2015, were as follows:

 

       Purchases        Sales  

Bond Fund

      $ 19,517         $ 13,556   

High Yield Fund

        225           225   

Multi-Sector Intermediate Bond Fund

        40,602           26,737   

 

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SEPTEMBER 30, 2015

 

 

Note 6. Capital Share Transactions

(reported in thousands)

Transactions in shares of capital stock, during the periods ended as indicated below, were as follows:

 

     Bond Fund     CA Tax-Exempt Bond Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      248      $ 2,789        372      $ 4,261        245      $ 3,076        10      $ 118   
Reinvestment of distributions      128        1,443        158        1,810        95        1,156        73        880   
Shares repurchased      (707 )      (7,970 )      (948 )      (10,852 )      (432 )      (5,262 )      (214 )      (2,620 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (331 )    $ (3,738 )      (418 )    $ (4,781 )      (92 )    $ (1,030 )      (131 )    $ (1,622 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class B                 
Sale of shares      —      $ — (2)      —      $ —        —      $ —        —      $ —   
Reinvestment of distributions      — (1)      4        1        9        —        —        —        —   
Shares repurchased      (10 )      (106 )      (16 )      (184 )      —        —        —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (10 )    $ (102 )      (15 )    $ (175 )      —      $ —        —      $ —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      1,066      $ 11,856        128      $ 1,442        —      $ —        —      $ —   
Reinvestment of distributions      17        190        16        179        —        —        —        —   
Shares repurchased      (827 )      (9,164 )      (201 )      (2,241 )      —        —        —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      256      $ 2,882        (57 )    $ (620 )      —      $ —        —      $ —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      429      $ 4,917        298      $ 3,463        66      $ 807        101      $ 1,222   
Reinvestment of distributions      52        600        58        673        64        753        32        383   
Shares repurchased      (342 )      (3,905 )      (874 )      (10,111 )      (133 )      (1,613 )      (1,367 )      (16,739 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      139      $ 1,612        (518 )    $ (5,975 )      (3 )    $ (53 )      (1,234 )    $ (15,134 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

     Essential Resources Fund               High Yield Fund  
     From Inception
March 23, 2015
to September 30, 2015		               Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT               SHARES     AMOUNT     SHARES     AMOUNT  

Class A

                   

Sale of shares

      10      $ 103              11,578      $ 49,167        2,906      $ 12,699   

Reinvestment of distributions

      —        —              824        3,485        792        3,494   

Shares repurchased

      —        —              (13,440 )      (56,820 )      (6,129 )      (27,052 ) 
  

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

  

Net Increase / (Decrease)

      10      $ 103              (1,038 )    $ (4,168 )      (2,431 )    $ (10,859 ) 
  

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

  

Class B

                   

Sale of shares

      —      $ —              1      $ 4        —      $ —   

Reinvestment of distributions

      —        —              1        3        1        5   

Shares repurchased

      —        —              (16 )      (66 )      (8 )      (33 ) 
  

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

  

Net Increase / (Decrease)

      —      $ —              (14 )    $ (59 )      (7 )    $ (28 ) 
  

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

  

Class C

                   

Sale of shares

      13      $ 129              349      $ 1,452        374      $ 1,629   

Reinvestment of distributions

      —        —              41        172        33        143   

Shares repurchased

      — (1)      — (2)            (388 )      (1,603 )      (249 )      (1,075 ) 
  

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

  

Net Increase / (Decrease)

      13      $ 129              2      $ 21        158      $ 697   
  

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

  

Class I

                   

Sale of shares

      485      $ 4,847              815      $ 3,498        190      $ 844   

Reinvestment of distributions

      —        —              87        367        65        285   

Shares repurchased

      (2 )      (19 )            (1,148 )      (4,834 )      (208 )      (918 ) 
  

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

  

Net Increase / (Decrease)

      483      $ 4,826              (246 )    $ (969 )      47      $ 211   
  

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)  Amount is less than 500.
(2)  Amount is less than $500.

 

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NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

     Low Volatility Equity Fund     Multi-Sector Intermediate Bond Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      171      $ 2,056        31      $ 355        2,970      $ 30,801        3,763      $ 40,776   
Reinvestment of distributions      1        7        — (1)      1        565        5,794        908        9,799   
Shares repurchased      (34 )      (395 )      (3 )      (40 )      (3,956 )      (40,421 )      (10,641 )      (115,701 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      138      $ 1,668        28      $ 316        (421 )    $ (3,826 )      (5,970 )    $ (65,126 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class B                 
Sale of shares      —      $ —        —      $ —        3      $ 36        — (1)    $ 5   
Reinvestment of distributions      —        —        —        —        19        196        35        372   
Shares repurchased      —        —        —        —        (230 )      (2,365 )      (241 )      (2,601 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      —      $ —        —      $ —        (208 )    $ (2,133 )      (206 )    $ (2,224 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      140      $ 1,648        12      $ 137        2,225      $ 23,203        1,482      $ 16,227   
Reinvestment of distributions      — (1)      2        — (1)      1        337        3,489        388        4,218   
Shares repurchased      (39 )      (462 )      —        —        (2,927 )      (30,282 )      (2,602 )      (28,418 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      101      $ 1,188        12      $ 138        (365 )    $ (3,590 )      (732 )    $ (7,973 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      6      $ 71        —      $ —        7,369      $ 75,867        9,376      $ 102,122   
Reinvestment of distributions      1        6        1        13        657        6,736        411        4,444   
Shares repurchased      —        —        —        —        (7,278 )      (74,560 )      (4,327 )      (46,859 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      7      $ 77        1      $ 13        748      $ 8,043        5,460      $ 59,707   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class R6                 
Sale of shares      —      $ —        —      $ —        183      $ 1,906        —      $ —   
Reinvestment of distributions      —        —        —        —        5        40        —        —   
Shares repurchased      —        —        —        —        (6 )      (61 )      —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      —      $ —        —      $ —        182      $ 1,885        —      $ —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

     Senior Floating Rate Fund     Wealth Masters Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      5,295      $ 51,097        20,351      $ 200,743        1,889      $ 28,329        4,607      $ 65,457   
Reinvestment of distributions      1,177        11,287        1,405        13,850        82        1,205        1        14   
Shares repurchased      (8,090 )      (77,658 )      (30,864 )      (304,300 )      (1,740 )      (25,440 )      (1,149 )      (16,700 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (1,618 )    $ (15,274 )      (9,108 )    $ (89,707 )      231      $ 4,094        3,459      $ 48,771   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      1,575      $ 15,160        4,222      $ 41,705        1,134      $ 16,676        2,113      $ 29,835   
Reinvestment of distributions      483        4,636        472        4,661        39        567        — (1)      4   
Shares repurchased      (5,520 )      (53,095 )      (5,080 )      (50,109 )      (680 )      (9,890 )      (115 )      (1,639 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (3,462 )    $ (33,299 )      (386 )    $ (3,743 )      493      $ 7,353        1,998      $ 28,200   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      9,564      $ 91,910        33,480      $ 329,745        1,346      $ 20,069        3,818      $ 54,849   
Reinvestment of distributions      1,206        11,564        1,248        11,990        74        1,097        5        73   
Shares repurchased      (27,432 )      (263,127 )      (26,595 )      (261,835 )      (2,336 )      (33,811 )      (3,873 )      (55,434 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (16,662 )    $ (159,653 )      8,103      $ 79,900        (916 )    $ (12,645 )      (50 )    $ (512 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)  Amount is less than 500.
(2)  Amount is less than $500.

 

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

Note 7. 10% Shareholders

As of September 30, 2015, certain Funds had individual shareholder account(s) and/or omnibus shareholder account(s) (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of each such Fund as detailed below:

 

       % of Shares
Outstanding		        Number of
Accounts		  

CA-Tax Exempt Bond Fund

        31 %         1   

Essential Resources Fund

        95           1 * 

Low Volatility Equity Fund

        71           3 * 

Multi-Sector Intermediate Bond Fund

        21           2   

Senior Floating Rate Fund

        44           3   

Wealth Masters Fund

        18           1   

 

  * Includes affiliated shareholder account(s)

 

Note 8. Credit Risk and Asset Concentration

In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund’s ability to repatriate such amounts.

High-yield/high-risk securities typically entail greater price volatility and/or principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high-yield/high-risk securities may be complex, and as a result, it may be more difficult for the Adviser and/or subadviser to accurately predict risk.

Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that the market may fluctuate for other reasons, and there is no assurance that the insurance company will meet its obligations. Insured securities have been identified in the Schedule of Investments. A real or perceived decline in creditworthiness of a bond insurer can have an adverse impact on the value of insured bonds held in the Funds.

Certain Funds may invest a high percentage of their assets in specific sectors of the market in the pursuit of their investment objectives. 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, 2015, the following Funds held securities issued by various companies in specific sectors or countries as detailed below:

 

                    Fund

     

Sector

      Percentage of Total
Investments		  

Essential Resources Fund

     

Industrials

        33 % 

Senior Floating Rate Fund

     

Consumer Discretionary

        30   

Wealth Masters Fund

     

Consumer Discretionary

        34   

 

Note 9. Indemnifications

Under the Trust’s organizational documents, its Trustees and officers are indemnified against certain liabilities arising out of the performance of their duties to the Funds. Each Trustee has also entered into an indemnification agreement with the Trust. In addition, in the normal course of business, the Funds enter into contracts that provide a variety of indemnifications to other parties. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds and that have not occurred. However, the Funds have not had prior claims or losses pursuant to these arrangements and expect the risk of loss to be remote.

 

Note 10. Federal Income Tax Information

($ reported in thousands)

At September 30, 2015, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Funds were as follows:

 

Fund

    Federal
Tax Cost		     Unrealized
Appreciation		      Unrealized
(Depreciation)		     Net Unrealized
Appreciation
(Depreciation)		  

Bond Fund

    $ 74,842      $ 1,360       $ (1,993 )    $ (633 ) 

CA Tax-Exempt Bond Fund

      28,913        1,810         (182 )      1,628   

Essential Resources Fund

      5,057        11         (1,018 )      (1,007 ) 

High Yield Fund

      72,625        361         (4,943 )      (4,582 ) 

Low Volatility Equity Fund Securities

      5,049        5         —        5   

Low Volatility Equity Fund Options

      (39 )      —         —        —   

Multi-Sector Intermediate Bond Fund

      356,255        4,799         (26,833 )      (22,034 ) 

Senior Floating Rate Fund

      740,376        1,156         (27,428 )      (26,272 ) 

Wealth Masters Fund

      134,400        8,538         (15,951 )      (7,413 ) 

(1) Amount is less than $500

 

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

Certain Funds have capital loss carryovers available to offset future realized capital gains, through the indicated expiration dates shown below:

 

     2017      2018      No Expiration      Total  
                   Short-Term      Long-Term         

Bond Fund

    $ 3,149       $ —       $ 8       $ —       $ 3,157   

High Yield Fund

      13,758         9,151         7         —         22,916   

Multi-Sector Intermediate Bond Fund

      —         —         —         114         114   

Senior Floating Rate Fund

      —         —         129         68         197   

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.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized for tax years beginning after December 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

For the Period ended September 30, 2015, the Low Volatility Equity Fund utilized losses of $12 deferred in prior years against current year capital gains.

Capital losses realized after October 31 and certain late year ordinary losses may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal period ended September 30, 2015, certain Funds deferred and recognized post-October losses as follows:

 

Fund

      Capital Loss
Deferred		        Capital Loss
Recognized		  

Bond Fund

      $ 1,302         $ —   

High Yield Fund

        2,043           —   

Low Volatility Equity Fund

        —           39   

Multi-Sector Intermediate Bond Fund

        6,432           —   

Senior Floating Rate Fund

        9,748           —   

The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which are disclosed above) consist of the following:

 

       Undistributed
Ordinary
Income		        Undistributed
Long-Term
Capital Gains		        Undistributed
Tax-Exempt
Income		  

Bond Fund

      $ —         $ —         $ —   

CA Tax-Exempt Bond Fund

        12           652           10   

Essential Resources Fund

        26           —           —   

High Yield Fund

        45           —           —   

Low Volatility Equity Fund

        48           45           —   

Multi-Sector Intermediate Bond Fund

        —           —           —   

Senior Floating Rate Fund

        —           —           —   

Wealth Masters Fund

        1,723           509           —   

For the period ended September 30, 2015, the CA Tax-Exempt Bond Fund distributed $1,130 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. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

          2015                 2014        
    Tax Exempt
Income		     Ordinary
income		     Long-Term
Capital
Gains		     Tax Return
of Capital		     Total     Tax Exempt
Income		     Ordinary
Income		     Long-Term
Capital
Gains		     Total  

Bond Fund

   $ —      $ 2,207      $ —      $ 379      $ 2,586      $ —      $ 3,256      $ —      $ 3,256   

CA Tax-Exempt Bond Fund

     1,130        33        1,061        —        2,224        1,479        17        938        2,434   

Essential Resources Fund

     —        —        —        —        —        —        —        —        —   

High Yield Fund

     —        4,752        —        —        4,752        —        4,910        —        4,910   

Low Volatility Equity Fund

     —        15        —        —        15        —        15        —        15   

Multi-Sector Intermediate Bond Fund

     —        14,411        3,975        1,912        20,298        —        20,052        3,597        23,649   

Senior Floating Rate Fund

     —        32,389        1,003        —        33,392        —        37,727        —        37,727   

Wealth Masters Fund

     —        2,974        48        —        3,022        —        90        2        92   

 

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NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

Note 11. Reclassification of Capital Accounts

($ reported in thousands)

For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Funds. As of September 30, 2015, certain Funds recorded reclassifications to increase (decrease) the accounts as listed below ($ reported in thousands):

 

       Capital Paid in on
Shares of
Beneficial Interest		        Undistributed
Net Investment
Income (Loss)		        Accumulated
Net Realized
Gain (Loss)		  

Bond Fund

      $ —         $ (490 )       $ 490   

CA Tax-Exempt Bond Fund

        — (1)         —           — (1) 

Essential Resources Fund

        —           1           (1 ) 

High Yield Fund

        —           3           (3 ) 

Low Volatility Equity Fund

        — (1)         —           — (1) 

Multi-Sector Intermediate Bond Fund

        —           (3,478 )         3,478   

Senior Floating Rate Fund

        (111 )         6           105   

Wealth Masters Fund

        — (1)         135           (135 ) 

(1) Amount less than $500.

 

Note 12. Regulatory Matters and Litigation

From time to time, the Funds’ investment adviser and/or its affiliates and/or subadvisers may be involved in litigation and arbitration as well as examinations and investigations by various regulatory bodies, including the SEC, involving compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting their products and other activities. At this time, the Funds’ investment adviser believes that the outcomes of such matters are not likely, either individually or in the aggregate, to be material to these financial statements.

As part of an SEC non-public, confidential investigation of a matter entitled – In the Matter of F-Squared Investments Inc., the SEC staff informed the Funds’ investment adviser that it was inquiring into whether it had violated securities laws or regulations with respect to circumstances related to that matter. On November 16, 2015, without admitting or denying the SEC’s findings, the Funds’ investment adviser consented to the entry of an order providing that it cease and desist from committing or causing any violations and future violations of Sections 204, 206(2) and 206(4) of the Investment Advisers Act of 1940, as amended, and Rules 204-2, 206(4)-1, 206(4)-7 and 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940, as amended; agreed to a censure; and paid $16.5 million, which included a civil money penalty of $2 million, disgorgement of $13.4 million and prejudgment interest of $1.1 million.

On February 20, 2015, a putative class action complaint (In re Virtus Investment Partners, Inc. Securities Litigation; formerly styled as Tom Cummins v. Virtus Investment Partners Inc. et al) alleging violation of the federal securities laws was filed by an individual shareholder against Virtus and certain of its officers (the “defendants”) in the United States District Court for the Southern District of New York. On August 21, 2015, the lead plaintiff filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint and adding the Trust as a defendant. The Consolidated Complaint was purportedly filed on behalf of all purchasers of Virtus common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint alleges that during the Class Period, the defendants knowingly disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds previously subadvised by F-Squared Investments, Inc. and/or its affiliates (“F-Squared”). The plaintiff seeks to recover unspecified damages. Virtus and its affiliates, including the Funds’ adviser, believe that the suit is without merit and intend to defend it vigorously. A motion to dismiss the Consolidated Complaint was filed on behalf of the defendants on October 21, 2015. The Trust believes that the risk of loss to the Funds as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Funds.

On May 8, 2015, a putative class action complaint (Mark Youngers v. Virtus Investment Partners, Inc. et al) alleging violations of certain provisions of the federal securities laws was filed in the United States District Court for the Central District of California. The complaint, which was purportedly filed on behalf of purchasers of certain Virtus Funds previously subadvised by F-Squared between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”), alleges claims against Virtus, certain Virtus officers and affiliates (including the Funds’ investment adviser, Euclid Advisors LLC and VP Distributors, LLC), the trustees and certain officers of the Trust, and certain other parties (the “defendants”). The complaint alleges that during the Class Period the defendants knowingly disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On October 1, 2015, the plaintiff filed a First Amended Class Action Complaint which, among other things, added a derivative claim for breach of fiduciary duty on behalf of the Trust. On October 19, 2015, the Court entered an order transferring the action to the Southern District of New York. Virtus and its affiliates, including the Funds’ adviser, believe the plaintiff’s claims asserted in the complaint are frivolous and intend to defend them vigorously. The Trust believes that the risk of loss to the Funds as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Funds.

 

Note 13. Borrowings

($ reported in thousands)

On July 2, 2015, the Funds as well as other Funds of the Trust (with the exception of the Senior Floating Rate Fund), entered into a $50,000 secured Line of Credit Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Funds to manage large unexpected redemptions and trade fails, up to a limit of one-third or one-fifth of each Fund’s total net assets in accordance with the Agreement. Interest is

 

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

charged at the higher of the LIBOR (London Interbank Offered Rate) or the Federal Funds rate plus an additional percentage rate on the amount borrowed. Commitment fees are charged on the undrawn balance. The Funds are individually, and not jointly, liable for their particular advances, if any, under the line of credit. The Bank has the ability to require repayment of outstanding borrowings under the Agreement upon certain circumstances such as an event of default.

From July 2, 2015 to September 30, 2015, the High Yield Fund made borrowings. The average daily borrowings under the Agreement and the weighted daily average interest rate were $2,483 and 1.19%, respectively. No other Funds made borrowings during the period and no Fund had any outstanding borrowings as of September 30, 2015.

On April 30, 2012, the Senior Floating Rate Fund entered into a Credit Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Fund to borrow cash from the Bank, up to a limit of $125,000. Borrowings under the Agreement are collateralized by investments of the Fund. Interest is charged at LIBOR (London Interbank Offered Rate) plus an additional percentage rate on the amount borrowed. Commitment fees are charged on the undrawn balance. Total commitment fees paid and accrued for the period ended September 30, 2015, were $118 and are included in interest expense and fees on the Statement of Operations. The Agreement is renewable by the Fund with the Bank’s consent. The Agreement can also be converted to a 364 day fixed term facility, one time at the Fund’s option. The Bank has the ability to require repayment of outstanding borrowings under the Agreement upon certain circumstances such as an event of default. From October 1, 2014 to September 30, 2015, the average daily borrowings under the Agreement and the weighted daily average interest rate were $32,566 and 1.022%, respectively. At September 30, 2015, the amount of such outstanding borrowings was as follows:

 

Outstanding
 Borrowings

    Interest
Rate		  

$25,500

      1.0475 % 

 

Note 14. Illiquid and Restricted Securities

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 a 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. However, a portion of such footnoted securities could be liquid where it is determined that some, though not all, of the position could 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 applicable Fund.

Restricted securities are illiquid securities, as defined above, not registered under the Securities Act of 1933, as amended (the “1933 Act”). Generally, 144A securities are excluded from this category, except where defined as illiquid.

Each Fund will bear any costs, including those involved in registration under the 1933 Act, in connection with the disposition of such securities.

At September 30, 2015, the Funds did not hold any securities that are both illiquid and restricted.

 

Note 15. Subsequent Events

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there are no subsequent events requiring recognition or disclosure in the financial statements.

 

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LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 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 Bond Fund, Virtus CA Tax-Exempt Bond Fund, Virtus Essential Resources Fund, Virtus High Yield Fund, Virtus Low Volatility Equity Fund, Virtus Multi-Sector Intermediate Bond Fund, Virtus Senior Floating Rate Fund and Virtus Wealth Masters Fund (constituting funds within Virtus Opportunities Trust, hereafter referred to as the “Funds”) at September 30, 2015, the results of each of their operations for the year or period then ended, 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, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

November 20, 2015

 

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VIRTUS OPPORTUNITIES TRUST

TAX INFORMATION NOTICE

SEPTEMBER 30, 2015

(Unaudited)

 

For the fiscal year ended September 30, 2015, 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  

Bond Fund

      0 %         0 %       $ —   

CA Tax-Exempt Bond Fund

      —           —           656   

Essential Resources Fund

      100           42           —   

High Yield Fund

      —           —           —   

Low Volatility Equity Fund

      100           100           45   

Multi-Sector Intermediate Bond Fund

      —           —           —   

Senior Floating Rate Fund

      —           —           —   

Wealth Masters Fund

      84           75           513   

For federal income tax purposes, 100% of the income dividends paid by the CA Tax-Exempt Bond Fund qualify as exempt-interest dividends.

For the period ended September 30, 2015, the Essential Resources Fund (the “Fund”) recognized $48 ($ reported in thousands) of foreign source income on which the Fund paid foreign taxes of $5 ($ 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.

 

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FUND MANAGEMENT TABLES

(UNAUDITED)

 

Information pertaining to the trustees and officers of the Trust as of September 30, 2015, 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) 243-1574. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for trustees of the Trust.

Independent Trustees

 

   
Name,
Year of Birth,
Year Elected and
Number of Funds Overseen		  

Principal Occupation(s) During Past 5 Years and

Other Directorships Held by Trustee

McClellan, Hassell H.

YOB: 1945

Elected: 2015

55 Portfolios

   Retired. Professor (1984 to 2013), Wallace E. Carroll School of Management, Boston College; Trustee, Virtus Variable Insurance Trust (9 portfolios) (since 2008); Trustee (since 2015), Virtus Mutual Fund Complex (46 portfolios); Trustee, John Hancock Fund Complex (since 2000), John Hancock Funds (collectively, 234 portfolios); and Director (since 2010), Barnes Group, Inc. (diversified global components manufacturer and logistical services company).

McLoughlin, Philip

YOB: 1946

Elected: 2006

69 Portfolios

   Director (since 1991) and Chairman (since 2010), World Trust Fund (closed-end investment firm in Luxembourg); Director (since 1995), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); Chairman (since 2002) and Trustee (since 1989), Virtus Mutual Fund Complex (46 portfolios); Chairman and Trustee (since 2003), Virtus Variable Insurance Trust (9 portfolios); Trustee/Director and Chairman (since 2011), Virtus Closed-End Funds (3 portfolios); Trustee and Chairman (since 2013), Virtus Alternative Solutions Trust (7 portfolios); Partner (2006 to 2010), Cross Pond Partners, LLC (investment management consultant); and Managing Director (2008 to 2010), SeaCap Partners, LLC (investment management).

McNamara, Geraldine M.

YOB: 1951

Elected: 2006

59 Funds

   Retired. Trustee (since 2001), Virtus Mutual Fund Complex (46 portfolios); and Director (since 2003), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); and Trustee (since 2015), Virtus Variable Insurance Trust (9 portfolios)

Oates, James M.

YOB: 1946

Elected: 2006

56 Funds

   Managing Director (since 1994), Wydown Group (consulting firm). Trustee (since 1987), Virtus Mutual Fund Complex (46 portfolios); Director (since 1996), Stifel Financial; Director (1998 to 2014), Connecticut River Bancorp; Chairman and Director (1999 to 2014), Connecticut River Bank; Chairman (since 2000), Emerson Investment Management, Inc.; Director (2002 to 2014), New Hampshire Trust Company; Chairman and Trustee (since 2005), John Hancock Fund Complex (228 portfolios); Non-Executive Chairman (2007 to 2011), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services); Trustee/Director (since 2013), Virtus Closed-End Funds (3 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

Segerson, Richard E.

YOB: 1948

Elected: 2006

46 Funds

   Trustee (since 1983), Virtus Mutual Fund Complex (46 portfolios); and Managing Director (1998 to 2013), Northway Management Company.

Verdonck, Ferdinand L.J.

YOB: 1942

Elected: 2006

46 Funds

   Trustee (since 2002), Virtus Mutual Fund Complex (46 portfolios).

Interested Trustee

The individual listed below is an “interested person” of the Trust, as defined in Section 2(a)(19) of the 1940 Act, as amended, and the rules and regulations thereunder.

 

   
Name,
Year of Birth,
Year Elected and
Number of Funds Overseen		   Principal Occupation(s) During Past 5 Years and
Other Directorships Held by Trustee

Aylward, George R.*

Trustee and President

YOB: 1964

Elected: 2006

67 Funds

   Director, President and Chief Executive Officer (since 2008), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions with Virtus affiliates (since 2005); Trustee (since 2006), Virtus Mutual Funds (46 portfolios); Chairman, President and Chief Executive Officer (since 2006), The Zweig Closed-End Funds (2 portfolios); Trustee (since 2012) and President (since 2010), Virtus Variable Insurance Trust (9 portfolios); Trustee and President (since 2011), Virtus Closed-End Funds (3 portfolios); Director (since 2013), Virtus Global Funds, PLC (2 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

 

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FUND MANAGEMENT TABLES (Continued)

(UNAUDITED)

 

Officers of the Trust Who Are Not Trustees

 

     

Name, Address and

Year of Birth

   Position(s) Held with Trust and
Length of Time Served		   Principal Occupation(s)
During Past 5 Years

Waltman, Francis G.

YOB: 1962

   Executive Vice President (since 2013); Senior Vice President (2008-2013).   Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2006) with Virtus affiliates; Executive Vice President (since 2013), Senior Vice President (2008 to 2013), Virtus Mutual Fund Complex; Executive Vice President (since 2013), Senior Vice President (2010 to 2013), Virtus Variable Insurance Trust; Executive Vice President (since 2013), Senior Vice President (2011 to 2013), Virtus Closed-End Funds; Director (since 2013), Virtus Global Funds PLC; and Executive Vice President (since 2013), Virtus Alternative Solutions Trust.

Bradley, W. Patrick

YOB: 1972

   Senior Vice President (since 2013); Vice President (2011 to 2013); Chief Financial Officer and Treasurer (since 2006).   Senior Vice President, Fund Services (since 2010), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2006) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2004), Virtus Variable Insurance Trust; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2006), Virtus Mutual Fund Complex; Senior Vice President (since 2013), Vice President (2012 to 2013) and Treasurer (Chief Financial Officer) (since 2007), The Zweig Closed-End Funds; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2011), Virtus Closed-End Funds; Vice President and Assistant Treasurer (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Director (since 2013), Virtus Global Funds, PLC; and Senior Vice President, Chief Financial Officer and Treasurer (since 2013), Virtus Alternative Solutions Trust.

Carr, Kevin J.

YOB: 1954

   Senior Vice President, since 2013; Vice President (2005-2013); Chief Legal Officer, Counsel and Secretary (since 2005).   Senior Vice President (since 2009), Vice President, Counsel and Secretary (2008 to 2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2005) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2005 to 2013), Chief Legal Officer, Counsel and Secretary (since 2005), Virtus Mutual Fund Complex; Senior Vice President (2013 to 2014), Vice President (2012 to 2013) and Assistant Secretary (since 2012), Secretary and Chief Legal Officer (2005 to 2012), The Zweig Closed-End Funds; Assistant Secretary (since 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2010 to 2013), Virtus Variable Insurance Trust; Vice President and Assistant Secretary (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Senior Vice President and Assistant Secretary (2013 to 2014), Vice President and Assistant Secretary (2012 to 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2011 to 2012), Virtus Closed-End Funds; and Assistant Secretary (since 2013), Virtus Alternative Solutions Trust.

Engberg, Nancy J.

YOB: 1956

   Vice President and Chief Compliance Officer since 2011.   Vice President (since 2008) and Chief Compliance Officer (2008 to 2011), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2003) with Virtus affiliates; Vice President and Chief Compliance Officer (since 2011), Virtus Mutual Fund Complex; Vice President (since 2010), Chief Compliance Officer (since 2011), Virtus Variable Insurance Trust; Vice President and Chief Compliance Officer (since 2011), Virtus Closed-End Funds; Vice President and Chief Compliance Officer (since 2012), The Zweig Closed-End Funds; and Vice President and Chief Compliance Officer (since 2013), Virtus Alternative Solutions Trust.

 

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Virtus Bond Fund,

Virtus CA Tax-Exempt Bond Fund,

Virtus High Yield Fund,

Virtus Low Volatility Equity Fund,

Virtus Senior Floating Rate Fund and Virtus Wealth Masters Fund each a series of Virtus Opportunities Trust

Supplement dated September 14, 2015 to the Summary Prospectuses dated January 28, 2015, as supplemented, and the Virtus Opportunities Trust Statutory Prospectus, dated January 28, 2015, as supplemented.

THIS SUPPLEMENT SUPERCEDES THE SUPPLEMENT DATED SEPTEMBER 2, 2015 TO THE ABOVE-REFERENCED PROSPECTUSES. THIS SUPPLEMENT INCLUDES ADDITIONAL INFORMATION WHICH WAS INADVERTANTLY OMITTED IN THE EARLIER SUPPLEMENT.

IMPORTANT NOTICE TO INVESTORS

Virtus Bond Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses  that you pay each year as a percentage of the value of your investment)    Class A   Class B   Class C   Class I
Management Fees    0.45%   0.45%   0.45%   0.45%
Distribution and Shareholder Servicing (12b-1) Fees    0.25%   1.00%   1.00%   None
Other Expenses    0.40%   0.40%   0.40%   0.40%
Total Annual Fund Operating Expenses    1.10%   1.85%   1.85%   0.85%
Less: Expense Reimbursement(b)    (0.25%)   (0.25%)   (0.25%)   (0.25%)
Total Annual Fund Operating Expenses After                 
Expense Reimbursement(b)    0.85%   1.60%   1.60%   0.60%

 

  (b)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 0.85% for Class A Shares, 1.60% for Class B Shares, 1.60% for Class C Shares and 0.60% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

     Share Status      1 Year         3 Years         5 Years         10 Years   
Class A    Sold or Held    $ 459       $ 663       $ 911       $ 1,620   
Class B    Sold    $ 563       $ 732       $ 953       $ 1,930   
   Held    $ 163       $ 532       $ 953       $ 1,930   
Class C    Sold    $ 263       $ 532       $ 953       $ 2,127   
   Held    $ 163       $ 532       $ 953       $ 2,127   
Class I    Sold or Held    $ 61       $ 220       $ 421       $ 1,001   

Virtus CA Tax-Exempt Bond Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)   Class A   Class I
Management Fees   0.45%   0.45%
Distribution and Shareholder Servicing (12b-1) Fees   0.25%   None
Other Expenses   0.41%   0.41%
Total Annual Fund Operating Expenses   1.11%   0.86%
Less: Expense Reimbursement(a)   (0.26%)   (0.26%)
Total Annual Fund Operating Expenses After Expense Reimbursement(a)   0.85%   0.60%

 

  (a) 

The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not

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  exceed 0.85% for Class A Shares and 0.60% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

     Share Status      1 Year         3 Years         5 Years         10 Years   
Class A    Sold or Held    $ 359       $ 567       $ 819       $ 1,543   
Class I    Sold or Held    $ 61       $ 221       $ 424       $ 1,011   

Virtus High Yield Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)    Class A   Class B   Class C   Class I
Management Fees    0.65%   0.65%   0.65%   0.65%
Distribution and Shareholder Servicing (12b-1) Fees    0.25%   1.00%   1.00%   None
Other Expenses    0.41%   0.41%   0.41%   0.41%
Total Annual Fund Operating Expenses    1.31%   2.06%   2.06%   1.06%
Less: Expense Reimbursement(b)    (0.16%)   (0.16%)   (0.16%)   (0.16%)
Total Annual Fund Operating Expenses After                 
Expense Reimbursement(b)    1.15%   1.90%   1.90%   0.90%

 

  (b)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.15% for Class A Shares, 1.90% for Class B Shares , 1.90% for Class C Shares and 0.90% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

     Share Status      1 Year         3 Years         5 Years         10 Years   
Class A    Sold or Held    $ 488       $ 743       $ 1,036       $ 1,867   
Class B    Sold    $ 593       $ 814       $ 1,078       $ 2,171   
   Held    $ 193       $ 614       $ 1,078       $ 2,171   
Class C    Sold    $ 293       $ 614       $ 1,078       $ 2,363   
   Held    $ 193       $ 614       $ 1,078       $ 2,363   
Class I    Sold or Held    $ 92       $ 305       $ 553       $ 1,264   

Virtus Low Volatility Equity Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)    Class A   Class C   Class I
Management Fees    0.95%   0.95%   0.95%
Distribution and Shareholder Servicing (12b-1) Fees    0.25%   1.00%   None
Other Expenses    4.95%   4.95%   4.95%
Acquired Fund Fees and Expenses    0.20%   0.20%   0.20%
Total Annual Fund Operating Expenses(b)    6.35%   7.10%   6.10%
Less: Expense Reimbursement(c)    (4.80%)   (4.80%)   (4.80%)
Total Annual Fund Operating Expenses After Expense Reimbursement(b)(c)    1.55%   2.30%   1.30%

 

  (b)  The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.
  (c)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.55% for Class A Shares, 2.30% for Class C Shares and 1.30% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

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Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

     Share Status      1 Year         3 Years         5 Years         10 Years   
Class A    Sold or Held    $ 724       $ 1,514       $ 2,760       $ 5,733   
Class C    Sold    $ 333       $ 1,213       $ 2,649       $ 5,983   
   Held    $ 233       $ 1,213       $ 2,649       $ 5,983   
Class I    Sold or Held    $ 132       $ 922       $ 2,205       $ 5,292   

Virtus Wealth Masters Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)   Class A    Class C    Class I
Management Fees   0.85%    0.85%    0.85%
Distribution and Shareholder Servicing (12b-1) Fees   0.25%    1.00%    None
Other Expenses   0.36%    0.36%    0.36%
Total Annual Fund Operating Expenses   1.46%    2.21%    1.21%
Less: Expense Reimbursement(b)   (0.01%)    (0.01%)    (0.01%)
Total Annual Fund Operating Expenses After Expense Reimbursement(b)   1.45%    2.20%    1.20%

 

  (b)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.45% for Class A Shares, 2.20% for Class C Shares and 1.20% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

     Share Status      1 Year         3 Years         5 Years         10 Years   
Class A    Sold or Held    $ 714       $ 1,008       $ 1,325       $ 2,219   
Class C    Sold    $ 323       $ 689       $ 1,183       $ 2,543   
   Held    $ 223       $ 689       $ 1,183       $ 2,543   
Class I    Sold or Held    $ 122       $ 382       $ 663       $ 1,464   

Virtus Bond Fund, Virtus CA Tax-Exempt Bond Fund, Virtus High Yield Fund, Virtus Low Volatility Equity Fund, Virtus Senior Floating Rate Fund and Virtus Wealth Masters Fund

The first paragraph and the information in the first table in the section “More Information About Fund Expenses” on page 139 of the statutory prospectus are hereby revised with the following information for the above referenced funds:

Virtus Investment Advisers, Inc. (“VIA”) has contractually agreed to limit the total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, leverage expenses, extraordinary expenses and acquired fund fees and expenses, if any) of certain of the funds so that expenses do not exceed, on an annualized basis, the amounts indicated in the following table.

Virtus Wealth Masters Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)   Class A    Class C    Class I
Management Fees   0.85%    0.85%    0.85%
Distribution and Shareholder Servicing (12b-1) Fees   0.25%    1.00%    None
Other Expenses   0.36%    0.36%    0.36%
Total Annual Fund Operating Expenses   1.46%    2.21%    1.21%
Less: Expense Reimbursement(b)   (0.01%)    (0.01%)    (0.01%)
Total Annual Fund Operating Expenses After Expense Reimbursement(b)   1.45%    2.20%    1.20%

 

  (b) 

The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not

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  exceed 1.45% for Class A Shares, 2.20% for Class C Shares and 1.20% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

     Share Status      1 Year         3 Years         5 Years         10 Years   
Class A    Sold or Held    $ 714       $ 1,008       $ 1,325       $ 2,219   
Class C    Sold    $ 323       $ 689       $ 1,183       $ 2,543   
   Held    $ 223       $ 689       $ 1,183       $ 2,543   
Class I    Sold or Held    $ 122       $ 382       $ 663       $ 1,464   

Virtus Bond Fund, Virtus CA Tax-Exempt Bond Fund, Virtus High Yield Fund, Virtus Low Volatility Equity Fund, Virtus Senior Floating Rate Fund and Virtus Wealth Masters Fund

The first paragraph and the information in the first table in the section “More Information About Fund Expenses” on page 139 of the statutory prospectus are hereby revised with the following information for the above referenced funds:

Virtus Investment Advisers, Inc. (“VIA”) has contractually agreed to limit the total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, leverage expenses, extraordinary expenses and acquired fund fees and expenses, if any) of certain of the funds so that expenses do not exceed, on an annualized basis, the amounts indicated in the following table.

 

     Class A
Shares		    Class B
Shares		    Class C
Shares		    Class I
Shares		    Class R6
Shares		    Class T
Shares		    Through Date
Virtus Bond Fund    0.85%    1.60%    1.60%    0.60%    N/A    N/A    January 31, 2017
Virtus CA Tax Exempt Bond Fund    0.85%    N/A    N/A    0.60%    N/A    N/A    January 31, 2017
Virtus High Yield Fund    1.15%    1.90%    1.90%    0.90%    N/A    N/A    January 31, 2017
Virtus Low Volatility Equity Fund    1.55%    N/A    2.30%    1.30%    N/A    N/A    January 31, 2017
Virtus Senior Floating Rate Fund(1)    1.20%    N/A    1.95%    0.95%    N/A    N/A    January 31, 2017
Virtus Wealth Masters Fund    1.45%    N/A    2.20%    1.20%    N/A    N/A    January 31, 2017

 

  (1)  Fund expenses currently below the capped level.

Investors should retain this supplement with the Prospectuses for future reference.

 

 

 

 

VOT 8020/6FundsNewExpCap&Waiver (09/15)

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VIRTUS OPPORTUNITIES TRUST

101 Munson Street

Greenfield, MA 01301-9668

 

Trustees

George R. Aylward

Hassell H. McClellan

Philip R. McLoughlin, Chairman

Geraldine M. McNamara

James M. Oates

Richard E. Segerson

Ferdinand L.J. Verdonck

Officers

George R. Aylward, President

Francis G. Waltman, Executive Vice President

W. Patrick Bradley, Senior Vice President, Chief Financial Officer and Treasurer

Kevin J. Carr, Senior Vice President, Chief Legal Officer, Counsel and Secretary

Nancy J. Engberg, Vice President and Chief Compliance Officer

Investment Adviser

Virtus Investment Advisers, Inc.

100 Pearl Street

Hartford, CT 06103-4506

Principal Underwriter

VP Distributors, LLC

100 Pearl Street

Hartford, CT 06103-4506

Administrator and Transfer Agent

Virtus Fund Services, LLC

100 Pearl Street

Hartford, CT 06103-4506

Custodian

JPMorgan Chase Bank, NA

1 Chase Manhattan Plaza

New York, NY 10005-1401

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   

Web site

      Virtus.com   
 

 

 

Important Notice to Shareholders

The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-243-1574.

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LOGO

 

   

P.O. Box 9874

Providence, RI 02940-8074

   

 

For more information about Virtus Mutual Funds,

please call your financial representative, or contact us

at 1-800-243-1574 or Virtus.com.

 

8008

    11-15

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LOGO

 

 

ANNUAL REPORT

 

 

Virtus Real Estate Securities Fund

September 30, 2015

TRUST NAME: VIRTUS OPPORTUNITIES TRUST

Not FDIC Insured

No Bank Guarantee

May Lose Value

 

LOGO

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Table of Contents

Virtus Real Estate Securities Fund

(“Real Estate Securities Fund”)

 

Message to Shareholders

     1   

Disclosure of Fund Expenses

     2   

Key Investment Terms

     4   

Fund Summary

     5   

Schedule of Investments

     9   

Statement of Assets and Liabilities

     11   

Statement of Operations

     12   

Statements of Changes in Net Assets

     13   

Financial Highlights

     14   

Notes to Financial Statements

     16   

Report of Independent Registered Public Accounting Firm

     24   

Tax Information Notice

     25   

Fund Management Tables

     26   

 

PROXY VOTING PROCEDURES AND VOTING RECORD (FORM N-PX)

The subadviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Board of Trustees of the Trust (“Trustees,” or the “Board”). 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, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

FORM N-Q INFORMATION

The Trust files a complete schedule of portfolio holdings for the Fund with 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, the Fund’s record and other pertinent information.

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MESSAGE TO SHAREHOLDERS

To My Fellow Shareholders of Virtus Mutual Funds:

 

LOGO   

I am pleased to present this annual report that reviews the performance of your fund for the twelve months ended September 30, 2015.

 

During this period, global equity markets were challenged by falling oil prices, China’s economic slowdown, Greece’s debt crisis, and the growing likelihood of an interest rate hike by the Federal Reserve (the “Fed”). Volatility took its toll on major U.S. equity indices for the twelve months ended September 30, 2015. The large-cap S&P 500® Index and Dow Jones Industrial AverageSM moderately declined 0.61% and 2.11%, respectively, while the technology-heavy NASDAQ Composite Index® gained 4.00%. By comparison, international equities were down even further, with emerging markets hit particularly hard.

Against this backdrop, U.S. Treasuries remained an attractive “safe haven” among global investors. The bellwether 10-year U.S. Treasury yield declined from 2.52% at September 30, 2014 to 2.06% at September 30, 2015. Fixed income assets experienced slight losses in anticipation of the Fed’s stated intention to raise interest rates at the end of 2015. The Barclays U.S. Aggregate Bond Index, which tracks Treasuries and other investment-grade debt securities, gained 2.94% for the twelve-month period ended September 30, 2015, while non-investment grade bonds underperformed, with the Barclays U.S. Corporate High Yield Bond Index down 3.43% for the same period.

 

The strength of the global economy is likely to remain a concern for the markets in the months ahead. Actions by the Fed and other global central banks will be watched with great interest. Following the weak start to the year, the U.S. economy exhibited growth over the second and third quarters of 2015 – including stronger jobs, housing, and consumer spending data – and gives investors reason for optimism. Future market direction will be determined largely by the ability of corporations to continue to produce robust earnings.

 

Market uncertainty serves as a constant reminder of the importance of portfolio diversification, including exposure to both traditional and alternative asset classes. While diversification cannot guarantee a profit or prevent a loss, owning a variety of asset classes may provide a cushion against inevitable market fluctuations. Your financial advisor can help you ensure that your portfolio is adequately diversified across asset classes and investment strategies.

 

As always, thank you for entrusting Virtus with your assets. Should you have questions about your account or require assistance, please visit our website at www.Virtus.com, or call our customer service team at 1-800-243-1574. We appreciate your business and remain committed to your long-term financial success.

 

Sincerely,

 

LOGO

George R. Aylward

President, Virtus Mutual Funds

 

October 2015

 

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

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VIRTUS REAL ESTATE SECURITIES FUND

DISCLOSURE OF FUND EXPENSES (Unaudited)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Virtus Real Estate Securities Fund (the “Fund”), you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class B and Class C shares; and (2) ongoing costs, including investment advisory fees, distribution and service fees, and other expenses. Class I shares and Class R6 shares are sold without a sales charge and do not incur distribution and service fees. For further information regarding applicable sales charges, see Note 1 in the Notes to Financial Statements. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your Fund’s costs in two ways.

Actual Expenses

The first section of the accompanying table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes

The second section of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the accompanying table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and timing of any purchases or redemptions.

 

 

2

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VIRTUS REAL ESTATE SECURITIES FUND

DISCLOSURE OF FUND EXPENSES (Unaudited) (Continued)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

Expense Table                                
       

Beginning
Account

Value
April 1, 2015

        Ending
Account Value
September 30, 2015		        Annualized
Expense
Ratio		        Expenses
Paid
During
Period*		  

Actual

                    
Class A      $ 1,000.00         $ 928.00           1.36 %       $ 6.57   
Class B        1,000.00           924.70           2.12           10.23   
Class C        1,000.00           924.50           2.12           10.23   
Class I        1,000.00           929.40           1.12           5.42   
Class R6        1,000.00           930.30           0.94           4.55   

Hypothetical (5% return before expenses)

  

          
Class A        1,000.00           1,018.16           1.36           6.90   
Class B        1,000.00           1,014.31           2.12           10.76   
Class C        1,000.00           1,014.31           2.12           10.76   
Class I        1,000.00           1,019.38           1.12           5.69   
Class R6        1,000.00           1,020.30           0.94           4.77   

 

* 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

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VIRTUS REAL ESTATE SECURITIES FUND

SEPTEMBER 30, 2015

(Unaudited)

 

KEY INVESTMENT TERMS

Barclays U.S. Aggregate Bond Index

The Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Barclays U.S. Corporate High Yield Bond Index

The Barclays U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Basel III

A comprehensive series of reform measures intended to strengthen the regulation, supervision, and risk management of the global banking sector.

Dow Jones Industrial AverageSM

A price weighted average of 30 blue chip stocks. The index is calculated on total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges and it is not available for direct investment.

Federal Reserve (the “Fed”)

The Central Bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable.

Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system.

FTSE NAREIT Equity REITs Index

The FTSE NAREIT Equity REITs Index is a free-float market capitalization index measuring equity tax-qualified real estate investment trusts, which meet minimum size and liquidity criteria, that are listed on the New York Stock Exchange, the American Stock Exchange and the NASDAQ National Market System. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

NASDAQ Composite Index®

A market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. Unlike other market indexes, the NASDAQ composite is not limited to companies that have U.S. headquarters. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges and it is not available for direct investment.

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® Index

The S&P 500® 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 index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

 

4

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REAL ESTATE SECURITIES FUND

 

Fund Summary

Portfolio Manager Commentary by

Duff & Phelps Investment Management Co.

   

Ticker Symbols:

Class A: PHRAX

Class B: PHRBX

Class C: PHRCX

Class R6: VRREX

Class I: PHRIX

 

¢   The Fund is diversified and has investment objectives of capital appreciation and income with approximately equal emphasis.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned 11.34%, Class B shares returned 10.51%, Class C shares returned 10.49%, Class I shares returned 11.63% and Class R6 shares from November 12, 2014 (inception date) through September 30, 2015, returned 1.54%*. For the fiscal year, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the FTSE NAREIT Equity REITs Index, the Fund’s style-specific index appropriate for comparison, returned 9.88%.

 

* Returns less than 1 year are not annualized.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   Equity markets as measured by the S&P 500®Index were flat during the Fund’s fiscal year, yet U.S. REITs performed well, returning 9.88% as measured by the Fund’s benchmark, the FTSE NAREIT Equity REITs Index, which the Fund outperformed. Keys to the solid U.S. REIT performance included strong commercial real estate fundamentals and increases in private market values.

 

¢   Over the fiscal year, the 10-Year U.S. Treasury defied the consensus forecast again and rallied a bit, ending the period at a 2.04% yield after starting the year at a 2.49% yield on September 30, 2014. For an additional reference point, the yield was 2.61% on September 30, 2013. The key to the ongoing 10-Year U.S. Treasury rally was slowing global growth estimates with China driving the greatest concern among major economies.
¢   Across the major regions of the world, economic growth continued to remain the most resilient in the U.S., the U.K. and the major Nordic cities, as we evidenced during our ongoing property tours. Our U.S. and international travels during the period included property tours in many markets. Touring properties of U.S.-listed names with investments overseas is a regular part of our due diligence. The trips were helpful in providing timely updates on the space and asset markets in each respective locale. Additionally, quality time was spent with existing strategy holdings and conducting due diligence on potential new investment opportunities. At a high level, the strong appetite for high-quality commercial real estate from a wide and deep pool of institutional capital sources was evident across most locations as reflected in recent asset market pricing trends. Space market trends were notably robust for U.S. self-storage, apartment, and industrial real estate.

 

¢   As of the end of the fiscal year, there remained a range of communication from Federal Reserve (“Fed”) presidents and governors regarding the potential for a 2015 or 2016 initial interest rate hike. Yet the key point is, for another fiscal year of the Fund, the first Fed interest rate hike was deferred. For many market participants including ourselves, having the Fed reload its tool kit before it faces the next economic slowdown in the U.S. is important. Fed Chair Yellen is getting a de-facto benefit of what many could view as an accommodating fiscal policy for consumers in the form of a materially lower gasoline price, something former Fed Chair Bernanke did not witness in his last few years.

 

¢   Importantly, one differentiator between this recovery and others is the lack of overbuilding. Basel III’s restrictions on banks are providing new constraints this cycle. Supply has increased, but remains contained at 1.2% of existing space in aggregate, broadly in line

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms on page 4.

 

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REAL ESTATE SECURITIES FUND (Continued)   

 

   

with historical obsolescence levels and below long-term historical levels of approximately 2% (source: McGraw-Hill Construction & Citi Research). Controlled supply is a net positive for the REITs we invest in, as it can lead to greater occupancy and pricing power. And in today’s global environment, pricing power is a compelling attribute of commercial real estate.

 

¢   Thematically, real estate companies remained active on the capital raising front as they looked to fund redevelopment, selective development, and acquisitions. Portfolio pruning and capital recycling was more evident in the U.S. than in other markets as is often the case. We also witnessed a pick-up in mergers and acquisition activity as several privatization deals were announced in the U.S. With the significant amount of real estate private equity capital that has been raised, but currently remains unspent, and the more attractive valuations on offer by publicly traded real estate securities, we expect M&A activity to continue, if not accelerate, over the coming year.

What factors affected the Fund’s performance during its fiscal year?

 

¢   For the one-year period ended September 30, 2015, the Fund benefited from both security selection and property sector allocation, with the bulk of the relative performance driven from property sector allocation. Overall, the Fund performed ahead of its style-specific benchmark.

 

¢   Within the U.S., the manufactured home, self-storage, and apartment property sectors demonstrated the best total returns over the last 12 months. The lodging, diversified, and mixed office & industrial property sectors were laggards.

 

¢   The most significant individual positive contributor to relative performance during the Fund’s fiscal year was allocation to and stock selection within the self-storage property sector. Diversified and regional malls, primarily a result of property sector allocation in the
   

case of diversified and security selection for regional malls, were the second and third most positive contributors to the Fund’s relative performance.

 

¢   The most significant detractor from relative performance during the Fund’s fiscal year was our overweight allocation and stock selection within the lodging sector. Lodging lagged other sectors in the last 12 months, primarily due to concerns of a global slowdown. There were modest announced downward revisions of less than a couple percent to revenue-per-available-room expectations over the summer, even though per-share earnings guidance, as measured by funds from operations, had been lifted from the start of the year for a number of the key lodging REITs. One of those lodging REITs announced its privatization in September to a strong bid. The possibility of more privatizations to follow, given significant discounts of lodging REITs to net asset value and a robust and well-funded private bid, remains present in lodging and other property sectors. No other property sector had an adverse impact of more than a few basis points on the Fund in its fiscal year.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Real Estate: The fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management.

 

 

 

6

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REAL ESTATE SECURITIES FUND (Continued)   

 

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 
Asset Allocations  
 

The following table presents asset allocations within certain sectors as a percentage of total investments at September 30, 2015.

 

    

Apartments

     21 % 

Office

     15   

Regional Malls

     13   

Shopping Centers

     12   

Lodging/Resorts

     10   

Self Storage

     10   

Industrials

     9   

Other (includes short-term investments)

     10   
   

 

 

  
      100 % 
   

 

 

  
 

 

7

Table of Contents
REAL ESTATE SECURITIES FUND (Continued)   

 

Average Annual Total Returns1 for periods ended 9/30/15  
     1
Year		     5
Years		     10
Years		     Since
Inception		     Inception
Date		  
Class A Shares at NAV2      11.34 %      11.70 %      7.11 %      —        —   
Class A Shares at POP3,4      4.94        10.38        6.48        —        —   
Class B Shares at NAV2      10.51        10.86        6.30        —        —   
Class B Shares with CDSC4      9.30        10.86        6.30        —        —   
Class C Shares with NAV2 and with CDSC4      10.49        10.87        6.31        —        —   
Class I Shares at NAV      11.63        11.98        —        4.14 %6      12/29/06   
Class R6 Shares at NAV      —        —        —        1.54        11/12/14   
S&P 500® Index      -0.61        13.34        6.80        —5        —   
FTSE NAREIT Equity REITs Index      9.88        12.00        6.82        —6        —   

Fund Expense Ratios7: A Shares: 1.38%, B Shares: 2.13%, C Shares: 2.13%, I Shares: 1.13%, R6 Shares 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 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 made within 18 months of purchases on which a finder’s fee was paid and all redemptions of Class C shares are 1% within the first year and 0% thereafter.
5  The index returned 5.76% for Class I shares and -4.06% for Class R6 shares since the inception date of the respective class.
6  The index returned 4.00% for Class I shares and 0.36% for Class R6 shares since the inception date of the respective class.
7  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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, 2005, 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.

LOGO

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.

 

8

Table of Contents

VIRTUS REAL ESTATE SECURITIES FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES      VALUE  
COMMON STOCKS—99.3%   
REAL ESTATE INVESTMENT TRUSTS—99.3%   
DIVERSIFIED—1.5%   

American Homes 4 Rent Class A

     1,291,800       $ 20,772   
    

 

 

  
HEALTH CARE—2.7%   

HCP, Inc.

     284,221         10,587   

Ventas, Inc.

     462,961         25,954   
    

 

 

  
       36,541   
    

 

 

  
INDUSTRIAL/OFFICE—27.7%   
Industrial—8.6%  

DCT Industrial Trust, Inc.

     1,605,903         54,055   

Prologis, Inc.

     1,578,550         61,405   
    

 

 

  
       115,460   
    

 

 

  
Mixed—4.2%  

Duke Realty Corp.

     1,094,852         20,857   

Liberty Property Trust

     1,119,344         35,270   
    

 

 

  
       56,127   
    

 

 

  
Office—14.9%  

Boston Properties, Inc.

     292,883         34,677   

Cousins Properties, Inc.

     2,440,850         22,505   

Douglas Emmett, Inc.

     1,195,829         34,344   

Highwoods Properties, Inc.

     702,942         27,239   

Kilroy Realty Corp.

     808,942         52,711   

Paramount Group, Inc.

     750,136         12,602   

SL Green Realty Corp.

     138,077         14,935   
    

 

 

  
       199,013   
    

 

 

  
       370,600   
    

 

 

  
LODGING/RESORTS—10.4%   

Host Hotels & Resorts, Inc.

     2,553,336         40,368   

LaSalle Hotel Properties

     1,059,147         30,069   

Pebblebrook Hotel Trust

     1,008,713         35,759   

RLJ Lodging Trust

     1,292,700         32,667   
    

 

 

  
       138,863   
    

 

 

  
RESIDENTIAL—21.6%   
Apartments—20.5%  

American Campus Communities, Inc.

     635,424         23,028   
    SHARES      VALUE  
Apartments (continued)  

AvalonBay Communities, Inc.

     375,190       $ 65,591   

Camden Property Trust

     515,686         38,109   

Equity Residential

     957,645         71,938   

Essex Property Trust, Inc.

     337,040         75,302   
    

 

 

  
       273,968   
    

 

 

  
Manufactured Homes—1.1%   

Equity Lifestyle Properties, Inc.

     264,953         15,518   
    

 

 

  
       289,486   
    

 

 

  
RETAIL—25.6%   
Regional Malls—13.4%  

General Growth Properties, Inc.

     1,955,475         50,784   

Macerich Co. (The)

     67,675         5,199   

Simon Property Group, Inc.

     666,641         122,475   
    

 

 

  
       178,458   
    

 

 

  
Shopping Centers—12.2%   

Brixmor Property Group, Inc.

     1,621,196         38,066   

Federal Realty Investment Trust

     327,200         44,646   

Regency Centers Corp.

     516,600         32,107   

Tanger Factory Outlet Centers

     1,482,700         48,884   
    

 

 

  
       163,703   
    

 

 

  
       342,161   
    

 

 

  
SELF STORAGE—9.8%   

CubeSmart

     654,250         17,802   

Extra Space Storage, Inc.

     661,933         51,075   

Public Storage

     293,020         62,012   
    

 

 

  
               130,889   
TOTAL COMMON STOCKS
(Identified Cost $864,134)		          1,329,312   
TOTAL LONG TERM INVESTMENTS—99.3%   
(Identified cost $864,134)         1,329,312   
 

 

See Notes to Financial Statements

 

 

9

Table of Contents

VIRTUS REAL ESTATE SECURITIES FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES      VALUE  
SHORT-TERM INVESTMENTS—0.2%   
Money Market Mutual Funds—0.2%  

Fidelity Money Market Portfolio – Institutional Shares (Seven-day effective yield 0.170%)

     2,189,000       $ 2,189   
TOTAL SHORT-TERM INVESTMENTS
   
(Identified Cost $2,189)         2,189   

TOTAL INVESTMENTS—99.5%

(Identified Cost $866,323)

  

  

      1,331,501 (1) 

Other assets and liabilities, net—0.5%

   

      7,070   
    

 

 

  
NET ASSETS—100.0%       $ 1,338,571   
    

 

 

  

Abbreviation:

REIT Real Estate Investment Trust

FOOTNOTE LEGEND:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 9 Federal Income Tax Information in the Notes to Financial Statements.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total Value at
September 30,
2015		      Level 1
Quoted Prices		  

Equity Securities:

      

Common Stocks

    $ 1,329,312       $ 1,329,312   

Short-term Investments

      2,189         2,189   
  

 

 

     

 

 

  

Total Investments

    $ 1,331,501       $ 1,331,501   
  

 

 

     

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

 

For information about the abbreviation, See Key Investment Terms on page 4.

 

See Notes to Financial Statements

 

 

10

Table of Contents

VIRTUS REAL ESTATE SECURITIES FUND

STATEMENT OF ASSETS AND LIABILITIES

SEPTEMBER 30, 2015

($ Reported in thousands except shares and per share amounts)

 

Assets   

Investment in securities at value(1)

    $ 1,331,501   

Receivables

   

Investment securities sold

      4,633   

Fund shares sold

      1,648   

Dividends and interest receivable

      5,941   

Prepaid expenses

      77   

Prepaid trustee retainer

      25   
  

 

 

  

Total assets

      1,343,825   
  

 

 

  
Liabilities   

Payables

   

Fund shares repurchased

      3,546   

Investment advisory fees

      803   

Distribution and service fees

      181   

Administration fees

      132   

Transfer agent fees and expenses

      498   

Professional fees

      29   

Trustee fees and expenses

      2   

Other accrued expenses

      63   
  

 

 

  

Total liabilities

      5,254   
  

 

 

  
Net Assets    $ 1,338,571   
  

 

 

  
Net Assets Consist of:   

Capital paid in on shares of beneficial interest

    $ 717,237   

Accumulated undistributed net investment income (loss)

      64   

Accumulated undistributed net realized gain (loss)

      156,092   

Net unrealized appreciation (depreciation) on investments

      465,178   
  

 

 

  
Net Assets    $ 1,338,571   
  

 

 

  
Class A   

Net asset value (net assets/shares outstanding) per share

    $ 38.45   

Maximum offering price per share NAV/(1-5.75%)

    $ 40.80   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      16,163,574   

Net Assets

    $ 621,507   
Class B   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 37.90   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      37,409   

Net Assets

    $ 1,418   
Class C   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 38.37   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      1,720,520   

Net Assets

    $ 66,023   
Class I   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 38.42   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      16,867,541   

Net Assets

    $ 647,976   
Class R6   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 38.42   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      42,858   

Net Assets

    $ 1,647   

(1) Investment in securities at cost

    $ 866,323   

 

See Notes to Financial Statements

 

11

Table of Contents

VIRTUS REAL ESTATE SECURITIES FUND

STATEMENT OF OPERATIONS

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

Investment Income   

Dividends

    $ 41,621   
  

 

 

  

Total investment income

      41,621   
  

 

 

  
Expenses   

Investment advisory fees

      11,538   

Service fees, Class A

      1,949   

Distribution and service fees, Class B

      22   

Distribution and service fees, Class C

      710   

Administration fees

      1,893   

Transfer agent fees and expenses

      3,595   

Registration fees

      119   

Printing fees and expenses

      142   

Trustees’ fees and expenses

      53   

Professional fees

      36   

Custodian fees

      19   

Interest expense and fees

      7   

Miscellaneous expenses

      79   
  

 

 

  

Total expenses

      20,162   
  

 

 

  
Net investment income (loss)      21,459   
  

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments   

Net realized gain (loss) on investments

      197,947   

Net change in unrealized appreciation (depreciation) on investments

      (43,973 ) 
  

 

 

  
Net gain (loss) on investments      153,974   
  

 

 

  
Net increase (decrease) in net assets resulting from operations    $ 175,433   
  

 

 

  

 

 

 

See Notes to Financial Statements

 

12

Table of Contents

VIRTUS REAL ESTATE SECURITIES FUND

STATEMENTS OF CHANGES IN NET ASSETS

(Reported in thousands)

 

     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
INCREASE/(DECREASE) IN NET ASSETS     
From Operations     

Net investment income (loss)

    $ 21,459      $ 12,621   

Net realized gain (loss)

      197,947        82,965   

Net change in unrealized appreciation (depreciation)

      (43,973 )      75,694   
  

 

 

    

 

 

  
Increase (decrease) in net assets resulting from operations      175,433        171,280   
  

 

 

    

 

 

  
From Distributions to Shareholders     

Net investment income, Class A

      (9,863 )      (5,947 ) 

Net investment income, Class B

      (10 )      —   

Net investment income, Class C

      (399 )      (22 ) 

Net investment income, Class I

      (11,111 )      (6,661 ) 

Net investment income, Class R6

      (12 )      —   

Net realized short-term gains, Class A

      (2,206 )      (3,484 ) 

Net realized short-term gains, Class B

      (7 )      (16 ) 

Net realized short-term gains, Class C

      (189 )      (289 ) 

Net realized short-term gains, Class I

      (1,983 )      (2,785 ) 

Net realized short-term gains, Class R6

      (— )(1)      —   

Net realized long-term gains, Class A

      (36,741 )      (44,343 ) 

Net realized long-term gains, Class B

      (122 )      (231 ) 

Net realized long-term gains, Class C

      (3,144 )      (3,706 ) 

Net realized long-term gains, Class I

      (33,016 )      (35,011 ) 

Net realized long-term gains, Class R6

      (5 )      —   
  

 

 

    

 

 

  
Decrease in net assets from distributions to shareholders      (98,808 )      (102,495 ) 
  

 

 

    

 

 

  
From Share Transactions (See Note 5)     
Sale of shares     

Class A (5,635 and 7,009 shares, respectively)

      229,447        255,043   

Class B (—(2) and 1 shares, respectively)

      14        24   

Class C (249 and 226 shares, respectively)

      10,111        8,175   

Class I (3,839 and 8,981 shares, respectively)

      156,081        320,980   

Class R6 (55 and 0 shares, respectively)

      2,219        —   
Reinvestment of distributions     

Class A (1,152 and 1,522 shares, respectively)

      46,862        50,196   

Class B (3 and 6 shares, respectively)

      124        207   

Class C (83 and 106 shares, respectively)

      3,363        3,460   

Class I (1,103 and 1,207 shares, respectively)

      44,771        39,908   

Class R6 (—(2) and 0 shares, respectively)

      17        —   
Shares repurchased     

Class A (10,962 and 9,437 shares, respectively)

      (439,189 )      (339,925 ) 

Class B (43 and 45 shares, respectively)

      (1,694 )      (1,607 ) 

Class C (330 and 412 shares, respectively)

      (13,174 )      (14,730 ) 

Class I (6,450 and 5,925 shares, respectively)

      (260,654 )      (213,956 ) 

Class R6 (12 and 0 shares, respectively)

      (489 )      —   
  

 

 

    

 

 

  
Increase (decrease) in net assets from share transactions      (222,191 )      107,775   
  

 

 

    

 

 

  
Net increase (decrease) in net assets      (145,566 )      176,560   
Net Assets     

Beginning of period

      1,484,137        1,307,577   
  

 

 

    

 

 

  
End of period    $ 1,338,571      $ 1,484,137   
  

 

 

    

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ 64      $ —   

 

(1)  Amount is less than $500.
(2)  Amount is less than 500 shares.

 

See Notes to Financial Statements

 

13

Table of Contents

VIRTUS REAL ESTATE SECURITIES FUND

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

    Net Asset Value,
Beginning of Period		   Net Investment Income
(Loss)(2)		   Net Realized and
Unrealized Gain (Loss)		   Total from
Investment Operations		   Dividends from Net
Investment Income		   Distributions from Net
Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total
Return(1)		   Net Assets, End of Period
(000’s)		   Ratio of Expenses to
Average Net Assets(3)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate

Class A

                                                                                                                                            
10/1/14 to 9/30/15     $ 36.65         0.51         3.76         4.27         (0.53 )       (1.94 )       (2.47 )       1.80       $ 38.45         11.34 %     $ 621,507         1.36 %       1.26 %       22 %
10/1/13 to 9/30/14       35.10         0.29         3.86         4.15         (0.29 )       (2.31 )       (2.60 )       1.55         36.65         12.75         745,473         1.38         0.79         28  
10/1/12 to 9/30/13       34.19         0.36         0.91         1.27         (0.36 )       —         (0.36 )       0.91         35.10         3.70         745,631         1.40         1.00         30  
10/1/11 to 9/30/12       26.05         0.21         8.24         8.45         (0.31 )       —         (0.31 )       8.14         34.19         32.49         789,925         1.41         0.67         24  
10/1/10 to 9/30/11       26.10         0.11         0.12         0.23         (0.28 )       —         (0.28 )       (0.05 )       26.05         0.82         605,073         1.46         0.39         36  

Class B

                                                        
10/1/14 to 9/30/15     $ 36.13         0.17         3.74         3.91         (0.20 )       (1.94 )       (2.14 )       1.77       $ 37.90         10.51 %     $ 1,418         2.11 %       0.42 %       22 %
10/1/13 to 9/30/14       34.62         (0.01 )       3.84         3.83         (0.01 )       (2.31 )       (2.32 )       1.51         36.13         11.91         2,770         2.13         (0.02 )       28  
10/1/12 to 9/30/13       33.72         0.10         0.89         0.99         (0.09 )       —         (0.09 )       0.90         34.62         2.92         3,978         2.15         0.29         30  
10/1/11 to 9/30/12       25.71         0.02         8.06         8.08         (0.07 )       —         (0.07 )       8.01         33.72         31.49         6,761         2.16         0.07         24  
10/1/10 to 9/30/11       25.76         (0.01 )       0.03         0.02         (0.07 )       —         (0.07 )       (0.05 )       25.71         0.03         9,461         2.21         (0.05 )       36  

Class C

                                                        
10/1/14 to 9/30/15     $ 36.59         0.22         3.73         3.95         (0.23 )       (1.94 )       (2.17 )       1.78       $ 38.37         10.49 %     $ 66,023         2.11 %       0.56 %       22 %
10/1/13 to 9/30/14       35.04         0.01         3.87         3.88         (0.02 )       (2.31 )       (2.33 )       1.55         36.59         11.91         62,889         2.13         0.04         28  
10/1/12 to 9/30/13       34.14         0.08         0.92         1.00         (0.10 )       —         (0.10 )       0.90         35.04         2.93         63,005         2.15         0.23         30  
10/1/11 to 9/30/12       26.02         (0.03 )       8.22         8.19         (0.07 )       —         (0.07 )       8.12         34.14         31.48         60,941         2.16         (0.10 )       24  
10/1/10 to 9/30/11       26.06         (0.09 )       0.12         0.03         (0.07 )       —         (0.07 )       (0.04 )       26.02         0.08         44,853         2.21         (0.30 )       36  

The footnote legend is at the end of the financial highlights

 

See Notes to Financial Statements

 

14

Table of Contents

VIRTUS REAL ESTATE SECURITIES FUND

FINANCIAL HIGHLIGHTS (Continued)

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

    Net Asset Value,
Beginning of Period		   Net Investment Income
(Loss)(2)		   Net Realized and
Unrealized Gain (Loss)		   Total from
Investment Operations		   Dividends from Net
Investment Income		   Distributions from Net
Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total
Return(1)		   Net Assets, End of Period
(000’s)		   Ratio of Expenses to
Average Net Assets(3)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate

Class I

                                                                                                                                            
10/1/14 to 9/30/15     $ 36.62         0.62         3.75         4.37         (0.63 )       (1.94 )       (2.57 )       1.80       $ 38.42         11.63 %     $ 647,976         1.11 %       1.55 %       22 %
10/1/13 to 9/30/14       35.07         0.39         3.86         4.25         (0.39 )       (2.31 )       (2.70 )       1.55         36.62         13.04         673,005         1.13         1.07         28  
10/1/12 to 9/30/13       34.16         0.43         0.92         1.35         (0.44 )       —         (0.44 )       0.91         35.07         3.96         494,963         1.15         1.21         30  
10/1/11 to 9/30/12       26.03         0.30         8.22         8.52         (0.39 )       —         (0.39 )       8.13         34.16         32.80         422,374         1.16         0.93         24  
10/1/10 to 9/30/11       26.08         0.19         0.12         0.31         (0.36 )       —         (0.36 )       (0.05 )       26.03         1.08         320,059         1.21         0.65         36  

Class R6

                                                        
11/12/14(4) to 9/30/15     $ 40.32         0.79         (0.06 )       0.73         (0.69 )       (1.94 )       (2.63 )       (1.90 )     $ 38.42         1.54 %(6)     $ 1,647         0.94 %(5)       2.30 %(5)       22 %

Footnote Legend

(1)  Sales charges, where applicable, are not reflected in the total return calculation.
(2)  Computed using average shares outstanding.
(3)  The Fund may invest in other funds, and the annualized expense ratios do not reflect fees and expenses associated with the underlying funds.
(4)  Inception date of class.
(5)  Annualized.
(6)  Not annualized.

 

See Notes to Financial Statements

 

15

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VIRTUS REAL ESTATE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

Note 1. Organization

Virtus Opportunities Trust (the “Trust”) is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company.

As of the date of this report, 32 funds of the Trust are offered for sale, of which the Real Estate Securities Fund (the “Fund”) is reported in this annual report. The Fund’s investment objectives is outlined in the Fund Summary page. There is no guarantee the Fund will achieve its objective.

The Fund offers Class A shares, Class C shares, Class I shares and Class R6 shares for sale. 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 Fund’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. The period for which the CDSC applies for the Fund is 18 months. 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% CDSC, applicable if redeemed within one year of purchase. Class I shares are sold without a front-end sales charge or CDSC.

Class R6 shares are only available to participants in employer-sponsored retirement plans, such as 401(k) plans, profit sharing plans, defined benefit plans and other employer directed plans. Class R6 shares do not carry sales commissions or pay Rule 12b-1 fees.

Virtus Mutual Funds may impose an annual fee on accounts having balances of less than $2,500. The small account fee may be waived in certain circumstances, as disclosed in the prospectuses and/or statements of additional information. The fees collected will be used to offset certain expenses of the funds.

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 Rule 12b-1 and/or shareholder service plan (“12b-1 plan”) and has exclusive voting rights with respect to such plans. Class I shares and Class R6 shares are not subject to a 12b-1 plan. Income and other expenses as well as realized and unrealized gains and losses of the Fund are borne pro rata by the holders of each class of shares.

Note 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 amounts 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.

 

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VIRTUS REAL ESTATE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

  A. Security Valuation

Security valuation procedures for the Fund, which include nightly price variance, as well as back-testing such as bi-weekly unchanged price, monthly secondary source and transaction analysis, have been approved by the Board of Trustees (the “Board”, or the “Trustees”). All internally fair valued securities are approved by a valuation committee (the “Valuation Committee”) appointed by the Board. The Valuation Committee is comprised of certain members of management as identified to the Board and convenes independently from portfolio management. All internally fair valued securities are updated daily and reviewed in detail by the Valuation Committee monthly unless changes occur within the period. The Valuation Committee reviews the validity of the model inputs and any changes to the model. Quarterly fair valuations are reviewed by the Board.

The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. It is the Fund’s policy to recognize transfers at the end of the reporting period.

 

  •    Level 1 – quoted prices in active markets for identical securities (security types generally include listed equities).

 

  •    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 Valuation Committee’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 Valuation Committee, are generally categorized as Level 3 in the hierarchy.

Certain non-U.S. 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 non-U.S. markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (“NAV”) (at the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4 p.m. Eastern time) that may impact the value of securities traded in these non-U.S. markets. In such cases the Fund fair values non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. 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 non-U.S. 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 derivative

 

17

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VIRTUS REAL ESTATE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

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 NAV. Investments in closed-end funds are valued as of the close of regular trading on the NYSE each business day. Both are categorized as Level 1 in the hierarchy.

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 methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

  B. Security Transactions and Investment Income

Security transactions are recorded on the trade date. Realized gains and losses from the sale of securities are determined on the identified cost basis. Dividend income is recognized 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.

Dividend income from REIT investments 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 intention 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.

Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. As of September 30, 2015, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2012 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 that 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.

 

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VIRTUS REAL ESTATE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

  E. Expenses

Expenses incurred together by the Fund and other affiliated mutual funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately used.

In addition to the net operating expenses that the Fund bears directly, the shareholders of the Fund indirectly bear the Fund’s pro-rata expenses of any underlying mutual funds in which the Fund invests.

Note 3. Investment Advisory Fees and Related Party Transactions

($ reported in thousands except as noted)

 

  A. Adviser

Virtus Investment Advisers, Inc. (the “Adviser”), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the adviser to the Trust. The Adviser manages the Fund’s investment program and general operations of the Fund, including oversight of the Fund’s subadviser.

As compensation for its services to the Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of the Fund:

 

First $1 Billion

  

$1 Billion through
$2 Billion

  

$2+ Billion

0.75%   0.70%   0.65%

 

  B. Subadviser

Duff & Phelps Investment Management Co. (the “Subadviser”), an indirect wholly-owned subsidiary of Virtus, is the subadviser to the Fund. The Subadviser manages the investments of the Fund for which it is paid a fee by the Adviser.

 

  C. Distributor

VP Distributors, LLC (“VP Distributors”), an indirect wholly-owned subsidiary of Virtus, serves as the distributor of the Fund’s shares. VP Distributors has advised the Fund that for the fiscal year (the “period”) ended September 30, 2015, it retained net commissions of $23 for Class A shares and deferred sales charges of $1, $0 and $0 for Class A shares, Class B shares and Class C shares, respectively.

In addition, the Fund pays VP Distributors distribution and/or service fees under a 12b-1 plan as a percentage of the daily average net assets of each respective class at the annual rates as follows: 0.25% for Class A shares, 1.00% for Class B shares, and 1.00% for Class C shares. Class R6 shares and 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 NAV 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.

 

19

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VIRTUS REAL ESTATE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

  D. Administrator and Transfer Agent

Virtus Fund Services, LLC, an indirect wholly-owned subsidiary of Virtus, serves as administrator and transfer agent to the Fund.

For the period ended September 30, 2015, the Fund incurred administration fees totaling $1,514 which are included in the Statement of Operations.

For the period ended September 30, 2015, the Fund incurred transfer agent fees totaling $3,478 which are included in the Statement of Operations. A portion of these fees was paid to outside entities that also provide services to the Trust.

 

  E. Affiliated Shareholders

At September 30, 2015, 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 to the following:

 

     Shares        Aggregate
Net Asset
Value		  
     200,403         $ 7,699   

Note 4. Purchases and Sales of Securities

($ reported in thousands)

Purchases and sales of securities (excluding U.S. Government and agency securities and short-term securities) during the period ended September 30, 2015, were as follows:

 

     Purchases        Sales  
   $ 330,978         $ 615,313   

There were no purchases or sales of long-term U.S. Government and agency securities for the period ended September 30, 2015.

Note 5. Borrowings

($ reported in thousands)

On July 2, 2015, the Fund and other affiliated Funds entered into a $50,000 secured Line of Credit Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Fund to borrow cash from the Bank to manage large unexpected redemptions and trade fails, up to a limit of one-fifth of the Fund’s total net assets in accordance with the Agreement. Interest is charged at the higher of the LIBOR (London Interbank Offered Rate) or the Federal Funds rate plus an additional percentage rate on the amount borrowed. Commitment fees are charged on the undrawn balance. The Funds are individually, and not jointly, liable for their particular advances, if any, under the line of credit. The Bank has the ability to require repayment of outstanding borrowings under the Agreement upon certain circumstances such as an event of default.

From July 2, 2015 to September 30, 2015, the average daily borrowings under the Agreement and the weighted daily average interest rate were $12,500 and 1.19%, respectively. The Fund had no outstanding borrowings as of September 30, 2015.

 

20

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VIRTUS REAL ESTATE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

Note 6. 10% Shareholders

As of September 30, 2015, the Fund had individual shareholder account(s) and/or omnibus shareholder account(s) (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
Outstanding		        Number
of
Accounts		  
     27 %         2   

The shareholders are not affiliated with Virtus.

Note 7. Credit Risk and Asset Concentrations

The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of its investment objective. 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.

Note 8. Indemnifications

Under the Trust’s organizational documents, its Trustees and officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Each Trustee has also entered into an indemnification agreement with the Trust. In addition, in the normal course of business, the Fund enters into contracts that provide a variety of indemnifications to other parties. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund and that have not occurred. However, the Fund has not had prior claims or losses pursuant to these arrangements and expects the risk of loss to be remote.

Note 9. Federal Income Tax Information

($ reported in thousands)

At September 30, 2015, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows:

 

Federal
Tax Cost

  

Unrealized
Appreciation

  

Unrealized
(Depreciation)

  

Net Unrealized
Appreciation
(Depreciation)

$889,060   $468,675   $(26,234)   $442,441

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized for tax years beginning after December 22, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses.

The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) (which are disclosed above) consist of undistributed ordinary income of $8,841 and undistributed long-term capital gains of $170,052.

The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

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VIRTUS REAL ESTATE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

The tax character of dividends and distributions paid during the years ended September 30, 2015 and 2014 was as follows:

 

     Year Ended  
     2015        2014  

Ordinary Income

    $ 25,780         $ 19,204   

Long-Term Capital Gains

      73,028           83,291   
  

 

 

       

 

 

  

Total

    $ 98,808         $ 102,495   
  

 

 

       

 

 

  

Note 10. Regulatory Matters and Litigation

From time to time, the Fund’s investment adviser and/or its affiliates and/or subadvisers may be involved in litigation and arbitration as well as examinations and investigations by various regulatory bodies, including the SEC, involving compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting their products and other activities. At this time, the Fund’s investment adviser believes that the outcomes of such matters are not likely, either individually or in the aggregate, to be material to these financial statements.

As part of an SEC non-public, confidential investigation of a matter entitled – In the Matter of F-Squared Investments Inc., the SEC staff informed the Fund’s investment adviser that it was inquiring into whether it had violated securities laws or regulations with respect to circumstances related to that matter. On November 16, 2015, without admitting or denying the SEC’s findings, the Fund’s investment adviser consented to the entry of an order providing that it cease and desist from committing or causing any violations and future violations of Sections 204, 206(2) and 206(4) of the Investment Advisers Act of 1940, as amended, and Rules 204-2, 206(4)-1, 206(4)-7 and 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940, as amended; agreed to a censure; and paid $16.5 million, which included a civil money penalty of $2 million, disgorgement of $13.4 million and prejudgment interest of $1.1 million.

On February 20, 2015, a putative class action complaint (In re Virtus Investment Partners, Inc. Securities Litigation; formerly styled as Tom Cummins v. Virtus Investment Partners Inc. et al) alleging violation of the federal securities laws was filed by an individual shareholder against Virtus and certain of its officers (the “defendants”) in the United States District Court for the Southern District of New York. On August 21, 2015, the lead plaintiff filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint and adding the Trust as a defendant. The Consolidated Complaint was purportedly filed on behalf of all purchasers of Virtus common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint alleges that during the Class Period, the defendants knowingly disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds previously subadvised by F-Squared Investments, Inc. and/or its affiliates (“F-Squared”). The plaintiff seeks to recover unspecified damages. Virtus and its affiliates, including the Fund’s adviser, believe that the suit is without merit and intend to defend it vigorously. A motion to dismiss the Consolidated Complaint was filed on behalf of the defendants on October 21, 2015. The Trust believes that the risk of loss to the Fund as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Fund.

 

22

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VIRTUS REAL ESTATE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

On May 8, 2015, a putative class action complaint (Mark Youngers v. Virtus Investment Partners, Inc. et al) alleging violations of certain provisions of the federal securities laws was filed in the United States District Court for the Central District of California. The complaint, which was purportedly filed on behalf of purchasers of certain Virtus Funds previously subadvised by F-Squared between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”), alleges claims against Virtus, certain Virtus officers and affiliates (including the Fund’s investment adviser, Euclid Advisors LLC and VP Distributors, LLC), the trustees and certain officers of the Trust, and certain other parties (the “defendants”). The complaint alleges that during the Class Period the defendants knowingly disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On October 1, 2015, the plaintiff filed a First Amended Class Action Complaint which, among other things, added a derivative claim for breach of fiduciary duty on behalf of the Trust. On October 19, 2015, the Court entered an order transferring the action to the Southern District of New York. Virtus and its affiliates, including the Fund’s adviser, believe the plaintiff’s claims asserted in the complaint are frivolous and intend to defend them vigorously. The Trust believes that the risk of loss to the Fund as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Fund.

Note 11. Subsequent Events

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there are no subsequent events requiring recognition or disclosure in the financial statements.

 

23

Table of Contents

LOGO

Report of Independent Registered Public

Accounting Firm

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 the Virtus Real Estate Securities Fund (one of the funds constituting Virtus Opportunities Trust, hereafter referred to as the “Fund”) at September 30, 2015, 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 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, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

November 20, 2015

 

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VIRTUS REAL ESTATE SECURITIES FUND

TAX INFORMATION NOTICE (Unaudited)

SEPTEMBER 30, 2015

 

For the fiscal year ended September 30, 2015, 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 as long-term capital gains dividends (“LTCG”) taxable at a 20% rate, or lower depending on the shareholder’s income ($ reported in thousands). LTCG amount, if subsequently different, will be designated in the next annual report.

 

    QDI    

  

    DRD    

  

    LTCG    

0%   0%   $181,095

 

25

Table of Contents

FUND MANAGEMENT TABLES (UNAUDITED)

Information pertaining to the Trustees and officers of the Trust as of September 30, 2015, 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) 243-1574. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust.

Independent Trustees

 

Name, Year of Birth,
Year Elected and
Number of Funds
Overseen		  

Principal Occupation(s)
During Past 5 Years and

Other Directorships Held by Trustee

McClellan, Hassell H.

YOB: 1945

Elected: 2015

55 Portfolios

   Retired. Professor (1984 to 2013), Wallace E. Carroll School of Management, Boston College; Trustee, Virtus Variable Insurance Trust (9 portfolios) (since 2008); Trustee (since 2015), Virtus Mutual Fund Complex (46 portfolios); Trustee, John Hancock Fund Complex (since 2000), John Hancock Funds (collectively, 234 portfolios); and Director (since 2010), Barnes Group, Inc. (diversified global components manufacturer and logistical services company).

McLoughlin, Philip

YOB: 1946

Elected: 2006

69 Portfolios

   Director (since 1991) and Chairman (since 2010), World Trust Fund (closed-end investment firm in Luxembourg); Director (since 1995), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); Chairman (since 2002) and Trustee (since 1989), Virtus Mutual Fund Complex (46 portfolios); Chairman and Trustee (since 2003), Virtus Variable Insurance Trust (9 portfolios); Trustee/Director and Chairman (since 2011), Virtus Closed-End Funds (3 portfolios); Trustee and Chairman (since 2013), Virtus Alternative Solutions Trust (7 portfolios); Partner (2006 to 2010), Cross Pond Partners, LLC (investment management consultant); and Managing Director (2008 to 2010), SeaCap Partners, LLC (investment management).

McNamara, Geraldine M.

YOB: 1951

Elected: 2006

59 Funds

   Retired. Trustee (since 2001), Virtus Mutual Fund Complex (46 portfolios); and Director (since 2003), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); and Trustee (since 2015), Virtus Variable Insurance Trust (9 portfolios).

Oates, James M.

YOB: 1946

Elected: 2006

56 Funds

   Managing Director (since 1994), Wydown Group (consulting firm). Trustee (since 1987), Virtus Mutual Fund Complex (46 portfolios); Director (since 1996), Stifel Financial; Director (1998 to 2014), Connecticut River Bancorp; Chairman and Director (1999 to 2014), Connecticut River Bank; Chairman (since 2000), Emerson Investment Management, Inc.; Director (2002 to 2014), New Hampshire Trust Company; Chairman and Trustee (since 2005), John Hancock Fund Complex (228 portfolios); Non-Executive Chairman (2007 to 2011), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services); Trustee/Director (since 2013), Virtus Closed-End Funds (3 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

Segerson, Richard E.

YOB: 1948

Elected: 2006

46 Funds

   Trustee (since 1983), Virtus Mutual Fund Complex (46 portfolios); and Managing Director (1998 to 2013), Northway Management Company.

Verdonck, Ferdinand L.J.

YOB: 1942

Elected: 2006

46 Funds

   Trustee (since 2002), Virtus Mutual Fund Complex (46 portfolios).

 

26

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FUND MANAGEMENT TABLES (UNAUDITED) (Continued)

 

Interested Trustee

The individual listed below is an “interested person” of the Trust, as defined in Section 2(a)(19) of the 1940 Act, as amended, and the rules and regulations thereunder.

 

Name, Year of Birth,
Year Elected and
Number of Funds
Overseen		  

Principal Occupation(s)

During Past 5 Years and
Other Directorships Held by Trustee

Aylward, George R.*

Trustee and President

YOB: 1964

Elected: 2006

67 Funds

   Director, President and Chief Executive Officer (since 2008), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions with Virtus affiliates (since 2005); Trustee (since 2006), Virtus Mutual Funds (46 portfolios); Chairman, President and Chief Executive Officer (since 2006), The Zweig Closed-End Funds (2 portfolios); Trustee (since 2012) and President (since 2010), Virtus Variable Insurance Trust (9 portfolios); Trustee and President (since 2011), Virtus Closed-End Funds (3 portfolios); Director (since 2013), Virtus Global Funds, PLC (2 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

 

27

Table of Contents

FUND MANAGEMENT TABLES (UNAUDITED) (Continued)

 

Officers of the Trust Who Are Not Trustees

 

Name, Address and

Year of Birth

  

Position(s) Held with
Trust and Length of

Time Served

   Principal Occupation(s)
During Past 5 Years

Waltman, Francis G.

YOB: 1962

   Executive Vice President (since 2013); Senior Vice President (2008-2013).   Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2006) with Virtus affiliates; Executive Vice President (since 2013), Senior Vice President (2008 to 2013), Virtus Mutual Fund Complex; Executive Vice President (since 2013), Senior Vice President (2010 to 2013), Virtus Variable Insurance Trust; Executive Vice President (since 2013), Senior Vice President (2011 to 2013), Virtus Closed-End Funds; Director (since 2013), Virtus Global Funds PLC; and Executive Vice President (since 2013), Virtus Alternative Solutions Trust.

Bradley, W. Patrick

YOB: 1972

   Senior Vice President (since 2013); Vice President (2011 to 2013); Chief Financial Officer and Treasurer (since 2006).   Senior Vice President, Fund Services (since 2010), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2006) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2004), Virtus Variable Insurance Trust; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2006), Virtus Mutual Fund Complex; Senior Vice President (since 2013), Vice President (2012 to 2013) and Treasurer (Chief Financial Officer) (since 2007), The Zweig Closed-End Funds; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2011), Virtus Closed-End Funds; Vice President and Assistant Treasurer (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Director (since 2013), Virtus Global Funds, PLC; and Senior Vice President, Chief Financial Officer and Treasurer (since 2013), Virtus Alternative Solutions Trust.

Carr, Kevin J.

YOB: 1954

   Senior Vice President, since 2013; Vice President (2005-2013); Chief Legal Officer, Counsel and Secretary (since 2005).   Senior Vice President (since 2009), Vice President, Counsel and Secretary (2008 to 2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2005) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2005 to 2013), Chief Legal Officer, Counsel and Secretary (since 2005), Virtus Mutual Fund Complex; Senior Vice President (2013 to 2014), Vice President (2012 to 2013) and Assistant Secretary (since 2012), Secretary and Chief Legal Officer (2005 to 2012), The Zweig Closed-End Funds; Assistant Secretary (since 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2010 to 2013), Virtus Variable Insurance Trust; Vice President and Assistant Secretary (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Senior Vice President and Assistant Secretary (2013 to 2014), Vice President and Assistant Secretary (2012 to 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2011 to 2012), Virtus Closed-End Funds; and Assistant Secretary (since 2013), Virtus Alternative Solutions Trust.

 

28

Table of Contents

FUND MANAGEMENT TABLES (UNAUDITED) (Continued)

 

Name, Address and

Year of Birth

  

Position(s) Held with
Trust and Length of

Time Served

   Principal Occupation(s)
During Past 5 Years

Engberg, Nancy J.

YOB: 1956

   Vice President and Chief Compliance Officer since 2011.   Vice President (since 2008) and Chief Compliance Officer (2008 to 2011), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2003) with Virtus affiliates; Vice President and Chief Compliance Officer (since 2011), Virtus Mutual Fund Complex; Vice President (since 2010), Chief Compliance Officer (since 2011), Virtus Variable Insurance Trust; Vice President and Chief Compliance Officer (since 2011), Virtus Closed-End Funds; Vice President and Chief Compliance Officer (since 2012), The Zweig Closed-End Funds; and Vice President and Chief Compliance Officer (since 2013), Virtus Alternative Solutions Trust.

 

29

Table of Contents

VIRTUS OPPORTUNITIES TRUST

101 Munson Street

Greenfield, MA 01301-9668

 

Trustees

George R. Aylward

Hassell H. McClellan

Philip R. McLoughlin, Chairman

Geraldine M. McNamara

James M. Oates

Richard E. Segerson

Ferdinand L.J. Verdonck

Officers

George R. Aylward, President

Francis G. Waltman, Executive Vice President

W. Patrick Bradley, Senior Vice President, Chief Financial Officer and Treasurer

Kevin J. Carr, Senior Vice President, Chief Legal Officer, Counsel and Secretary

Nancy J. Engberg, Vice President and Chief Compliance Officer

Investment Adviser

Virtus Investment Advisers, Inc.

100 Pearl Street

Hartford, CT 06103-4506

Principal Underwriter

VP Distributors, LLC

100 Pearl Street

Hartford, CT 06103-4506

Administrator and Transfer Agent

Virtus Fund Services, LLC

100 Pearl Street

Hartford, CT 06103-4506

Custodian

JPMorgan Chase Bank, NA

1 Chase Manhattan Plaza

New York, NY 10005-1401

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   

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.

Table of Contents

 

For more information about

Virtus Mutual Funds, please call

your financial representative, or

contact us at 1-800-243-1574

or Virtus.com

 

8009    11-15

 

LOGO

 

Table of Contents

LOGO

 

ANNUAL REPORT

 

 

Virtus Alternatives Diversifier Fund

Virtus Disciplined Equity Style Fund*

Virtus Disciplined Select Bond Fund*

Virtus Disciplined Select Country Fund*

Virtus Dynamic Trend Fund

Virtus Equity Trend Fund*

Virtus Global Equity Trend Fund*

Virtus Herzfeld Fund*

Virtus Multi-Asset Trend Fund*

Virtus Sector Trend Fund

September 30, 2015

TRUST NAME: VIRTUS OPPORTUNITIES TRUST

* Prospectus supplements applicable to these Funds appear at the back of this Annual Report.

LOGO

Not FDIC Insured

No Bank Guarantee

May Lose Value

Table of Contents

Table of Contents

 

Message to Shareholders

  

      1   

Disclosure of Fund Expenses

  

      2   

Key Investment Terms

  

      4   
Fund   Fund
Summary		      Schedule
of
Investments		  

Virtus Alternatives Diversifier Fund (“Alternatives Diversifier Fund”)

    8         34   

Virtus Disciplined Equity Style Fund (“Disciplined Equity Style Fund”)

    10         35   

Virtus Disciplined Select Bond Fund (“Disciplined Select Bond Fund”)

    12         36   

Virtus Disciplined Select Country Fund (“Disciplined Select Country Fund”)

     14         37   

Virtus Dynamic Trend Fund (“Dynamic Trend Fund”)

     16         38   

Virtus Equity Trend Fund (“Equity Trend Fund”)

     19         39   

Virtus Global Equity Trend Fund (“Global Equity Trend Fund”)

     22         41   

Virtus Herzfeld Fund (“Herzfeld Fund”)

     25         42   

Virtus Multi-Asset Trend Fund (“Multi-Asset Trend Fund”)

     28         43   

Virtus Sector Trend Fund (“Sector Trend Fund”)

     31         45   

Statements of Assets and Liabilities

        46   

Statements of Operations

        49   

Statements of Changes in Net Assets

        52   

Financial Highlights

        57   

Notes to Financial Statements

        63   

Report of Independent Registered Public Accounting Firm

        76   

Tax Information Notice

        77   

Fund Management Tables

        78   

 

Proxy Voting Procedures and Voting Record (Form N-PX)

The subadvisers vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Board of Trustees (“Trustees” or the “Board”) of the Trust. 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, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission’s (the “SEC”) website at http://www.sec.gov.

Form N-Q Information

The Trust files a complete schedule of portfolio holdings for each Fund with 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.

Table of Contents

MESSAGE TO SHAREHOLDERS

To My Fellow Shareholders of Virtus Mutual Funds:

 

LOGO   

I am pleased to present this annual report that reviews the performance of your fund for the twelve months ended September 30, 2015.

 

During this period, global equity markets were challenged by falling oil prices, China’s economic slowdown, Greece’s debt crisis, and the growing likelihood of an interest rate hike by the Federal Reserve (the “Fed”). Volatility took its toll on major U.S. equity indices for the twelve months ended September 30, 2015. The large-cap S&P 500® Index and Dow Jones Industrial AverageSM moderately declined 0.61% and 2.11%, respectively, while the technology-heavy NASDAQ Composite Index® gained 4.00%. By comparison, international equities were down even further, with emerging markets hit particularly hard.

 

Against this backdrop, U.S. Treasuries remained an attractive “safe haven” among global investors. The bellwether 10-year U.S. Treasury yield declined from 2.52% at September 30, 2014 to 2.06% at September 30, 2015. Fixed income assets experienced slight losses in anticipation of the Fed’s stated intention to raise interest rates at the end of 2015. The Barclays U.S. Aggregate Bond Index, which tracks Treasuries and other investment-grade debt securities, gained 2.94% for the twelve-month period ended September 30, 2015, while non-investment grade bonds underperformed, with the Barclays U.S. Corporate High Yield Bond Index down 3.43% for the same period.

 

The strength of the global economy is likely to remain a concern for the markets in the months ahead. Actions by the Fed and other global central banks will be watched with great interest. Following the weak start to the year, the U.S. economy exhibited growth over the second and third quarters of 2015 – including stronger jobs, housing, and consumer spending data – and gives investors reason for optimism. Future market direction will be determined largely by the ability of corporations to continue to produce robust earnings.

 

Market uncertainty serves as a constant reminder of the importance of portfolio diversification, including exposure to both traditional and alternative asset classes. While diversification cannot guarantee a profit or prevent a loss, owning a variety of asset classes may provide a cushion against inevitable market fluctuations. Your financial advisor can help you ensure that your portfolio is adequately diversified across asset classes and investment strategies.

 

As always, thank you for entrusting Virtus with your assets. Should you have questions about your account or require assistance, please visit our website at www.Virtus.com or call our customer service team at 1-800-243-1574. We appreciate your business and remain committed to your long-term financial success.

 

Sincerely,

 

LOGO

 

George R. Aylward

President, Virtus Mutual Funds

 

October 2015

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

Table of Contents

VIRTUS OPPORTUNITIES TRUST

Disclosure of Fund Expenses (Unaudited)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of a Virtus Opportunities Trust Fund (each, a “Fund”) you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class B and Class C shares; and (2) ongoing costs, including investment advisory fees, distribution and service fees, and other expenses. Class I shares and Class R6 shares are sold without a sales charge and do not incur distribution and service fees. For further information regarding applicable sales charges, see Note 1 in the Notes to Financial Statements. These examples are intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your Fund’s costs in two ways.

Actual Expenses

The first section of the accompanying table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes

The second section of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the accompanying table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

Expense Table         
     Beginning
Account Value
April 1, 2015		     Ending
Account Value
September 30, 2015		     Annualized
Expense
Ratio		     Expenses Paid
During
Period*		  

Alternatives Diversifier Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 910.40        0.70 %    $ 3.35   

Class C

     1,000.00        906.80        1.45        6.93   

Class I

     1,000.00        911.60        0.44        2.11   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,021.51        0.70        3.55   

Class C

     1,000.00        1,017.71        1.45        7.36   

Class I

     1,000.00        1,022.83        0.44        2.23   

Disciplined Equity Style Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 897.30        1.60 %    $ 7.61   

Class C

     1,000.00        894.20        2.35        11.16   

Class I

     1,000.00        897.90        1.35        6.42   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,016.95        1.60        8.12   

Class C

     1,000.00        1,013.14        2.35        11.93   

Class I

     1,000.00        1,018.22        1.35        6.85   

Disciplined Select Bond Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 963.80        1.40 %    $ 6.89   

Class C

     1,000.00        959.60        2.15        10.56   

Class I

     1,000.00        964.80        1.15        5.66   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,017.96        1.40        7.11   

Class C

     1,000.00        1,014.15        2.15        10.91   

Class I

     1,000.00        1,019.23        1.15        5.84   

Disciplined Select Country Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 906.40        1.70 %    $ 8.12   

Class C

     1,000.00        903.10        2.45        11.69   

Class I

     1,000.00        907.60        1.45        6.93   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,016.44        1.70        8.63   

Class C

     1,000.00        1,012.63        2.45        12.44   

Class I

     1,000.00        1,017.71        1.45        7.36   

Dynamic Trend Fund**†

  

        

Actual

        

Class A

   $ 1,000.00      $ 957.40        0.19 %    $ 0.93   

Class B

     1,000.00        953.10        1.01        4.95   

Class C

     1,000.00        953.90        0.93        4.56   

Class I

     1,000.00        958.00        -0.05        -0.25   

Class R6

     1,000.00        959.00        -0.24        -1.18   

Hypothetical (5% return before expenses)

  

    

Class A

     1,000.00        1,024.10        0.19        0.96   

Class B

     1,000.00        1,019.94        1.01        5.13   

Class C

     1,000.00        1,020.35        0.93        4.72   

Class I

     1,000.00        1,025.32        -0.05        -0.25   

Class R6

     1,000.00        1,026.29        -0.24        -1.22   
 

 

2

Table of Contents

VIRTUS OPPORTUNITIES TRUST

Disclosure of Fund Expenses (Unaudited) (Continued)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

Expense Table         
     Beginning
Account Value
April 1, 2015		     Ending
Account Value
September 30, 2015		     Annualized
Expense
Ratio		     Expenses Paid
During
Period*		  

Equity Trend Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 936.70        1.61 %      $7.82   

Class C

     1,000.00        933.20        2.37        11.49   

Class I

     1,000.00        937.70        1.36        6.61   

Class R6

     1,000.00        938.50        1.25        6.07   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,016.90        1.61        8.17   

Class C

     1,000.00        1,013.04        2.37        12.03   

Class I

     1,000.00        1,018.16        1.36        6.90   

Class R6

     1,000.00        1,018.72        1.25        6.35   

Global Equity Trend Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 929.50        1.68 %      $8.13   

Class C

     1,000.00        926.60        2.43        11.74   

Class I

     1,000.00        930.60        1.44        6.97   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,016.54        1.68        8.53   

Class C

     1,000.00        1,012.73        2.43        12.34   

Class I

     1,000.00        1,017.76        1.44        7.31   

Herzfeld Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 896.90        1.60 %      $7.61   

Class C

     1,000.00        893.20        2.35        11.15   

Class I

     1,000.00        898.20        1.35        6.42   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,016.95        1.60        8.12   

Class C

     1,000.00        1,013.14        2.35        11.93   

Class I

     1,000.00        1,018.22        1.35        6.85   

Multi-Asset Trend Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 952.10        1.61 %    $ 7.88   

Class C

     1,000.00        948.70        2.36        11.53   

Class I

     1,000.00        953.20        1.36        6.66   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,016.90        1.61        8.17   

Class C

     1,000.00        1,013.09        2.36        11.98   

Class I

     1,000.00        1,018.16        1.36        6.90   

Sector Trend Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 956.50        1.00 %    $ 4.90   

Class C

     1,000.00        953.10        1.76        8.62   

Class I

     1,000.00        958.30        0.76        3.73   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,019.99        1.00        5.08   

Class C

     1,000.00        1,016.13        1.76        8.93   

Class I

     1,000.00        1,021.21        0.76        3.86   
* Expenses are equal to the relevant Fund’s annualized expense ratio, which is net of 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 to reflect the one-half year period.

 

** Dynamic Trend Fund’s annualized expense ratios include interest expense due to leverage and dividends and interest expense on short sales.

 

†  The expense figures reflected in the table for the Dynamic Trend Fund are due to a negative performance fee adjustment during the period. See Note 3A in the Notes to Financial Statements for more information on the performance fee calculation.

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.

 

 

3

Table of Contents

KEY INVESTMENT TERMS

(Unaudited)

 

Alerian MLP Index

The Alerian MLP Index is the leading gauge of large- and mid-cap energy Master Limited Partnerships (MLPs). The float adjusted, capitalization-weighted index, which includes 50 prominent companies and captures approximately 75% of available market capitalization, is disseminated real-time on a price-return basis (AMZ) and on a total-return basis. The index is unmanaged, its returns do not reflect any fees, tax assets or liabilities, expenses or sales charges, and it is not available for direct investment.

Alternatives Diversifier Composite Index

The Alternatives Diversifier composite index consists of: Diversified Trends Index (15%), UBS Global Investors (Real Estate) Index (20%), Global Infrastructure, represented by the MSCI World Infrastructure Sector Capped Index (since 9/1/2008) (15%), S&P North American Natural Resources Sector Index (10%), Deutsche Bank Liquid Commodity Index (15%), Deutsche Bank G10 Currency Harvest Index (15%), and Credit Suisse Leveraged Loan Index (10%). From 9/1/2008 to 3/1/2012 the composite consisted of HFRX Equity Market Neutral Index (20%), UBS Global Investors (Real Estate) Index (20%), Global Infrastructure, represented by the MSCI World Infrastructure Sector Capped Index (since 9/1/2008) (15%), S&P North American Natural Resources Sector Index (10%), Deutsche Bank Liquid Commodity Index (15%), Deutsche Bank G10 Currency Harvest Index (10%) and Credit Suisse Leveraged Loan Index (10%). Prior to 9/1/2008, the Global Infrastructure component was represented by a mix of MSCI US Utilities Index (65%), MSCI World Telecom Services Index (20%) and MSCI World ex US Utilities Index (15%). The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

American Depositary Receipt (ADR)

Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a bank or a trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares.

Barclays U.S. Corporate High Yield Bond Index

The Barclays U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Barclays U.S. Aggregate Bond Index

The Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

BofA Merrill Lynch US High Yield Master II Option-Adjusted Spread Index

The BofA Merrill Lynch Option-Adjusted Spreads (OASs) are the calculated spreads between a computed OAS index of all bonds in a given rating category and a spot Treasury curve. An OAS index is constructed using each constituent bond’s OAS, weighted by market capitalization. The BofA Merrill Lynch High Yield Master II OAS uses an index of bonds that are below investment grade (those rated BB or below).

Chicago Board Options Exchange (CBOE) Volatility Index®

The Chicago Board Options Exchange (CBOE) Volatility Index (“VIX® Index”) shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500® Index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX® Index is a widely used measure of market risk and is often referred to as the “investor fear gauge.” The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

Dow Jones Global Moderate Portfolio Index

The Dow Jones Global Moderate Portfolio Index is a benchmark that takes 60% of the risk of the global securities market. It is a total returns index that is a time-varying weighted average of stocks, bonds, and cash. The index is the efficient allocation of stocks, bonds, and cash in a portfolio with 60% of the risk of the Dow Jones Aggressive Portfolio Index. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

 

4

Table of Contents

KEY INVESTMENT TERMS (Continued)

(Unaudited)

 

Dow Jones Industrial AverageSM

A market indicator composed of 30 actively traded blue chip U.S. stocks. While the index attempts to be representative of the U.S. economy as a whole, it is somewhat heavily weighted toward industrials. It is a price-weighted average, which means that the price movement of each stock is weighted equally regardless of its market capitalization. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Exchange-Traded Funds (ETF)

A Fund that is traded on a stock exchange. Most ETFs have a portfolios of stocks or bonds that track a specific market index.

Federal Reserve (the “Fed”)

The Central Bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable. Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system.

Herzfeld Composite Index (60% MSCI AC World Index (net)/40% Barclays U.S. Aggregate Bond Index)

The composite index consists of 60% MSCI AC World Index (net) and 40% Barclays U.S. Aggregate Bond Index. The MSCI AC World Index (net) is a free float-adjusted market capitalization-weighted index that measures equity performance of developed and emerging markets. The index is calculated on a total return basis with net dividends reinvested. The Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. Each index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

HFRX Equity Hedge Index

The HFRX Equity Hedge Index measures performance of long and short strategies that invest primarily in equity and equity derivative securities. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

iShares®

Represents shares of an open-end exchange-traded fund.

Long position (“long”)

Ownership of a security, giving the investor the right to transfer ownership to someone else, the right to receive income paid by the security, and the right to any profits or losses as the security’s value changes.

MLP (Master Limited Partnership)

A type of limited partnership that is publicly traded. The partnership must derive most of its cash flows from real estate, natural resources and commodities.

MSCI All Country World Index (Net)

The MSCI All Country World Index (Net) is a free float-adjusted market capitalization-weighted index that measures equity performance of developed and emerging markets. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses or sales charges, and is not available for direct investment.

MSCI EAFE® Index (net)

The MSCI EAFE® Index (net) is a free float-adjusted market capitalization-weighted index that measures developed foreign market equity performance, excluding the U.S. and Canada. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI France Index

The MSCI France Index is designed to measure the performance of the large, mid and small cap segments of the French market. With 74 constituents, the index covers about 85% of the equity universe in France. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

 

5

Table of Contents

KEY INVESTMENT TERMS (Continued)

(Unaudited)

 

MSCI Japan Index

The MSCI Japan Index is designed to measure the performance of the large and mid cap segments of the Japanese market. With 316 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Japan. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI Sweden Index

The MSCI Sweden Index is designed to measure the performance of the large and mid cap segments of the Swedish market. With 30 constituents, the index covers about 85% of the equity universe in Sweden. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI Switzerland Index

The MSCI Switzerland Index is designed to measure the performance of the large and mid cap segments of the Swiss market. With 39 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Switzerland. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

NASDAQ Composite Index®

A market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. Unlike other market indexes, the NASDAQ composite is not limited to companies that have U.S. headquarters. The index is unmanaged, its returns do not reflect any fees, expenses or sales charges and it is not available for direct investment.

Russell 1000® Index

The Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Russell 1000® Value Index

The Russell 1000® Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000® companies with lower price-to-book ratios and lower expected growth values. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Russell 2000® Index

The Russell 2000® Index is a market capitalization-weighted index of the 2,000 smallest companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Russell 2000® Value Index

The Russell 2000® Value Index measures the performance of small-cap value segment of the U.S. equity universe. It includes those Russell 2000® companies with lower price-to-book ratios and lower forecasted growth values. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Russell 3000® Index

The Russell 3000® Index is a market capitalization-weighted index that measures the performance of the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Russell 3000® Growth Index

The Russell 3000 Growth Index measures the performance of the broad growth segment of the U.S. equity universe. It includes those Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

 

6

Table of Contents

KEY INVESTMENT TERMS (Continued)

(Unaudited)

 

Russell 3000® Value Index

The Russell 3000® Value Index measures the performance of the broad value segment of U.S. equity value universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

Russell Midcap® Index

The Russell Midcap® Index is a market capitalization-weighted index of medium-capitalization stocks of U.S. companies. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Russell Midcap® Value Index

The Russell Midcap® Value Index measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap® Index companies with lower price-to-book ratios and lower forecasted growth values. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

S&P 500® Index

The S&P 500® 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 index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

SPDR®

Represents shares of an open-end exchange-traded fund.

Short position (“short”)

Stock shares that an investor has sold without actually owning (by borrowing the certificates from a broker) in anticipation of a decline in the stock value by a certain date. If the price falls, the investor buys the shares at the lower rate and makes a profit on the difference. It the price rises, the investor must buy at the higher price and sustains a loss.

Treasury Inflation-Protected Securities (TIPS)

Treasury Inflation-Protected Securities provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, the investor is paid the adjusted principal or original principal, whichever is greater.

 

7

Table of Contents

Alternatives Diversifier Fund

 

Fund Summary

   

Ticker Symbols:

Class A: PDPAX

Class C: PDPCX Class I: VADIX

 

Portfolio Manager Commentary by Euclid Advisors LLC

 

¢   The Fund is diversified and has an investment objective of long-term capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -10.02%, Class C shares returned -10.66%, and Class I shares returned -9.77%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the Alternatives Diversifier Composite Index, the Fund’s style-specific index appropriate for comparison, returned -11.55%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   U.S. stock markets experienced increased volatility over the last 12 months. After a violent 7.5% sell-off in the fall of 2014, stocks rallied more than 14% to make new all-time highs in May of this year. After a few months of mostly sideways action, in August the market had its first 10% correction since 2011. Other global equity markets also suffered losses, with many emerging markets in bear market territory, having lost more than 20% during the year. Bond markets remained surprisingly subdued with government yields in most developed markets very low because of exceedingly accommodative central bank policy. Commodity markets were very weak over the year and continued to be so as of the end of the Fund’s fiscal year. Crude oil and other hydrocarbons, such as natural gas and coal, collapsed over the last year and remained under pricing pressure as of the end of the Fund’s fiscal year. The slow pace of global growth, particularly in China, caused industrial metals and grain prices to decline as well.

What factors affected the Fund’s performance during its fiscal year?

 

¢   For the previous 12 months, the Fund declined 10.02% (Class A shares), slightly ahead of its style
 

index, which was down 11.55%. The Fund’s overweighting of real estate was a positive performance driver, as it was the best performing asset class over the last year. The Fund’s underweighting of commodities and related equities was beneficial, but was not enough to stave off losses in the portfolio. Very low inflation globally, combined with weakening economic conditions in many emerging markets and China, put downward pressure on commodity prices. During the year, both commodities and commodity equites suffered losses of more than 30%. The Fund invests some of its money in these areas to diversify away from traditional stocks and bonds, but this year, that diversification was detrimental to overall performance as commodities were especially hard hit. The Fund’s underweight to managed futures also detracted from performance. Even though that area suffered losses for the year, it was still among the Fund’s better performing components.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment

advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment.

Allocation: The fund’s exposure to different asset classes may not be optimal for market conditions at a given time. Asset allocation does not guarantee a profit or protect against a loss in declining markets.

Foreign Investing: Investing internationally involves additional risks such as currency, political, accounting, economic, and market risk.

Real Estate: The fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management.

Fund of funds: Because the fund can invest in other funds, it indirectly bears its proportionate share of the operating expenses and management fees of the underlying fund(s).

Affiliated Funds: The fund’s adviser can select affiliated and/or unaffiliated funds, which may create a conflict of interest.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Affiliated Equity Mutual Funds

     47 % 

Exchange-Traded Funds

     38   

Affiliated Fixed Income Mutual Funds

     15   
   

 

 

  

Total

     100 % 
   

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

8

Table of Contents

Alternatives Diversifier Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        5 years        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -10.02 %         1.31 %         1.48 %         11/30/05   
Class A Shares at POP3,4        -15.19           0.12           0.87           11/30/05   
Class C Shares at NAV2 and with CDSC4        -10.66           0.55           0.72           11/30/05   
Class I Shares at NAV        -9.77           1.56           3.09           10/1/09   
S&P 500® Index        -0.61           13.34           — 5         —   
Alternatives Diversifier Composite Index        -11.55           2.04           — 6         —   

Fund Expense Ratios7: A Shares: 1.70%; C Shares: 2.45%; I Shares: 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 index returned 6.69% for Class A and Class C shares and 13.29% for Class I shares since the inception date of the respective share class.
6  The index returned 2.65% for Class A and Class C shares and 3.23% for Class I shares since the inception date of the respective share class.
7  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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 reflect fees and expenses associated with the underlying funds.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on November 30, 2005 (inception date of the Fund), for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

9

Table of Contents

Disciplined Equity Style Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VDEAX

Class C: VDECX

Class I: VDEIX

 

Portfolio Manager Commentary by Newfound Investments, LLC

 

¢   The Fund is diversified and has an investment objective of capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -0.01%, Class C shares returned -0.72%, and Class I shares returned 0.16%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the Russell 3000® Index the Fund’s style-specific benchmark appropriate for comparison returned -0.49%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   During the Fund’s prior fiscal year, the Russell 3000® Index returned -0.49%, marred by volatility and dramatic sell-offs in October 2014 and August 2015. Global economic news remains mixed with concerns around deflation in Europe, slowing economic growth in China, and the stability of the U.S. economic recovery.

 

¢   Over this period, in line with the nearly eight-year secular trend, growth equities continued to outperform value equities, with the Russell 3000® Growth Index out-performing the Russell 3000® Value Index by over 7.50%.

 

¢   Small-cap equities (proxied by the Russell 2000® Index) outperformed mid-cap equities (Russell MidCap® Index), which in turn outperformed large-cap equities (Russell 1000® Index), creating a demonstrable size-bias throughout the fiscal year. This resulted in small-caps outperforming their large-cap peers by just over 2.00%

What factors affected the Fund’s performance during its fiscal year?

 

¢   The Fund seeks to take advantage of relative performance difference in growth and value equities by holding an equal share of either large-, mid-, and small-cap growth equities or large-, mid-, and small-cap value equities.
¢   The equal-weight approach to market capitalization within the Fund provided a tailwind to the Fund’s performance as small- and mid-cap equities outperformed large-cap equities.

 

¢   Short-term head-fakes in the relative performance between growth and value in the third quarter of 2015 led to several “whipsaw” trades, detracting from overall performance and the Fund’s ability to capture the full relative outperformance opportunity offered by the performance difference between these two categories.

 

¢   The Fund’s overall tilt towards growth during the fiscal year served as a positive contribution to performance, as growth equities outperformed their value peers.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based on market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Exchange-Traded Funds

       99 % 

Russell 2000® Value Index Fund

     33 %     

Russell Midcap® Value Index Fund

     33       

Russell 1000® Value Index Fund

     33       

Other (includes short-term investments)

       1   
     

 

 

  

Total

       100 % 
           

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

10

Table of Contents

Disciplined Equity Style Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -0.01 %         13.00 %         12/18/12   
Class A Shares at POP3,4        -5.76           10.62           12/18/12   
Class C Shares at NAV2 and with CDSC4        -0.72           12.17           12/18/12   
Class I Shares at NAV        0.16           13.26           12/18/12   

S&P 500® Index

        -0.61           13.03 5         —   

Russell 3000® Index

        -0.49           13.00 5         —   

Fund Expense Ratios6: A Shares: Gross 5.20%, Net 1.60%; C Shares: Gross 5.95%, Net 2.35%; I Shares: Gross 4.95%, Net 1.35%.

All returns represent past performance which is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The above table and graph below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. Please visit Virtus.com for performance data current to the most recent month-end.

1  Total returns are historical and include changes in share price and the reinvestment of both dividends and capital gains distributions.
2  “NAV” (Net Asset Value) total returns do not include the effect of any sales charge.
3  “POP” (Public Offering Price) total returns include the effect of the maximum front-end 5.75% sales charge.
4  “CDSC” (Contingent Deferred Sales Charge) is applied to redemptions of certain classes of shares that do not have a sales charge applied at the time of purchase. CDSC charges for 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver. Expense ratios 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 December 18, 2012 (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.

 

LOGO

The indexes are unmanaged and not available for direct investment; therefore, their performance does not reflect the expense associated with active management of an actual portfolio.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

11

Table of Contents

Disciplined Select Bond Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VDBAX

Class C: VDBCX

Class I: VDBIX

 

Portfolio Manager Commentary by Newfound Investments LLC

 

¢   The Fund is diversified and has an investment objective of high total return from current income and capital appreciation.

 

¢   For the fiscal ended September 30, 2015, the Fund’s Class A shares at NAV returned -2.25%, Class C shares returned -3.02%, and Class I shares returned -2.03%. For the same period, the Barclays U.S. Aggregate Bond Index, a broad-based fixed income index, returned 2.94%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   U.S. Treasury rates remained volatile through the year, with the 10-year rate hitting a low of 1.68% and a high of 2.52% and the 20-year rate hitting a low of 2.04% and 2.98% during the Fund’s fiscal year.

 

¢   Credit spreads, as measured by the BofA Merrill Lynch U.S. High Yield Master II Option-Adjusted Spread Index, began the fiscal year at 4.40% and ended the period at 6.62%, a multi-year high. During the year, however, spreads fell from 5.71% to 4.38% in a three-month period, highlighting the volatility of these spreads.

 

¢   The 10-year breakeven inflation rate fell throughout the period, from 1.97% to 1.41%, highlighting continued deflationary pressures.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The high levels of volatility within U.S. Treasury rates and credit spreads made the identification of meaningful secular relative outperformance trends difficult.

 

¢   The lack of meaningful long-term relative trends led to several whipsaw trades throughout the Fund’s fiscal year which detracted from performance.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based on market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Exchange-Traded Funds

       98 % 

Treasury Bond Funds

     20 %     

Corporate Bond Funds

     78       

Other (includes short-term investments)

       2   
     

 

 

  

Total

       100 % 
           

 

 

  

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

U.S. Government Securities: U.S. government securities may be subject to price fluctuations. An agency may default on an obligation not backed by the United States. Any guarantee on U.S. government securities does not apply to the value of the fund’s shares.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

12

Table of Contents

Disciplined Select Bond Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -2.25 %         -1.21 %         12/18/12   
Class A Shares at POP3,4        -5.91           -2.55           12/18/12   
Class C Shares at NAV2 and with CDSC4        -3.02           -1.94           12/18/12   
Class I Shares at NAV        -2.03           -0.98           12/18/12   
Barclays U.S. Aggregate Bond Index        2.94           1.92 5         —   

Fund Expense Ratios6: A Shares: Gross 7.48%, Net 1.40%; C Shares: Gross 8.23%, Net 2.15%; I Shares: Gross 7.23%, 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 3.75% 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver. Expense ratios 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 December 18, 2012 (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.

 

LOGO

The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expense associated with active management of an actual portfolio.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

13

Table of Contents

Disciplined Select Country Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VDCAX

Class C: VDCCX

Class I: VDCIX

 

Portfolio Manager Commentary by Newfound Investments, LLC

 

¢   The Fund is diversified and has an investment objective of capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -9.68%, Class C shares returned -10.29%, and Class I shares returned -9.43%. For the same period, S&P 500® Index, a broad-based equity index, returned -0.61%, and the MSCI EAFE® Index (net), the Fund’s style-specific benchmark appropriate for comparison, returned -8.66%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   During the Fund’s fiscal year, the MSCI EAFE® Index returned -8.66%. This return was largely due to concerns about slowing global economic growth as well as a strengthening U.S. dollar relative to global currencies.

 

¢   While January through May 2015 saw strong growth in the MSCI EAFE® Index, concerns about global growth and economic recovery led to a significant sell-off throughout the second and third quarters of 2015. At the end of the Fund’s fiscal year, the MSCI EAFE® Index was in a -14.80% drawdown.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The Fund dramatically shifted off-benchmark during the period; in the vast majority of weeks, at least one or two countries were selectively removed from the portfolio. Australia (ETF: EWA) and Spain (ETF: EWP), for example, were both removed from the portfolio for the entire fiscal year, avoiding a -20.84% and -20.18% drawdown in these positions.

 

¢   A significant detractor in performance was the construction methodology utilized in the defensive, minimum-volatility portfolio. When a country is
   

selectively removed, available capital is reallocated equally across the four countries exhibiting the lowest volatility (subject to the constraint that not all the countries are from the same geographic region).

 

¢   Despite a negative signal since June, Singapore (ETF: EWS) remained in the portfolio at significant size based on its inclusion in the minimum volatility portfolio. Instead of avoiding a -19.17% loss in the country based on our momentum signals, we held an overweight to this country due to its low volatility levels. This resulted in a significant drag on portfolio performance over the period.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based on market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Exchange-Traded Funds

       99 % 

MSCI Switzerland Index Fund

     25 %     

MSCI Japan Index Fund

     25       

MSCI France Index Fund

     25       

MSCI Sweden Index Fund

     24       

Other (includes short-term investments)

       1   
     

 

 

  

Total

       100 % 
           

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Foreign Investing: Investing internationally involves additional risks such as currency, political, accounting, economic, and market risk.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

14

Table of Contents

Disciplined Select Country Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -9.68 %         0.97 %         12/18/12   
Class A Shares at POP3,4        -14.87           -1.16           12/18/12   
Class C Shares at NAV2 and with CDSC4        -10.29           0.24           12/18/12   
Class I Shares at NAV        -9.43           1.24           12/18/12   

S&P 500® Index

        -0.61           13.03 5         —   
MSCI EAFE® Index (net)        -8.66           3.74 5         —   

Fund Expense Ratios6: A Shares: Gross 6.92%, Net 1.70%; C Shares: Gross 7.67%, Net 2.45%; I Shares: Gross 6.67%, 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver. Expense ratios 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 December 18, 2012 (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.

 

LOGO

The indexes are unmanaged and not available for direct investment; therefore, their performance does not reflect the expense associated with active management of an actual portfolio.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

15

Table of Contents

Dynamic Trend Fund

 

Fund Summary

   

Ticker Symbols:

Class A: EMNAX

Class B: EMNBX

Class C: EMNCX

Class I: VIMNX

Class R6: VDARX

 

Portfolio Manager Commentary by Euclid Advisors LLC

 

¢   The Fund is diversified and has an investment objective of long-term capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -11.02%, Class B shares returned -11.76%, Class C shares returned -11.73%, Class I shares returned -10.86%, and Class R6 shares from November 12, 2014 (inception date) through September 30, 2015 returned -7.69%*. For the fiscal year, the S&P 500® Index, which is the broad-based equity index returned -0.61%, and the HFRX Equity Hedge Index the Fund’s style-specific index returned -2.95%.

 

* Returns less than 1 year are not annualized.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   During the early months of the fiscal year, equity markets were mostly calm, rising gradually despite a spike in volatility in October 2014, a quick sell-off and subsequent recovery, and a modest drawdown in January 2015. In the middle of May 2015, management of the Fund changed, as did the Fund’s investment strategy. While the central investment thesis – participation in rising equity markets with protection in higher risk markets – remained the same, the techniques used to achieve these goals changed. The new investment strategy combines relative strength analysis, used to identify the most attractive areas for investment in the U.S. equity markets, with absolute momentum analysis, which is used to identify periods when a more cautious approach to taking equity risk is required.

 

¢   Soon after the manager change was made, the new strategy was tested by two very different market environments. The months of May, June, and July were relatively calm for U.S. equity markets, despite a brief spike in volatility in late June. Global
   

concerns seemed to have little impact on U.S. markets, and the longstanding bull market appeared intact. Stocks began to fall into August, although volatility and risk levels remained reasonable.

 

¢   As August came to a close, U.S. equity markets experienced massive volatility, as markets appeared to digest an array of global stresses all at once. A deterioration that began in the third week of August devolved into a complete meltdown on Monday, August 24, when the Dow Jones Industrial AverageSM dropped more than 1,000 points after the market open, the largest intra-day drop in history. Concurrently, the CBOE Volatility Index® (VIX®) experienced its largest two-day percentage increase since the index was first published in 1990.

 

¢   Volatility settled into an elevated regime over the rest of September, with the VIX® at levels roughly double what was seen in July and early August. After an extremely choppy September, the S&P 500® Index (price return) ended the quarter about 7% below where it started, and about 10% below the highs reached in mid-July. This put the index down just over 1% over the 12 months, and down over 7% for 2015, leaving market participants to ask the question: Is this the end of one of the longest and strongest bull markets of all time, or just a (major) bump in the road? In our view, prediction is less reliable than preparation, and the portfolio is prepared to respond to both eventualities.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The Fund was bullishly positioned (with five sectors on and levered 25%) to start the fiscal year before a large drawdown occurred in which the portfolio de-risked to just one sector (75% in cash equivalents and 45% short) as volatility levels escalated quickly. The market subsequently rebounded quicker than the downturn and hit all-time highs. Going to cash and shorting the sectors, then carrying them through to the middle of December, was the largest drag on the portfolio as the market continued to advance. Heading into January the Fund was bullishly positioned (with four sectors on and levered 15%) in January before the market experienced another modest
   

downturn and volatility levels became elevated; the portfolio de-risked to one sector (75% cash equivalents and 45% short). The market subsequently rebounded in February, reaching all-time highs. Remaining invested in one or two sectors, being short seven or eight sectors during February, and failing to participate in the strong market rally in February led to the underperformance in the first part of the fiscal year.

 

¢   As the change in Fund management was made in May 2015, global markets remained calm. The Fund maintained full exposure to equities until the last week of August, in line with the calm markets up to that point. Just before the end of the month, in response to the quickly deteriorating conditions, the Fund began to aggressively trade out of equities and into cash equivalents as a defensive mechanism. By the end of August, more than one-third of the portfolio was in cash equivalents. In addition, a short position in the S&P 500® Index was added to provide further protection and to enable the Fund to benefit from a continuation of the negative market trend.

 

¢   Selling activity was not focused on any sectors in particular, as the market sell-off was broad-based and appeared to impact all parts of the equities universe. The Fund did maintain an existing overweight to consumer discretionary stocks throughout the selling activity, ending the period with a nearly 30% allocation to that sector. This allocation was based on the strength of the sub-industries within that sector compared to the rest of the market, a theme which has been active for a number of months.

 

¢   As of the Fund’s fiscal year end, the S&P 500® Index was still significantly below its 200-day average price level, and the portfolio had a cash position in excess of 35% plus a short S&P 500® Index position. The defensive actions taken by the Fund in August and September led to outperformance, compared to the S&P 500® Index, of approximately 2.40% since the changes to the investment strategy were made.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

16

Table of Contents
Dynamic Trend Fund (Continued)   

 

advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Allocation: The fund’s exposure to different asset classes may not be optimal for market conditions at a given time. Asset allocation does not guarantee a profit or protect against a loss in declining markets.

Short Sales: The fund may engage in short sales, and may experience a loss if the price of a borrowed security increases before the date on which the fund replaces the security.

Prospectus: For additional information on risks, please see the fund’s prospectus.

There is no relationship between Dorsey Wright and Virtus other than a license by Dorsey Wright to Virtus of certain Dorsey Wright trademarks and trade names, and the Dorsey Wright technical analysis (“Technical Analysis”). The Technical Analysis has been created and developed by Dorsey Wright without regard to and independently of Virtus, its business, its development of this product, and/or any prospective investor. The licensing of any Technical Analysis to Virtus is not an offer to purchase or sell, or a solicitation or an offer to buy any securities. A determination that any portion of an investor’s portfolio should be devoted to any product developed by Virtus is a determination made solely by the investment advisor serving the investor or the investor himself, not Dorsey Wright or Virtus.

 

 
Asset Allocation – Long  
 

The following table presents asset allocations within certain sectors as a percentage of total long investments as of September 30, 2015.

 

    

Consumer Discretionary

     28 % 

Information Technology

     8   

Consumer Staples

     8   

Health Care

     7   

Other (includes short-term investments)

     49   
   

 

 

  

Total

     100 % 
   

 

 

  

 

   
Asset Allocation – Short      
 

The following table presents asset allocations within certain sectors as a percentage of total short investments as of September 30, 2015.

 

    

Exchange-Traded Fund

     100 % 
   

 

 

  

Total

     100 % 
   

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

17

Table of Contents

Dynamic Trend Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        5 years        10 years       

Since

Inception

       

Inception

Date

  
Class A Shares at NAV2        -11.02 %         2.98 %         0.65 %         —           —   
Class A Shares at POP3,4        -16.14           1.77           0.05           —           —   
Class B Shares at NAV2        -11.76           2.17           -0.14           —           —   
Class B Shares with CDSC4        -14.74           2.00           -0.14           —           —   
Class C Shares at NAV2 and with CDSC4        -11.73           2.22           -0.11           —           —   
Class I Shares at NAV        -10.86           3.26           —           2.87 %         10/1/09   
Class R6 Shares at NAV        —           —           —           -7.69           11/12/14   
S&P 500® Index        -0.61           13.34           6.80           — 5         —   
HFRX Equity Hedge Index        -2.95           -0.18           -0.25           — 6         —   

Fund Expense Ratios7: A Shares: 1.52%; B Shares: 2.27%; C Shares: 2.27%; I Shares: 1.27%; R6 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. CDSC charges for B shares decline from 5% to 0% over a six year period.
5  The index returned 0.52% for Class I and -2.45% for Class R6 since the inception date of the respective share class.
6  The index returned 13.29% for Class I and -4.06% for Class R6 since the inception date of the respective share class.
7  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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 include 0.22% of dividends on short sales and interest expenses.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on September 30, 2005, 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.

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

18

Table of Contents

Equity Trend Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VAPAX

Class C: VAPCX

Class I: VAPIX

Class R6: VRPAX

 

Portfolio Manager Commentary by Euclid Advisors LLC

 

¢   The Fund is diversified and has an investment objective of long-term capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -12.79%, Class C shares returned -13.45%, Class I shares returned -12.57% for the fiscal year and Class R6 shares from November 12, 2014, (inception date) through September 30, 2015 returned -11.39%*. For the fiscal year, the S&P 500® Index, both the broad-based equity index and the style specific index, returned -0.61%.

 

* Returns less than 1 year are not annualized.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   During the early months of the fiscal year, equity markets were mostly calm, rising gradually despite a spike in volatility in October 2014, a quick sell-off and subsequent recovery, and a modest drawdown in January 2015. In the middle of May 2015, management of the Fund changed, as did the Fund’s investment strategy. While the central investment thesis – participation in rising equity markets with protection in higher risk markets – remained the same, the techniques used to achieve these goals changed. The new investment strategy combines relative strength analysis, used to identify the most attractive areas for investment in the U.S. equity markets, with absolute momentum analysis, which is used to identify periods when a more cautious approach to taking equity risk is required.

 

¢   Soon after the manager change was made, the new strategy was tested by two very different market environments. The months of May, June, and July were relatively calm for U.S. equity markets, despite a brief spike in volatility in late June. Global concerns seemed to have little impact on U.S. markets, and the longstanding bull market
   

appeared intact. Stocks began to fall into August, although volatility and risk levels remained reasonable.

 

¢   As August came to a close, U.S. equity markets experienced massive volatility, as markets appeared to digest an array of global stresses all at once. A deterioration that began in the third week of August devolved into a complete meltdown on Monday, August 24, when the Dow Jones Industrial AverageSM dropped more than 1,000 points after the market open, the largest intra-day drop in history. Concurrently, the CBOE Volatility Index® (VIX®) experienced its largest two-day percentage increase since the index was first published in 1990.

 

¢   Volatility settled into an elevated regime over the rest of September, with the VIX® at levels roughly double what was seen in July and early August. After an extremely choppy September, the S&P 500® Index (price return) ended the quarter about 7% below where it started, and about 10% below the highs reached in mid-July. This put the index down just over 1% over the 12 months, and down over 7% for 2015, leaving market participants to ask the question: Is this the end of one of the longest and strongest bull markets of all time, or just a (major) bump in the road? In our view, prediction is less reliable than preparation, and the portfolio is prepared to respond to both eventualities.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The Fund was bullishly positioned (with five sectors on) to start the fiscal year before a large drawdown occurred in which the portfolio de-risked to one sector (with 75% in cash equivalents) as volatility levels escalated quickly. The market subsequently rebounded quicker than the downturn and managed to hit all-time highs. Going to cash and carrying it through to the middle of December 2014, was the largest drag on the portfolio as the market continued to advance. The Fund avoided most of the drawdown in energy which had deteriorated quickly over this period, helping performance. Heading into January, the Fund was bullishly positioned (with five sectors on) before the market experienced another modest downturn and volatility levels became elevated; the portfolio once again de-risked to one sector (and 75% in cash equivalents). The market subsequently rebounded in February,
   

reaching all-time highs. Remaining invested in just one or two sectors and failing to participate in the strong market rally in February led to the underperformance in the first part of the year.

 

¢   As the change in Fund management was made in May 2015, global markets remained calm. The Fund maintained full exposure to equities until the last week of August, in line with the calm markets up to that point. Just before the end of the month, in response to the quickly deteriorating conditions, the Fund began to aggressively trade out of equities and into cash equivalents as a defensive mechanism. By the end of August, more than one-third of the portfolio was in cash equivalents. By the first week of September, the cash position had increased to greater than 50% of the portfolio.

 

¢   Activity was not focused on any sectors in particular, as the market sell-off was broad-based and appeared to impact all parts of the equities universe. The Fund did maintain an existing overweight to consumer discretionary stocks throughout the selling activity, ending the period with a roughly 20% allocation to that sector. This allocation was based on the strength of the sub-industries within that sector compared to the rest of the market, a theme which has been active for a number of months.

 

¢   As the quarter ended, the S&P 500® Index was still significantly below its 200-day average price level, and the portfolio had a cash position in excess of 50%. The defensive actions taken by the Fund in August and September led to outperformance during the quarter of approximately 1.25% compared to the S&P 500® Index.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

19

Table of Contents
Equity Trend Fund (Continued)   

 

a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Allocation: The fund’s exposure to different asset classes may not be optimal for market conditions at a given time. Asset allocation does not guarantee a profit or protect against a loss in declining markets.

Prospectus: For additional information on risks, please see the fund’s prospectus.

There is no relationship between Dorsey Wright and Virtus other than a license by Dorsey Wright to Virtus of certain Dorsey Wright trademarks and trade names, and the Dorsey Wright technical analysis (“Technical Analysis”). The Technical Analysis has been created and developed by Dorsey Wright without regard to and independently of Virtus, its business, its development of this product, and/or any prospective investor. The licensing of any Technical Analysis to Virtus is not an offer to purchase or sell, or a solicitation or an offer to buy any securities. A determination that any portion of an investor’s portfolio should be devoted to any product developed by Virtus is a determination made solely by the investment advisor serving the investor or the investor himself, not Dorsey Wright or Virtus.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

    

Consumer Discretionary

     21 % 

Consumer Staples

     8   

Information Technology

     6   

Industrials

     5   

Health Care

     3   

Materials

     2   

Utilities

     2   

Other (includes short-term investments)

     53   
   

 

 

  

Total

     100 % 
   

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

20

Table of Contents

Equity Trend Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        5 years        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -12.79 %         7.42 %         9.33 %         7/1/10   
Class A Shares at POP3,4        -17.81           6.15           8.10           7/1/10   
Class C Shares at NAV2 and with CDSC4        -13.45           6.61           8.51           7/1/10   
Class I Shares at NAV        -12.57           7.68           9.59           7/1/10   
Class R6 Shares at NAV        —           —           -11.39           11/12/14   
S&P 500® Index        -0.61           13.34           — 5         —   

Fund Expense Ratios6: A Shares: 1.51%; C Shares: 2.26%; I Shares: 1.26%; R6 Shares 1.19%.

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 returned 15.05% for Classes A, C, and I since the inception date of those respective classes and -4.06% since the inception date of Class R6.
6 The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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 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.

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

21

Table of Contents

Global Equity Trend Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VGPAX

Class C: VGPCX

Class I: VGPIX

 

Portfolio Manager Commentary by Euclid Advisors LLC

 

¢   The Fund is diversified and has an investment objective of capital appreciation. In pursuing this objective, the Fund maintains an emphasis on preservation of capital.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -13.21%, Class C shares returned -13.88%, and Class I shares returned -13.06%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%. MSCI All Country World Index (net), the Fund’s style-specific benchmark appropriate for comparison returned -6.66%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   During the early months of the fiscal year, global equity markets were mostly calm, rising gradually despite a spike in volatility in October 2014, a quick sell-off and subsequent recovery, and a modest drawdown in January 2015. In the middle of May 2015, management of the Fund changed, as did the Fund’s investment strategy. While the central investment thesis – participation in rising equity markets with protection in higher risk markets – remained the same, the techniques used to achieve these goals changed. The new investment strategy combines relative strength analysis, used to identify the most attractive areas for investment in global equity markets, with absolute momentum analysis, which is used to identify periods when a more cautious approach to taking equity risk is required.

 

¢   Soon after the manager change was made, the new strategy was tested by two very different market environments. The months of May, June, and July were relatively calm for U.S. equity markets, despite a brief spike in volatility in late June. Global concerns seemed to have little impact on U.S. markets, and the longstanding bull market appeared intact. Stocks began to fall into August, although volatility and risk levels remained reasonable.
¢   As August came to a close, U.S. equity markets experienced massive volatility, as markets appeared to digest an array of global stresses all at once. A deterioration that began in the third week of August devolved into a complete meltdown on Monday, August 24, when the Dow Jones Industrial AverageSM dropped more than 1,000 points after the market open, the largest intra-day drop in history. Concurrently, the CBOE Volatility Index® (VIX®) experienced its largest two-day percentage increase since the index was first published in 1990.

 

¢   Volatility settled into an elevated regime over the rest of September, with the VIX® at levels roughly double what was seen in July and early August. After an extremely choppy September, the S&P 500® Index (price return) ended the quarter about 7% below where it started, and about 10% below the highs reached in mid-July. This put the index down just over 1% over the 12 months, and down over 7% for 2015. In comparison, the MSCI All Country World Index (ex-US) was down nearly 12% over the 12 months and down over 8% year to date. These troubling signs leave market participants to ask the question: Is this the end of one of the longest and strongest bull markets of all time, or just a (major) bump in the road? In our view, prediction is less reliable than preparation, and the portfolio is prepared to respond to both eventualities.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The Fund was bullishly positioned to start the fiscal year before a large drawdown occurred in which the portfolio de-risked to one sector on the domestic side, and one region on the international side, as volatility levels escalated quickly. The market subsequently rebounded quicker than the downturn and hit all-time highs. Going to over 60% in cash equivalents, and carrying it through to the middle of December, was the largest drag on the portfolio as the market continued to advance. The Fund avoided most of the drawdown in energy, which had deteriorated quickly over this time period, helping performance. Staying in emerging markets also helped performance. Heading into January, the Fund was bullishly positioned before the market experienced another modest downturn and volatility levels became elevated; the portfolio de-risked to 57% cash equivalents. The market
   

subsequently rebounded in February, reaching all-time highs. Remaining invested in one or two sectors/regions during February and failing to participate in the strong market rally that month led to the underperformance in the first part of the year.

 

¢   As the change in Fund management was made in May 2015, global markets remained calm. The Fund maintained full exposure to equities until the last week of August, in line with the calm markets up to that point. Just before the end of the month, in response to the quickly deteriorating conditions, the Fund began to aggressively trade out of equities and into cash as a defensive mechanism. By the end of August, more than one-third of the U.S. portion of the portfolio was in cash, and the non-U.S. portion had a nearly 85% cash equivalents position. By the first week of September, the U.S. portfolio’s cash position had increased to greater than 50%, while the non-U.S. portfolio maintained its large cash allocation.

 

¢   Activity in the U.S. portfolio was not focused on any sectors in particular, as the market sell-off was broad-based and appeared to impact all parts of the equities universe. The Fund did maintain an existing overweight to consumer discretionary stocks throughout the selling activity, ending the period with a roughly 20% allocation to that sector. This allocation was based on the strength of the sub-industries within that sector compared to the rest of the market, a theme which has been active for a number of months.

 

¢   The global portfolio, in the context of generally weaker global markets, had begun cutting risk exposure in late July. In short order the Fund exited positions in Asia (China, India, Japan, Hong Kong) and Europe (Spain, Switzerland, Germany). By the end of August, only Italy remained in the portfolio.

 

¢   As the quarter ended, both the S&P 500® Index and the MSCI All Country World Index (ex-US) were still significantly below their 200-day average price levels, and the portfolio had a cash equivalents position in excess of 65%. The defensive activities the Fund took in August and September led to outperformance, since the investment strategy was changed, of approximately 7.00% compared to the MSCI All Country World Index

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

22

Table of Contents
Global Equity Trend Fund (Continued)   

 

   

(ex-US), while the non-U.S exposure led to slight underperformance compared to the S&P 500® Index.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Allocation: The fund’s exposure to different asset classes may not be optimal for market conditions at a given time. Asset allocation does not guarantee a profit or protect against a loss in declining markets.

Prospectus: For additional information on risks, please see the fund’s prospectus

There is no relationship between Dorsey Wright and Virtus other than a license by Dorsey Wright to Virtus of certain Dorsey Wright trademarks and trade names, and the Dorsey Wright technical analysis (“Technical Analysis”). The Technical Analysis has been created and developed by Dorsey Wright without regard to and independently of Virtus, its business, its development of this product, and/or any prospective investor. The licensing of any Technical

Analysis to Virtus is not an offer to purchase or sell, or a solicitation or an offer to buy any securities. A determination that any portion of an investor’s portfolio should be devoted to any product developed by Virtus is a determination made solely by the investment advisor serving the investor or the investor himself, not Dorsey Wright or Virtus.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

    

Consumer Discretionary

     16 % 

Consumer Staples

     6   

Information Technology

     5   

Industrials

     4   

Health Care

     3   

Energy

     1   

Materials

     1   

Other (includes short-term investments)

     64   
   

 

 

  

Total

     100 % 
   

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

23

Table of Contents

Global Equity Trend Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -13.21 %         2.62 %         3/15/11   
Class A Shares at POP3,4        -18.20           1.29           3/15/11   
Class C Shares at NAV2 and with CDSC4        -13.88           1.88           3/15/11   
Class I Shares at NAV        -13.06           2.85           3/15/11   
S&P 500® Index        -0.61           11.64 5         —   
MSCI AC World Index (Net)        -6.66           5.78 5         —   

Fund Expense Ratios6: A Shares: Gross 1.78%, Net 1.75%; C Shares: Gross 2.53%, Net 2.50%; I Shares: Gross 1.53%, Net 1.50%.

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 28, 2015, as supplemented and revised, 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 the contractual fee waiver, in effect through January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver. Expense ratios reflect fees and expenses associated with the underlying funds. Class C share ratio reflects distributor’s contractual waiver for 12b-1 fees.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on March 15, 2011 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

24

Table of Contents

Herzfeld Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VHFAX

Class C: VHFCX

Class I: VHFIX

 

Portfolio Manager Commentary by Thomas J. Herzfeld Advisors, Inc.

 

¢   The Fund is diversified and has an investment objective of seeking capital appreciation and current income.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -7.17%, Class C shares returned -7.94%, and Class I shares returned -7.01%. For the same period, the Fund’s style-specific benchmark, the Herzfeld Composite Index, which consists of 60% MSCI AC World Index (net) and 40% Barclays U.S. Aggregate Index, returned -2.76%. Performance for the composite’s underlying indices over the period was -6.66% for the MSCI AC World Index (net) and 2.94% for the Barclays U.S. Aggregate Bond Index.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   Over the Fund’s fiscal year, the broad equity market struggled as the commodity sell-off led to widespread underperformance in energy, materials, industrials, and the emerging markets. Additionally, fears of the Federal Reserve’s first interest rate hike since 2006 sent the closed-end fund (CEF) fixed income market into a tailspin as price performance vastly underperformed NAV returns. With fixed income CEFs making up two-thirds of the marketplace, it made for a difficult fiscal year as discounts in taxable fixed income CEFs widened from -7.09% to -12.04% while municipal CEF discounts remained unchanged but elevated at -8.01%. The combination of weak global equity markets combined with weak fixed income CEF performance made for an extremely difficult market for CEF investors.

 

¢   The trend of discount widening, dating back to September 2012, had continued for three years as of September 2015. The discount widening trend in the industry has been extreme compared to historical standards as the CEF market traded at a slight premium of 0.25% in September of 2012
   

and closed the recent fiscal year at -9.99%. As a result, the average CEF investor has had a difficult time keeping pace with the overall equity and fixed income markets as they have lost more than 10 percentage points to discount widening over the three-year period.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The Fund kept pace with the benchmark composite index over the first eight months of the fiscal period as the discount in the Fund vacillated between -10.06% and -11.79%. Through June 16, the Fund performance was equal with the benchmark composite index. The Fund deviated from the benchmark composite index in June as discounts widened to -12.95%. In July, oil began to sell off again, which sent the energy sector to new lows. The Fund’s overweight allocation to energy MLPs led to additional underperformance into the end of the fiscal year as the Alerian MLP Index dropped 22.1% in our last fiscal quarter. With all MLP CEFs utilizing leverage, this exacerbated the Fund’s underperformance. From June 16 to the end of the fiscal year, the Fund dropped 10.2% versus only a 5.8% loss for the benchmark composite index with 2 percentage points directly attributed to discount widening in the Fund and the remaining underperformance related to underperformance of levered equities, mainly MLPs.

 

¢   The sharp collapse in the stock market in August sent CEF investors to the sidelines as discounts on the Fund widened to more than -14% before closing the fiscal year at -13.95%. At the start of the fiscal year, the average discount of the Fund was -10.25%. The closing discount of -13.95% was 3.70 percentage points lower than the start of the year. This widening in the overall market and Fund holdings, coupled with the overweighting to midstream MLP CEFs, were the main detractors to the Fund’s performance over the fiscal year.

 

¢   Our overweight positioning to CEF preferred shares, our largest positioning by strategy, provided a solid income stream and minimal volatility. We felt these investments, which provide qualified dividends with coupons ranging from 7.25% to 8.125%, were more prudent than fixed income CEFs going into a possible Fed rate hike in 2015. Understanding the behavior and mindset of
   

retail CEF investors, we expected there to be selling pressure in fixed income CEFs regardless of NAV performance as the constant news flow on when the Fed was going to hike rates would influence investment decisions more than fundamentals. Although no rate hike occurred over the fiscal year, discounts in taxable fixed income funds widened from -7.09% to -12.04%, leading to a majority of funds to have negative total returns over the fiscal year.

 

¢   With only four periods since 1987 where discounts in the CEF market breached -10%, we went to full investment in the Fund at the end of the fiscal year instead of waiting until tax-loss selling in December as we believe seasonal discount widening will be muted due to the extreme discounts we are currently seeing in the market. The Fund closed the fiscal year with a cash position of 2.5% versus the prior year’s 14%.

 

¢   The Fund used the sell-off in CEFs in the last fiscal quarter to add to equity and fixed income positions, which closed the period at 58.8% and 38.7%, respectively. At the prior fiscal year-end, only 46% was allocated to equities and 40% to fixed income. The fixed income allocation appears relatively unchanged year over year, but the composition of the holdings is vastly different as 24.6% of the portfolio is direct investment in CEF preferred shares versus 7.2% the year before. After the first Fed rate hike is done, we will be taking a closer look at fixed income CEFs again as we believe retail investors will return to the space once they see a rise in rates won’t affect the industry as much as they think based on the current extreme discounts.

 

¢   All CEF premium/discount data is sourced daily from Bloomberg and compiled by Thomas J. Herzfeld Advisors, Inc. Premium/discount is weighted by net assets of each fund.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based on market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

25

Table of Contents
Herzfeld Fund (Continued)   

 

There is no guarantee that the Fund will meet its objectives.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Equity Funds

     35 % 

International Equity Funds

     20   

Fixed Income Funds

     15   

Preferred Stock

     25   

International Fixed Income Funds

     1   

Other (includes short-term investments)

     4   
   

 

 

  

Total

     100 % 
   

 

 

  

Closed-end Funds: Closed-end funds may trade at a discount from their net asset values, which may affect whether the fund will realize gains or losses. They may also employ leverage, which may increase volatility.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Fund of funds: Because the fund can invest in other funds, it indirectly bears its proportionate share of the operating expenses and management fees of the underlying fund(s).

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

26

Table of Contents

Herzfeld Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
     1 year      Since
Inception		      Inception
Date		  
Class A Shares at NAV2      -7.17 %       3.99 %       9/5/12   
Class A Shares at POP3,4      -12.51         2.01         9/5/12   
Class C Shares at NAV2 and with CDSC      -7.94         3.22         9/5/12   
Class I Shares at NAV      -7.01         4.25         9/5/12   

MSCI AC World Index (net)

      -6.66         8.04 5       —   
Barclays U.S. Aggregate Bond Index      2.94         1.74 5       —   
Herzfeld Composite: 60% MSCI AC World Index (net) / 40% Barclays U.S. Aggregate Index      -2.76         5.61 5       —   

Fund Expense Ratios6: A Shares: Gross 3.51%, Net 1.60%; C Shares: Gross 4.26%, Net 2.35%; I Shares: Gross 3.26%, Net 1.35%.

All returns represent past performance which is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The above table and graph below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. Please visit Virtus.com for performance data current to the most recent month-end.

1  Total returns are historical and include changes in share price and the reinvestment of both dividends and capital gains distributions.
2  “NAV” (Net Asset Value) total returns do not include the effect of any sales charge.
3  “POP” (Public Offering Price) total returns include the effect of the maximum front-end 5.75% sales charge.
4  “CDSC” (Contingent Deferred Sales Charge) is applied to redemptions of certain classes of shares that do not have a sales charge applied at the time of purchase. CDSC charges for 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver. Expense ratios 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 September 5, 2012 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

27

Table of Contents

Multi-Asset Trend Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VAAAX

Class C: VAACX

Class I: VAISX

 

Portfolio Manager Commentary by Euclid Advisors LLC

 

¢   The Fund is diversified and has an investment objective of capital appreciation. In pursuing this objective, the Fund maintains an emphasis on preservation of capital.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -8.58%, Class C shares returned -9.23%, and Class I shares returned -8.36%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%. Dow Jones Global Moderate Portfolio Index, the Fund’s style-specific index appropriate for comparison, returned -1.83%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   During the early months of the fiscal year, global equity markets were mostly calm, rising gradually despite a spike in volatility in October 2014, a quick sell-off and subsequent recovery, and a modest drawdown in January 2015. In the middle of May 2015, management of the Fund changed, as did the Fund’s investment strategy. While the central investment thesis – participation in rising equity markets with protection in higher risk markets – remains the same, the techniques used to achieve these goals changed. The new investment strategy combines relative strength analysis, used to identify the most attractive areas for investment in a variety of global securities markets, with absolute momentum analysis, which is used to identify periods when a more cautious approach to taking risk is required.

 

¢   Soon after the change was made, the new strategy was tested by two very different market environments.

 

¢   May, June, and July proved to be relatively calm in the U.S. equity markets, despite a brief spike in volatility near the end of June. Global markets began to show weakness in May, after certain
   

non-U.S. equity indexes approached all-time highs in April, although volatility levels remained in line with historical averages. This global weakness seemed to have little impact on U.S. markets, and the longstanding bull market appeared intact. Stocks did begin to falter into August, although volatility and risk levels remained reasonable.

 

¢   As August came to a close, U.S. and global equity markets experienced massive volatility, as markets appeared to digest an array of global stresses all at once. A deterioration that began in the third week of August devolved into a complete meltdown on Monday, August 24, as the Dow Jones Industrial AverageSM dropped more than 1,000 points after the open, the largest intra-day drop in history. Concurrently, the CBOE Volatility Index® (VIX®) experienced its largest two-day percentage increase since the index was first published in 1990. The one-day damage in non-U.S. markets was less severe, but significant pain had already been felt overseas in the week prior.

 

¢   Volatility settled into an elevated regime over the rest of September, with the VIX® at levels roughly double what was seen in July and early August. After an extremely choppy September, the S&P 500® Index (price return) ended the quarter about 7% below where it started, and about 10% below the highs reached in mid-July. This puts the index down just over 1% over the past 12 months and down over 7% for 2015. In comparison, the MSCI All Country World Index (ex-US) was down nearly 12% over the past 12 months and down over 8% year to date. These troubling signs leave market participants to ask the question: Is this the end of one of the longest and strongest bull markets of all time, or just a (major) bump in the road? In our view, prediction is less reliable than preparation, and the portfolio is prepared to respond to both eventualities.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The equity portion of the Fund was bullishly positioned to start the fiscal year before a large drawdown occurred in which the portfolio de-risked to one sector on the domestic side, and one region on the international side, as volatility levels escalated quickly. The market subsequently rebounded quicker than the downturn and hit all-time highs.
   

Going to over 50% cash equivalents, and carrying it through to the middle of December, was the largest drag on the portfolio as the market continued to advance. The Fund avoided most of the drawdown in energy, which had deteriorated quickly over this time period, helping performance. Staying in emerging markets and real estate also helped performance. Heading into January the Fund was bullishly positioned before the market experienced another modest downturn and volatility levels became elevated; the portfolio then de-risked to 46% cash equivalents. The market subsequently rebounded in February, reaching all-time highs. Remaining invested in one or two sectors/regions during the course of February and failing to participate in the strong market rally led to the underperformance in the first part of the year.

 

¢   As the change in Fund management was made in May 2015, global markets remained calm. The Fund maintained exposure to risky assets until the last week of August, including global equities, real estate, and a long-dollar position. The Fund had exited an emerging market bond position in June, and a TIPS position in late July, shifting to safer fixed income assets. All positions as the end of the summer approached were in line with the calm markets up to that point, and were chosen based on strong relative strength signals. Just before the end of August, in response to the quickly deteriorating conditions, the Fund began to aggressively trade out of equities and into cash as a defensive mechanism. By the end of August, more than one-third of the U.S. portion of the portfolio was in cash, and the non-U.S. portion of the portfolio had a nearly 85% cash position. By the first week of September, the U.S. portfolio’s cash position had increased to greater than 50%, while the non-U.S. portfolio maintained its large cash allocation. The Fund also exited real estate and added a gold position.

 

¢   Activity in the U.S. equity portfolio was not focused on any sectors in particular, as the market sell-off was broad-based and appeared to impact all parts of the equities universe. The Fund did maintain an existing overweight to consumer discretionary stocks throughout the selling activity, ending the period with a roughly 20% allocation to that sector. This allocation was based on the strength of

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

28

Table of Contents
Multi-Asset Trend Fund (Continued)   

 

   

the sub-industries within that sector compared to the rest of the market, a theme which has been active for a number of months.

 

¢   The global equity portfolio, in the context of generally weaker global markets, had begun cutting risk exposure in late July. In short order the Fund exited positions in Asia (China, India, Japan, Hong Kong) and Europe (Spain, Switzerland, Germany). By the end of August, only Italy remained in the portfolio.

 

¢   As the quarter ended, both the S&P 500® Index and the MSCI All Country World Index (ex-U.S.) were still significantly below their 200-day average price levels, and the portfolio had a cash equivalents position in excess of 65%. The fixed income portion of the portfolio was highly defensive, limiting risk to U.S. Treasuries. In addition, the Fund had exposure to gold and the dollar. The defensive activities the Fund took in August and September led to outperformance, since the investment strategy was changed, of approximately 3.00% compared to the S&P 500® Index, and outperformance of approximately 1.00% compared to the Dow Jones Global Moderate Portfolio Index.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments.

Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Exchange Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities.

Commodity-Linked: Commodity-linked instruments may experience a return different than the commodity they attempt to track and may also be exposed to counterparty risk.

Allocation: The fund’s exposure to different asset classes may not be optimal for market conditions at a given time. Asset allocation does not guarantee a profit or protect against a loss in declining markets.

Prospectus: For additional information on risks, please see the fund’s prospectus.

There is no relationship between Dorsey Wright and Virtus other than a license by Dorsey Wright to Virtus of certain Dorsey Wright trademarks and trade names, and the Dorsey Wright technical analysis (“Technical Analysis”). The Technical Analysis has been created and developed by Dorsey Wright without regard to and independently of Virtus, its business, its development of this product, and/or any prospective investor. The licensing of any Technical Analysis to Virtus is not an offer to purchase or sell, or a solicitation or an offer to buy any securities. A determination that any portion of an investor’s portfolio should be devoted to any product developed by Virtus is a determination made solely by the investment advisor serving the investor or the investor himself, not Dorsey Wright or Virtus.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Common Stocks

       19 % 

Consumer Discretionary

     8 %     

Consumer Staples

     3       

Information Technology

     3       

All other Common Stocks

     5       

Exchange-Traded Funds

       44   

Other (includes short-term investments)

       37   
     

 

 

  

Total

       100 % 
           

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

29

Table of Contents

Multi-Asset Trend Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -8.58 %         2.52 %         3/15/11   
Class A Shares at POP3,4        -13.84           1.19           3/15/11   
Class C Shares at NAV2 and with CDSC4        -9.23           1.78           3/15/11   
Class I Shares at NAV        -8.36           2.77           3/15/11   
S&P 500® Index        -0.61           11.64 5         —   
Dow Jones Global Moderate Portfolio IndexSM        -1.83           5.78 5         —   

Fund Expense Ratios6: A Shares: Gross 1.79%, Net 1.75%; C Shares: Gross 2.52%, Net 2.50%; I Shares: Gross 1.54%, Net 1.50%.

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 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 28, 2015, as supplemented and revised, 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 through January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver. Expense ratios reflect fees and expenses associated with the underlying funds. Class C share ratio reflects distributor’s contractual waiver for 12b-1 fees.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on March 15, 2011 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

30

Table of Contents

Sector Trend Fund

 

Fund Summary

   

Ticker Symbols:

Class A: PWBAX

Class C: PWBCX Class I: VARIX

 

Portfolio Manager Commentary by Euclid Advisors LLC

 

¢   The Fund is diversified and has an investment objective of long-term capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -6.19%, Class C shares returned -6.86%, and Class I shares returned -5.90%. For the same period, the S&P 500® Index, which is both the broad-based equity index, and the Fund’s style-specific benchmark returned -0.61%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

 

¢   During the early months of the fiscal year, equity markets were mostly calm, rising gradually despite a spike in volatility in October 2014, a quick sell-off and subsequent recovery, and a modest drawdown in January 2015. In the middle of May 2015, management of the Fund changed, as did the Fund’s investment strategy. While the central investment thesis – participation in rising equity markets with protection in higher risk markets – remained the same, the techniques used to achieve these goals changed. The new investment strategy combines relative strength analysis, used to identify the most attractive areas for investment in the U.S. equity markets, with absolute momentum analysis, which is used to identify periods when a more cautious approach to taking equity risk is required.

 

¢   Soon after the manager change was made, the new strategy was tested by two very different market environments. The months of May, June, and July were relatively calm for U.S. equity markets, despite a brief spike in volatility in late June. Global concerns seemed to have little impact on U.S. markets, and the longstanding bull market appeared intact. Stocks began to fall into August, although volatility and risk levels remained reasonable.
¢   As August came to a close, U.S. equity markets experienced massive volatility, as markets appeared to digest an array of global stresses all at once. A deterioration that began in the third week of August devolved into a complete meltdown on Monday, August 24, when the Dow Jones Industrial AverageSM dropped more than 1,000 points after the market open, the largest intra-day drop in history. Concurrently, the CBOE Volatility Index® (VIX®) experienced its largest two-day percentage increase since the index was first published in 1990.

 

¢   Volatility settled into an elevated regime over the rest of September, with the VIX® at levels roughly double what was seen in July and early August. After an extremely choppy September, the S&P 500® Index (price return) ended the quarter about 7% below where it started, and about 10% below the highs reached in mid-July. This put the index down just over 1% over the 12 months, and down over 7% for 2015, leaving market participants to ask the question: Is this the end of one of the longest and strongest bull markets of all time, or just a (major) bump in the road? In our view, prediction is less reliable than preparation, and the portfolio is prepared to respond to both eventualities.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The Fund was bullishly positioned (with seven sectors on) to start the fiscal year before a large drawdown occurred in the markets. The portfolio de-risked to one sector (and 75% in cash equivalents) as volatility levels remained escalated. Going to cash, and then carrying it through to the middle of December was the largest drag on the portfolio as the market continued to advance. The Fund avoided most of the drawdown in energy which had deteriorated quickly over this time period, helping performance. Heading into January, the Fund was bullishly positioned (with five sectors on) before the market experienced another modest downturn and volatility levels became elevated; the portfolio de-risked to one sector (and 75% in cash equivalents). The market subsequently rebounded in February, reaching all-time highs. Remaining invested in one or two sectors during February and failing to participate in the strong market rally led to the underperformance in the first part of the year.
¢   As the change in investment strategy was made in May 2015, global markets remained calm. The Fund maintained full exposure to equities until the last week of August, in line with the calm markets up to that point. During June and July, the Fund removed allocations to the utilities, materials, and industrials sectors, reallocating capital to sectors with positive trends. Just before the end of August, in response to the quickly deteriorating conditions, the Fund began to aggressively trade out of equities and into cash equivalents as a defensive mechanism.

 

¢   Over the course of just a few days, the Fund exited the technology, health care, consumer staples, and financials sectors as each began to show signs of a negative price trend. By the end of August, only the consumer discretionary sector remained, leaving the portfolio with an 80% cash position.

 

¢   The defensive activities the Fund took in August and September led to outperformance, compared to the S&P 500® Index, of 3.00% since the changes to the investment strategy were made.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Allocation: The fund’s exposure to different asset classes may not be optimal for market conditions at a given time. Asset allocation does not guarantee a profit or protect against a loss in declining markets.

Prospectus: For additional information on risks, please see the fund’s prospectus

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

31

Table of Contents
Sector Trend Fund (Continued)   

 

There is no relationship between Dorsey Wright and Virtus other than a license by Dorsey Wright to Virtus of certain Dorsey Wright trademarks and trade names, and the Dorsey Wright technical analysis (“Technical Analysis”). The Technical Analysis has been created and developed by Dorsey Wright without regard to and independently of Virtus, its business, its development of this product, and/or any prospective investor. The licensing of any Technical Analysis to Virtus is not an offer to purchase or sell, or a solicitation or an offer to buy any securities. A determination that any portion of an investor’s portfolio should be devoted to any product developed by Virtus is a determination made solely by the investment advisor serving the investor or the investor himself, not Dorsey Wright or Virtus.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Consumer Discretionary

     21 % 

Other (includes short-term investments)

     79   
   

 

 

  

Total

     100 % 
   

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

32

Table of Contents

Sector Trend Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        5 years        10 years        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -6.19 %         10.53 %         5.92 %         —           —   
Class A Shares at POP3,4        -11.59           9.23           5.29           —           —   
Class C Shares at NAV2 and with CDSC4        -6.86           9.73           5.15           —           —   
Class I Shares at NAV        -5.90           10.82           —           11.12 %         10/1/09   
S&P 500® Index        -0.61           13.34           6.80           13.29 5         —   

Fund Expense Ratios6: A Shares 0.98%; C Shares 1.73%; I Shares 0.73%.

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 inception date of Class I shares.
6  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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 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 September 30, 2005, for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

33

Table of Contents

VIRTUS ALTERNATIVES DIVERSIFIER FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
AFFILIATED MUTUAL FUNDS(3)—61.2%   
Equity Funds—46.3%   

Virtus Global Infrastructure Fund

     1,125,028      $ 15,334   

Virtus Global Real Estate Securities Fund

     286,002        7,542   

Virtus International Real Estate Securities Fund

     1,160,713        7,707   

Virtus Real Estate Securities Fund

     187,107        7,189   
   

 

 

  
      37,772   
   

 

 

  
Fixed Income Funds—14.9%   

Virtus Senior Floating Rate Fund

     1,300,941        12,164   
TOTAL AFFILIATED MUTUAL FUNDS (Identified Cost $38,363)         49,936   
EXCHANGE-TRADED FUNDS(3)—38.0%   

Global X Uranium Fund

     30,100        209   

iShares S&P North American Natural Resources Sector Index Fund

     218,500        6,345   

PowerShares DB Commodity Index Tracking Fund(2)

     572,400        8,672   

PowerShares DB G10 Currency Harvest Fund(2)

     439,450        9,756   

WisdomTree Managed Futures Strategy Fund(2)

     146,000        6,050   
TOTAL EXCHANGE-TRADED FUNDS (Identified Cost $34,989)         31,032   
TOTAL LONG TERM INVESTMENTS—99.2%   
(Identified Cost $73,352)             80,968   
    SHARES     VALUE  
SHORT-TERM INVESTMENTS—0.4%   
Money Market Mutual Fund—0.4%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     296,368      $ 296   
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $296)         296   
TOTAL INVESTMENTS—99.6% (Identified Cost $73,648)         81,264 (1) 

Other assets and liabilities, net—0.4%

  

     293   
   

 

 

  
NET ASSETS—100.0%      $ 81,557   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
(3)  All of these funds are public funds and the prospectus and annual reports of each are publicly available.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at,
September 30,
2015		      Level 1
Quoted Prices		  

Equity Securities:

  

Affiliated Mutual Funds

   $ 49,936       $ 49,936   

Exchange-Traded Funds

     31,032         31,032   

Short-Term Investments

     296         296   
 

 

 

     

 

 

  

Total Investments

   $ 81,264       $ 81,264   
 

 

 

     

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

 

See Notes to Financial Statements

 

 

 

34

Table of Contents

VIRTUS DISCIPLINED EQUITY STYLE FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
EXCHANGE-TRADED FUNDS(2)—99.5%   

iShares Russell 1000® Value Index Fund

     15,500      $ 1,446   

iShares Russell 2000® Value Index Fund

     15,880        1,431   

iShares Russell Midcap® Value Index Fund

     21,530        1,444   
TOTAL EXCHANGE-TRADED FUNDS
(Identified Cost $4,300)		         4,321   
TOTAL LONG TERM INVESTMENTS—99.5%   
(Identified Cost $4,300)        4,321   
    SHARES     VALUE  
SHORT-TERM INVESTMENTS—0.9%   
Money Market Mutual Fund—0.9%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     38,900      $ 39   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $39)		         39   
TOTAL INVESTMENTS—100.4%
(Identified Cost $4,339)		         4,360 (1) 

Other assets and liabilities, net—(0.4)%

  

     (19 ) 
   

 

 

  
NET ASSETS—100.0%     $ 4,341   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  All of these funds are public funds and the prospectus and annual reports of each are publicly available.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted Prices		  

Equity Securities:

    

Exchange-Traded Funds

   $ 4,321      $ 4,321   

Short-Term Invest
ments

     39        39   
 

 

 

    

 

 

  

Total Investments

   $ 4,360      $ 4,360   
 

 

 

    

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

See Notes to Financial Statements

 

 

 

35

Table of Contents

VIRTUS DISCIPLINED SELECT BOND FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
EXCHANGE-TRADED FUNDS(2)—98.3%   

iShares 1-3 Year Treasury Bond Fund

     570      $ 49   

iShares 20+ Year Treasury Bond Fund

     400        49   

iShares Barclays 7-10 Year Treasury Bond Fund

     450        49   

iShares iBoxx $ High Yield Corporate Bond Fund

     3,710        309   

iShares iBoxx $ Investment Grade Corporate Bond Fund

     7,340        852   

iShares TIPS Bond Fund

     1,320        146   
TOTAL EXCHANGE-TRADED FUNDS
(Identified Cost $1,460)		         1,454   
TOTAL LONG TERM INVESTMENTS—98.3%   
(Identified Cost $1,460)        1,454   
SHORT-TERM INVESTMENTS—1.8%   
Money Market Mutual Fund—1.8%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     26,474        26   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $26)		         26   
TOTAL INVESTMENTS—100.1%
(Identified Cost $1,486)		         1,480 (1) 

Other assets and liabilities, net—(0.1)%

  

     (1 ) 
   

 

 

  
NET ASSETS—100.0%      $ 1,479   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  All of these funds are public funds and the prospectus and annual reports of each are publicly available.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted Prices		  

Equity Securities:

    

Exchange-Traded Funds

   $ 1,454      $ 1,454   

Short-Term Invest
ments

     26        26   
 

 

 

    

 

 

  

Total Investments

   $ 1,480      $ 1,480   
 

 

 

    

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

See Notes to Financial Statements

 

 

 

36

Table of Contents

VIRTUS DISCIPLINED SELECT COUNTRY FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
EXCHANGE-TRADED FUNDS(2)—100.6%     

iShares MSCI France Index Fund

     12,970      $ 312   

iShares MSCI Japan Index Fund

     27,320        312   

iShares MSCI Sweden Index Fund

     10,670        310   

iShares MSCI Switzerland Index Fund Capped

     10,250        314   
TOTAL EXCHANGE-TRADED FUNDS
(Identified Cost $1,293)		         1,248   
TOTAL LONG TERM INVESTMENTS—100.6%   
(Identified Cost $1,293)        1,248   
SHORT-TERM INVESTMENTS—0.9%   
Money Market Mutual Fund—0.9%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     10,949        11   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $11)		         11   
TOTAL INVESTMENTS—101.5% (Identified Cost $1,304)         1,259 (1) 

Other assets and liabilities, net—(1.5)%

  

     (19 ) 
   

 

 

  
NET ASSETS—100.0%     $ 1,240   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  All of these funds are public funds and the prospectus and annual reports of each are publicly available.

The following table provides a summary of inputs used to value the Fund’s investments as of

September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted Prices		  

Equity Securities:

    

Exchange-Traded Funds

   $ 1,248      $ 1,248   

Short-Term Invest
ments

     11        11   
 

 

 

    

 

 

  

Total Investments

   $ 1,259      $ 1,259   
 

 

 

    

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

See Notes to Financial Statements

 

 

 

37

Table of Contents

VIRTUS DYNAMIC TREND FUND

SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—60.0%   
Consumer Discretionary—27.4%   

Advance Auto Parts, Inc.

     12,228      $ 2,318   

Amazon.com, Inc.(2)(4)

     27,369        14,010   

AutoNation, Inc.(2)

     31,592        1,838   

AutoZone, Inc.(2)

     12,370        8,954   

Cablevision Systems Corp. Class A

     21,390        695   

CarMax, Inc.(2)(4)

     90,010        5,339   

Comcast Corp. Class A(4)

     258,577        14,708   

Expedia, Inc.

     7,089        834   

Goodyear Tire & Rubber Co. (The)(4)

     681,770        19,996   

Home Depot, Inc.

     152,950        17,664   

Lowe’s Cos., Inc.

     114,320        7,879   

Netflix, Inc.(2)

     29,472        3,043   

Newell Rubbermaid, Inc.(4)

     609,950        24,221   

NIKE, Inc. Class B(4)

     231,220        28,433   

O’Reilly Automotive, Inc.(2)

     38,835        9,709   

Priceline Group, Inc. (The)(2)

     3,731        4,615   

Time Warner Cable, Inc.

     25,912        4,648   

TripAdvisor, Inc.(2)

     8,142        513   
   

 

 

  
      169,417   
   

 

 

  
Consumer Staples—7.7%   

Brown-Forman Corp. Class B

     97,330        9,431   

Constellation Brands, Inc. Class A(4)

     116,860        14,632   

CVS Health Corp.(4)

     146,550        14,139   

Walgreens Boots Alliance, Inc.

     110,480        9,181   
   

 

 

  
      47,383   
   

 

 

  
Health Care—7.4%   

Aetna, Inc.

     32,415        3,546   

Anthem, Inc.

     27,165        3,803   

Cigna Corp.

     23,325        3,149   

HCA Holdings, Inc.(2)(4)

     169,850        13,140   

Humana, Inc.

     14,780        2,646   

Tenet Healthcare Corp.(2)

     67,325        2,486   

UnitedHealth Group, Inc.

     93,770        10,878   

Universal Health Services, Inc. Class B

     49,790        6,214   
   

 

 

  
      45,862   
   

 

 

  
Industrials—3.5%   

Allegion plc

     157,895        9,104   

Masco Corp.

     499,660        12,582   
   

 

 

  
      21,686   
   

 

 

  
Information Technology—8.2%   

Alliance Data Systems Corp.(2)

     4,775        1,237   

Automatic Data Processing, Inc.

     32,040        2,575   

Computer Sciences Corp.

     10,172        624   

Electronic Arts, Inc.(2)(4)

     368,780        24,985   

Fidelity National Information Services, Inc.

     17,520        1,175   

Fiserv, Inc.(2)

     15,940        1,380   

MasterCard, Inc. Class A

     65,242        5,880   

Paychex, Inc.

     21,420        1,020   

PayPal Holdings, Inc.(2)

     33,774        1,048   

Total System Services, Inc.

     12,625        573   
    SHARES     VALUE  
Information Technology—continued   

Visa, Inc. Class A

     127,830      $ 8,905   

Western Union Co. (The)

     39,740        730   

Xerox Corp.

     78,490        764   
   

 

 

  
      50,896   
   

 

 

  
Materials—3.7%   

Martin Marietta Materials, Inc.

     66,374        10,086   

Vulcan Materials Co.

     143,343        12,786   
   

 

 

  
      22,872   
   

 

 

  
Utilities—2.1%   

AGL Resources, Inc.(4)

     212,660        12,981   
   

 

 

  
              12,981   
TOTAL COMMON STOCKS
(Identified Cost $366,945)		         371,097   
TOTAL LONG TERM INVESTMENTS—60.0%   
(Identified Cost $366,945)        371,097   
SHORT-TERM INVESTMENTS—38.7%   
Money Market Mutual Funds—38.7%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     71,793,883        71,794   

Goldman Sachs Financial Square Funds – Money Market Fund – Institutional Shares (seven-day effective yield 0.090%)

     131,622,118        131,622   

JPMorgan U.S. Government Money Market Fund (seven-day effective yield 0.040%)

     35,896,941        35,897   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $239,313)		         239,313   
TOTAL INVESTMENTS, BEFORE SECURITIES SOLD SHORT—98.7%    
(Identified Cost $606,258)        610,410 (1) 
SECURITIES SOLD SHORT—(24.4)%   
EXCHANGE-TRADED FUNDS SOLD SHORT—(24.4)%    

S & P 500® ETF Trust SPDR Fund(3)

     785,199        (150,468 ) 
TOTAL SECURITIES SOLD SHORT—(24.4)%   
(Proceeds ($155,502))        (150,468 ) 
TOTAL INVESTMENTS, NET OF SECURITIES SOLD SHORT—74.3%
   
(Identified Cost $450,756)        459,942 (1) 

Other assets and liabilities, net—25.7%

  

     157,990   
   

 

 

  
NET ASSETS—100.0%      $ 617,932   
   

 

 

  

Abbreviations:

ETF Exchange-Traded Fund
SPDR S&P Depositary Receipt

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
(3)  This is a public fund and the prospectus and annual report are publicly available.
(4)  All or a portion segregated as collateral for securities sold short.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted Prices		  

Equity Securities:

    

Common stocks

   $ 371,097      $ 371,097   

Short-Term Investments

     239,313        239,313   
 

 

 

    

 

 

  

Total Investments Before Securities Sold Short

   $ 610,410      $ 610,410   
 

 

 

    

 

 

  

Liabilities:

    

Exchange-Traded Funds Sold Short

     (150,468 )      (150,468 ) 
 

 

 

    

 

 

  

Total Investments Net of Securities Sold Short

     459,942     

 

 

 

459,942

 

  

 

 

 

    

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

38

Table of Contents

VIRTUS EQUITY TREND FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—48.5%   
Consumer Discretionary—21.3%   

Advance Auto Parts, Inc.

     28,989      $ 5,494   

Amazon.com, Inc.(2)

     35,715        18,282   

AutoNation, Inc.(2)

     39,650        2,307   

AutoZone, Inc.(2)

     14,910        10,792   

Best Buy Co., Inc.

     603,999        22,420   

Cablevision Systems Corp. Class A

     26,940        875   

CarMax, Inc.(2)

     121,030        7,179   

Chipotle Mexican Grill, Inc.(2)

     3,690        2,658   

Comcast Corp. Class A

     317,665        18,069   

Darden Restaurants, Inc.

     16,470        1,129   

Expedia, Inc.

     10,540        1,240   

GameStop Corp. Class A

     218,611        9,009   

Gap, Inc. (The)

     94,825        2,702   

Goodyear Tire & Rubber Co. (The)

     993,350        29,135   

H&R Block, Inc.

     902,407        32,667   

Home Depot, Inc.

     177,650        20,517   

Horton (D.R.), Inc.

     345,010        10,129   

L Brands, Inc.

     85,475        7,704   

Leggett & Platt, Inc.

     236,605        9,760   

Lennar Corp. Class A

     204,740        9,854   

Lowe’s Cos., Inc.

     145,553        10,032   

McDonald’s Corp.

     112,840        11,118   

Mohawk Industries, Inc.(2)

     100,325        18,238   

Netflix, Inc.(2)

     31,610        3,264   

Newell Rubbermaid, Inc.

     732,020        29,069   

NIKE, Inc. Class B

     287,070        35,301   

O’Reilly Automotive, Inc.(2)

     45,050        11,262   

Priceline Group, Inc. (The)(2)

     5,590        6,914   

PulteGroup, Inc.

     365,870        6,904   

Ross Stores, Inc.

     121,180        5,874   

Starbucks Corp.

     180,050        10,234   

Time Warner Cable, Inc.

     31,445        5,640   

TJX Cos., Inc.

     189,590        13,541   

TripAdvisor, Inc.(2)

     14,325        903   

Urban Outfitters, Inc.(2)

     43,927        1,291   

Yum! Brands, Inc.

     53,810        4,302   
   

 

 

  
      395,809   
   

 

 

  
Consumer Staples—8.1%   

Altria Group, Inc.

     232,577        12,652   

Brown-Forman Corp. Class B

     129,730        12,571   

Campbell Soup Co.

     21,705        1,100   

ConAgra Foods, Inc.

     49,477        2,004   

Constellation Brands, Inc. Class A

     144,657        18,112   

CVS Health Corp.

     183,660        17,720   

General Mills, Inc.

     69,506        3,901   

Hershey Co. (The)

     16,107        1,480   

Hormel Foods Corp.

     16,916        1,071   

J.M. Smucker Co. (The)

     10,684        1,219   

Kellogg Co.

     30,639        2,039   

Keurig Green Mountain, Inc.

     11,639        607   

Kraft Heinz Co.(The)

     69,171        4,882   

McCormick & Co., Inc.

     15,798        1,298   

Mead Johnson Nutrition Co.

     23,754        1,672   
    SHARES     VALUE  
Consumer Staples—continued   

Molson Coors Brewing Co. Class B

     354,635      $ 29,442   

Mondelez International, Inc. Class A

     189,438        7,932   

Philip Morris International, Inc.

     182,953        14,514   

Reynolds American, Inc.

     97,742        4,327   

Tyson Foods, Inc. Class A

     34,453        1,485   

Walgreens Boots Alliance, Inc.

     140,375        11,665   
   

 

 

  
      151,693   
   

 

 

  
Energy—1.6%   

Marathon Petroleum Corp.

     145,186        6,727   

Phillips 66

     152,918        11,750   

Tesoro Corp.

     29,708        2,889   

Valero Energy Corp.

     125,575        7,547   
   

 

 

  
      28,913   
   

 

 

  
Health Care—3.0%   

Aetna, Inc.

     37,880        4,145   

Anthem, Inc.

     34,830        4,876   

Cigna Corp.

     29,110        3,930   

HCA Holdings, Inc.(2)

     214,200        16,571   

Humana, Inc.

     18,380        3,290   

Tenet Healthcare Corp.(2)

     73,865        2,727   

UnitedHealth Group, Inc.

     111,040        12,882   

Universal Health Services, Inc. Class B

     63,395        7,912   
   

 

 

  
      56,333   
   

 

 

  
Industrials—4.8%   

Allegion plc

     195,430        11,269   

Cintas Corp.

     370,680        31,786   

Dun & Bradstreet Corp.

     38,610        4,054   

Equifax, Inc.

     112,260        10,909   

Masco Corp.

     644,600        16,231   

Nielsen Holdings plc

     336,100        14,946   
   

 

 

  
      89,195   
   

 

 

  
Information Technology—6.4%   

Adobe Systems, Inc.(2)

     110,345        9,073   

Akamai Technologies, Inc.(2)

     11,280        779   

Alliance Data Systems Corp.(2)

     6,180        1,601   

Autodesk, Inc.

     49,512        2,186   

Automatic Data Processing, Inc.

     42,830        3,442   

Citrix Systems, Inc.(2)

     34,878        2,416   

Computer Sciences Corp.

     12,920        793   

eBay, Inc.(2)

     61,310        1,498   

Electronic Arts, Inc.(2)

     442,980        30,012   

Facebook, Inc. Class A(2)

     93,200        8,379   

Fidelity National Information Services, Inc.

     23,780        1,595   

Fiserv, Inc.(2)

     20,615        1,786   

Google, Inc. Class A(2)

     11,580        7,392   

Google, Inc. Class C(2)

     12,022        7,314   

Intuit, Inc.

     63,095        5,600   
    SHARES     VALUE  
Information Technology—continued   

MasterCard, Inc. Class A

     79,980      $ 7,208   

Paychex, Inc.

     30,802        1,467   

PayPal Holdings, Inc.(2)

     58,740        1,823   

salesforce.com, Inc.(2)

     138,293        9,602   

Total System Services, Inc.

     13,940        633   

VeriSign, Inc.(2)

     6,092        430   

Visa, Inc. Class A

     158,360        11,031   

Western Union Co. (The)

     50,500        927   

Xerox Corp.

     96,547        939   

Yahoo!, Inc.(2)

     61,497        1,778   
   

 

 

  
      119,704   
   

 

 

  
Materials—1.6%   

Martin Marietta Materials, Inc.

     84,370        12,820   

Vulcan Materials Co.

     187,510        16,726   
   

 

 

  
      29,546   
   

 

 

  
Utilities—1.7%   

AGL Resources, Inc.

     513,638        31,352   
TOTAL COMMON STOCKS
(Identified Cost $885,519)		         902,545   
TOTAL LONG TERM INVESTMENTS—48.5%   
(Identified Cost $885,519)        902,545   
SHORT-TERM INVESTMENTS—50.7%   
Money Market Mutual Funds—50.7%   

BlackRock Liquidity Funds TempFund Portfolio – Institutional Shares (seven-day effective yield 0.010%)

     141,491,837        141,492   

JPMorgan Prime Money Market Fund (seven-day effective yield 0.090%)

     660,295,241        660,295   

JPMorgan U.S. Government Money Market Fund (seven-day effective yield 0.040%)

     141,491,837        141,492   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $943,279)		         943,279   
TOTAL INVESTMENTS—99.2%     
(Identified Cost $1,828,798)        1,845,824 (1) 

Other assets and liabilities, net—0.8%

  

     15,452   
   

 

 

  
NET ASSETS—100.0%     $ 1,861,276   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
 

 

See Notes to Financial Statements

 

 

 

39

Table of Contents

VIRTUS EQUITY TREND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 1A in the Notes to Schedules of Investments):

 

     Total Value at
September 30,
2015		     Level 1
Quoted Prices		  

Equity Securities:

     

Common Stocks

    $ 902,545      $ 902,545   

Short-Term Investments

      943,279        943,279   
  

 

 

    

 

 

  

Total Investments

    $ 1,845,824      $ 1,845,824   
  

 

 

    

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

 

See Notes to Financial Statements

 

40

Table of Contents

VIRTUS GLOBAL EQUITY TREND FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—35.0%   
Consumer Discretionary—15.5%   

Advance Auto Parts, Inc.

     528      $ 100   

Amazon.com, Inc.(2)

     927        475   

AutoNation, Inc.(2)

     960        56   

AutoZone, Inc.(2)

     350        253   

Best Buy Co., Inc.

     11,025        409   

Cablevision Systems Corp. Class A

     400        13   

CarMax, Inc.(2)

     2,382        141   

Chipotle Mexican Grill, Inc.(2)

     70        50   

Comcast Corp. Class A

     7,290        415   

Darden Restaurants, Inc.

     320        22   

Expedia, Inc.

     290        34   

GameStop Corp. Class A

     4,002        165   

Gap, Inc. (The)

     2,160        62   

Goodyear Tire & Rubber Co. (The)

     22,380        656   

H&R Block, Inc.

     16,401        594   

Home Depot, Inc. (The)

     4,090        472   

Horton (D.R.), Inc.

     8,520        250   

L Brands, Inc.

     1,725        156   

Leggett & Platt, Inc.

     5,255        217   

Lennar Corp. Class A

     4,610        222   

Lowe’s Cos., Inc.

     3,045        210   

McDonald’s Corp.

     2,440        240   

Mohawk Industries, Inc.(2)

     2,400        436   

Netflix, Inc.(2)

     1,260        130   

Newell Rubbermaid, Inc.

     17,400        691   

NIKE, Inc. Class B

     6,610        813   

O’Reilly Automotive, Inc.(2)

     1,090        273   

Priceline Group, Inc. (The)(2)

     130        161   

PulteGroup, Inc.

     8,450        159   

Ross Stores, Inc.

     3,180        154   

Starbucks Corp.

     3,740        213   

Time Warner Cable, Inc.

     845        152   

TJX Cos., Inc.

     4,580        327   

TripAdvisor, Inc.(2)

     320        20   

Urban Outfitters, Inc.(2)

     815        24   

Yum! Brands, Inc.

     1,100        88   
   

 

 

  
      8,853   
   

 

 

  
Consumer Staples—5.4%   

Altria Group, Inc.

     4,424        241   

Brown-Forman Corp. Class B

     3,087        299   

Campbell Soup Co.

     412        21   

ConAgra Foods, Inc.

     941        38   

Constellation Brands, Inc. Class A

     3,340        418   

CVS Health Corp.

     4,070        393   

General Mills, Inc.

     1,275        71   

Hershey Co. (The)

     291        27   

Hormel Foods Corp.

     321        20   

J.M. Smucker Co. (The)

     225        26   

Kellogg Co.

     582        39   

Keurig Green Mountain, Inc.

     246        13   

Kraft Heinz Co.(The)

     1,315        93   

McCormick & Co., Inc.

     250        20   

Mead Johnson Nutrition Co.

     418        29   

Molson Coors Brewing Co. Class B

     6,417        533   

Mondelez International, Inc. Class A

     3,696        155   

Philip Morris International, Inc.

     3,513        279   

Reynolds American, Inc.

     1,858        82   

Tyson Foods, Inc. Class A

     624        27   

Walgreens Boots Alliance, Inc.

     3,170        263   
   

 

 

  
      3,087   
   

 

 

  
    SHARES     VALUE  
Energy—1.2%   

Marathon Petroleum Corp.

     3,234      $ 150   

Phillips 66

     3,235        249   

Tesoro Corp.

     880        85   

Valero Energy Corp.

     3,042        183   
   

 

 

  
      667   
   

 

 

  
Health Care—2.5%   

Aetna, Inc.

     1,130        124   

Anthem, Inc.

     870        122   

Cigna Corp.

     840        113   

HCA Holdings, Inc.(2)

     5,140        398   

Humana, Inc.

     480        86   

Tenet Healthcare Corp.(2)

     2,070        76   

UnitedHealth Group, Inc.

     2,540        295   

Universal Health Services, Inc. Class B

     1,567        195   
   

 

 

  
      1,409   
   

 

 

  
Industrials—3.5%   

Allegion plc

     4,280        247   

Cintas Corp.

     8,057        691   

Dun & Bradstreet Corp.

     880        92   

Equifax, Inc.

     2,450        238   

Masco Corp.

     15,510        390   

Nielsen Holdings plc

     7,637        340   
   

 

 

  
      1,998   
   

 

 

  
Information Technology—4.6%   

Adobe Systems, Inc.(2)

     1,981        163   

Akamai Technologies, Inc.(2)

     130        9   

Alliance Data Systems Corp.

     140        36   

Autodesk, Inc.(2)

     870        38   

Automatic Data Processing, Inc.

     1,017        82   

Citrix Systems, Inc.(2)

     646        45   

Computer Sciences Corp.

     160        10   

eBay, Inc.(2)

     1,455        35   

Electronic Arts, Inc.(2)

     10,865        736   

Facebook, Inc. Class A(2)

     2,280        205   

Fidelity National Information Services, Inc.

     610        41   

Fiserv, Inc.(2)

     520        45   

Google, Inc. Class A(2)

     320        204   

Google, Inc. Class C(2)

     320        195   

Intuit, Inc.

     1,154        102   

MasterCard, Inc. Class A

     1,750        158   

Paychex, Inc.

     700        33   

PayPal Holdings, Inc.(2)

     1,455        45   

salesforce.com, Inc.(2)

     2,533        176   

Total System Services, Inc.

     190        9   

VeriSign, Inc.

     70        5   

Visa, Inc. Class A

     3,475        242   

Western Union Co. (The)

     1,130        21   
   

 

 

  
      2,635   
   

 

 

  
Materials—1.3%   

Martin Marietta Materials, Inc.

     1,960        298   

Vulcan Materials Co.

     4,140        369   

Xerox Corp.

     2,270        22   

Yahoo!, Inc.(2)

     1,160        34   
   

 

 

  
      723   
   

 

 

  
    SHARES     VALUE  
Utilities—1.0%    

AGL Resources, Inc.

     9,335      $ 570   
TOTAL COMMON STOCKS (Identified Cost $19,600)             19,942   
TOTAL LONG TERM INVESTMENTS—35.0%   
(Identified Cost $19,600)             19,942   
SHORT-TERM INVESTMENTS—59.0%   
Money Market Mutual Fund—59.0%   

Fidelity Money Market Portfolio – Institutional Shares (Seven-day effective yield 0.140%)

     33,546,257        33,546   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $33,546)		         33,546   
TOTAL INVESTMENTS—94.0%
(Identified Cost $53,146)		         53,488 (1) 

Other assets and liabilities, net—6.0%

  

     3,409   
   

 

 

  
NET ASSETS—100.0%     $ 56,897   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total Value at
September 30,
2015		     Level 1
Quoted Prices		  

Equity Securities:

     

Common Stocks

    $ 19,942      $ 19,942   

Short-Term Investments

      33,546        33,546   
  

 

 

    

 

 

  

Total Investments

    $ 53,488      $ 53,488   
  

 

 

    

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

See Notes to Financial Statements

 

 

 

41

Table of Contents

VIRTUS HERZFELD FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
CLOSED END FUNDS—72.7%   
Convertible Fund—0.9%   

Putnam High Income Securities Fund

     48,414      $ 341   
   

 

 

  
Equity Funds—35.8%   

Adams Diversified Equity Fund, Inc.

     71,234        908   

Adams Natural Resources Fund, Inc.

     13,166        239   

Alpine Total Dynamic Dividend Fund

     118,834        891   

BlackRock Science & Technology Trust

     116,277        1,843   

Boulder Growth & Income Fund, Inc.

     239,381        1,783   

Cohen & Steers Infrastructure Fund, Inc.

     27,935        533   

Cohen & Steers Total Return Realty Fund, Inc.

     16,684        198   

Cushing MLP Total Return Fund (The)

     30,672        361   

Eaton Vance Tax-Advantaged Dividend Income Fund

     9,652        177   

First Trust Energy Infrastructure Fund

     25,901        414   

Gabelli Dividend & Income Trust (The)

     56,938        1,000   

Gabelli Healthcare & WellnessRx Trust (The)

     68,857        667   

Gabelli Multimedia Trust, Inc.

     44,700        337   

General American Investors Co., Inc.

     20,749        643   

Guggenheim Enhanced Equity Income Fund

     68,412        493   

Kayne Anderson Midsteam/Energy Fund, Inc.

     15,100        285   

Liberty All Star Equity Fund

     175,199        890   

Salient Midstream & MLP Fund

     65,385        915   

Tortoise Pipeline & Energy Fund, Inc.

     32,000        574   

Tri-Continental Corp.

     26,847        523   
   

 

 

  
      13,674   
   

 

 

  
Fixed Income Funds—14.7%   

First Trust High Income Long/Short Fund

     32,500        458   

First Trust Mortgage Income Fund

     14,700        212   

NexPoint Credit Strategies Fund

     196,934        1,128   

Nuveen Credit Strategies Income Fund

     11,000        88   

Nuveen Multi-Market Income Fund, Inc.

     14,024        98   

PIMCO Corporate & Income Strategy Fund

     10,911        143   

PIMCO Dynamic Credit Income Fund

     98,300        1,796   

PIMCO Dynamic Income Fund

     52,056        1,499   

PIMCO Income Strategy Fund

     22,000        213   
   

 

 

  
      5,635   
   

 

 

  
International Equity Funds—20.1%   

Aberdeen Japan Equity Fund, Inc.

     64,648        444   

Aberdeen Singapore Fund, Inc.

     5,100        44   
    SHARES     VALUE  
International Equity Funds—continued   

Alpine Global Dynamic Dividend Fund

     58,343      $ 499   

Brookfield Global Listed Infrastructure Income Fund, Inc.

     7,000        88   

Clough Global Opportunities Fund

     24,477        262   

Delaware Enhanced Global Dividend and Income Fund

     18,872        175   

Japan Smaller Capitalization Fund, Inc.

     53,793        547   

Korea Fund, Inc. (The)(2)

     7,079        251   

Macquarie Global Infrastructure Total Return Fund, Inc.

     4,000        77   

Morgan Stanley China A Share Fund, Inc.

     38,500        864   

New Germany Fund, Inc. (The)

     30,664        442   

RMR Real Estate Income Fund

     11,278        203   

Taiwan Fund, Inc. (The)

     29,640        429   

Tekla Healthcare Investors

     20,000        552   

Tekla Healthcare Opportunities Fund

     136,403        2,223   

Tekla World Healthcare Fund

     39,431        567   

Templeton Dragon Fund, Inc.

     1,837        34   
   

 

 

  
      7,701   
   

 

 

  
International Income Funds—1.2%   

Aberdeen Asia-Pacific Income Fund, Inc.

     14,107        64   

Diversified Real Asset Income Fund

     24,030        386   
   

 

 

  
              450   
TOTAL CLOSED END FUNDS
(Identified Cost $31,998)		         27,801   
PREFERRED STOCKS—24.8%   
Financials—24.8%   

Eagle Point Credit Co, Inc. 7.75%

     19,140        490   

MVC Capital, Inc. 7.25

     83,145        1,961   

Oxford Lane Capital Corp. 7.50%

     142,952        3,445   

Oxford Lane Capital Corp. 8.125%

     142,366        3,581   
TOTAL PREFERRED STOCKS
(Identified Cost $9,667)		         9,477   
TOTAL LONG TERM INVESTMENTS—97.5%   
(Identified Cost $41,665)             37,278   
SHORT-TERM INVESTMENTS—3.6%   
Money Market Mutual Fund—3.6%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     1,376,096        1,376   
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $1,376)         1,376   
TOTAL INVESTMENTS—101.1% (Identified Cost $43,041)         38,654 (1) 

Other assets and liabilities, net—(1.1)%

  

     (421 ) 
   

 

 

  
NET ASSETS—100.0%      $ 38,233   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		      Level 1
Quoted Prices		  

Equity Securities:

     

Closed-End Funds

   $ 27,801       $ 27,801   

Preferred Stock

     9,477         9,477   

Short-Term Invest
ments

     1,376         1,376   
 

 

 

     

 

 

  

Total Investments

   $ 38,654       $ 38,654   
 

 

 

     

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

See Notes to Financial Statements

 

 

 

42

Table of Contents

VIRTUS MULTI-ASSET TREND FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—18.8%   
Consumer Discretionary—8.3%   

Advance Auto Parts, Inc.

     1,478      $ 280   

Amazon.com, Inc.(2)

     2,090        1,070   

AutoNation, Inc.(2)

     2,520        147   

AutoZone, Inc.(2)

     920        666   

Best Buy Co., Inc.

     31,315        1,162   

Cablevision Systems Corp. Class A

     1,050        34   

CarMax, Inc.(2)

     6,110        363   

Chipotle Mexican Grill, Inc.(2)

     190        137   

Comcast Corp. Class A

     16,630        946   

Darden Restaurants, Inc.

     820        56   

Expedia, Inc.

     760        89   

GameStop Corp. Class A

     11,056        456   

Gap, Inc. (The)

     5,065        144   

Goodyear Tire & Rubber Co. (The)

     57,282        1,680   

H&R Block, Inc.

     46,250        1,674   

Home Depot, Inc.

     10,105        1,167   

Horton (D.R.), Inc.

     21,480        631   

L Brands, Inc.

     4,500        406   

Leggett & Platt, Inc.

     12,290        507   

Lennar Corp. Class A

     11,620        559   

Lowe’s Cos., Inc.

     8,345        575   

McDonald’s Corp.

     6,160        607   

Mohawk Industries, Inc.(2)

     5,460        993   

Netflix, Inc.(2)

     1,940        200   

Newell Rubbermaid, Inc.

     41,310        1,640   

NIKE, Inc. Class B

     15,125        1,860   

O’Reilly Automotive, Inc.(2)

     2,510        628   

Priceline Group, Inc. (The)(2)

     380        470   

PulteGroup, Inc.

     21,310        402   

Ross Stores, Inc.

     7,740        375   

Starbucks Corp.

     9,480        539   

Time Warner Cable, Inc.

     2,180        391   

TJX Cos., Inc.

     12,605        900   

TripAdvisor, Inc.(2)

     860        54   

Urban Outfitters, Inc.(2)

     2,150        63   

Yum! Brands, Inc.

     2,810        225   
   

 

 

  
      22,096   
   

 

 

  
Consumer Staples—3.0%   

Altria Group, Inc.

     12,007        653   

Brown-Forman Corp. Class B

     7,110        689   

Campbell Soup Co.

     1,222        62   

ConAgra Foods, Inc.

     2,786        113   

Constellation Brands, Inc. Class A

     9,190        1,151   

CVS Health Corp.

     9,417        909   

General Mills, Inc.

     3,605        202   

Hershey Co. (The)

     972        89   

Hormel Foods Corp.

     952        60   

J.M. Smucker Co. (The)

     501        57   

Kellogg Co.

     1,294        86   

Keurig Green Mountain, Inc.

     546        29   

Kraft Heinz Co.(The)

     3,506        248   

McCormick & Co., Inc.

     741        61   

Mead Johnson Nutrition Co.

     1,114        78   

Molson Coors Brewing Co. Class B

     18,179        1,509   

Mondelez International, Inc. Class A

     9,575        401   

Philip Morris International, Inc.

     9,433        748   

Reynolds American, Inc.

     4,816        213   
    SHARES     VALUE  
Consumer Staples—continued   

Tyson Foods, Inc. Class A

     1,386      $ 60   

Walgreens Boots Alliance, Inc.

     7,087        589   
   

 

 

  
      8,007   
   

 

 

  
Energy—0.7%   

Marathon Petroleum Corp.

     8,860        411   

Phillips 66

     8,872        682   

Tesoro Corp.

     2,070        201   

Valero Energy Corp.

     8,340        501   
   

 

 

  
      1,795   
   

 

 

  
Health Care—1.2%   

Aetna, Inc.

     2,657        291   

Anthem, Inc.

     2,030        284   

Cigna Corp.

     1,970        266   

HCA Holdings, Inc.(2)

     10,940        846   

Humana, Inc.

     1,130        202   

Tenet Healthcare Corp.(2)

     4,860        180   

UnitedHealth Group, Inc.

     6,990        811   

Universal Health Services, Inc. Class B

     3,440        429   
   

 

 

  
      3,309   
   

 

 

  
Industrials—2.0%   

Allegion plc

     11,770        679   

Cintas Corp.

     20,000        1,715   

Dun & Bradstreet Corp.

     2,060        216   

Equifax, Inc.

     6,715        653   

Masco Corp.

     42,700        1,075   

Nielsen Holdings plc

     20,970        932   
   

 

 

  
      5,270   
   

 

 

  
Information Technology—2.4%   

Adobe Systems, Inc.(2)

     5,618        462   

Akamai Technologies, Inc.(2)

     620        43   

Alliance Data Systems Corp.(2)

     360        93   

Autodesk, Inc.

     2,323        102   

Automatic Data Processing, Inc.

     2,395        192   

Citrix Systems, Inc.(2)

     1,888        131   

Computer Sciences Corp.

     800        49   

eBay, Inc.(2)

     3,415        83   

Electronic Arts, Inc.(2)

     23,665        1,603   

Facebook, Inc. Class A(2)

     4,840        435   

Fidelity National Information Services, Inc.

     1,620        109   

Fiserv, Inc.(2)

     1,360        118   

Google, Inc. Class A(2)

     640        409   

Google, Inc. Class C(2)

     660        402   

Intuit, Inc.

     3,172        281   

MasterCard, Inc. Class A

     4,800        433   

Paychex, Inc.

     1,850        88   

PayPal Holdings, Inc.(2)

     3,290        102   

salesforce.com, Inc.(2)

     7,252        503   

Total System Services, Inc.

     500        23   

VeriSign, Inc.(2)

     200        14   

Visa, Inc. Class A

     9,540        665   

Western Union Co. (The)

     2,980        55   

Xerox Corp.

     5,960        58   

Yahoo!, Inc.(2)

     3,055        88   
   

 

 

  
      6,541   
   

 

 

  
    SHARES     VALUE  
Materials—0.6%   

Martin Marietta Materials, Inc.

     4,700      $ 714   

Vulcan Materials Co.

     11,385        1,016   
   

 

 

  
      1,730   
   

 

 

  
Utilities—0.6%   

AGL Resources, Inc.

     26,324        1,607   
TOTAL COMMON STOCKS
(Identified Cost $49,596)		         50,355   
EXCHANGE-TRADED FUNDS(3)—43.3%   

iShares 1-3 Year Treasury Bond Fund

     676,665        57,510   

iShares 20+ Year Treasury Bond Fund

     313,540        38,735   

PowerShares DB Gold Fund(2)

     258,206        9,445   

Powershares DB U.S. Dollar Index Bullish Fund(2)

     415,267        10,423   
TOTAL EXCHANGE-TRADED FUNDS (Identified Cost $115,021)         116,113   
TOTAL LONG TERM INVESTMENTS—62.1%   
(Identified Cost $164,617)             166,468   
SHORT-TERM INVESTMENTS—34.8%   
Money Market Mutual Fund—34.8%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     93,287,912        93,288   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $93,288)		         93,288   
TOTAL INVESTMENTS—96.9%   
(Identified Cost $257,905)        259,756 (1) 

Other assets and liabilities, net—3.1%

  

     8,209   
   

 

 

  
NET ASSETS—100.0%     $ 267,965   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
(3)  All of these funds are public funds and the prospectus and annual reports of each are publicly available.
 

See Notes to Financial Statements

 

 

 

43

Table of Contents

VIRTUS MULTI-ASSET TREND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted Prices		  

Equity Securities:

    

Common Stocks

   $ 50,355      $ 50,355   

Exchange-Traded Funds

     116,113        116,113   

Short-Term Invest
ments

     93,288        93,288   
 

 

 

    

 

 

  

Total Investments

   $ 259,756      $ 259,756   
 

 

 

    

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

 

See Notes to Financial Statements

 

44

Table of Contents

VIRTUS SECTOR TREND FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—21.3%   
Consumer Discretionary—21.3%   

Advance Auto Parts, Inc.

     3,750      $ 711   

Amazon.com, Inc.(2)

     19,395        9,928   

AutoNation, Inc.(2)

     3,998        233   

AutoZone, Inc.(2)

     1,585        1,147   

Bed Bath & Beyond, Inc.

     8,910        508   

Best Buy Co., Inc.

     15,790        586   

BorgWarner, Inc.

     11,815        491   

Cablevision Systems Corp. Class A

     11,220        364   

CarMax, Inc.(2)

     10,530        625   

Carnival Corp.

     23,848        1,185   

CBS Corp. Class B

     22,813        910   

Chipotle Mexican Grill, Inc.(2)

     1,590        1,145   

Coach, Inc.

     14,220        411   

Comcast Corp. Class A

     108,660        6,181   

Comcast Corp. Special Class A

     18,940        1,084   

Darden Restaurants, Inc.

     5,805        398   

Delphi Automotive plc

     14,530        1,105   

Discovery Communications, Inc. Class A(2)

     7,548        196   

Discovery Communications, Inc. Class C(2)

     13,260        322   

Dollar General Corp.

     15,135        1,096   

Dollar Tree, Inc.(2)

     12,037        802   

Expedia, Inc.

     5,050        594   

Ford Motor Co.

     201,360        2,732   

Fossil Group, Inc.(2)

     2,260        126   

GameStop Corp. Class A

     5,425        224   

Gap, Inc. (The)

     12,205        348   

Garmin Ltd.

     6,290        226   

General Motors Co.

     74,725        2,243   

Genuine Parts Co.

     7,733        641   

Goodyear Tire & Rubber Co. (The)

     13,975        410   

H&R Block, Inc.

     14,075        510   

Hanesbrands, Inc.

     20,250        586   

Harley-Davidson, Inc.

     10,648        585   

Harman International Industries, Inc.

     3,718        357   

Hasbro, Inc.

     5,740        414   

Home Depot, Inc.

     66,033        7,626   

Horton (D.R.), Inc.

     16,618        488   

Interpublic Group of Cos., Inc. (The)

     20,525        393   

Johnson Controls, Inc.

     33,650        1,392   

Kohl’s Corp.

     10,325        478   

L Brands, Inc.

     13,085        1,179   

Leggett & Platt, Inc.

     6,885        284   

Lennar Corp. Class A

     8,930        430   

Lowe’s Cos., Inc.

     47,540        3,276   

Macy’s, Inc.

     17,200        883   

Marriott International, Inc. Class A

     10,243        699   

Mattel, Inc.

     17,668        372   

McDonald’s Corp.

     48,240        4,753   

Michael Kors Holdings Ltd.

     9,978        421   

Mohawk Industries, Inc.(2)

     3,265        594   

Netflix, Inc.(2)

     21,981        2,270   

Newell Rubbermaid, Inc.

     13,610        540   
    SHARES     VALUE  
Consumer Discretionary—continued   

News Corp

     5,500      $ 71   

News Corp. Class A

     19,568        247   

NIKE, Inc. Class B

     34,468        4,239   

Nordstrom, Inc.

     7,138        512   

O’Reilly Automotive, Inc.(2)

     5,080        1,270   

Omnicom Group, Inc.

     12,528        826   

Phillips-Van Heusen Corp.

     4,290        437   

Priceline Group, Inc. (The)(2)

     2,600        3,216   

PulteGroup, Inc.

     16,770        316   

Ralph Lauren Corp.

     3,130        370   

Ross Stores, Inc.

     21,276        1,031   

Royal Caribbean Cruises Ltd.

     8,870        790   

Scripps Networks Interactive, Inc. Class A

     4,958        244   

Signet Jewelers Ltd.

     4,030        549   

Staples, Inc.

     33,190        389   

Starbucks Corp.

     75,505        4,292   

Starwood Hotels & Resorts Worldwide, Inc.

     8,853        589   

Target Corp.

     32,110        2,526   

TEGNA, Inc.

     11,590        260   

Tiffany & Co.

     5,703        440   

Time Warner Cable, Inc.

     14,378        2,579   

Time Warner, Inc.

     41,968        2,885   

TJX Cos., Inc.

     34,600        2,471   

Tractor Supply Co.

     6,888        581   

TripAdvisor, Inc.(2)

     5,725        361   

Twenty-First Century Fox Inc

     22,180        600   

Twenty-First Century Fox, Inc. Class A

     62,730        1,692   

Under Armour, Inc. Class A(2)

     9,187        889   

Urban Outfitters, Inc.(2)

     4,813        141   

VF Corp.

     17,417        1,188   

Viacom, Inc. Class B

     17,825        769   

Walt Disney Co. (The)

     79,396        8,114   

Whirlpool Corp.

     4,020        592   

Wyndham Worldwide Corp.

     6,145        442   

Wynn Resorts Ltd.

     4,265        227   

Yum! Brands, Inc.

     22,450        1,795   
TOTAL COMMON STOCKS
(Identified Cost $116,539)		         113,442   
TOTAL LONG TERM INVESTMENTS—21.3%   
(Identified Cost $116,539)        113,442   
SHORT-TERM INVESTMENTS—79.0%   
Money Market Mutual Funds—79.0%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     315,921,510        315,922   

Goldman Sachs Financial Square Funds – Money Market Fund – Institutional Shares (seven-day effective yield 0.090%)

     84,245,736        84,246   
    SHARES     VALUE  
Money Market Mutual Funds—continued   

JPMorgan U.S. Government Money Market Fund (seven-day effective yield 0.040%)

     21,061,434      $ 21,061   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $421,229)		         421,229   
TOTAL INVESTMENTS—100.3%
(Identified Cost $537,768)		         534,671 (1) 

Other assets and liabilities, net—(0.3)%

  

     (1,379 ) 
   

 

 

  
NET ASSETS—100.0%     $ 533,292   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 11 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total Value at
September 30,
2015		      Level 1
Quoted Prices		  

Equity Securities:

      

Common Stocks

    $ 113,442       $ 113,442   

Short-Term Investments

      421,229         421,229   
  

 

 

     

 

 

  

Total Investments

    $ 534,671       $ 534,671   
  

 

 

     

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

 

See Notes to Financial Statements

 

 

 

45

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES

SEPTEMBER 30, 2015

(Reported in thousands except shares and per share amounts)

 

 

 

 

    

 

 

    

 

 

    

 

 

  
    Alternatives
Diversifier
Fund		     Disciplined
Equity Style
Fund		     Disciplined
Select Bond
Fund		     Disciplined
Select Country
Fund		  
Assets        

Investment in unaffiliated securities at value(1)(3)

   $ 31,328      $ 4,360      $ 1,480      $ 1,259   

Investments in affiliated funds at value(2)

     49,936        —        —        —   

Receivables

        

Investment securities sold

     1,400        4,276        —        —   

Fund shares sold

     20        —        —        —   

Receivable from adviser

     —        2        4        3   

Dividends and interest receivable

     39        10        —        —   

Prepaid trustee retainer

     1        —        —        —   

Prepaid expenses

     32        15        14        14   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

     82,756        8,663        1,498        1,276   
 

 

 

    

 

 

    

 

 

    

 

 

  
Liabilities        

Cash overdraft

        

Payables

        

Fund shares repurchased

     334        —        —        17   

Investment securities purchased

     769        4,300        —        —   

Distribution and service fees

     27        1        —        —   

Administration fees

     8        1        —        —   

Transfer agent fees and expenses

     36        1        —        —   

Trustees’ fees and expenses

     —        —        —        —   

Professional fees

     19        18        18        18   

Other accrued expenses

     6        1        1        1   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

     1,199        4,322        19        36   
 

 

 

    

 

 

    

 

 

    

 

 

  
Net Assets   $ 81,557      $ 4,341      $ 1,479      $ 1,240   
 

 

 

    

 

 

    

 

 

    

 

 

  
Net Assets Consist of:        

Capital paid in on shares of beneficial interest

   $ 155,153      $ 4,633      $ 1,601      $ 1,401   

Accumulated undistributed net investment income (loss)

     411        (20 )      1        4   

Accumulated undistributed net realized gain (loss)

     (81,623 )      (293 )      (117 )      (120 ) 

Net unrealized appreciation (depreciation) on investments

     7,616        21        (6 )      (45 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  
Net Assets   $ 81,557      $ 4,341      $ 1,479      $ 1,240   
 

 

 

    

 

 

    

 

 

    

 

 

  
Class A        

Net asset value (net assets/shares outstanding) per share

   $ 9.99      $ 10.83      $ 9.32      $ 9.30   

Maximum offering price per share NAV/(1–3.75%)

   $ —      $ —      $ 9.68      $ —   

Maximum offering price per share NAV/(1–5.75%)

   $ 10.60      $ 11.49      $ —      $ 9.87   

Shares of beneficial interest outstanding, no par value, unlimited authorization

     2,540,845        158,782        53,521        26,536   

Net Assets

   $ 25,377      $ 1,720      $ 499      $ 247   
Class C        

Net asset value (net assets/shares outstanding) and offering price per share

   $ 9.90      $ 10.57      $ 9.26      $ 9.23   

Shares of beneficial interest outstanding, no par value, unlimited authorization

     2,589,782        140,418        21,787        16,360   

Net Assets

   $ 25,637      $ 1,484      $ 202      $ 151   
Class I        

Net asset value (net assets/shares outstanding) and offering price per share

   $ 9.98      $ 10.91      $ 9.33      $ 9.33   

Shares of beneficial interest outstanding, no par value, unlimited authorization

     3,061,072        104,230        83,424        90,237   

Net Assets

   $ 30,543      $ 1,137      $ 778      $ 842   

(1) Investment in unaffiliated securities at cost

   $ 35,285      $ 4,339      $ 1,486      $ 1,304   

(2) Investment in affiliated funds at cost

   $ 38,363      $ —      $ —      $ —   

 

See Notes to Financial Statements

 

46

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES (Continued)

SEPTEMBER 30, 2015

(Reported in thousands except shares and per share amounts)

 

  

 

 

    

 

 

     

 

 

    

 

 

  
     Dynamic
Trend
Fund		     Equity
Trend
Fund		      Global
Equity Trend
Fund		     Herzfeld
Fund		  
                 
Assets          

Investment in unaffiliated securities at value(1)

    $ 610,410      $ 1,845,824       $ 53,488      $ 38,654   

Cash

      41        —         —        —   

Deposits with prime broker for securities sold short

      155,502        —         —        —   

Receivables

          

Investment securities sold

      —        27,405         3,765        —   

Fund shares sold

      7,736        1,244         13        299   

Dividends and interest receivable

      149        1,150         26        259   

Prepaid trustee retainer

      5        17         1        —   

Prepaid expenses

      82        168         25        29   
  

 

 

    

 

 

     

 

 

    

 

 

  

Total assets

      773,925        1,875,808         57,318        39,241   
  

 

 

    

 

 

     

 

 

    

 

 

  
Liabilities          

Securities sold short at value(2)

      150,468        —         —        —   

Payables

          

Fund shares repurchased

      3,293        11,137         305        597   

Investment securities purchased

      —        —         —        332   

Dividends and interest expense on securities sold short

      883        —         —        —   

Investment advisory fees

      783        1,610         49        32   

Distribution and service fees

      209        755         23        14   

Administration fees

      64        195         6        4   

Transfer agent fees and expenses

      232        639         14        7   

Trustees’ fees and expenses

      1        3         — (3)      —   

Professional fees

      20        24         18        19   

Other accrued expenses

      40        169         6        3   
  

 

 

    

 

 

     

 

 

    

 

 

  

Total liabilities

      155,993        14,532         421        1,008   
  

 

 

    

 

 

     

 

 

    

 

 

  
Net Assets    $ 617,932      $ 1,861,276       $ 56,897      $ 38,233   
  

 

 

    

 

 

     

 

 

    

 

 

  
Net Assets Consist of:          

Capital paid in on shares of beneficial interest

    $ 726,905      $ 2,251,358       $ 69,840      $ 42,707   

Accumulated undistributed net investment income (loss)

      — (3)      (8,830 )       (698 )      —   

Accumulated undistributed net realized gain (loss)

      (118,158 )      (398,278 )       (12,587 )      (87 ) 

Net unrealized appreciation (depreciation) on investments

      4,152        17,026         342        (4,387 ) 

Net unrealized appreciation (depreciation) on securities sold short

      5,033        —         —        —   
  

 

 

    

 

 

     

 

 

    

 

 

  
Net Assets    $ 617,932      $ 1,861,276       $ 56,897      $ 38,233   
  

 

 

    

 

 

     

 

 

    

 

 

  
Class A          

Net asset value (net assets/shares outstanding) per share

    $ 10.10      $ 12.14       $ 9.76      $ 9.91   

Maximum offering price per share NAV/(1–5.75%)

    $ 10.72      $ 12.88       $ 10.36      $ 10.51   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      15,029,556        42,873,573         1,898,041        840,073   

Net Assets

    $ 151,867      $ 520,337       $ 18,523      $ 8,324   
Class B          

Net asset value (net assets/shares outstanding) and offering price per share

    $ 9.15      $ —       $ —      $ —   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      4,831        —         —        —   

Net Assets

    $ 44      $ —       $ —      $ —   
Class C          

Net asset value (net assets/shares outstanding) and offering price per share

    $ 9.09      $ 11.87       $ 9.59      $ 9.87   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      22,668,315        62,902,674         2,333,491        1,495,125   

Net Assets

    $ 206,159      $ 746,390       $ 22,376      $ 14,761   
Class I          

Net asset value (net assets/shares outstanding) and offering price per share

    $ 10.27      $ 12.19       $ 9.79      $ 9.92   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      25,291,601        48,769,639         1,633,329        1,526,603   

Net Assets

    $ 259,770      $ 594,460       $ 15,998      $ 15,148   
Class R6          

Net asset value (net assets/shares outstanding) and offering price per share

    $ 10.28      $ 12.20       $ —      $ —   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      8,980        7,263         —        —   

Net Assets

    $ 92      $ 89       $ —      $ —   

(1) Investment in securities at cost

    $ 606,258      $ 1,828,798       $ 53,146      $ 43,041   

(2) Proceeds from securities sold short

    $ 155,502      $ —       $ —      $ —   

(3) Amount is less than $500.

          

 

See Notes to Financial Statements

 

47

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES (Continued)

SEPTEMBER 30, 2015

(Reported in thousands except shares and per share amounts)

 

  

 

 

     

 

 

  
     Multi-Asset
Trend
Fund		      Sector
Trend
Fund		  
         
Assets      

Investment in unaffiliated securities at value(1)

    $ 259,756       $ 534,671   

Receivables

      

Investment securities sold

      9,916         —   

Fund shares sold

      314         745   

Dividends and interest receivable

      70         155   

Prepaid trustee retainer

      2         4   

Prepaid expenses

      32         135   
  

 

 

     

 

 

  

Total assets

      270,090         535,710   
  

 

 

     

 

 

  
Liabilities      

Payables

      

Fund shares repurchased

      1,638         1,754   

Investment advisory fees

      229         203   

Distribution and service fees

      130         206   

Administration fees

      28         55   

Transfer agent fees and expenses

      60         145   

Trustees’ fees and expenses

      1         1   

Professional fees

      18         19   

Other accrued expenses

      21         35   
  

 

 

     

 

 

  

Total liabilities

      2,125         2,418   
  

 

 

     

 

 

  
Net Assets    $ 267,965       $ 533,292   
  

 

 

     

 

 

  
Net Assets Consist of:      

Capital paid in on shares of beneficial interest

    $ 298,820       $ 582,797   

Accumulated undistributed net investment income (loss)

      (2,581 )       1,513   

Accumulated undistributed net realized gain (loss)

      (30,125 )       (47,922 ) 

Net unrealized appreciation (depreciation) on investments

      1,851         (3,096 ) 
  

 

 

     

 

 

  
Net Assets    $ 267,965       $ 533,292   
  

 

 

     

 

 

  
Class A      

Net asset value (net assets/shares outstanding) per share

    $ 9.94       $ 11.00   

Maximum offering price per share NAV/(1–5.75%)

    $ 10.55       $ 11.67   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      5,552,953         14,257,268   

Net Assets

    $ 55,214       $ 156,759   
Class C      

Net asset value (net assets/shares outstanding) and offering price per share

    $ 9.80       $ 10.76   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      14,204,285         19,197,935   

Net Assets

    $ 139,223       $ 206,556   
Class I      

Net asset value (net assets/shares outstanding) and offering price per share

    $ 9.99       $ 11.02   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      7,363,867         15,426,427   

Net Assets

    $ 73,528       $ 169,977   

(1) Investment in securities at cost

    $ 257,905       $ 537,768   

 

See Notes to Financial Statements

 

48

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

 

 

 

    

 

 

    

 

 

    

 

 

  
    Alternatives
Diversifier
Fund 		    Disciplined
Equity Style
Fund		     Disciplined
Select Bond
Fund		     Disciplined
Select Country
Fund		  
                 
Investment Income        

Dividends

   $ 235      $ 38      $ 30      $ 49   

Dividends from affiliated funds

     2,410        —        —        —   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total investment income

     2,645        38        30        49   
 

 

 

    

 

 

    

 

 

    

 

 

  
Expenses        

Investment advisory fees

     —        34        12        17   

Service fees, Class A

     84        3        1        1   

Distribution and service fees, Class C

     332        11        2        2   

Administration fees

     132        4        1        1   

Transfer agent fees and expenses

     202        4        1        1   

Registration fees

     46        39        39        39   

Printing fees and expenses

     13        1        1        1   

Custodian fees

     2        1        1        1   

Professional fees

     23        18        18        18   

Trustees’ fees and expenses

     5        — (1)      — (1)      — (1) 

Miscellaneous expenses

     7        1        2        2   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total expenses

     846        116        78        83   

Less expenses reimbursed and/or waived by investment adviser

     —        (57 )      (58 )      (58 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Net expenses

     846        59        20        25   
 

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

     1,799        (21 )      10        24   
 

 

 

    

 

 

    

 

 

    

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments        

Net realized gain (loss) on unaffiliated investments

     (3,866 )      (293 )      (75 )      (110 ) 

Net realized gain (loss) on affiliated investments

     3,355        —        —        —   

Capital gain distributions from affiliated funds

     911        —        —        —   

Net increase from payments by affiliate(2)

     —        —        22        4   

Net change in unrealized appreciation (depreciation) on unaffiliated investments

     (5,718 )      58        (4 )      (73 ) 

Net change in unrealized appreciation (depreciation) on affiliated investments

     (6,791 )      —        —        —   
 

 

 

    

 

 

    

 

 

    

 

 

  
Net gain (loss) on investments     (12,109 )      (235 )      (57 )      (179 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

   $ (10,310 )    $ (256 )    $ (47 )    $ (155 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

(1) Amount is less than $500.

(2) See Note 3I in the Notes to Financial Statements.

 

See Notes to Financial Statements

 

49

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS (Continued)

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

  

 

 

    

 

 

     

 

 

     

 

 

  
     Dynamic
Trend
Fund		     Equity
Trend
Fund		      Global
Equity Trend
Fund		      Herzfeld
Fund		  
                 
Investment Income           

Dividends

    $ 13,354      $ 62,297       $ 1,924       $ 1,516   

Security lending

      —        32         —         —   

Foreign taxes withheld

      —        (21 )       —         —   
  

 

 

    

 

 

     

 

 

     

 

 

  

Total investment income

      13,354        62,308         1,924         1,516   
  

 

 

    

 

 

     

 

 

     

 

 

  
Expenses           

Investment advisory fees

      4,975 (2)      48,367         1,406         319   

Service fees, Class A

      862        3,044         103         21   

Distribution and service fees, Class B

      1        —         —         —   

Distribution and service fees, Class C

      3,635        13,843         452         136   

Administration fees

      1,662        5,346         155         38   

Transfer agent fees and expenses

      1,770        5,397         183         38   

Interest expense

      605        —         —         —   

Registration fees

      174        375         59         41   

Printing fees and expenses

      104        320         11         4   

Custodian fees

      23        126         4         1   

Professional fees

      58        129         23         25   

Trustees’ fees and expenses

      119        381         11         1   

Miscellaneous expenses

      100        291         11         3   
  

 

 

    

 

 

     

 

 

     

 

 

  

Total expenses

      14,088        77,619         2,418         627   
  

 

 

    

 

 

     

 

 

     

 

 

  

Dividends on short sales

      5,940        —         —         —   

Interest expense on short sales

      775        —         —         —   
  

 

 

    

 

 

     

 

 

     

 

 

  

Total expenses, including dividends and interest expense on short sales

      20,803        77,619         2,418         627   
  

 

 

    

 

 

     

 

 

     

 

 

  

Less expenses reimbursed and/or waived by investment adviser

      —        —         (7 )       (40 ) 
  

 

 

    

 

 

     

 

 

     

 

 

  

Net expenses

      20,803        77,619         2,411         587   
  

 

 

    

 

 

     

 

 

     

 

 

  

Net investment income (loss)

      (7,449 )      (15,311 )       (487 )       929   
  

 

 

    

 

 

     

 

 

     

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments           

Net realized gain (loss) on unaffiliated investments

      156,390        179,217         (8,221 )       (398 ) 

Net realized gain (loss) on foreign currency transactions

      — (1)      —         —         —   

Net realized gain (loss) on securities sold short

      (81,135 )      —         —         —   

Capital gain distributions from underlying funds

      —        —         —         616   

Net change in unrealized appreciation (depreciation) on investments

      (262,270 )      (738,910 )       (10,115 )       (4,845 ) 

Net change in unrealized appreciation (depreciation) on securities sold short

      10,846        —         —         —   
  

 

 

    

 

 

     

 

 

     

 

 

  
Net gain (loss) on investments      (176,169 )      (559,693 )       (18,336 )       (4,627 ) 
  

 

 

    

 

 

     

 

 

     

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ (183,618 )    $ (575,004 )     $ (18,823 )     $ (3,698 ) 
  

 

 

    

 

 

     

 

 

     

 

 

  

(1) Amount is less than $500.

(2) Includes $(16,501) related to a performance fee adjustment. See Note 3A.

 

See Notes to Financial Statements

 

50

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS (Continued)

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

  

 

 

     

 

 

  
     Multi-Asset
Trend
Fund		      Sector
Trend
Fund		  
         
Investment Income      

Dividends

    $ 7,576       $ 11,095   

Security lending

      —         4   

Foreign taxes withheld

      (1 )       (1 ) 
  

 

 

     

 

 

  

Total investment income

      7,575         11,098   
  

 

 

     

 

 

  
Expenses      

Investment advisory fees

      5,544         3,603   

Service fees, Class A

      253         668   

Distribution and service fees, Class C

      2,379         2,742   

Administration fees

      616         959   

Transfer agent fees and expenses

      631         1,041   

Registration fees

      99         42   

Printing fees and expenses

      41         68   

Custodian fees

      9         17   

Professional fees

      32         42   

Trustees’ fees and expenses

      44         68   

Miscellaneous expenses

      34         47   
  

 

 

     

 

 

  

Total expenses

      9,682         9,297   

Less expenses reimbursed and/or waived by investment adviser

      (19 )       —   
  

 

 

     

 

 

  

Net expenses

      9,663         9,297   
  

 

 

     

 

 

  

Net investment income (loss)

      (2,088 )       1,801   
  

 

 

     

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments      

Net realized gain (loss) on investments

      (20,719 )       94,402   

Capital gain distributions from underlying funds

      43         —   

Net change in unrealized appreciation (depreciation) on investments

      (21,205 )       (139,165 ) 
  

 

 

     

 

 

  
Net gain (loss) on investments      (41,881 )       (44,763 ) 
  

 

 

     

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ (43,969 )     $ (42,962 ) 
  

 

 

     

 

 

  

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

51

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS

($ reported in thousands)

 

  

 

 

       

 

 

  
     Alternatives Diversifier Fund        Disciplined Equity Style Fund  
     Year Ended
September 30,
2015		        Year Ended
September 30,
2014		        Year Ended
September 30,
2015		        Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ 1,799         $ 2,116         $ (21 )       $ (10 ) 

Net realized gain (loss)

      400           3,565           (293 )         423   

Net change in unrealized appreciation (depreciation)

      (12,509 )         2,712           58           (215 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
Increase (decrease) in net assets resulting from operations      (10,310 )         8,393           (256 )         198   
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (652 )         (549 )         —           —   

Net investment income, Class C

      (386 )         (21 )         —           —   

Net investment income, Class I

      (977 )         (1,358 )         —           —   

Net investment income, Class R6

      (— )         —           —           —   

Net realized short-term gains, Class A

      —           —           (117 )         (22 ) 

Net realized short-term gains, Class C

      —           —           (83 )         (15 ) 

Net realized short-term gains, Class I

      —           —           (210 )         (63 ) 

Net realized long-term gains, Class A

      —           —           (1 )         —   

Net realized long-term gains, Class C

      —           —           — (1)         —   

Net realized long-term gains, Class I

      —           —           (2 )         —   
  

 

 

       

 

 

       

 

 

       

 

 

  
Decrease in net assets from distributions to shareholders      (2,015 )         (1,928 )         (413 )         (100 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 5)                  

Change in net assets from share transactions, Class A

      (9,920 )         (14,109 )         1,372           242   

Change in net assets from share transactions, Class C

      (8,585 )         (8,314 )         1,397           51   

Change in net assets from share transactions, Class I

      (12,643 )         (66,597 )         212           63   
  

 

 

       

 

 

       

 

 

       

 

 

  
Increase (decrease) in net assets from share transactions      (31,148 )         (89,020 )         2,981           356   
  

 

 

       

 

 

       

 

 

       

 

 

  
Net increase (decrease) in net assets      (43,473 )         (82,555 )         2,312           454   
Net Assets                  

Beginning of fiscal year

      125,030           207,585           2,029           1,575   
  

 

 

       

 

 

       

 

 

       

 

 

  
End of fiscal year    $ 81,557         $ 125,030         $ 4,341         $ 2,029   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of fiscal year

    $ 411         $ 794         $ (20 )       $ —   

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

52

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

       

 

 

  
     Disciplined Select Bond Fund        Disciplined Select Country Fund  
     Year Ended
September 30,
2015		        Year Ended
September 30,
2014		        Year Ended
September 30,
2015		        Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ 10         $ 23         $ 24         $ 21   

Net realized gain (loss)

      (53 )         (4 )         (106 )         70   

Net change in unrealized appreciation (depreciation)

      (4 )         19           (73 )         (100 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
Increase (decrease) in net assets resulting from operations      (47 )         38           (155 )         (9 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (3 )         (3 )         (7 )         (1 ) 

Net investment income, Class C

      (— )(1)         (2 )         (2 )         —   

Net investment income, Class I

      (6 )         (17 )         (25 )         (10 ) 

Net realized short-term gains, Class A

      —           —           —           (2 ) 

Net realized short-term gains, Class C

      —           —           —           (1 ) 

Net realized short-term gains, Class I

      —           —           —           (8 ) 

Net realized long-term gains, Class A

      —           —           (16 )         —   

Net realized long-term gains, Class C

      —           —           (8 )         —   

Net realized long-term gains, Class I

      —           —           (54 )         —   
  

 

 

       

 

 

       

 

 

       

 

 

  
Decrease in net assets from distributions to shareholders      (9 )         (22 )         (112 )         (22 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 5)                  

Change in net assets from share transactions, Class A

      418           (53 )         (2 )         139   

Change in net assets from share transactions, Class C

      69           25           29           46   

Change in net assets from share transactions, Class I

      6           17           38           95   
  

 

 

       

 

 

       

 

 

       

 

 

  
Increase (decrease) in net assets from share transactions      493           (11 )         65           280   
  

 

 

       

 

 

       

 

 

       

 

 

  
Net increase (decrease) in net assets      437           5           (202 )         249   
Net Assets                  

Beginning of fiscal year

      1,042           1,037           1,442           1,193   
  

 

 

       

 

 

       

 

 

       

 

 

  
End of fiscal year    $ 1,479         $ 1,042         $ 1,240         $ 1,442   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of fiscal year

    $ 1         $ 1         $ 4         $ 14   

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

53

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

       

 

 

  
     Dynamic Trend Fund        Equity Trend Fund  
     Year Ended
September 30,
2015		        Year Ended
September 30,
2014		        Year Ended
September 30,
2015		        Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ (7,449 )       $ (4,830 )       $ (15,311 )       $ 21,879   

Net realized gain (loss)

      75,255           154,804           179,217           999,509   

Net change in unrealized appreciation (depreciation)

      (251,424 )         116,010           (738,910 )         (48,648 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
Increase (decrease) in net assets resulting from operations      (183,618 )         265,984           (575,004 )         972,740   
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      —           —           (816 )         (6,111 ) 

Net investment income, Class C

      —                —           —   

Net investment income, Class I

      —           —           (4,384 )         (15,369 ) 

Net investment income, Class R6

      —                (— )(1)         —   

Net realized short-term gains, Class A

      (7,936 )         —           (96,936 )         (42,252 ) 

Net realized short-term gains, Class B

      (2 )         —           —           —   

Net realized short-term gains, Class C

      (8,222 )         —           (98,311 )         (29,718 ) 

Net realized short-term gains, Class I

      (17,766 )         —           (160,323 )         (56,898 ) 

Net realized short-term gains, Class R6

      (2 )         —           (5 )         —   

Net realized long-term gains, Class A

      (67,402 )         —           (286,197 )         (16,551 ) 

Net realized long-term gains, Class B

      (15 )         —           —           —   

Net realized long-term gains, Class C

      (69,944 )         —           (289,362 )         (11,641 ) 

Net realized long-term gains, Class I

      (150,789 )         —           (473,696 )         (22,288 ) 

Net realized long-term gains, Class R6

      (13 )         —           (15 )         —   
  

 

 

       

 

 

       

 

 

       

 

 

  
Decrease in net assets from distributions to shareholders      (322,091 )         —           (1,410,045 )         (200,828 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 5)                  

Change in net assets from share transactions, Class A

      (447,390 )         (45,309 )         (984,779 )         (150,111 ) 

Change in net assets from share transactions, Class B

      (73 )         (4 )         —           —   

Change in net assets from share transactions, Class C

      (216,653 )         240,321           (668,784 )         508,692   

Change in net assets from share transactions, Class I

      (930,551 )         588,058           (2,373,748 )         917,705   

Change in net assets from share transactions, Class R6

      114           —           120           —   
  

 

 

       

 

 

       

 

 

       

 

 

  
Increase (decrease) in net assets from share transactions      (1,594,553 )         783,066           (4,027,191 )         1,276,286   
  

 

 

       

 

 

       

 

 

       

 

 

  
Net increase (decrease) in net assets      (2,100,262 )         1,049,050           (6,012,240 )         2,048,198   
Net Assets                  

Beginning of fiscal year

      2,718,194           1,669,144           7,873,516           5,825,318   
  

 

 

       

 

 

       

 

 

       

 

 

  
End of fiscal year    $ 617,932         $ 2,718,194         $ 1,861,276         $ 7,873,516   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of fiscal year

    $ — (1)       $ —         $ (8,830 )       $ 6,248   
                 

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

54

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

    

 

 

     

 

 

  
       Global Equity Trend Fund      Herzfeld Fund  
       Year Ended
September 30,
2015		        Year Ended
September 30,
2014		      Year Ended
September 30,
2015		        Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

      $ (487 )       $ 834       $ 929         $ 442   

Net realized gain (loss)

        (8,221 )         15,899         218           546   

Net change in unrealized appreciation (depreciation)

        (10,115 )         (3,898 )       (4,845 )         709   
    

 

 

       

 

 

     

 

 

       

 

 

  
Increase (decrease) in net assets resulting from operations        (18,823 )         12,835         (3,698 )         1,697   
    

 

 

       

 

 

     

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

        (271 )         (129 )       (283 )         (182 ) 

Net investment income, Class C

        —           —         (365 )         (209 ) 

Net investment income, Class I

        (467 )         (179 )       (414 )         (86 ) 

Net realized short-term gains, Class A

        (1,492 )         (1,574 )       (122 )         (20 ) 

Net realized short-term gains, Class C

        (1,771 )         (1,227 )       (166 )         (37 ) 

Net realized short-term gains, Class I

        (1,788 )         (1,115 )       (74 )         (12 ) 

Net realized long-term gains, Class A

        (3,944 )         (123 )       (104 )         (8 ) 

Net realized long-term gains, Class C

        (4,687 )         (96 )       (143 )         (15 ) 

Net realized long-term gains, Class I

        (4,759 )         (87 )       (69 )         (5 ) 
    

 

 

       

 

 

     

 

 

       

 

 

  
Decrease in net assets from distributions to shareholders        (19,179 )         (4,530 )       (1,740 )         (574 ) 
    

 

 

       

 

 

     

 

 

       

 

 

  
From Share Transactions (See Note 5)                  

Change in net assets from share transactions, Class A

        (45,890 )         15,714         428           5,951   

Change in net assets from share transactions, Class C

        (36,615 )         25,459         6,251           5,063   

Change in net assets from share transactions, Class I

        (70,130 )         58,239         13,715           1,516   
    

 

 

       

 

 

     

 

 

       

 

 

  
Increase (decrease) in net assets from share transactions        (152,635 )         99,412         20,394           12,530   
    

 

 

       

 

 

     

 

 

       

 

 

  
Net increase (decrease) in net assets        (190,637 )         107,717         14,956           13,653   
Net Assets                  

Beginning of fiscal year

        247,534           139,817         23,277           9,624   
    

 

 

       

 

 

     

 

 

       

 

 

  
End of fiscal year      $ 56,897         $ 247,534       $ 38,233         $ 23,277   
    

 

 

       

 

 

     

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of fiscal year

      $ (698 )       $ 526       $ —         $ 6   

 

See Notes to Financial Statements

 

55

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

       

 

 

  
     Multi-Asset Trend Fund        Sector Trend Fund  
     Year Ended
September 30,
2015		        Year Ended
September 30,
2014		        Year Ended
September 30,
2015		        Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ (2,088 )       $ 4,432         $ 1,801         $ 6,966   

Net realized gain (loss)

      (20,676 )         56,144           94,402           79,066   

Net change in unrealized appreciation (depreciation)

      (21,205 )         (18,719 )         (139,165 )         37,708   
  

 

 

       

 

 

       

 

 

       

 

 

  
Increase (decrease) in net assets resulting from operations      (43,969 )         41,857           (42,962 )         123,740   
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (516 )         (790 )         (1,055 )         (2,909 ) 

Net investment income, Class C

      —           —           (406 )         (577 ) 

Net investment income, Class I

      (1,292 )         (2,285 )         (1,161 )         (2,482 ) 

Net realized short-term gains, Class A

      (3,223 )         (1,344 )         (13,616 )         (8,366 ) 

Net realized short-term gains, Class C

      (7,394 )         (2,898 )         (13,013 )         (7,087 ) 

Net realized short-term gains, Class I

      (6,241 )         (2,928 )         (12,582 )         (5,701 ) 

Net realized long-term gains, Class A

      (7,765 )         (213 )         (59,091 )         (10,147 ) 

Net realized long-term gains, Class C

      (17,829 )         (460 )         (56,735 )         (8,594 ) 

Net realized long-term gains, Class I

      (15,105 )         (465 )         (54,658 )         (6,915 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
Decrease in net assets from distributions to shareholders      (59,365 )         (11,383 )         (212,317 )         (52,778 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 5)                  

Change in net assets from share transactions, Class A

      (68,771 )         22,647           (72,892 )         30,534   

Change in net assets from share transactions, Class C

      (146,112 )         89,286           (2,219 )         54,832   

Change in net assets from share transactions, Class I

      (206,162 )         55,797           (62,196 )         121,101   
  

 

 

       

 

 

       

 

 

       

 

 

  
Increase (decrease) in net assets from share transactions      (421,045 )         167,730           (137,307 )         206,467   
  

 

 

       

 

 

       

 

 

       

 

 

  
Net increase (decrease) in net assets      (524,379 )         198,204           (392,586 )         277,429   
Net Assets                  

Beginning of fiscal year

      792,344           594,140           925,878           648,449   
  

 

 

       

 

 

       

 

 

       

 

 

  
End of fiscal year    $ 267,965         $ 792,344         $ 533,292         $ 925,878   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of fiscal year

    $ (2,581 )       $ 1,359         $ 1,513         $ 2,325   

 

See Notes to Financial Statements

 

56

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Capital Gains Distributions
Received from Affiliated Funds(2)		   Net Realized and
Unrealized Gain
(Loss)		   Total from
Investment Operations		   Dividends from
Net Investment
Income		   Distributions from
Net Realized
Gains		   Total
Distributions		   Change in
Net Asset Value		   Net Asset
Value, End of Period		   Total
Return(1)		   Net Assets,
End of Period
(in thousands)		   Ratio of Net Expenses to
Average
Net Assets(8)		   Ratio of
Gross Expenses to Average    
Net Assets (before
waivers and
reimbursements)(8)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate
Alternatives                                                                                                                                                                  

Diversifier Fund

                                                                  

Class A

                                                                  

10/1/14 to 9/30/15

       $ 11.31         0.19         0.09         (1.39 )       (1.11 )       (0.21 )       —         (0.21 )       (1.32 )     $ 9.99         (10.02 )%     $ 25,377         0.64 %       0.64 %       1.77 %       46 %

10/1/13 to 9/30/14

         10.97         0.15         0.07         0.25         0.47         (0.13 )       —         (0.13 )       0.34         11.31         4.28         39,076         0.65         0.65         1.32         27  

10/1/12 to 9/30/13

         11.10         0.21         —         (0.13 )       0.08         (0.21 )       —         (0.21 )       (0.13 )       10.97         0.73         51,339         0.58 (7)       0.63         1.93         24  

10/1/11 to 9/30/12

         9.68         0.10         —         1.38         1.48         (0.06 )       —         (0.06 )       1.42         11.10         15.37         65,463         0.45         0.65         0.95         29  

10/1/10 to 9/30/11(11)

         10.05         0.21         0.07         (0.49 )       (0.21 )       (0.16 )       —         (0.16 )       (0.37 )       9.68         (2.12 )       79,103         0.45         0.65         1.96         18  

Class C

                                                                  

10/1/14 to 9/30/15

       $ 11.21         0.11         0.09         (1.39 )       (1.19 )       (0.12 )       —         (0.12 )       (1.31 )     $ 9.90         (10.66 )%     $ 25,637         1.39 %       1.39 %       1.02 %       46 %

10/1/13 to 9/30/14

         10.83         0.07         0.07         0.25         0.39         (0.01 )       —         (0.01 )       0.38         11.21         3.47         38,005         1.40         1.40         0.58         27  

10/1/12 to 9/30/13

         10.93         0.13         —         (0.13 )       —         (0.10 )       —         (0.10 )       (0.10 )       10.83         (0.05 )       44,850         1.33 (7)       1.38         1.22         24  

10/1/11 to 9/30/12

         9.55         0.02         —         1.36         1.38         —         —         —         1.38         10.93         14.45         57,336         1.20         1.40         0.20         29  

10/1/10 to 9/30/11(11)

         9.95         0.13         0.07         (0.48 )       (0.28 )       (0.12 )       —         (0.12 )       (0.40 )       9.55         (2.82 )       66,411         1.20         1.40         1.20         18  

Class I

                                                                  

10/1/14 to 9/30/15

       $ 11.30         0.22         0.09         (1.39 )       (1.08 )       (0.24 )       —         (0.24 )       (1.32 )     $ 9.98         (9.77 )%     $ 30,543         0.39 %       0.39 %       1.99 %       46 %

10/1/13 to 9/30/14

         10.98         0.18         0.08         0.24         0.50         (0.18 )       —         (0.18 )       0.32         11.30         4.52         47,949         0.40         0.40         1.56         27  

10/1/12 to 9/30/13

         11.12         0.16         —         (0.05 )       0.11         (0.25 )       —         (0.25 )       (0.14 )       10.98         1.00         111,396         0.36 (7)       0.38         1.48         24  

10/1/11 to 9/30/12

         9.70         0.13         —         1.38         1.51         (0.09 )       —         (0.09 )       1.42         11.12         15.63         37,590         0.20         0.40         1.21         29  

10/1/10 to 9/30/11(11)

         10.06         0.23         0.06         (0.48 )       (0.19 )       (0.17 )       —         (0.17 )       (0.36 )       9.70         (1.89 )       36,495         0.20         0.39         2.16         18  
Disciplined Equity                                                                  

Style Fund

                                                                  

Class A

                                                                  

10/1/14 to 9/30/15

       $ 13.13         (0.05 )       —         0.21         0.16         —         (2.46 )       (2.46 )       (2.30 )     $ 10.83         (0.01 )%     $ 1,720         1.60 %       3.21 %       (0.45 )%       408 %

10/1/13 to 9/30/14

         12.47         (0.07 )       —         1.51         1.44         —         (0.78 )       (0.78 )       0.66         13.13         11.77         594         1.60         4.97         (0.56 )       220  

12/18/12(6) to 9/30/13

         10.00         —         —         2.55         2.55         (0.08 )       — (5)       (0.08 )       2.47         12.47         25.75 (4)       326         1.60 (3)       7.63 (3)       0.02 (3)       447 (4)

Class C

                                                                  

10/1/14 to 9/30/15

       $ 12.95         (0.14 )       —         0.22         0.08         —         (2.46 )       (2.46 )       (2.38 )     $ 10.57         (0.72 )%     $ 1,484         2.35 %       3.87 %       (1.20 )%       408 %

10/1/13 to 9/30/14

         12.40         (0.17 )       —         1.50         1.33         —         (0.78 )       (0.78 )       0.55         12.95         10.91         300         2.35         5.76         (1.32 )       220  

12/18/12(6) to 9/30/13

         10.00         (0.05 )       —         2.53         2.48         (0.08 )       — (5)       (0.08 )       2.40         12.40         25.02 (4)       237         2.35 (3)       8.53 (3)       (0.51 )(3)       447 (4)

Class I

                                                                  

10/1/14 to 9/30/15

       $ 13.19         (0.04 )       —         0.22         0.18         —         (2.46 )       (2.46 )       (2.28 )     $ 10.91         0.16 %     $ 1,137         1.35 %       3.18 %       (0.29 )%       408 %

10/1/13 to 9/30/14

         12.49         (0.04 )       —         1.52         1.48         —         (0.78 )       (0.78 )       0.70         13.19         12.09         1,135         1.35         4.74         (0.33 )       220  

12/18/12(6) to 9/30/13

         10.00         0.05         —         2.52         2.57         (0.08 )       — (5)       (0.08 )       2.49         12.49         25.96 (4)       1,012         1.35 (3)       7.87 (3)       0.59 (3)       447 (4)

The footnote legend is at the end of the Financial Highlights

 

See Notes to Financial Statements

 

57

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets, End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(8)		   Ratio of Gross Expenses to Average    
Net Assets (before waivers and
reimbursements)(8)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate
Disciplined Select                                                                                                                                                        

Bond Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 9.59         0.06         (0.27 )       (0.21 )       (0.06 )       —         (0.06 )       (0.27 )     $ 9.32         (2.25 )%     $ 499         1.40 %       6.16 %       0.67 %       1,212 %

10/1/13 to 9/30/14

         9.44         0.19         0.15         0.34         (0.19 )       —         (0.19 )       0.15         9.59         3.59         108         1.40         7.28         2.02         1,126  

12/18/12(6) to 9/30/13

         10.00         0.11         (0.57 )       (0.46 )       (0.10 )       —         (0.10 )       (0.56 )       9.44         (4.53 )(4)       157         1.40 (3)       9.27 (3)       1.46 (3)       401 (4)

Class C

                                                              

10/1/14 to 9/30/15

       $ 9.57         (0.02 )       (0.27 )       (0.29 )       (0.02 )       —         (0.02 )       (0.31 )     $ 9.26         (3.02 )%     $ 202         2.15 %       5.62 %       (0.25 )%       1,212 %

10/1/13 to 9/30/14

         9.44         0.11         0.15         0.26         (0.13 )       —         (0.13 )       0.13         9.57         2.73         140         2.15         8.57         1.19         1,126  

12/18/12(6) to 9/30/13

         10.00         0.05         (0.54 )       (0.49 )       (0.07 )       —         (0.07 )       (0.56 )       9.44         (4.95 )(4)       114         2.15 (3)       10.14 (3)       0.70 (3)       401 (4)

Class I

                                                              

10/1/14 to 9/30/15

       $ 9.59         0.08         (0.27 )       (0.19 )       (0.07 )       —         (0.07 )       (0.26 )     $ 9.33         (2.03 )%     $ 778         1.15 %       4.50 %       0.86 %       1,212 %

10/1/13 to 9/30/14

         9.45         0.21         0.14         0.35         (0.21 )       —         (0.21 )       0.14         9.59         3.75         794         1.15         7.35         2.22         1,126  

12/18/12(6) to 9/30/13

         10.00         0.13         (0.55 )       (0.42 )       (0.13 )       —         (0.13 )       (0.55 )       9.45         (4.28 )(4)       766         1.15 (3)       9.18 (3)       1.71 (3)       401 (4)
Disciplined Select                                                              

Country Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 11.18         0.10         (1.13 )       (1.03 )       (0.25 )       (0.60 )       (0.85 )       (1.88 )     $ 9.30         (9.68 )%     $ 247         1.70 %       5.56 %       0.96 %       579 %

10/1/13 to 9/30/14

         11.34         0.25         (0.21 )       0.04         (0.06 )       (0.14 )       (0.20 )       (0.16 )       11.18         0.29         299         1.70         6.45         2.09         217  

12/18/12(6) to 9/30/13

         10.00         0.03         1.31         1.34         —         —         —         1.34         11.34         13.40 (4)       171         1.70 (3)       8.97 (3)       0.38 (3)       115 (4)

Class C

                                                              

10/1/14 to 9/30/15

       $ 11.09         0.04         (1.13 )       (1.09 )       (0.17 )       (0.60 )       (0.77 )       (1.86 )     $ 9.23         (10.29 )%     $ 151         2.45 %       6.37 %       0.41 %       579 %

10/1/13 to 9/30/14

         11.28         0.11         (0.16 )       (0.05 )       —         (0.14 )       (0.14 )       (0.19 )       11.09         (0.51 )       156         2.45         7.16         0.94         217  

12/18/12(6) to 9/30/13

         10.00         (0.04 )       1.32         1.28         —         —         —         1.28         11.28         12.80 (4)       113         2.45 (3)       9.87 (3)       (0.55 )(3)       115 (4)

Class I

                                                              

10/1/14 to 9/30/15

       $ 11.21         0.20         (1.20 )       (1.00 )       (0.28 )       (0.60 )       (0.88 )       (1.88 )     $ 9.33         (9.43 )%     $ 842         1.45 %       5.13 %       1.90 %       579 %

10/1/13 to 9/30/14

         11.37         0.19         (0.12 )       0.07         (0.09 )       (0.14 )       (0.23 )       (0.16 )       11.21         0.48         987         1.45         6.17         1.65         217  

12/18/12(6) to 9/30/13

         10.00         0.04         1.33         1.37         —         —         —         1.37         11.37         13.70 (4)       909         1.45 (3)       8.87 (3)       0.46 (3)       115 (4)

The footnote legend is at the end of the Financial Highlights

 

See Notes to Financial Statements

 

58

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Tax Return of Capital   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets, End of Period
(in thousands)		   Ratio of Expenses (including dividends
and interest on short sales after expense
waivers and reimbursements) to Average     
Net Assets(8)		   Ratio of Expenses (including dividends
and interest
on short sales before
expense
waivers and reimburse
ments)
to Average
Net Assets(8) 		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate

Dynamic Trend

                                                                                                                                                                  

Fund

                                                                 

Class A

                                                                  

10/1/14 to 9/30/15

       $ 13.29         (0.06 )       (1.27 )       (1.33 )       —         (1.86 )       —         (1.86 )       (3.19 )     $ 10.10         (11.02 )%     $ 151,867         1.42 %(9)       1.42 %(9)       (0.49 )%       687 %

10/1/13 to 9/30/14

         11.73         (0.03 )       1.59         1.56         —         —         —         —         1.56         13.29         13.30         721,407         2.68 (9)       2.68 (9)       (0.23 )       233  

10/1/12 to 9/30/13

         9.90         0.03         1.87         1.90         (0.04 )       —         (0.03 )       (0.07 )       1.83         11.73         19.32         660,921         2.73 (7)(9)       2.83 (9)       0.27         137  

10/1/11 to 9/30/12

         9.09         0.08         0.73         0.81         —         —         —         —         0.81         9.90         8.91         109,724         2.78 (9)       3.06 (9)       0.86         165  

10/1/10 to 9/30/11

         10.57         (0.28 )       (0.91 )       (1.19 )       —         (0.29 )       —         (0.29 )       (1.48 )       9.09         (11.59 )       6,615         4.35         4.65         (2.79 )       186  

Class B

                                                                  

10/1/14 to 9/30/15

       $ 12.30         (0.11 )       (1.18 )       (1.29 )       —         (1.86 )       —         (1.86 )       (3.15 )     $ 9.15         (11.76 )%     $ 44         2.02 %(9)       2.02 %(9)       (1.10 )%       687 %

10/1/13 to 9/30/14

         10.94         (0.12 )       1.48         1.36         —         —         —         —         1.36         12.30         12.43         144         3.44 (9)       3.44 (9)       (0.99 )       233  

10/1/12 to 9/30/13

         9.24         (0.07 )       1.77         1.70         —         —         —         —         1.70         10.94         18.40         130         3.41 (7)(9)       3.52 (9)       (0.71 )       137  

10/1/11 to 9/30/12

         8.54         (0.19 )       0.89         0.70         —         —         —         —         0.70         9.24         8.20         150         4.23 (9)       4.81 (9)       (2.19 )       165  

10/1/10 to 9/30/11

         10.04         (0.33 )       (0.88 )       (1.21 )       —         (0.29 )       —         (0.29 )       (1.50 )       8.54         (12.42 )       260         5.02         5.32         (3.49 )       186  

Class C

                                                                  

10/1/14 to 9/30/15

       $ 12.24         (0.10 )       (1.19 )       (1.29 )       —         (1.86 )       —         (1.86 )       (3.15 )     $ 9.09         (11.73 )%     $ 206,159         2.02 %(9)       2.02 %(9)       (1.02 )%       687 %

10/1/13 to 9/30/14

         10.88         (0.11 )       1.47         1.36         —         —         —         —         1.36         12.24         12.50         546,986         3.44 (9)       3.44 (9)       (0.87 )       233  

10/1/12 to 9/30/13

         9.21         (0.04 )       1.74         1.70         —         —         (0.03 )       (0.03 )       1.67         10.88         18.48         263,722         3.52 (7)(9)       3.62 (9)       (0.38 )       137  

10/1/11 to 9/30/12

         8.52         0.01         0.68         0.69         —         —         —         —         0.69         9.21         8.10         27,123         3.61 (9)       3.91 (9)       0.12         165  

10/1/10 to 9/30/11

         10.00         (0.33 )       (0.86 )       (1.19 )       —         (0.29 )       —         (0.29 )       (1.48 )       8.52         (12.26 )       2,330         5.07         5.38         (3.50 )       186  

Class I

                                                                  

10/1/14 to 9/30/15

       $ 13.45         (0.03 )       (1.29 )       (1.32 )       —         (1.86 )       —         (1.86 )       (3.18 )     $ 10.27         (10.86 )%     $ 259,770         1.24 %(9)       1.24 %(9)       (0.30 )%       687 %

10/1/13 to 9/30/14

         11.84         0.01         1.60         1.61         —         —         —         —         1.61         13.45         13.60         1,449,657         2.43 (9)       2.43 (9)       0.11         233  

10/1/12 to 9/30/13

         9.98         0.06         1.89         1.95         (0.06 )       —         (0.03 )       (0.09 )       1.86         11.84         19.67         744,371         2.49 (7)(9)       2.59 (9)       0.50         137  

10/1/11 to 9/30/12

         9.12         0.05         0.81         0.86         —         —         —         —         0.86         9.98         9.43         112,349         2.78 (9)       3.06 (9)       0.49         165  

10/1/10 to 9/30/11

         10.58         (0.25 )       (0.92 )       (1.17 )       —         (0.29 )       —         (0.29 )       (1.46 )       9.12         (11.47 )       27,976         4.03         4.33         (2.48 )       186  

Class R6

                                                                  

11/14/14(6) to 9/30/15

       $ 13.00         0.06         (0.92 )       (0.86 )       —         (1.86 )       —         (1.86 )       (2.72 )     $ 10.28         (7.69 )%(4)     $ 92         0.52 %(3)(9)       0.52 %(3)(9)       0.58 %(3)       687 %

The footnote legend is at the end of the Financial Highlights

 

See Notes to Financial Statements

 

59

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total
Return(1)		   Net Assets, End of Period
(In thousands)		   Ratio of Net Expenses to
Average Net Assets(8)		   Ratio of
Gross Expenses
to Average    
Net Assets
(before
waivers and
reimbursements)(8)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate

Equity Trend

                                                                                                                                                        

Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 17.39         (0.03 )       (1.79 )       (1.82 )       (0.01 )       (3.42 )       (3.43 )       (5.25 )     $ 12.14         (12.79 )%     $ 520,337         1.60 %(12)       1.60 %       (0.22 )%       674 %

10/1/13 to 9/30/14

         15.52         0.06         2.29         2.35         (0.04 )       (0.44 )       (0.48 )       1.87         17.39         15.31         2,044,955         1.61 (12)       1.61         0.36         227  

10/1/12 to 9/30/13

         13.43         0.11         2.09         2.20         (0.11 )       —         (0.11 )       2.09         15.52         16.50         1,937,456         1.62 (12)       1.62         0.75         140  

10/1/11 to 9/30/12

         11.69         0.10         1.73         1.83         (0.09 )       —         (0.09 )       1.74         13.43         15.74         1,323,109         1.64         1.64         0.80         297  

10/1/10 to 9/30/11

         11.17         0.10         0.52         0.62         (0.08 )       (0.02 )       (0.10 )       0.52         11.69         5.47         958,603         1.67 (10)       1.67         0.80         247  

Class C

                                                              

10/1/14 to 9/30/15

       $ 17.16         (0.13 )       (1.76 )       (1.89 )       —         (3.40 )       (3.40 )       (5.29 )     $ 11.87         (13.45 )%     $ 746,390         2.36 %(12)       2.36 %       (0.97 )%       674 %

10/1/13 to 9/30/14

         15.39         (0.06 )       2.27         2.21         —         (0.44 )       (0.44 )       1.77         17.16         14.48         1,988,290         2.36 (12)       2.36         (0.38 )       227  

10/1/12 to 9/30/13

         13.34         —         2.07         2.07         (0.02 )       —         (0.02 )       2.05         15.39         15.55         1,307,857         2.37 (12)       2.37         0.02         140  

10/1/11 to 9/30/12

         11.62         0.01         1.72         1.73         (0.01 )       —         (0.01 )       1.72         13.34         14.91         767,602         2.38         2.39         0.09         297  

10/1/10 to 9/30/11

         11.15         0.02         0.51         0.53         (0.04 )       (0.02 )       (0.06 )       0.47         11.62         4.68         457,630         2.38 (10)       2.42         0.13         247  

Class I

                                                              

10/1/14 to 9/30/15

       $ 17.42         0.01         (1.80 )       (1.79 )       (0.02 )       (3.42 )       (3.44 )       (5.23 )     $ 12.19         (12.57 )%     $ 594,460         1.35 %(12)       1.35 %       0.04 %       674 %

10/1/13 to 9/30/14

         15.54         0.10         2.30         2.40         (0.08 )       (0.44 )       (0.52 )       1.88         17.42         15.61         3,840,271         1.36 (12)       1.36         0.62         227  

10/1/12 to 9/30/13

         13.45         0.15         2.08         2.23         (0.14 )       —         (0.14 )       2.09         15.54         16.75         2,580,005         1.37 (12)       1.37         1.02         140  

10/1/11 to 9/30/12

         11.71         0.14         1.72         1.86         (0.12 )       —         (0.12 )       1.74         13.45         15.98         1,479,042         1.39         1.39         1.10         297  

10/1/10 to 9/30/11

         11.17         0.14         0.52         0.66         (0.10 )       (0.02 )       (0.12 )       0.54         11.71         5.78         754,415         1.42 (10)       1.42         1.09         247  

Class R6

                                                              

11/12/14(6) to 9/30/15

       $ 17.20         0.01         (1.57 )       (1.56 )       (0.02 )       (3.42 )       (3.44 )       (5.00 )     $ 12.20         (11.39 )%(4)     $ 89         1.28 %(3)(12)       1.28 %(3)       0.10 %(3)       674 %
Global Equity                                                              

Trend Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 12.42         (0.03 )       (1.48 )       (1.51 )       (0.07 )       (1.08 )       (1.15 )       (2.66 )     $ 9.76         (13.21 )%     $ 18,523         1.68 %(12)       1.68 %       (0.23 )%       614 %

10/1/13 to 9/30/14

         11.76         0.07         0.91         0.98         (0.02 )       (0.30 )       (0.32 )       0.66         12.42         8.43         75,879         1.66 (10)       1.65         0.55         205  

10/1/12 to 9/30/13

         10.56         0.04         1.26         1.30         (0.06 )       (0.04 )       (0.10 )       1.20         11.76         12.32         56,689         1.75 (10)       1.71         0.33         194  

10/1/11 to 9/30/12

         9.42         0.08         1.12         1.20         (0.06 )       —         (0.06 )       1.14         10.56         12.75         27,699         1.75         1.78         0.83         258  

3/15/11(6) to 9/30/11

         10.00         0.07         (0.63 )       (0.56 )       (0.02 )       —         (0.02 )       (0.58 )       9.42         (5.62 )(4)       5,467         1.75 (3)       2.88 (3)       1.23 (3)       199 (4)

Class C

                                                              

10/1/14 to 9/30/15

       $ 12.24         (0.09 )       (1.48 )       (1.57 )       —         (1.08 )       (1.08 )       (2.65 )     $ 9.59         (13.88 )%     $ 22,376         2.41 %(12)       2.43 %       (0.87 )%       614 %

10/1/13 to 9/30/14

         11.64         (0.02 )       0.92         0.90         —         (0.30 )       (0.30 )       0.60         12.24         7.69         72,013         2.37 (10)       2.40         (0.17 )       205  

10/1/12 to 9/30/13

         10.50         (0.05 )       1.25         1.20         (0.02 )       (0.04 )       (0.06 )       1.14         11.64         11.52         44,239         2.48 (10)       2.46         (0.42 )       194  

10/1/11 to 9/30/12

         9.40         — (5)       1.12         1.12         (0.02 )       —         (0.02 )       1.10         10.50         12.04         21,051         2.50         2.53         0.01         258  

3/15/11(6) to 9/30/11

         10.00         0.01         (0.61 )       (0.60 )       — (5)       —         —         (0.60 )       9.40         (6.09 )(4)       4,885         2.50 (3)       3.81 (3)       0.17 (3)       199 (4)

Class I

                                                              

10/1/14 to 9/30/15

       $ 12.47         — (5)       (1.50 )       (1.50 )       (0.10 )       (1.08 )       (1.18 )       (2.68 )     $ 9.79         (13.06 )%     $ 15,998         1.43 %(12)       1.43 %       0.01 %       614 %

10/1/13 to 9/30/14

         11.80         0.10         0.92         1.02         (0.05 )       (0.30 )       (0.35 )       0.67         12.47         8.68         99,642         1.44 (10)       1.41         0.80         205  

10/1/12 to 9/30/13

         10.58         0.07         1.25         1.32         (0.06 )       (0.04 )       (0.10 )       1.22         11.80         12.59         38,889         1.50 (10)       1.46         0.58         194  

10/1/11 to 9/30/12

         9.42         0.09         1.14         1.23         (0.07 )       —         (0.07 )       1.16         10.58         13.15         19,112         1.50         1.52         0.90         258  

3/15/11(6) to 9/30/11

         10.00         0.07         (0.63 )       (0.56 )       (0.02 )       —         (0.02 )       (0.58 )       9.42         (5.59 )(4)       9,565         1.50 (3)       2.85 (3)       1.37 (3)       199 (4)

The footnote legend is at the end of the Financial Highlights

 

See Notes to Financial Statements

 

60

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets, End of Period
(In thousands)		   Ratio of Net Expenses to
Average Net Assets(8)		   Ratio of Gross Expenses to Average    
Net Assets (before waivers and
reimbursements)(8)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate

Herzfeld Fund

                                                                                                                                                        

Class A

                                                              

10/1/14 to 9/30/15

       $ 11.37         0.35         (1.12 )       (0.77 )       (0.37 )       (0.32 )       (0.69 )       (1.46 )     $ 9.91         (7.17 )%     $ 8,324         1.60 %       1.73 %       3.20 %       57 %

10/1/13 to 9/30/14

         10.45         0.34         1.02         1.36         (0.36 )       (0.08 )       (0.44 )       0.92         11.37         13.21         9,212         1.60         1.93         3.04         53  

10/1/12 to 9/30/13

         10.21         0.33         0.18         0.51         (0.26 )       (0.01 )       (0.27 )       0.24         10.45         5.10         2,917         1.60         2.60         3.13         22  

9/5/12(6) to 9/30/12

         10.00         0.04         0.17         0.21         —         —         —         0.21         10.21         2.10 (4)       105         1.60 (3)       37.91 (3)       5.93         3 (4)

Class C

                                                              

10/1/14 to 9/30/15

       $ 11.34         0.26         (1.11 )       (0.85 )       (0.30 )       (0.32 )       (0.62 )       (1.47 )     $ 9.87         (7.94 )%     $ 14,761         2.35 %       2.48 %       2.39 %       57 %

10/1/13 to 9/30/14

         10.43         0.26         1.01         1.27         (0.28 )       (0.08 )       (0.36 )       0.91         11.34         12.34         10,624         2.35         2.70         2.35         53  

10/1/12 to 9/30/13

         10.21         0.25         0.19         0.44         (0.21 )       (0.01 )       (0.22 )       0.22         10.43         4.36         4,942         2.35         3.25         2.40         22  

9/5/12(6) to 9/30/12

         10.00         0.03         0.18         0.21         —         —         —         0.21         10.21         2.10 (4)       102         2.35 (3)       38.62 (3)       5.21         3 (4)

Class I

                                                              

10/1/14 to 9/30/15

       $ 11.39         0.37         (1.12 )       (0.75 )       (0.40 )       (0.32 )       (0.72 )       (1.47 )     $ 9.92         (7.01 )%     $ 15,148         1.35 %       1.47 %       3.39 %       57 %

10/1/13 to 9/30/14

         10.46         0.38         1.01         1.39         (0.38 )       (0.08 )       (0.46 )       0.93         11.39         13.54         3,441         1.35         1.71         3.40         53  

10/1/12 to 9/30/13

         10.21         0.09         0.46         0.55         (0.29 )       (0.01 )       (0.30 )       0.25         10.46         5.41         1,765         1.35         3.71         0.86         22  

9/5/12(6) to 9/30/12

         10.00         0.03         0.18         0.21         —         —         —         0.21         10.21         2.10 (4)       1,017         1.35 (3)       38.61 (3)       4.39         3 (4)
Multi-Asset Trend                                                              

Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 11.85         (0.02 )       (0.92 )       (0.94 )       (0.04 )       (0.93 )       (0.97 )       (1.91 )     $ 9.94         (8.58 )%     $ 55,214         1.62 %(12)       1.62 %       (0.15 )%       519 %

10/1/13 to 9/30/14

         11.28         0.10         0.69         0.79         (0.07 )       (0.15 )       (0.22 )       0.57         11.85         6.97         143,765         1.62 (12)       1.62 (12)       0.83         337  

10/1/12 to 9/30/13

         10.67         0.06         0.62         0.68         (0.05 )       (0.02 )       (0.07 )       0.61         11.28         6.39         114,697         1.64 (12)       1.64 (12)       0.51         275  

10/1/11 to 9/30/12

         9.69         0.09         0.98         1.07         (0.09 )       —         (0.09 )       0.98         10.67         11.08         66,122         1.73         1.70         0.84         211  

3/15/11(6) to 9/30/11

         10.00         0.07         (0.38 )       (0.31 )       —         —         —         (0.31 )       9.69         (3.10 )(4)       12,232         1.75 (3)       2.17 (3)       1.35 (3)       153 (4)

Class C

                                                              

10/1/14 to 9/30/15

       $ 11.73         (0.09 )       (0.91 )       (1.00 )       —         (0.93 )       (0.93 )       (1.93 )     $ 9.80         (9.23 )%     $ 139,223         2.36 %(12)       2.37 %       (0.89 )%       519 %

10/1/13 to 9/30/14

         11.19         0.01         0.68         0.69         —         (0.15 )       (0.15 )       0.54         11.73         6.15         331,980         2.35 (12)       2.37 (12)       0.09         337  

10/1/12 to 9/30/13

         10.60         (0.02 )       0.63         0.61         —         (0.02 )       (0.02 )       0.59         11.19         5.71         230,459         2.37 (12)       2.39 (12)       (0.23 )       275  

10/1/11 to 9/30/12

         9.66         0.02         0.96         0.98         (0.04 )       —         (0.04 )       0.94         10.60         10.13         131,330         2.45         2.45         0.16         211  

3/15/11(6) to 9/30/11

         10.00         0.02         (0.36 )       (0.34 )       —         —         —         (0.34 )       9.66         (3.40 )(4)       32,390         2.50 (3)       2.85 (3)       0.43 (3)       153 (4)

Class I

                                                              

10/1/14 to 9/30/15

       $ 11.88         0.01         (0.91 )       (0.90 )       (0.06 )       (0.93 )       (0.99 )       (1.89 )     $ 9.99         (8.36 )%     $ 73,528         1.36 %(12)       1.36 %       0.11 %       519 %

10/1/13 to 9/30/14

         11.31         0.13         0.69         0.82         (0.10 )       (0.15 )       (0.25 )       0.57         11.88         7.20         316,599         1.37 (12)       1.37 (12)       1.06         337  

10/1/12 to 9/30/13

         10.69         0.08         0.63         0.71         (0.07 )       (0.02 )       (0.09 )       0.62         11.31         6.70         248,984         1.39 (12)       1.39 (12)       0.74         275  

10/1/11 to 9/30/12

         9.71         0.12         0.96         1.08         (0.10 )       —         (0.10 )       0.98         10.69         11.24         146,634         1.49         1.46         1.17         211  

3/15/11(6) to 9/30/11

         10.00         0.10         (0.39 )       (0.29 )       —         —         —         (0.29 )       9.71         (2.90 )(4)       19,131         1.50 (3)       2.01 (3)       1.82 (3)       153 (4)

The footnote legend is at the end of the Financial Highlights

 

See Notes to Financial Statements

 

61

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(8)		   Ratio of Gross Expenses to Average    
Net Assets (before waivers and
reimbursements)(8)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate

Sector Trend Fund

                                                                                                                                                        

Class A

                                                              

10/1/14 to 9/30/15

       $ 15.21         0.05         (0.71 )       (0.66 )       (0.05 )       (3.50 )       (3.55 )       (4.21 )     $ 11.00         (6.19 )%     $ 156,759         0.98 %       0.98 %       0.39 %       576 %

10/1/13 to 9/30/14

         13.87         0.15         2.25         2.40         (0.13 )       (0.93 )       (1.06 )       1.34         15.21         17.81         316,571         0.98         0.98         1.02         129  

10/1/12 to 9/30/13

         12.15         0.17         2.11         2.28         (0.17 )       (0.39 )       (0.56 )       1.72         13.87         19.63         257,492         1.00         1.00         1.29         123  

10/1/11 to 9/30/12

         10.67         0.14         1.68         1.82         (0.12 )       (0.22 )       (0.34 )       1.48         12.15         17.51         199,268         1.02         1.02         1.22         190  

10/1/10 to 9/30/11

         10.18         0.11         0.54         0.65         (0.16 )       —         (0.16 )       0.49         10.67         6.20         184,613         1.04         1.04         0.97         134  

Class C

                                                              

10/1/14 to 9/30/15

       $ 15.02         (0.04 )       (0.69 )       (0.73 )       (0.02 )       (3.51 )       (3.53 )       (4.26 )     $ 10.76         (6.86 )%     $ 206,556         1.74 %       1.74 %       (0.34 )%       576 %

10/1/13 to 9/30/14

         13.73         0.04         2.21         2.25         (0.03 )       (0.93 )       (0.96 )       1.29         15.02         16.89         296,160         1.73         1.73         0.28         129  

10/1/12 to 9/30/13

         12.03         0.07         2.10         2.17         (0.08 )       (0.39 )       (0.47 )       1.70         13.73         18.80         217,861         1.74         1.75         0.57         123  

10/1/11 to 9/30/12

         10.56         0.06         1.67         1.73         (0.04 )       (0.22 )       (0.26 )       1.47         12.03         16.60         157,461         1.75         1.77         0.53         190  

10/1/10 to 9/30/11

         10.09         0.04         0.52         0.56         (0.09 )       —         (0.09 )       0.47         10.56         5.49         144,813         1.71         1.79         0.33         134  

Class I

                                                              

10/1/14 to 9/30/15

       $ 15.21         0.08         (0.71 )       (0.63 )       (0.05 )       (3.51 )       (3.56 )       (4.19 )     $ 11.02         (5.90 )%     $ 169,977         0.73 %       0.73 %       0.65 %       576 %

10/1/13 to 9/30/14

         13.87         0.19         2.25         2.44         (0.17 )       (0.93 )       (1.10 )       1.34         15.21         18.08         313,147         0.73         0.73         1.29         129  

10/1/12 to 9/30/13

         12.15         0.20         2.11         2.31         (0.20 )       (0.39 )       (0.59 )       1.72         13.87         19.92         173,096         0.75         0.75         1.56         123  

10/1/11 to 9/30/12

         10.67         0.17         1.68         1.85         (0.15 )       (0.22 )       (0.37 )       1.48         12.15         17.71         122,198         0.77         0.77         1.53         190  

10/1/10 to 9/30/11

         10.18         0.14         0.54         0.68         (0.19 )       —         (0.19 )       0.49         10.67         6.56         85,585         0.82         0.82         1.26         134  

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 cap, 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 effect of interest expense due to leverage, as well as dividends and interest expense on securities sold short, increased the expense ratio by the following:

10/1/14 to 9/30/15

      0.52 % 

10/1/13 to 9/30/14

      0.45 % 

10/1/12 to 9/30/13

      0.38 % 

10/1/11 to 9/30/12

      0.63 % 
 
  If interest and dividends were excluded the ratio would be lower.
(10)  See Note 3C in the Notes to Financial Statements for information on recapture of expense previously waived.
(11)  Effective December 1, 2010, the Adviser has discontinued charging an advisory fee.
(12)  The Fund is currently under its expense limitation.

 

See Notes to Financial Statements

 

62

Table of Contents

VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

Note 1. Organization

Virtus Opportunities Trust (the “Trust”) is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company.

As of the date of this report, 32 funds of the Trust are offered for sale, of which ten (each a “Fund”) are reported in this annual report.

The Fund’s investment objective is outlined in each Fund’s Summary Page

There is no guarantee that a Fund will achieve its objective.

All of the Funds offer Class A shares, Class C shares, and Class I shares. The Dynamic Trend and Equity Trend Funds now offer Class R6 shares. Class B shares are no longer available for purchase by new or existing shareholders, except for existing shareholders through Qualifying Transactions. For information regarding Qualifying Transactions, refer to the 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 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. The period for which such CDSC applies for the Funds is 18 months. 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% CDSC, applicable if redeemed within one year of purchase. Class I shares and Class R6 shares are sold without a front-end sales charge or CDSC. Class R6 shares are only available to participants in employer-sponsored retirement plans, such as 401(k) plans, profit sharing plans, defined benefit plans and other employer directed plans. Class R6 shares do not carry sales commissions or pay Rule 12b-1 fees.

Virtus Mutual Funds may impose an annual fee on accounts having balances of less than $2,500. The small account fee may be waived in certain circumstances, as disclosed in the prospectuses and/or statements of additional information. The fees collected will be used to offset certain expenses of the Funds.

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 Rule 12b-1 and/or shareholder servicing plan (“12b-1 plan”) and has exclusive voting rights with respect to such plans. Class I shares and Class R6 shares are not subject to a 12b-1 plan. Income and other expenses as well as realized and unrealized gains and losses of each Fund are borne pro rata by the holders of each class of shares.

 

Note 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 amounts 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

Security valuation procedures for each Fund, which include nightly price variance as well as back-testing such as bi-weekly unchanged price, monthly secondary source and transaction analysis, have been approved by the Board of Trustees (the “Board”, or the “Trustees”). All internally fair valued securities are approved by a valuation committee (the “Valuation Committee”) appointed by the Board. The Valuation Committee is comprised of certain members of management as identified to the Board and convenes independently from portfolio management. All internally fair valued securities are updated daily and reviewed in detail by the Valuation Committee monthly unless changes occur within the period. The Valuation Committee reviews the validity of the model inputs and any changes to the model. Quarterly fair valuations are reviewed by the Board.

Each Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The Funds’ policy is to recognize transfers between levels at the end of the reporting period.

 

  •    Level 1 – quoted prices in active markets for identical securities (security types generally include listed equities).

 

  •    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 Valuation Committee’s own assumptions in determining the fair value of investments).

A description of the valuation techniques applied to a 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 Valuation Committee, are generally categorized as Level 3 in the hierarchy.

Certain non-U.S. 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 non-U.S. markets close (where the security is principally traded) and the time that a Fund calculates its net asset value (“NAV”) (at the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4 p.m. Eastern time) that may impact the value of securities traded in these non-U.S. markets. In such cases the Fund fair values non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. security to the intraday trading in the

 

63

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

U.S. markets for investments such as ADRs, financial futures, ETFs, 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 non-U.S. 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 such as mortgage-backed and asset-backed securities 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 Valuation Committee, 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 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 NAV. Investments in closed-end funds and ETFs are valued as of the close of regular trading on the NYSE each business day. Both are categorized as Level 1 in the hierarchy.

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 methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

  B. Security Transactions and Investment Income

Security transactions are recorded on the trade date. Realized gains and losses from sales of securities are determined on the identified cost basis. Dividend income is recognized on the ex-dividend date or, in the case of certain foreign securities, as soon as a Fund is notified. Interest income is recorded on the accrual basis. Each Fund amortizes premiums and accretes discounts using the effective interest method. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.

 

  C. Income Taxes

Each Fund is treated as a separate taxable entity. It is the intention 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.

Certain Funds 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.

Management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. As of September 30, 2015 the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2012 forward (with limited exceptions).

 

  D. Distributions to Shareholders

Distributions are recorded by each 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 together by a fund and other affiliated mutual funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately used.

In addition to the net annual operating expenses that a fund bears directly, the shareholders of a fund indirectly bear the pro-rata expenses of any underlying mutual funds in which the fund invests.

 

  F. Foreign Currency Translation

Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at 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 Funds do not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

 

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  G. Short Sales

($ reported in thousands)

Certain Funds may sell securities short. A short sale is a transaction in which a Fund sells a security it does not own in anticipation of a decline in market price. To sell a security short, a 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.

In accordance with the terms of its prime brokerage agreement, the Dynamic Trend Fund may receive rebate income or be charged a fee on borrowed securities which is under “Interest Expense on short sales” on the Statements of Operations. 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.

 

  H. Securities Lending

Certain Funds may loan securities to qualified brokers through an agreement with Brown Brothers Harriman (“BBH”), as a third party lending agent. Under the terms of agreement, a Fund doing so 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 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 BBH 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 declining value of the collateral.

For the period October 1, 2014 to May 10, 2015, the Dynamic Trend Fund loaned securities through an agreement with JP Morgan Clearing Corp. (“JPMCC”). Under the terms of agreement, the Fund loaned directly to JPMCC and in doing was 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 is received in cash which is invested in additional portfolio securities of the Fund. The Fund paid a fee based on the one-week London Interbank Offering Rate (LIBOR) plus a negotiated spread. For the period ended September 30, 2015, the cost incurred by the Fund is $605 and is disclosed as “Interest Expense” on the Statement of Operations. Effective May 11, 2015, in conjunction with the name and strategy change of this fund, the Fund no longer utilizes securities lending.

At September 30, 2015, none of the Funds had securities on loan.

 

Note 3. Investment Advisory Fees and Related Party Transactions

($ reported in thousands except as noted)

 

  A. Adviser

Virtus Investment Advisers, Inc. (the “Adviser”), an indirect wholly-owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the adviser to the Trust. The Adviser manages the Funds’ investment programs and general operations of the Funds, including oversight of the Funds’ subadvisers.

As compensation for its services to the Funds, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets (except as otherwise noted) of the following Funds:

 

       First $2 Billion      $2+ Billion through $4 Billion      $4 + Billion  

Disciplined Equity Style Fund

        1.00 %       0.95 %       0.90 % 

Disciplined Select Bond Fund

        0.80         0.75         0.70   

Disciplined Select Country Fund

        1.10         1.05         1.00   

Global Equity Trend Fund

        1.00         0.95         0.90   

Multi-Asset Trend Fund

        1.00         0.95         0.90   
       First $1 Billion      $1+ Billion         

Dynamic Trend Fund*

        1.50 %       1.40 %    

Herzfeld Fund

        1.00         0.95      

Sector Trend Fund

        0.45         0.40      
       First $10 Billion      $10+ Billion         

Equity Trend Fund

        1.00 %       0.95 %    

Alternatives Diversifier Fund – the Adviser has discontinued charging an advisory fee.

 

  * The advisory fee is calculated based on the average daily managed assets (“managed assets” means the total assets of the Fund including any assets attributable to borrowings, minus the Fund’s accrued liabilities other than such borrowings). Beginning February 6, 2013, the advisory fee for this Fund became subject to a performance adjustment, which may increase or decrease the advisory fee based upon how well the Fund has performed relative to the S&P 500® Index (“Index”). The fee rate is adjusted by adding or subtracting 0.10% for each 1.00% of absolute performance by which the Fund’s performance exceeds or lags that of the Index. The maximum performance adjustment may be plus or minus 1.00%. Performance is measured for purposes of the performance adjustment over the most recent 36-month period or such shorter period (but not less than 12 months) if the performance fee has been in effect for less than 36 months. For the period ended September 30, 2015 there was a $(16,501) of additional advisory fee expense/(income) related to the performance fee adjustment. Such performance adjustment is included in the Investment Advisory Fees in the Statement of Operations.

 

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SEPTEMBER 30, 2015

 

 

  B. Subadvisers

The subadvisers manage the investments of each Fund for which they are paid a fee by the Adviser. A list of the subadvisers and the Fund(s) they serve is as follows:

 

Fund

  

Subadviser(s)

   

Fund

  

Subadviser(s)

Alternatives Diversifier Fund   Euclid(1)    Equity Trend Fund(5)   Euclid(1)

Disciplined Equity Style Fund

   Newfound(2)    Global Equity Trend Fund(5)   Euclid(1)

Disciplined Select Bond Fund

   Newfound(2)    Herzfeld Fund   Herzfeld(3)

Disciplined Select Country Fund

   Newfound(2)    Multi-Asset Trend Fund(5)   Euclid(1)
Dynamic Trend Fund(4)   Euclid(1)    Sector Trend Fund(5)   Euclid(1)

 

  (1)  Euclid Advisors LLC, an indirect wholly-owned subsidiary of Virtus.
  (2)  Newfound Investments, LLC, an indirect wholly-owned subsidiary of Virtus.
  (3)  Thomas J. Herzfeld Advisors, Inc.
  (4)  For the period of October 1, 2014, to May 10, 2015, F-Squared Alternative Advisors, LLC served as the limited services subadviser.
  (5)  For the period of October 1, 2014, to May 10, 2015, F-Squared Institutional Advisors, LLC served as the limited services subadviser.

 

  C. Expense Limits and Fee Waivers

Effective September 1, 2015, the Adviser has contractually agreed to limit certain Funds’ total operating expenses (excluding interest, taxes, extraordinary expenses and acquired fund fees and expenses, if any), so that such expenses do not exceed the percentages of the Fund’s average daily net asset values as listed below through January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary.

 

       Class A        Class C        Class I        Class R6  

Disciplined Equity Style Fund

        1.60 %         2.35 %         1.35 %         — % 

Disciplined Select Bond Fund

        1.40           2.15           1.15           —   

Disciplined Select Country Fund

        1.70           2.45           1.45           —   

Equity Trend Fund†

        1.70           2.45           1.45           1.38   

Global Equity Trend Fund†

        1.75           2.50           1.50           —   

Herzfeld Fund

        1.60           2.35           1.35           —   

Multi-Asset Trend Fund†

        1.75           2.50           1.50           —   

 

  †  expenses are currently below the cap level.

 

  D. Expense Recapture

For certain Funds the Adviser may recapture operating expenses waived or reimbursed under these arrangements, 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 or, if none, the expense limitation in effect at the time of the waiver or reimbursement. All or a portion of the following Adviser reimbursed expenses may be recaptured as follows:

 

       Fiscal Year Ended  
       2016        2017        2018        Total  

Alternatives Diversifier Fund

      $ 75         $ —         $ —         $ 75   

Disciplined Equity Style Fund

        64           64           57           185   

Disciplined Select Bond Fund

        64           65           58           187   

Disciplined Select Country Fund

        64           64           58           186   

Dynamic Trend Fund

        794           —           —           794   

Herzfeld Fund

        68           56           40           164   

 

  E. Distributor

VP Distributors, LLC (“VP Distributors”), an indirect wholly-owned subsidiary of Virtus, serves as the distributor of each Fund’s shares. VP Distributors has advised the Funds that for the fiscal year (the “period”) ended September 30, 2015, it retained net commissions of $262 of Class A shares and deferred sales charges of $264, $(3) and $1,275 for Class A shares, Class B shares and Class C shares respectively.

In addition, each Fund pays VP Distributors distribution and/or service fees under a 12b-1 plan as a percentage of the average daily net assets of each respective class at the annual rates of 0.25%(1) for Class A shares and 1.00%(1)(2) for Class B shares and Class C shares. Class I shares and Class R6 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 NAV 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.

 

  (1)  The Funds invest in ETFs. In addition to the fees listed the Funds bear their proportionate shares of any distribution and shareholder servicing fees of the ETFs.
  (2)  The Funds’ distributor has contractually agreed to waive its 12b-1 fees applicable to Class C shares to the extent that the Funds’ investments in underlying ETFs with their own 12b-1 fees would otherwise cause the total 12b-1 fees paid directly or indirectly by the Fund to exceed the limits set forth in applicable law or regulation.
  (3)  Amount is less than $500.

 

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SEPTEMBER 30, 2015

 

 

  F. Administrator and Transfer Agent

Virtus Fund Services, LLC, an indirect wholly-owned subsidiary of Virtus, serves as the administrator and transfer agent of the Trust.

For the period ended September 30, 2015, the Funds incurred administration fees from the Trust totaling $7,152 which are included in the Statements of Operations.

For the period ended September 30, 2015, the Funds incurred transfer agent fees from the Trust totaling $8,951 which are included in the Statements of Operations. A portion of these fees was paid to outside entities that also provide services to the Trust.

 

  G. Affiliated Shareholders

At September 30, 2015, Virtus and its affiliates held shares of certain Funds which may be redeemed at any time that aggregated the following:

 

       Shares        Aggregate
Net Asset
Value		  

Disciplined Equity Style Fund

          

Class A

        12,976         $ 141   

Class C

        13,024           138   

Class I

        103,698           1,131   

Disciplined Select Bond Fund

          

Class A

        10,373           97   

Class C

        10,226           95   

Class I

        83,424           778   

Disciplined Select Country Fund

          

Class A

        11,045           103   

Class C

        10,908           101   

Class I

        88,728           828   

Dynamic Trend Fund

          

Class R6

        8,980           92   

Equity Trend Fund

          

Class R6

        7,263           89   

Herzfeld Fund

          

Class A

        11,379           113   

Class C

        11,165           110   

Class I

        91,635           909   

 

  H. Investments in Affiliates

A summary of the Alternatives Diversifier Fund’s total long-term and short-term purchases and sales of the Class I shares of the affiliated underlying funds(1) during the period ended September 30, 2015 is as follows:

 

       Value,
beginning
of period		        Purchases(2)        Sales
Proceeds		  

Virtus Global Commodities Stock Fund

      $ 14,721         $ 400         $ 13,353   

Virtus Global Infrastructure Fund

        24,548           3,742           10,570   

Virtus Global Real Estate Securities Fund

        10,582           317           3,930   

Virtus International Real Estate Securities Fund

        13,051           2,921           7,700   

Virtus Real Estate Securities Fund

        13,261           3,658           10,905   

Virtus Senior Floating Rate Fund

        11,606           4,401           3,380   
    

 

 

       

 

 

       

 

 

  
     $ 87,769         $ 15,439         $ 49,838   
    

 

 

       

 

 

       

 

 

  
       Value,
end
of period		        Dividend
Income		        Distributions
of Realized
Gains		  

Virtus Global Commodities Stock Fund

      $ —         $ —         $ —   

Virtus Global Infrastructure Fund

        15,334           636           224   

Virtus Global Real Estate Securities Fund

        7,542           280           37   

Virtus International Real Estate Securities Fund

        7,707           821           —   

Virtus Real Estate Securities Fund

        7,189           138           619   

Virtus Senior Floating Rate Fund

        12,164           535           31   
    

 

 

       

 

 

       

 

 

  
     $ 49,936         $ 2,410         $ 911   
    

 

 

       

 

 

       

 

 

  

 

  (1)  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, 2015, the Fund was the owner of record of approximately, 19% of Virtus International Real Estate Securities Fund, 10% of Virtus Global Infrastructure Fund, and 10% of Virtus Global Real Estate Securities Fund.
  (2)  Includes reinvested dividends from income and capital gain distributions.

 

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SEPTEMBER 30, 2015

 

 

  I. Payment from Affiliate

During the period the Adviser reimbursed certain funds for losses. These amounts are included in payments by affiliate in the Statements of Operations. These payments by affiliates resulted in an increase in total return of 1.47% and 0.19% for the Disciplined Select Bond Fund and Disciplined Select Country Fund, respectively.

 

Note 4. Purchases and Sales of Securities

($ reported in thousands)

Purchases and sales of securities (excluding U.S. Government and agency securities, and short-term securities) during the period ended September 30, 2015, were as follows:

 

       Purchases        Sales  

Alternatives Diversifier Fund

      $ 50,084         $ 80,147   

Disciplined Equity Style Fund

        16,304           13,753   

Disciplined Select Bond Fund

        18,150           17,640   

Disciplined Select Country Fund

        8,440           8,410   

Dynamic Trend Fund

        7,100,895           10,064,947   

Equity Trend Fund

        19,827,069           26,235,829   

Global Equity Trend Fund

        568,348           772,829   

Herzfeld Fund

        39,918           16,146   

Multi-Asset Fund

        1,868,394           2,397,840   

Sector Trend Fund

        2,649,366           3,423,318   
       Buy Cover        Short Sales  

Dynamic Trend Fund

      $ 1,642,219         $ 1,414,014   

 

Note 5. Borrowings

($ reported in thousands)

On July 2, 2015, the Funds and other affiliated Funds entered into a $50,000 secured Line of Credit Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Funds to borrow cash from the Bank to manage large unexpected redemptions and trade fails, up to a limit of one-third or one-fifth of each Fund’s total net assets in accordance with the Agreement. Interest is charged at the higher of the LIBOR (London Interbank Offered Rate) or the Federal Funds rate plus an additional percentage rate on the amount borrowed. Commitment fees are charged on the undrawn balance. The Funds are individually, and not jointly, liable for their particular advances, if any, under the line of credit. The Bank has the ability to require repayment of outstanding borrowings under the Agreement upon certain circumstances such as an event of default.

The Funds had no outstanding borrowings at any time during the period ended September 30, 2015.

 

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SEPTEMBER 30, 2015

 

Note 6. Capital Share Transactions

(reported in thousands)

Transactions in shares of capital stock, during the periods ended as indicated below, were as follows:

 

     Alternatives Diversifier Fund     Disciplined Equity Style Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      240      $ 2,652        686      $ 7,882        151      $ 1,829        27      $ 345   
Reinvestment of distributions      55        607        44        492        10        117        2        22   
Shares repurchased      (1,209 )      (13,179 )      (1,956 )      (22,483 )      (47 )      (574 )      (10 )      (125 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (914 )    $ (9,920 )      (1,226 )    $ (14,109 )      114      $ 1,372        19      $ 242   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      75      $ 825        211      $ 2,411        140      $ 1,670        3      $ 37   
Reinvestment of distributions      28        309        1        16        7        83        1        15   
Shares repurchased      (904 )      (9,720 )      (963 )      (10,741 )      (30 )      (356 )      — (1)      (1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (801 )    $ (8,586 )      (751 )    $ (8,314 )      117      $ 1,397        4      $ 51   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      1,229      $ 13,567        3,719      $ 42,297        —      $ —        —      $ —   
Reinvestment of distributions      62        681        43        491        18        212        5        63   
Shares repurchased      (2,472 )      (26,891 )      (9,667 )      (109,385 )      —        —        —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (1,181 )    $ (12,643 )      (5,905 )    $ (66,597 )      18      $ 212        5      $ 63   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

     Disciplined Select Bond Fund     Disciplined Select Country Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      63      $ 614        — (1)    $ 5        7      $ 75        18      $ 207   
Reinvestment of distributions      — (1)      3        — (1)      3        2        23        — (1)      4   
Shares repurchased      (21 )      (199 )      (6 )      (61 )      (10 )      (100 )      (6 )      (72 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      42      $ 418        (6 )    $ (53 )      (1 )    $ (2 )      12      $ 139   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      12      $ 119        2      $ 23        7      $ 78        4      $ 45   
Reinvestment of distributions      — (1)      — (2)      — (1)      2        1        11        — (1)      1   
Shares repurchased      (5 )      (50 )      —        —        (6 )      (60 )      —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      7      $ 69        2      $ 25        2      $ 29        4      $ 46   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      —      $ —        —      $ —        94      $ 1,052        6      $ 77   
Reinvestment of distributions      1        6        2        17        8        78        2        18   
Shares repurchased      —        —        —        —        (100 )      (1,092 )      —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      1      $ 6        2      $ 17        2      $ 38        8      $ 95   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)  Amount is less than 500.
(2)  Amount is less than $500.

 

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SEPTEMBER 30, 2015

 

 

     Dynamic Trend Fund     Equity Trend Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  

Class A

                 
Sale of shares      4,968      $ 55,975        36,001      $ 459,530        14,875      $ 216,781        54,862      $ 915,782   
Reinvestment of distributions      6,511        71,488        —        —        26,015        358,962        3,699        61,192   
Shares repurchased      (50,713 )      (574,853 )      (38,073 )      (504,839 )      (115,604 )      (1,560,522 )      (65,809 )      (1,127,085 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (39,234 )    $ (447,390 )      (2,072 )    $ (45,309 )      (74,714 )    $ (984,779 )      (7,248 )    $ (150,111 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class B                 
Sale of shares      1      $ 12        4      $ 42        —      $ —        —      $ —   
Reinvestment of distributions      — (1)      5        —        —        —        —        —        —   
Shares repurchased      (9 )      (90 )      (4 )      (46 )      —        —        —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (8 )    $ (73 )      — (1)    $ (4 )      —      $ —        —      $ —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      5,928      $ 60,205        24,796      $ 292,883        16,872      $ 238,376        43,028      $ 712,397   
Reinvestment of distributions      6,656        66,220        — (1)      — (2)      24,034        325,886        2,071        33,878   
Shares repurchased      (34,614 )      (343,078 )      (4,338 )      (52,562 )      (93,877 )      (1,233,046 )      (14,189 )      (237,583 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (22,030 )    $ (216,653 )      20,458      $ 240,321        (52,971 )    $ (668,784 )      30,910      $ 508,692   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      16,768      $ 192,173        71,916      $ 943,464        39,668      $ 574,419        112,965      $ 1,913,873   
Reinvestment of distributions      12,609        140,330        — (1)      — (2)      37,699        521,659        4,322        71,756   
Shares repurchased      (111,882 )      (1,263,054 )      (27,004 )      (355,406 )      (248,990 )      (3,469,826 )      (62,865 )      (1,067,924 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (82,505 )    $ (930,551 )      44,912      $ 588,058        (171,623 )    $ (2,373,748 )      54,422      $ 917,705   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class R6                 
Sale of shares      8      $ 100        —      $ —        6      $ 100        —      $ —   
Reinvestment of distributions      1        14        —        —        1        20        —        —   
Plan of Reorganization      — (1)      — (2)      —        —        — (1)      — (2)      —        —   
Shares repurchased      — (2)      — (2)      —        —        — (2)      — (2)      —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      9      $ 114        —      $ —        7      $ 120        —      $ —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)  Amount is less than 500.
(2)  Amount is less than $500.

 

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

     Global Equity Trend Fund     Herzfeld Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      1,197      $ 13,144        3,483      $ 42,832        612      $ 6,823        547      $ 6,139   
Reinvestment of distributions      509        5,652        137        1,674        47        506        18        203   
Shares repurchased      (5,916 )      (64,685 )      (2,333 )      (28,792 )      (628 )      (6,901 )      (35 )      (391 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (4,210 )    $ (45,889 )      1,287      $ 15,714        31      $ 428        530      $ 5,951   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      635      $ 6,902        2,528      $ 30,806        967      $ 10,722        482      $ 5,281   
Reinvestment of distributions      584        6,384        107        1,299        63        671        22        240   
Shares repurchased      (4,770 )      (49,901 )      (550 )      (6,646 )      (472 )      (5,142 )      (41 )      (458 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (3,551 )    $ (36,615 )      2,085      $ 25,459        558      $ 6,251        463      $ 5,063   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      992      $ 11,048        5,607      $ 69,477        1,671      $ 18,514        149      $ 1,689   
Reinvestment of distributions      631        7,036        106        1,295        52        553        9        100   
Shares repurchased      (7,982 )      (88,214 )      (1,018 )      (12,533 )      (499 )      (5,352 )      (25 )      (273 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (6,359 )    $ (70,130 )      4,695      $ 58,239        1,224      $ 13,715        133      $ 1,516   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

     Multi-Asset Trend Fund     Sector Trend Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      1,899      $ 20,815        6,643      $ 78,209        11,512      $ 142,000        10,445      $ 153,503   
Reinvestment of distributions      1,017        11,007        184        2,162        5,546        66,431        1,358        19,450   
Shares repurchased      (9,493 )      (100,593 )      (4,863 )      (57,724 )      (23,619 )      (281,323 )      (9,546 )      (142,419 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (6,577 )    $ (68,771 )      1,964      $ 22,647        (6,561 )    $ (72,892 )      2,257      $ 30,534   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      2,972      $ 31,920        12,269      $ 142,783        9,549      $ 113,509        5,634      $ 81,499   
Reinvestment of distributions      2,252        24,117        274        3,169        4,741        55,847        866        12,234   
Shares repurchased      (19,312 )      (202,149 )      (4,846 )      (56,666 )      (14,803 )      (171,575 )      (2,662 )      (38,901 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (14,088 )    $ (146,112 )      7,697      $ 89,286        (513 )    $ (2,219 )      3,838      $ 54,832   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      3,215      $ 35,797        15,715      $ 185,802        19,340      $ 231,425        12,354      $ 184,057   
Reinvestment of distributions      1,924        20,908        450        5,304        5,015        60,118        784        11,234   
Shares repurchased      (24,418 )      (262,867 )      (11,539 )      (135,309 )      (29,519 )      (353,739 )      (5,027 )      (74,190 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (19,279 )    $ (206,162 )      4,626      $ 55,797        (5,164 )    $ (62,196 )      8,111      $ 121,101   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

Note 7. 10% Shareholders

As of September 30, 2015, certain Funds had individual shareholder account(s) and/or omnibus shareholder account(s) (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of each such Fund as detailed below.

 

       % of Shares
Outstanding		        Number of
Accounts		  

Alternatives Diversifier Fund

       21 %         2   

Disciplined Equity Style Fund

       53           3 * 

Disciplined Select Bond Fund

       77           2 * 

Disciplined Select Country Fund

       67           1 * 

Global Equity Trend Fund

       39           3   

Herzfeld Fund

       59           4   

Multi-Asset Trend Fund

        18           1   

 

  * Includes affiliated shareholder accounts.

 

Note 8. Credit Risk and Asset Concentration

Certain Funds may invest a high percentage of their assets in specific sectors of the market in their pursuit of their investment objectives. Fluctuations in these sectors of concentration may have a greater impact on a Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors. At September 30, 2015, the Dynamic Trend Fund held securities issued by various companies in the Consumer Discretionary sector representing 28% of the total investments of the Fund.

 

Note 9. Indemnifications

Under the Trust’s organizational documents, its Trustees and officers are indemnified against certain liabilities arising out of the performance of their duties to the Funds. Each Trustee has entered into an indemnification agreement with the Trust. In addition in the normal course of business, the Funds enter into contracts that provide a variety of indemnifications to other parties. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds and that have not occurred. However, the Funds have not had prior claims or losses pursuant to these arrangements and expect the risk of loss to be remote.

 

Note 10. Exemptive Order

On August 23, 2010, the SEC issued an amended order under Section 12(d) (1) (J) of the 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, in each case subject to certain conditions.

 

Note 11. Federal Income Tax Information

($ reported in thousands)

At September 30, 2015, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Funds were as follows:

 

      Federal
Tax Cost		     Unrealized
Appreciation		      Unrealized
(Depreciation)		     Net Unrealized
Appreciation
(Depreciation)		  

Alternative Book

          

Alternatives Diversifier Fund

    $ 101,030      $ 8,530       $ (28,296 )    $ (19,766 ) 

Disciplined Equity Style Fund

      4,679        24         (343 )      (319 ) 

Disciplined Select Bond Fund

      1,512        6         (38 )      (32 ) 

Disciplined Select Country Fund

      1,341        —         (82 )      (82 ) 

Dynamic Trend Fund-investments

      606,480        12,611         (8,681 )      3,930   

Dynamic Trend Fund securities sold short

      (155,502 )      5,034         —        5,034   

Equity Trend Fund

      1,840,381        25,838         (20,395 )      5,443   

Global Equity Trend Fund

      53,658        277         (447 )      (170 ) 

Herzfeld Fund

      43,262        221         (4,829 )      (4,608 ) 

Multi-Asset Trend Fund

      259,339        1,552         (1,135 )      417   

Sector Trend Fund

      541,622        2,616         (9,567 )      (6,951 ) 

Certain Funds have capital loss carryovers available to offset future realized capital gains, through the indicated expiration dates shown below:

 

     2016      2018      No Expiration      Total  
     Short-Term      Long-Term      Short-Term      Long-Term      Short-Term      Long-Term      Short-Term      Long-Term  

Alternatives Diversifier Fund

    $ —       $ —       $ 49,764       $ —       $ 2,070       $ 94       $ 51,834       $ 94   

Disciplined Select Bond Fund

      —         —         —         —         16         7         16         7   

Dynamic Trend Fund

      24         —         —         —         109         —         133      

Sector Trend Fund

      —         —         1,080         —         —         —         1,080      

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.

 

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized for tax years beginning after December 22, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

For the period ended September 30, 2015, the following Funds utilized losses deferred in prior years against current year capital gains:

 

Dynamic Trend Fund

    $ 295   

Sector Trend Fund

      360   

Capital losses realized after October 31 and certain late year ordinary losses may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2015, the Funds deferred and recognized post-October losses as follows:

 

     Late Year
Ordinary
Losses
Deferred		     Late Year
Ordinary
Losses
Recognized		      Capital
Loss
Deferred		      Capital
Loss
Recognized		  

Alternatives Diversifier Fund

    $ —      $ —       $ 2,312       $ 1,917   

Disciplined Equity Style Fund

      20        —         —         —   

Disciplined Select Bond Fund

      —        —         68         8   

Disciplined Select Country Fund

      —        —         84         —   

Dynamic Trend Fund

      — (1)      —         117,804         —   

Equity Trend Fund

      8,830        —         386,696         —   

Global Equity Trend Fund

      697        —         12,075         —   

Herzfeld Fund

      —        —         327         —   

Multi-Asset Trend Fund

      2,862        —         28,691         —   

Sector Trend Fund

      —        —         42,987         —   

 

  (1)  Amount is less than $500.

The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which are disclosed above) consist of the following:

 

     Undistributed
Ordinary
Income		      Undistributed
Long-Term
Capital Gains		  

Alternatives Diversifier Fund

    $ 411       $ —   

Disciplined Equity Style Fund

      —         46   

Disciplined Select Bond Fund

      1         —   

Disciplined Select Country Fund

      4         —   

Dynamic Trend Fund

      —         —   

Equity Trend Fund

      —         —   

Global Equity Trend Fund

      —         —   

Herzfeld Fund

      —         460   

Multi-Asset Trend Fund

      281         —   

Sector Trend Fund

      1,513         —   

The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

The tax character of dividends and distributions paid during the years ended September 30, 2015 and 2014 was as follows:

 

     2015      2014  
     Ordinary
income		      Long-Term
Capital Gains		      Total      Ordinary
income		      Long-Term
Capital Gains		      Total  

Alternatives Diversifier Fund

    $ 2,015       $ —       $ 2,015       $ 1,928       $ —       $ 1,928   

Disciplined Equity Style Fund

      410         3         413         100         —         100   

Disciplined Select Bond Fund

      9         —         9         22         —         22   

Disciplined Select Country Fund

      34         78         112         22         —         22   

Dynamic Trend Fund

      33,928         288,163         322,091         —         —         —   

Equity Trend Fund

      360,775         1,049,270         1,410,045         150,348         50,480         200,828   

Global Equity Trend Fund

      5,789         13,389         19,178         4,224         306         4,530   

Herzfeld Fund

      1,424         315         1,739         546         28         574   

Multi-Asset Trend Fund

      18,666         40,699         59,365         10,245         1,138         11,383   

Sector Trend Fund

      41,833         170,484         212,317         27,122         25,656         52,778   

 

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

Note 12. Reclassification of Capital Accounts

($ reported in thousands)

For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Funds. As of September 30, 2015, the Funds recorded reclassifications to increase (decrease) the accounts as listed below:

 

       Capital Paid in on
Shares of
Beneficial Interest		        Undistributed
Net Investment
Income (Loss)		        Accumulated
Net Realized
Gain (Loss)		  

Alternatives Diversifier Fund

      $ 322         $ (168 )       $ (154 ) 

Disciplined Equity Style Fund

        (1 )         1           — (1) 

Disciplined Select Bond Fund

        (22 )         — (1)         (22 ) 

Disciplined Select Country Fund

        (4 )         — (1)         (4 ) 

Dynamic Trend Fund

        (4,190 )         7,449           (3,259 ) 

Equity Trend Fund

        (1,797 )         5,433           (3,636 ) 

Global Equity Trend Fund

        (1 )         1           —   

Herzfeld Fund

        (— )(1)         127           (127 ) 

Multi-Asset Trend Fund

        — (1)         (43 )         43   

Sector Trend Fund

        1,230           10           (1,240 ) 

 

  (1)  Amount is less than $500.

 

Note 13. Regulatory Matters and Litigation

From time to time, the Funds’ investment adviser and/or its affiliates and/or subadvisers may be involved in litigation and arbitration as well as examinations and investigations by various regulatory bodies, including the SEC, involving compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting their products and other activities. At this time, the Funds’ investment adviser believes that the outcomes of such matters are not likely, either individually or in the aggregate, to be material to these financial statements.

As part of an SEC non-public, confidential investigation of a matter entitled – In the Matter of F-Squared Investments Inc., the SEC staff informed the Funds’ investment adviser that it was inquiring into whether it had violated securities laws or regulations with respect to circumstances related to that matter. On November 16, 2015, without admitting or denying the SEC’s findings, the Funds’ investment adviser consented to the entry of an order providing that it cease and desist from committing or causing any violations and future violations of Sections 204, 206(2) and 206(4) of the Investment Advisers Act of 1940, as amended, and Rules 204-2, 206(4)-1, 206(4)-7 and 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940, as amended; agreed to a censure; and paid $16.5 million, which included a civil money penalty of $2 million, disgorgement of $13.4 million and prejudgment interest of $1.1 million.

On February 20, 2015, a putative class action complaint (In re Virtus Investment Partners, Inc. Securities Litigation; formerly styled as Tom Cummins v. Virtus Investment Partners Inc. et al) alleging violation of the federal securities laws was filed by an individual shareholder against Virtus and certain of its officers (the “defendants”) in the United States District Court for the Southern District of New York. On August 21, 2015, the lead plaintiff filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint and adding the Trust as a defendant. The Consolidated Complaint was purportedly filed on behalf of all purchasers of Virtus common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint alleges that during the Class Period, the defendants knowingly disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds previously subadvised by F-Squared Investments, Inc. and/or its affiliates (“F-Squared”). The plaintiff seeks to recover unspecified damages. Virtus and its affiliates, including the Funds’ adviser, believe that the suit is without merit and intend to defend it vigorously. A motion to dismiss the Consolidated Complaint was filed on behalf of the defendants on October 21, 2015. The Trust believes that the risk of loss to the Funds as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Funds.

On May 8, 2015, a putative class action complaint (Mark Youngers v. Virtus Investment Partners, Inc. et al) alleging violations of certain provisions of the federal securities laws was filed in the United States District Court for the Central District of California. The complaint, which was purportedly filed on behalf of purchasers of certain Virtus Funds previously subadvised by F-Squared between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”), alleges claims against Virtus, certain Virtus officers and affiliates (including the Funds’ investment adviser, Euclid Advisors LLC and VP Distributors, LLC), the trustees and certain officers of the Trust, and certain other parties (the “defendants”). The complaint alleges that during the Class Period the defendants knowingly disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On October 1, 2015, the plaintiff filed a First Amended Class Action Complaint which, among other things, added a derivative claim for breach of fiduciary duty on behalf of the Trust. On October 19, 2015, the Court entered an order transferring the action to the Southern District of New York. Virtus and its affiliates, including the Funds’ adviser, believe the plaintiff’s claims asserted in the complaint are frivolous and intend to defend them vigorously. The Trust believes that the risk of loss to the Funds as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Funds.

 

Note 14. Subsequent Event Evaluations

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that the following subsequent events require recognition or disclosure in the financial statements.

On October 22, 2015, the Board of Trustees of the Virtus Opportunities Trust voted to liquidate the Virtus Disciplined Equity Style Fund, Virtus Disciplined Select Bond Fund and Virtus Disciplined Select Country Fund (the “Funds”). Based on the recommendation of management, the Trustees

 

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

determined that liquidation is in the best interest of the shareholders and voted to direct the mandatory redemption of all shares of the Funds. Effective November 20, 2015, the Funds will be closed to new investors and additional investor deposits.

On or about December 2, 2015 (the “Liquidation Date”), each of the Funds will be liquidated at its net asset value. Prior to such time, shareholders may exchange their shares of the Funds for shares of the same class of any other Virtus Mutual Fund. Shareholders may also redeem their shares at any time prior to the Funds’ liquidation on the Liquidation Date. There will be no fee or sales charges associated with exchange or redemption requests.

The Board of Trustees of Virtus Opportunities Trust (the “Board”), on behalf of Virtus Dynamic Trend Fund, has unanimously approved an Agreement and Plan of Reorganization (“Agreement”) relating to the proposed combination of Virtus Dynamic Trend Fund, a series of Virtus Opportunities Trust, with and into Virtus Equity Trend Fund, a separate series of Virtus Opportunities Trust.

 

Merging Fund   Surviving Fund
Virtus Dynamic Trend Fund   Virtus Equity Trend Fund

The merger is subject to shareholder approval. If approved the merger is expected to take place in 2016.

 

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LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 (including the schedule of investments and securities sold short for Virtus Dynamic Trend Fund), 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 Alternatives Diversifier Fund, Virtus Disciplined Equity Style Fund, Virtus Disciplined Select Bond Fund, Virtus Disciplined Select Country Fund, Virtus Dynamic Trend Fund, Virtus Equity Trend Fund, Virtus Global Equity Trend Fund, Virtus Herzfeld Fund, Virtus Multi-Asset Trend Fund and Virtus Sector Trend Fund (constituting funds within Virtus Opportunities Trust, hereafter referred to as the “Funds”) at September 30, 2015, the results of each of their operations for the year then ended, the changes in each of their 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 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, 2015 by correspondence with the custodian, brokers, and transfer agent of the investee funds, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

November 20, 2015

 

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VIRTUS OPPORTUNITIES TRUST

TAX INFORMATION NOTICE

SEPTEMBER 30, 2015

 

For the fiscal year ended September 30, 2015, the Funds make the following disclosures for federal income tax purposes. Below is listed the percentages, or the maximum amount allowable, of its ordinary income dividends (“QDI”) to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Funds which qualifies for the dividends received deduction (“DRD”) for corporate shareholders. The actual percentage of QDI and DRD for the calendar year will be designated in year-end tax statements. The Funds designate the amounts below as long-term capital gains dividends (“LTCG”) taxable at a 20% rate, or lower depending on the shareholder’s income ($ reported in thousands). LTCG amounts, if subsequently different, will be designated in the next annual report.

 

Fund

    QDI        DRD        LTCG  

Alternatives Diversifier Fund

      69 %         21 %       $ —   

Disciplined Equity Style Fund

      —           —           47   

Disciplined Select Country Fund

      89           16           —   

Dynamic Trend Fund

      —           —           175,430   

Equity Trend Fund

      —           —           464,699   

Global Equity Trend Fund

      100           100           1,259   

Herzfeld Fund

      30           8           560   

Multi-Asset Trend Fund

      100           100           3,998   

Sector Trend Fund

      38           49           118,777   

For the fiscal year ended September 30, 2015, certain 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
Income
Recognized		      Foreign Taxes
Paid on Foreign
Source Income		  

Alternatives Diversifier Fund

    $ 727       $ 19   

Disciplined Select Country Fund

      42         4   

Herzfeld Fund

      110         2   

Multi-Asset Trend Fund

      2,571         262   

 

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FUND MANAGEMENT TABLES

 

Information pertaining to the trustees and officers of the Trust as of September 30, 2015, 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) 243-1574. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for trustees of the Trust.

Independent Trustees

 

   
Name,
Year of Birth,
Year Elected and
Number of Funds Overseen		  

Principal Occupation(s) During Past 5 Years and

Other Directorships Held by Trustee

McClellan, Hassell H.

YOB: 1945

Elected: 2015

55 Portfolios

   Retired. Professor (1984 to 2013), Wallace E. Carroll School of Management, Boston College; Trustee, Virtus Variable Insurance Trust (9 portfolios) (since 2008); Trustee (since 2015), Virtus Mutual Fund Complex (46 portfolios); Trustee, John Hancock Fund Complex (since 2000), John Hancock Funds (collectively, 234 portfolios); and Director (since 2010), Barnes Group, Inc. (diversified global components manufacturer and logistical services company).

McLoughlin, Philip

YOB: 1946

Elected: 2006

69 Portfolios

   Director (since 1991) and Chairman (since 2010), World Trust Fund (closed-end investment firm in Luxembourg); Director (since 1995), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); Chairman (since 2002) and Trustee (since 1989), Virtus Mutual Fund Complex (46 portfolios); Chairman and Trustee (since 2003), Virtus Variable Insurance Trust (9 portfolios); Trustee/Director and Chairman (since 2011), Virtus Closed-End Funds (3 portfolios); Trustee and Chairman (since 2013), Virtus Alternative Solutions Trust (7 portfolios); Partner (2006 to 2010), Cross Pond Partners, LLC (investment management consultant); and Managing Director (2008 to 2010), SeaCap Partners, LLC (investment management).

McNamara, Geraldine M.

YOB: 1951

Elected: 2006

59 Funds

   Retired. Trustee (since 2001), Virtus Mutual Fund Complex (46 portfolios); and Director (since 2003), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); and Trustee (since 2015), Virtus Variable Insurance Trust (9 portfolios)

Oates, James M.

YOB: 1946

Elected: 2006

56 Funds

   Managing Director (since 1994), Wydown Group (consulting firm). Trustee (since 1987), Virtus Mutual Fund Complex (46 portfolios); Director (since 1996), Stifel Financial; Director (1998 to 2014), Connecticut River Bancorp; Chairman and Director (1999 to 2014), Connecticut River Bank; Chairman (since 2000), Emerson Investment Management, Inc.; Director (2002 to 2014), New Hampshire Trust Company; Chairman and Trustee (since 2005), John Hancock Fund Complex (228 portfolios); Non-Executive Chairman (2007 to 2011), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services); Trustee/Director (since 2013), Virtus Closed-End Funds (3 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

Segerson, Richard E.

YOB: 1948

Elected: 2006

46 Funds

   Trustee (since 1983), Virtus Mutual Fund Complex (46 portfolios); and Managing Director (1998 to 2013), Northway Management Company.

Verdonck, Ferdinand L.J.

YOB: 1942

Elected: 2006

46 Funds

   Trustee (since 2002), Virtus Mutual Fund Complex (46 portfolios).

Interested Trustee

The individual listed below is an “interested person” of the Trust, as defined in Section 2(a)(19) of the 1940 Act, as amended, and the rules and regulations thereunder.

 

   
Name,
Year of Birth,
Year Elected and
Number of Funds Overseen		   Principal Occupation(s) During Past 5 Years and
Other Directorships Held by Trustee

Aylward, George R.*

Trustee and President

YOB: 1964

Elected: 2006

67 Funds

   Director, President and Chief Executive Officer (since 2008), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions with Virtus affiliates (since 2005); Trustee (since 2006), Virtus Mutual Funds (46 portfolios); Chairman, President and Chief Executive Officer (since 2006), The Zweig Closed-End Funds (2 portfolios); Trustee (since 2012) and President (since 2010), Virtus Variable Insurance Trust (9 portfolios); Trustee and President (since 2011), Virtus Closed-End Funds (3 portfolios); Director (since 2013), Virtus Global Funds, PLC (2 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

 

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FUND MANAGEMENT TABLES (Continued)

 

Officers of the Trust Who Are Not Trustees

 

     

Name, Address and

Year of Birth

   Position(s) Held with Trust and
Length of Time Served		   Principal Occupation(s)
During Past 5 Years

Waltman, Francis G.

YOB: 1962

   Executive Vice President (since 2013); Senior Vice President (2008-2013).   Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2006) with Virtus affiliates; Executive Vice President (since 2013), Senior Vice President (2008 to 2013), Virtus Mutual Fund Complex; Executive Vice President (since 2013), Senior Vice President (2010 to 2013), Virtus Variable Insurance Trust; Executive Vice President (since 2013), Senior Vice President (2011 to 2013), Virtus Closed-End Funds; Director (since 2013), Virtus Global Funds PLC; and Executive Vice President (since 2013), Virtus Alternative Solutions Trust.

Bradley, W. Patrick

YOB: 1972

   Senior Vice President
(since 2013); Vice President (2011 to 2013); Chief Financial Officer and Treasurer (since 2006).		   Senior Vice President, Fund Services (since 2010), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2006) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2004), Virtus Variable Insurance Trust; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2006), Virtus Mutual Fund Complex; Senior Vice President (since 2013), Vice President (2012 to 2013) and Treasurer (Chief Financial Officer) (since 2007), The Zweig Closed-End Funds; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2011), Virtus Closed-End Funds; Vice President and Assistant Treasurer (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Director (since 2013), Virtus Global Funds, PLC; and Senior Vice President, Chief Financial Officer and Treasurer (since 2013), Virtus Alternative Solutions Trust.

Carr, Kevin J.

YOB: 1954

   Senior Vice President,
since 2013; Vice President (2005-2013); Chief Legal Officer, Counsel and Secretary (since 2005).		   Senior Vice President (since 2009), Vice President, Counsel and Secretary (2008 to 2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2005) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2005 to 2013), Chief Legal Officer, Counsel and Secretary (since 2005), Virtus Mutual Fund Complex; Senior Vice President (2013 to 2014), Vice President (2012 to 2013) and Assistant Secretary (since 2012), Secretary and Chief Legal Officer (2005 to 2012), The Zweig Closed-End Funds; Assistant Secretary (since 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2010 to 2013), Virtus Variable Insurance Trust; Vice President and Assistant Secretary (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Senior Vice President and Assistant Secretary (2013 to 2014), Vice President and Assistant Secretary (2012 to 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2011 to 2012), Virtus Closed-End Funds; and Assistant Secretary (since 2013), Virtus Alternative Solutions Trust.

Engberg, Nancy J.

YOB: 1956

  

Vice President and Chief Compliance

Officer since 2011.

   Vice President (since 2008) and Chief Compliance Officer (2008 to 2011), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2003) with Virtus affiliates; Vice President and Chief Compliance Officer (since 2011), Virtus Mutual Fund Complex; Vice President (since 2010), Chief Compliance Officer (since 2011), Virtus Variable Insurance Trust; Vice President and Chief Compliance Officer (since 2011), Virtus Closed-End Funds; Vice President and Chief Compliance Officer (since 2012), The Zweig Closed-End Funds; and Vice President and Chief Compliance Officer (since 2013), Virtus Alternative Solutions Trust.

 

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Virtus Disciplined Equity Style Fund, Virtus Disciplined Select Bond Fund,

Virtus Disciplined Select Country Fund, Virtus Equity Trend Fund,

Virtus Global Equity Trend Fund, Virtus Herzfeld Fund and

Virtus Multi-Asset Trend Fund each a series of Virtus Opportunities Trust

Supplement dated September 1, 2015 to the Summary Prospectuses dated January 28, 2015,

as supplemented, and the Virtus Opportunities Trust Statutory Prospectus,

dated January 28, 2015, as supplemented.

IMPORTANT NOTICE TO INVESTORS

Virtus Disciplined Equity Style Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each year as a
percentage of the value of your investment)		    Class A      Class C      Class I  

Management Fees

      1.00 %       1.00 %       1.00 % 

Distribution and Shareholder Servicing (12b-1) Fees

      0.25 %       1.00 %       None   

Other Expenses

      3.72 %       3.72 %       3.72 % 

Acquired Fund Fees and Expenses

      0.23 %       0.23 %       0.23 % 

Total Annual Fund Operating Expenses(b)

      5.20 %       5.95 %       4.95 % 

Less: Expense Reimbursement(c)

      (3.60 %)       (3.60 %)       (3.60 %) 

Total Annual Fund Operating Expenses After Expense Reimbursement(b)(c)

      1.60 %       2.35 %       1.35 % 

 

  (b)  The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.
  (c)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.60% for Class A Shares, 2.35% for Class C Shares and 1.35% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 728         $ 1,410         $ 2,454         $ 5,045   

Class C

      Sold      $ 338         $ 1,107         $ 2,337         $ 5,311   
     Held      $ 238         $ 1,107         $ 2,337         $ 5,311   

Class I

      Sold or Held      $ 137         $ 812         $ 1,877         $ 4,543   

Virtus Disciplined Select Bond Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each year as a
percentage of the value of your investment)		    Class A      Class C      Class I  

Management Fees

      0.80 %       0.80 %       0.80 % 

Distribution and Shareholder Servicing (12b-1) Fees

      0.25 %       1.00 %       None   

Other Expenses

      6.23 %       6.23 %       6.23 % 

Acquired Fund Fees and Expenses

      0.20 %       0.20 %       0.20 % 

Total Annual Fund Operating Expenses(b)

      7.48 %       8.23 %       7.23 % 

Less: Expense Reimbursement(c)

      (6.08 %)       (6.08 %)       (6.08 %) 

Total Annual Fund Operating Expenses After Expense Reimbursement(b)(c)

      1.40 %       2.15 %       1.15 % 

 

  (b)  The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.
  (c)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.40% for Class A Shares, 2.15% for Class C Shares and 1.15% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Table of Contents

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 512         $ 1,417         $ 2,887         $ 6,255   

Class C

      Sold      $ 318         $ 1,299         $ 2,930         $ 6,568   
     Held      $ 218         $ 1,299         $ 2,930         $ 6,568   

Class I

      Sold or Held      $ 117         $ 1,010         $ 2,501         $ 5,947   

Virtus Disciplined Select Country Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each year as a
percentage of the value of your investment)		    Class A      Class C      Class I  

Management Fees

      1.10 %       1.10 %       1.10 % 

Distribution and Shareholder Servicing (12b-1) Fees

      0.25 %       1.00 %       None   

Other Expenses

      5.10 %       5.10 %       5.10 % 

Acquired Fund Fees and Expenses

      0.47 %       0.47 %       0.47 % 

Total Annual Fund Operating Expenses(b)

      6.92 %       7.67 %       6.67 % 

Less: Expense Reimbursement(c)

      (5.22 %)       (5.22 %)       (5.22 %) 

Total Annual Fund Operating Expenses After Expense Reimbursement(b)(c)

      1.70 %       2.45 %       1.45 % 

 

  (b)  The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.
  (c)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.70% for Class A Shares, 2.45% for Class C Shares and 1.45% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 738         $ 1,595         $ 2,935         $ 6,064   

Class C

      Sold      $ 348         $ 1,298         $ 2,827         $ 6,305   
     Held      $ 248         $ 1,298         $ 2,827         $ 6,305   

Class I

      Sold or Held      $ 148         $ 1,010         $ 2,393         $ 5,653   

Virtus Herzfeld Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment)		      Class A        Class C        Class I  

Management Fees

        1.00 %         1.00 %         1.00 % 

Distribution and Shareholder Servicing (12b-1) Fees

        0.25 %         1.00 %         None   

Other Expenses

        0.68 %         0.68 %         0.68 % 

Acquired Fund Fees and Expenses

        1.58 %         1.58 %         1.58 % 

Total Annual Fund Operating Expenses(b)

        3.51 %         4.26 %         3.26 % 

Less: Expense Reimbursement(c)

        (1.91 %)         (1.91 %)         (1.91 %) 

Total Annual Fund Operating Expenses After Expense Reimbursement(b)(c)

        1.60 %         2.35 %         1.35 % 

 

  (b)  The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.
  (c)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.60% for Class A Shares, 2.35% for Class C Shares and 1.35% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Table of Contents

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 728         $ 1,243         $ 1,972         $ 3,891   

Class C

      Sold      $ 338         $ 933         $ 1,844         $ 4,182   
     Held      $ 238         $ 933         $ 1,844         $ 4,182   

Class I

      Sold or Held      $ 137         $ 633         $ 1,358         $ 3,284   

Virtus Disciplined Equity Style Fund, Virtus Disciplined Select Bond Fund, Virtus Disciplined Select Country Fund, Virtus Equity Trend Fund, Virtus Global Equity Trend Fund, Virtus Herzfeld Fund and Virtus Multi-Asset Trend Fund

The first paragraph and the information in the first table in the section “More Information About Fund Expenses” on page 139 of the statutory prospectus are hereby revised with the following information for the above referenced funds:

Virtus Investment Advisers, Inc. (“VIA”) has contractually agreed to limit the total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, leverage expenses, extraordinary expenses and acquired fund fees and expenses, if any) of certain of the funds so that expenses do not exceed, on an annualized basis, the amounts indicated in the following table.

 

   

   

   Class A
Shares		      Class B
Shares		      Class C
Shares		      Class I
Shares		      Class R6
Shares		      Class T
Shares		      Through Date  

Virtus Disciplined Equity Style Fund

      1.60 %       N/A         2.35 %       1.35 %       N/A         N/A         January 31, 2017   

Virtus Disciplined Select Bond Fund

      1.40 %       N/A         2.15 %       1.15 %       N/A         N/A         January 31, 2017   

Virtus Disciplined Select Country Fund

      1.70 %       N/A         2.45 %       1.45 %       N/A         N/A         January 31, 2017   

Virtus Equity Trend Fund(1)

      1.70 %       N/A         2.45 %       1.45 %       1.38 %       N/A         January 31, 2017   

Virtus Global Equity Trend Fund(1)

      1.75 %       N/A         2.50 %       1.50 %       N/A         N/A         January 31, 2017   

Virtus Herzfeld Fund

      1.60 %       N/A         2.35 %       1.35 %       N/A         N/A         January 31, 2017   

Virtus Multi-Asset Trend Fund(1)

      1.75 %       N/A         2.50 %       1.50 %       N/A         N/A         January 31, 2017   

 

  (1)  Fund expenses currently below the capped level.

Investors should retain this supplement with the Prospectuses for future reference.

VOT 8020/7FundsNewExpCap&Waiver (09/15)

Table of Contents

FUND MANAGEMENT TABLES (Continued)

(UNAUDITED)

 

VIRTUS OPPORTUNITIES TRUST

101 Munson Street

Greenfield, MA 01301-9668

 

Trustees

George R. Aylward

Hassell H. McClellan

Philip R. McLoughlin, Chairman

Geraldine M. McNamara

James M. Oates

Richard E. Segerson

Ferdinand L.J. Verdonck

Officers

George R. Aylward, President

Francis G. Waltman, Executive Vice President

W. Patrick Bradley, Senior Vice President, Chief Financial Officer and Treasurer

Kevin J. Carr, Senior Vice President, Chief Legal Officer, Counsel and Secretary

Nancy J. Engberg, Vice President and Chief Compliance Officer

Investment Adviser

Virtus Investment Advisers, Inc.

100 Pearl Street

Hartford, CT 06103-4506

Principal Underwriter

VP Distributors, LLC

100 Pearl Street

Hartford, CT 06103-4506

Administrator and Transfer Agent

Virtus Fund Services, LLC

100 Pearl Street

Hartford, CT 06103-4506

Custodian

JPMorgan Chase Bank, NA

1 Chase Manhattan Plaza,

New York, NY 10005-1401

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

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.

 

Table of Contents

LOGO

 

   

P.O. Box 9874

Providence, RI 02940-8074

   

For more information about Virtus Mutual Funds,

please call your financial representative, or contact us

at 1-800-243-1574 or Virtus.com

 

8454    11-15

Table of Contents

LOGO

 

 

ANNUAL REPORT

 

 

Virtus Foreign Opportunities Fund

September 30, 2015

TRUST NAME: VIRTUS OPPORTUNITIES TRUST

Not FDIC Insured

No Bank Guarantee

May Lose Value

 

LOGO

Table of Contents

Table of Contents

Virtus Foreign Opportunities Fund

(“Foreign Opportunities Fund”)

 

Message to Shareholders

     1   

Disclosure of Fund Expenses

     2   

Key Investment Terms

     4   

Fund Summary

     6   

Schedule of Investments

     10   

Statement of Assets and Liabilities

     13   

Statement of Operations

     14   

Statements of Changes in Net Assets

     15   

Financial Highlights

     16   

Notes to Financial Statements

     17   

Report of Independent Registered Public Accounting Firm

     26   

Tax Information Notice

     27   

Fund Management Tables

     28   

 

PROXY VOTING PROCEDURES AND VOTING RECORD (FORM N-PX)

The subadviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Board of Trustees of the Trust (“Trustees,” or the “Board”). 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, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission’s (the “SEC”) website at http://www.sec.gov.

FORM N-Q INFORMATION

The Trust files a complete schedule of portfolio holdings for the Fund with 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.

Table of Contents

MESSAGE TO SHAREHOLDERS

To My Fellow Shareholders of Virtus Mutual Funds:

 

LOGO   

I am pleased to present this annual report that reviews the performance of your fund for the twelve months ended September 30, 2015.

 

During this period, global equity markets were challenged by falling oil prices, China’s economic slowdown, Greece’s debt crisis, and the growing likelihood of an interest rate hike by the Federal Reserve (the “Fed”). Volatility took its toll on major U.S. equity indices for the twelve months ended September 30, 2015. The large-cap S&P 500® Index and Dow Jones Industrial AverageSM moderately declined 0.61% and 2.11%, respectively, while the technology-heavy NASDAQ Composite Index® gained 4.00%. By comparison, international equities were down even further, with emerging markets hit particularly hard.

 

Against this backdrop, U.S. Treasuries remained an attractive “safe haven” among global investors. The bellwether 10-year U.S. Treasury yield declined from 2.52% at September 30, 2014 to 2.06% at September 30, 2015. Fixed income assets experienced slight losses in anticipation of the Fed’s stated intention to raise interest rates at the end of 2015. The Barclays U.S. Aggregate Bond Index, which tracks Treasuries and other investment-grade debt securities, gained 2.94% for the twelve-month period ended September 30, 2015, while non-investment grade bonds underperformed, with the Barclays U.S. Corporate High Yield Bond Index down 3.43% for the same period.

 

The strength of the global economy is likely to remain a concern for the markets in the months ahead. Actions by the Fed and other global central banks will be watched with great interest. Following the weak start to the year, the U.S. economy exhibited growth over the second and third quarters of 2015 – including stronger jobs, housing, and consumer spending data – and gives investors reason for optimism. Future market direction will be determined largely by the ability of corporations to continue to produce robust earnings.

 

Market uncertainty serves as a constant reminder of the importance of portfolio diversification, including exposure to both traditional and alternative asset classes. While diversification cannot guarantee a profit or prevent a loss, owning a variety of asset classes may provide a cushion against inevitable market fluctuations. Your financial advisor can help you ensure that your portfolio is adequately diversified across asset classes and investment strategies.

 

As always, thank you for entrusting Virtus with your assets. Should you have questions about your account or require assistance, please visit our website at www.Virtus.com, or call our customer service team at 1-800-243-1574. We appreciate your business and remain committed to your long-term financial success.

 

Sincerely,

 

LOGO

George R. Aylward

President, Virtus Mutual Funds

 

October 2015

 

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

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VIRTUS FOREIGN OPPORTUNITIES FUND

DISCLOSURE OF FUND EXPENSES (Unaudited)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Virtus Foreign Opportunities Fund (the “Fund”) you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class C shares; and (2) ongoing costs, including investment advisory fees, distribution and service fees, and other expenses. Class I shares and Class R6 shares are sold without a sales charge and do not incur distribution and service fees. For further information regarding applicable sales charges, see Note 1 in the Notes to Financial Statements. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your Fund’s costs in two ways.

Actual Expenses

The first section of the accompanying table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes

The second section of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the accompanying table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

 

2

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VIRTUS FOREIGN OPPORTUNITIES FUND

DISCLOSURE OF FUND EXPENSES (Unaudited) (Continued)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

Expense Table                                
       

Beginning
Account
Value

April 1, 2015

       

Ending
Account Value

September 30, 2015

        Annualized
Expense
Ratio		        Expenses
Paid
During
Period*		  

Actual

                    

Class A

      $ 1,000.00         $    963.10           1.43 %       $ 7.04   

Class C

        1,000.00           959.40           2.18           10.71   

Class I

        1,000.00           964.30           1.18           5.81   
Class R6        1,000.00           965.00           1.07           5.27   

Hypothetical (5% return before expenses)

  

Class A

        1,000.00           1,017.81           1.43           7.26   

Class C

        1,000.00           1,014.00           2.18           11.07   

Class I

        1,000.00           1,019.08           1.18           5.99   
Class R6        1,000.00           1,019.64           1.07           5.43   

 

* 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

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VIRTUS FOREIGN OPPORTUNITIES FUND

SEPTEMBER 30, 2015

(Unaudited)

 

KEY INVESTMENT TERMS

American Depositary Receipt (ADR)

Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a U.S. bank or trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares.

Barclays U.S. Aggregate Bond Index

The Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. The index is unmanaged its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Barclays U.S. Corporate High Yield Bond Index

The Barclays U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Dow Jones Industrial AverageSM

A price weighted average of 30 blue chip stocks. The index is calculated on total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Federal Reserve (the “Fed”)

The Central Bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable. Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system.

MSCI EAFE® Index (net)

A free float-adjusted market capitalization-weighted index that measures developed foreign market equity performance, excluding the U.S. and Canada. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI Emerging Markets Index (net)

The MSCI Emerging Markets Index (net) is a free float-adjusted market capitalization-weighted index designed to measure equity market performance in the global emerging markets. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI Europe Index (net)

The MSCI Europe Index (net) is a free float-adjusted market capitalization weighted index that measures equity market performance of the developed markets in Europe. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

 

4

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VIRTUS FOREIGN OPPORTUNITIES FUND (Continued)

SEPTEMBER 30, 2015

(Unaudited)

 

NASDAQ Composite Index®

A market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. Unlike other market indexes, the NASDAQ composite is not limited to companies that have U.S. headquarters. The index is unmanaged, its returns do not reflect any fees, expenses or sales charges, and it is not available for direct investment.

Quantitative Easing

A government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative Easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

Real Estate Investment Trust (REIT)

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® Index

The S&P 500® 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 index is unmanaged its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

 

5

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VIRTUS FOREIGN OPPORTUNITIES FUND

 

Fund Summary

Portfolio Manager Commentary by

Vontobel Asset Management, Inc.

   

Ticker Symbols:

Class A: JVIAX

Class C: JVICX

Class R6: VFOPX

Class I: JVXIX

 

¢   The Fund is diversified and has an investment objective of long-term capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -2.41%, Class C shares returned -3.13% Class I shares returned -2.16% and Class R6 shares from November 14, 2014 (inception date) through September 30, 2015, returned -3.84%*. For the fiscal year, the S&P® 500 Index, a broad-based equity index, returned -0.61% and the MSCI EAFE® Index (net), the Fund’s style-specific index appropriate for comparison, returned -8.66%.

 

* Returns less than 1 year are not annualized.

All performance figures assume reinvestment of distribution and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown.

How did the market perform during the Fund’s fiscal year?

 

¢   The MSCI EAFE® Index was down in fiscal Q1, positive in fiscal Q2, essentially flat in fiscal Q3, and negative in fiscal Q4 as global markets sold off.

 

¢   Concerns over global growth and uncertainty driven by the U.S. Federal Reserve’s decision in September to postpone its pending interest rate hike negatively impacted global equities at the end of the one-year period.

 

¢   Towards the end of 2014, European equities struggled as disappointing economic data was released and the European Central Bank lowered its growth forecasts for the eurozone economy. However, European equities entered positive territory in the beginning of 2015, bolstered by central bank bond purchases. By mid-year, the Greek debt crisis impacted European markets, which experienced losses through September, as the effects of the Chinese slowdown and a scandal at German auto
   

manufacturer Volkswagen weighed on investor sentiment. Over the one-year period ended September 30, 2015, European equities (as represented by the MSCI Europe Index) returned -9.33% in U.S. dollar terms. The euro experienced a significant devaluation, declining more than 11.5% against the U.S. dollar over the period.

 

¢   Falling commodity prices and a strengthening U.S. dollar drove emerging markets to negative territory at the end of 2014. Emerging markets entered 2015 with positive momentum with promising developments occurring in India, where equities benefited from two unexpected central bank rate cuts and a greater government focus on infrastructure spending. After reaching highs in late April, driven by soaring Chinese equity markets, emerging markets experienced steep declines as concerns over China’s weak macroeconomic data, Beijing’s unexpected move to devalue its currency, and substantial Chinese equity market volatility led to a global market sell-off in August. Emerging markets suffered far worse than their developed market counterparts. Currencies of many developing countries tumbled as well. Emerging market equities (as represented by the MSCI Emerging Markets Index) returned -19.28% in U.S. dollar terms over the one-year period ended September 30, 2015.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The following discussion highlights specific stocks – those that provided the largest contribution to absolute performance and those that were the largest detractors for the quarter. As bottom-up stock pickers, we hope that the Fund’s shareholders find this useful and gain a greater understanding of how we invest their capital.

Stocks that Helped Absolute Performance

 

¢   HDFC Bank is a high-quality Indian private sector bank which has been a cornerstone

 

 

For information regarding the indexes and certain investment terms, see Key Investment Terms starting on page 4.

 

6

Table of Contents
VIRTUS FOREIGN OPPORTUNITIES FUND (Continued)   

 

   

investment in the portfolio for many years. HDFC Bank released solid F1Q2016 results. We believe that its cutting its benchmark (base rate) lending rate will likely accelerate its market share gains. HDFC Bank is the largest privately owned retail bank in India with a network of 3,659 branches and 11,633 ATMs (many outside of branches) across 2,287 towns and cities nationwide at calendar year-end 2014. The bank has delivered solid growth while maintaining high credit and underwriting standards. HDFC Bank has a strong deposit franchise and powerful technology backbone that has allowed it to significantly grow earnings over the past 10 years.

 

¢   Paddy Power, an Irish gaming company, has been a long-held and successful position in our strategies. It is predominantly a technology company as much of gambling has moved online. The company has a powerful brand and a fun, innovative, and edgy image. Its business footprint currently spans only jurisdictions where it can operate legally, which is a rarity in the global online gaming marketplace. Most competitors in the online space have been happy to cross into geographies where gambling is not legal, tempted by the short-term buck to be made. Paddy Power has consistently kept its gaming nose clean and mainly operates in Ireland, the United Kingdom, France, Italy, and Australia through direct or business-to-business operating ventures. Specifically, Paddy Power has been extremely successful in Australia and, by far, has become the market leader there. Paddy Power’s stock performed well over the period as it released 1H2015 results that exceeded expectations and announced that it has reached an agreement on the key terms of a merger with Betfair, which would create one the world’s largest public online betting and gaming companies. In our view, the merger brings together two very strong businesses to create an even stronger business. And, since Betfair is currently managed by many former Paddy Power employees, it is a good cultural fit. We believe the combined company will be
   

a long-term industry winner in online gaming, particularly in the U.K. In our view, Paddy Power has a bright future as penetration to online continues to grow and the company is growing its online business with existing customers.

Stocks that Hurt Absolute Performance

 

¢   Baidu disappointed over the period with continued weakness in margins as the company is spending heavily on marketing to drive adoption of its online-to-offline (O2O) platforms. We agree that longer term O2O is the right strategy as it allows Baidu to take a higher share of revenues from completed transactions in local services areas, such as food delivery. Longer term, as search revenue slows down, we think O2O transactions will become a more important growth driver for the company; however, shorter term, the investment required is impacting margins. We believe the majority of these investments are discretionary and will be pulled back over the years. The core search business continues to perform well with revenue growth in the 30-35% range as the investments the company has made in promoting mobile search are coming to fruition. However, the O2O strategy is not driving incremental revenue growth for the near term and intense competition for the O2O markets continues to be strong. This is necessitating Baidu to spend more aggressively on marketing and promotion to try to win market share, which is not value added from its shareholders’ perspective, and continues to drag down margins.

 

¢   Enbridge is the largest liquid pipeline in Canada. It is the backbone system to move oil from the Alberta region to Eastern Canada and the United States. We think that the underperformance of the stock reflects the sharp correction in oil prices. In a scenario of long-term low oil prices, there is risk that oil producers in Canada will need to start cutting production targets. And, this will have a negative impact on Enbridge’s long-term growth trajectory.
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms on page 4.

 

7

Table of Contents
VIRTUS FOREIGN OPPORTUNITIES FUND (Continued)   

 

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized

Past performance is not indicative of future results. Any performance results portrayed reflect the reinvestment of dividends and other earnings. Any companies described in this commentary may or may not currently represent a position in our client portfolios. Also, any sector and industry weights described in the commentary may or may not have changed since the writing of this commentary. The information and methodology described in this commentary should not be construed as a recommendation to purchase or sell securities.

Any projections, forecasts or estimates contained in this commentary are based on a variety of estimates and assumptions. There can be no assurance that the estimates or assumptions made will prove accurate, and actual results may differ materially.

In the event a company described in this commentary is a position in client portfolios, the securities identified and described do not represent all of the securities purchased, sold or recommended. The reader should not assume that an investment in any securities identified was or will be profitable or that investment recommendations or investment decisions we make in the future will be profitable.

There is no guarantee that the Fund will meet its objective.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Prospectus: For additional information on risks, please see the fund’s prospectus.

 

 
Asset Allocations  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

     

Consumer Staples

     39 % 

Health Care

     19   

Financials

     16   

Consumer Discretionary

     12   

Information Technology

     6   

Industrials

     3   

Energy

     2   

Other (includes short-term investments and securities lending collateral)

     3   
   

 

 

  

Total

     100 % 
   

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms on page 4.

 

8

Table of Contents
VIRTUS FOREIGN OPPORTUNITIES FUND (Continued)   

 

Average Annual Total Returns1 for periods ended 9/30/15  
   

1

Year

    

5

Years

    

10

Years

     Since
Inception		     Inception
Date		  
Class A Shares at NAV2     -2.41 %      5.51 %      5.21 %      —        —   
Class A Shares at POP3,4     -8.03        4.27        4.59        —        —   
Class C Shares at NAV2 and with CDSC4     -3.13        4.73        4.42        —        —   
Class I Shares at NAV     -2.16        5.78        —        3.85 %      5/15/06   
Class R6 Shares at NAV     —        —        —        -3.84        11/14/14   
S&P 500® Index     -0.61        13.34        6.80        — 5,6      —   
MSCI EAFE® Index (net)     -8.66        3.98        2.97        — 5,6      —   

Fund Expense Ratios7: A Shares: 1.43%; C Shares: 2.18%; I Shares: 1.18%; R6 Shares: 1.06%.

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  The index returned 6.53% for Class I shares and -4.06% for Class R6 shares since the inception date of the respective class.
6  The index returned 1.21% for Class I shares and 6.92% for Class R6 shares since the inception date of the respective class.
7  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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, 2005, for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions.

 

LOGO

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.

 

9

Table of Contents

VIRTUS FOREIGN OPPORTUNITIES FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES      VALUE  
COMMON STOCKS—100.3%   
Consumer Discretionary—11.7%  

Alimentation Couche-Tard, Inc. Class B (Canada)

     737,102       $ 33,897   

Domino’s Pizza Group plc (United Kingdom)

     1,866,480         25,073   

Hermes International SA (France)

     64,826         23,542   

Naspers Ltd. Class N (South Africa)

     201,463         25,159   

Paddy Power plc (Ireland)

     196,111         22,615   

Persimmon plc (United Kingdom)

     1,140,508         34,644   

Priceline Group, Inc. (The) (United States)(2)

     32,212         39,841   
    

 

 

  
       204,771   
    

 

 

  
Consumer Staples—39.3%  

AmorePacific Corp. (South Korea)

     11,041         3,598   

British American Tobacco plc (United Kingdom)

     2,140,720         117,973   

Chocoladefabrike Lindt & Spruengli AG (Switzerland)

     5,714         33,507   

Diageo plc (United Kingdom)

     1,046,354         28,025   

Imperial Tobacco Group plc (United Kingdom)

     876,111         45,234   

ITC Ltd. (India)

     8,440,838         42,325   

L’Oreal SA (France)

     155,938         27,017   

Nestle S.A. Registered Shares (Switzerland)

     1,201,979         90,340   

Philip Morris International, Inc. (United States)

     1,068,236         84,743   

Reckitt Benckiser Group plc (United Kingdom)

     881,695         79,853   

SABMiller plc (United Kingdom)

     1,057,756         59,796   

Unicharm Corp. (Japan)

     952,100         16,863   

Unilever N.V. CVA (Netherlands)

     1,552,727         62,270   
    

 

 

  
       691,544   
    

 

 

  
    SHARES      VALUE  
Energy—2.3%  

Enbridge, Inc. (Canada)

     1,092,113       $ 40,550   
    

 

 

  
Financials—16.3%  

Banco Bilbao Vizcaya Argentaria S.A. (Spain)

     2,375,686         20,122   

Daito Trust Construction Co., Ltd. (Japan)

     204,400         20,768   

Housing Development Finance Corp. (India)

     4,954,412         91,793   

Housing Development Finance Corp. Bank Ltd. (India)

     4,854,967         79,311   

Housing Development Finance Corp. Bank Ltd. ADR (India)

     15,574         952   

Link REIT (The) (Hong Kong)

     3,398,857         18,712   

Lloyds Banking Group plc (United Kingdom)

     18,936,054         21,530   

UBS Group AG (Switzerland)

     1,808,503         33,420   
    

 

 

  
       286,608   
    

 

 

  
Health Care—19.6%  

Bayer AG Registered Shares (Germany)

     316,592         40,488   

Coloplast A/S Class B (Denmark)

     169,840         12,023   

CSL Ltd. (Australia)

     636,420         40,052   

Essilor International SA (France)

     285,871         34,786   

Fresenius Medical Care AG & Co. KGaA (Germany)

     232,700         18,155   

Grifols SA (Spain)

     666,364         27,472   

Novo Nordisk A/S Class B (Denmark)

     1,038,937         55,733   

Ramsay Health Care Ltd. (Australia)

     708,704         29,230   

Roche Holding AG (Switzerland)

     301,680         79,552   

Sonic Healthcare Ltd. (Australia)

     618,141         7,951   
    

 

 

  
       345,442   
    

 

 

  
 

 

See Notes to Financial Statements

 

 

10

Table of Contents

VIRTUS FOREIGN OPPORTUNITIES FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES      VALUE  
COMMON STOCKS (continued)   
Industrials—3.2%  

Bureau Veritas SA (France)

     1,272,260       $ 26,776   

Cheung Kong Infrastructure Holdings Ltd. (Hong Kong)(3)

     2,109,989         18,911   

DKSH Holding AG (Switzerland)

     149,876         9,481   
    

 

 

  
       55,168   
    

 

 

  
Information Technology—6.5%  

Accenture plc Class A (United States)

     117,595         11,555   

Google, Inc. Class C (United States)(2)

     58,173         35,394   

Paypal Holdings, Inc. (United States)(2)

     1,206,222         37,441   

SAP SE (Germany)

     471,577         30,536   
    

 

 

  
       114,926   
    

 

 

  
Materials—1.4%  

Air Liquide SA (France)

     205,676         24,281   
TOTAL COMMON STOCKS
(Identified Cost $1,394,119)		          1,763,290   
TOTAL LONG TERM INVESTMENTS—100.3%   
(Identified Cost $1,394,119)         1,763,290   
SHORT-TERM INVESTMENTS—0.7%   
Money Market Mutual Fund—0.7%  

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     12,963,290         12,963   
TOTAL SHORT-TERM INVESTMENTS   
(Identified Cost $12,963)         12,963   
    SHARES     VALUE  
SECURITIES LENDING COLLATERAL—0.5%  

INVESCO Trust Short-Term Investments Liquid Assets Portfolio (The) Institutional Shares (seven-day effective yield 0.160%)(4)

     9,258,540      $ 9,259   
TOTAL SECURITIES LENDING COLLATERAL   
(Identified Cost $9,259)        9,259   
TOTAL INVESTMENTS—101.5%
(Identified Cost $1,416,341)		         1,785,512 (1) 

Other assets and liabilities,
net—(1.5)%

   

     (25,664 ) 
   

 

 

  
NET ASSETS—100.0%      $ 1,759,848   
   

 

 

  

Abbreviations:

ADR American Depositary Receipt
REIT Real Estate Investment Trust

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 9 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
(3)  All or a portion of security is on loan.
(4)  Represents security purchased with cash collateral received for securities on loan.

 

Country Weightings (Unaudited)†  

United Kingdom

     23 % 

Switzerland

     14   

United States

     13   

India

     12   

France

     8   

Germany

     5   

Australia

     4   

Other

     21   

Total

     100 % 

 

 

† % of total investments as of September 30, 2015

 

 

 

For information regarding the abbreviations, See Key Investment Terms starting on page 4

 

See Notes to Financial Statements

 

 

11

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VIRTUS FOREIGN OPPORTUNITIES FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total Value at
September 30, 2015		      Level 1
Quoted Prices		      Level 2
Significant
Observable
Inputs		  

Equity Securities:

         

Common Stocks

    $ 1,763,290       $ 1,393,776       $ 369,514   

Securities Lending Collateral

      9,259         9,259         —   

Short-Term Investments

      12,963         12,963         —   
  

 

 

     

 

 

     

 

 

  

Total Investments

    $ 1,785,512       $ 1,415,998       $ 369,514   
  

 

 

     

 

 

     

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

Securities held by the Fund with an end of period value of $341,102 were transferred from Level 1 to Level 2 based on our valuation procedures for non-U.S. securities (See Notes 2A in the Notes to Financial Statements).

 

See Notes to Financial Statements

 

12

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VIRTUS FOREIGN OPPORTUNITIES FUND

STATEMENT OF ASSETS AND LIABILITIES

SEPTEMBER 30, 2015

(Reported in thousands except shares and per share amounts)

 

Assets   

Investment in securities at value(1)(3)

    $ 1,785,512   

Foreign currency at value(2)

      — (4) 
Receivables   

Investment securities sold

      8,944   

Fund shares sold

      1,872   

Dividends and interest receivable

      2,518   

Tax reclaims

      3,667   

Securities Lending Receivable

      4   

Prepaid expenses

      112   

Prepaid trustee retainer

      31   
  

 

 

  

Total assets

      1,802,660   
  

 

 

  
Liabilities   
Payables   

Fund shares repurchased

      18,908   

Collateral on securities loaned

      9,259   

Investment securities purchased

      12,220   

Investment advisory fees

      1,244   

Distribution and service fees

      181   

Administration fees

      178   

Transfer agent fees and expenses

      578   

Trustees’ fees and expenses

      3   

Professional fees

      39   

Other accrued expenses

      202   
  

 

 

  

Total liabilities

      42,812   
  

 

 

  
Net Assets    $ 1,759,848   
  

 

 

  
Net Assets Consist of:   

Capital paid in on shares of beneficial interest

    $ 1,625,762   

Accumulated undistributed net investment income (loss)

      11,585   

Accumulated undistributed net realized gain (loss)

      (246,530 ) 

Net unrealized appreciation (depreciation) on investments

      369,031   
  

 

 

  
Net Assets    $ 1,759,848   
  

 

 

  
Class A   

Net asset value (net assets/shares outstanding) per share

    $ 27.21   

Maximum offering price per share NAV/(1–5.75%)

    $ 28.87   

Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization

      14,934,979   

Net Assets

    $ 406,429   
Class C   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 26.95   

Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization

      4,362,522   

Net Assets

    $ 117,568   
Class I   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 27.23   

Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization

      45,227,449   

Net Assets

    $ 1,231,349   
Class R6   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 27.24   

Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization

      165,248   

Net Assets

    $ 4,502   

(1) Investment in securities at cost

    $ 1,416,341   

(2) Foreign currency at cost

    $ — (4) 

(3) Market value of securities on loan

    $ 8,835   

(4) Amount is less than $500.

   

 

See Notes to Financial Statements

 

13

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VIRTUS FOREIGN OPPORTUNITIES FUND

STATEMENT OF OPERATIONS

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

Investment Income   

Dividends

    $ 46,840   

Security lending

      201   

Foreign taxes withheld

      (2,556 ) 
  

 

 

  

Total investment income

      44,485   
  

 

 

  
Expenses   

Investment advisory fees

      16,386   

Service fees, Class A

      1,197   

Distribution and service fees, Class C

      1,223   

Administration fees

      2,317   

Transfer agent fees and expenses

      3,006   

Registration fees

      94   

Printing fees and expenses

      138   

Custodian fees

      246   

Professional fees

      96   

Trustees’ fees and expenses

      65   

Miscellaneous expenses

      107   
  

 

 

  

Total expenses

      24,875   
  

 

 

  
Net investment income (loss)      19,610   
  

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments   

Net realized gain (loss) on investments

      (54,525 ) 

Net realized gain (loss) on foreign currency transactions

      (232 ) 

Net change in unrealized appreciation (depreciation) on investments

      (7,890 ) 

Net change in unrealized appreciation (depreciation) on foreign currency translation

      (2 ) 
  

 

 

  
Net gain (loss) on investments      (62,649 ) 
  

 

 

  
Net increase (decrease) in net assets resulting from operations    $ (43,039 ) 
  

 

 

  

 

See Notes to Financial Statements

 

14

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VIRTUS FOREIGN OPPORTUNITIES FUND

STATEMENTS OF CHANGES IN NET ASSETS

($ Reported in thousands)

 

     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
INCREASE/(DECREASE) IN NET ASSETS     
From Operations     

Net investment income (loss)

    $ 19,610      $ 18,417   

Net realized gain (loss)

      (54,757 )      24,752   

Net change in unrealized appreciation (depreciation)

      (7,892 )      42,875   
  

 

 

    

 

 

  
Increase (decrease) in net assets resulting from operations      (43,039 )      86,044   
  

 

 

    

 

 

  
From Distributions to Shareholders     

Net investment income, Class A

      (4,099 )      (3,966 ) 

Net investment income, Class C

      (244 )      —   

Net investment income, Class I

      (14,754 )      (9,101 ) 

Net investment income, Class R6

      (22 )      —   
  

 

 

    

 

 

  
Decrease in net assets from distributions to shareholders      (19,119 )      (13,067 ) 
  

 

 

    

 

 

  
From Share Transactions     
Sale of shares     

Class A (3,683 and 6,394 shares, respectively)

      104,669        178,539   

Class C (981 and 1,172 shares, respectively)

      27,884        32,538   

Class I (13,604 and 19,587 shares, respectively)

      387,428        553,830   

Class R6 (170 and 0 shares, respectively)

      4,966        —   
Reinvestment of distributions     

Class A (133 and 129 shares, respectively)

      3,774        3,591   

Class C (8 and 0 shares, respectively)

      211        —   

Class I (488 and 298 shares, respectively)

      13,901        8,294   

Class R6 (1 and 0 shares, respectively)

      22        —   
Shares repurchased     

Class A (5,843 and 14,591 shares, respectively)

      (164,218 )      (413,237 ) 

Class C (855 and 733 shares, respectively)

      (24,083 )      (20,420 ) 

Class I (13,756 and 13,775 shares, respectively)

      (390,723 )      (383,850 ) 

Class R6 (6 and 0 shares, respectively)

      (165 )      —   
  

 

 

    

 

 

  
Increase (decrease) in net assets from share transactions      (36,334 )      (40,715 ) 
  

 

 

    

 

 

  
Net increase (decrease) in net assets      (98,492 )      32,262   
Net Assets     

Beginning of period

      1,858,340        1,826,078   
  

 

 

    

 

 

  
End of period    $ 1,759,848      $ 1,858,340   
  

 

 

    

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ 11,585        11,326   

 

See Notes to Financial Statements

 

15

Table of Contents

VIRTUS FOREIGN OPPORTUNITIES FUND

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

    Net Asset Value,
Beginning of Period		   Net Investment Income
(Loss)(2)		   Net Realized and
Unrealized Gain (Loss)		   Total from
Investment Operations		   Dividends from Net
Investment Income		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets, End of Period
(000’s)		   Ratio of Expenses to
Average Net Assets(3)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate

Class A

                                                                                                                                  

10/1/14 to 9/30/15

     $ 28.12         0.25         (0.92 )       (0.67 )       (0.24 )       (0.24 )       (0.91 )     $ 27.21         (2.41 )%     $ 406,429         1.41 %       0.89 %       32 %

10/1/13 to 9/30/14

       27.01         0.24         1.03         1.27         (0.16 )       (0.16 )       1.11         28.12         4.72         477,036         1.43         0.85         31  

10/1/12 to 9/30/13

       25.42         0.23         1.63         1.86         (0.27 )       (0.27 )       1.59         27.01         7.37         676,149         1.46         0.85         29  

10/1/11 to 9/30/12

       20.83         0.27         4.73         5.00         (0.41 )       (0.41 )       4.59         25.42         24.34         398,166         1.45         1.16         47  

10/1/10 to 9/30/11

       22.06         0.34         (1.23 )       (0.89 )       (0.34 )       (0.34 )       (1.23 )       20.83         (4.15 )       346,594         1.47         1.48         31  

Class C

                                                    

10/1/14 to 9/30/15

     $ 27.88         0.04         (0.91 )       (0.87 )       (0.06 )       (0.06 )       (0.93 )     $ 26.95         (3.13 )%     $ 117,568         2.17 %       0.15 %       32 %

10/1/13 to 9/30/14

       26.82         0.04         1.02         1.06         —         —         1.06         27.88         3.95         117,906         2.18         0.15         31  

10/1/12 to 9/30/13

       25.27         0.03         1.62         1.65         (0.10 )       (0.10 )       1.55         26.82         6.56         101,655         2.21         0.10         29  

10/1/11 to 9/30/12

       20.57         0.10         4.70         4.80         (0.10 )       (0.10 )       4.70         25.27         23.43         54,634         2.20         0.42         47  

10/1/10 to 9/30/11

       21.81         0.17         (1.22 )       (1.05 )       (0.19 )       (0.19 )       (1.24 )       20.57         (4.85 )       45,742         2.22         0.74         31  

Class I

                                                    

10/1/14 to 9/30/15

     $ 28.14         0.32         (0.91 )       (0.59 )       (0.32 )       (0.32 )       (0.91 )     $ 27.23         (2.16 )%     $ 1,231,349         1.17 %       1.14 %       32 %

10/1/13 to 9/30/14

       27.03         0.32         1.02         1.34         (0.23 )       (0.23 )       1.11         28.14         4.97         1,263,398         1.18         1.13         31  

10/1/12 to 9/30/13

       25.43         0.28         1.66         1.94         (0.34 )       (0.34 )       1.60         27.03         7.66         1,048,274         1.21         1.04         29  

10/1/11 to 9/30/12

       20.89         0.34         4.72         5.06         (0.52 )       (0.52 )       4.54         25.43         24.64         672,948         1.20         1.46         47  

10/1/10 to 9/30/11

       22.12         0.42         (1.26 )       (0.84 )       (0.39 )       (0.39 )       (1.23 )       20.89         (3.88 )       584,212         1.22         1.83         31  

Class R6

                                                    

11/14/14(4) to 9/30/15

     $ 28.66         0.36         (1.45 )       (1.09 )       (0.33 )       (0.33 )       (1.42 )     $ 27.24         (3.84 )%(6)     $ 4,502         1.07 %(5)       1.44 %(5)       32 %

 

Footnote Legend

(1) Sales charges, where applicable, are not reflected in the total return calculation.
(2) Computed using average shares outstanding.
(3) The Fund may invest in other funds, and the annualized expense ratios do not reflect fees and expenses associated with the underlying funds.
(4)  Inception date of class.
(5)  Annualized.
(6)  Not annualized.

 

See Notes to Financial Statements

 

16

Table of Contents

VIRTUS FOREIGN OPPORTUNITIES FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

Note 1. Organization

Virtus Opportunities Trust (the “Trust”) is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company.

As of the date of this report, 32 funds of the Trust are offered for sale, of which the Foreign Opportunities Fund (the “Fund”) is reported in this annual report. The Fund’s investment objective is outlined in the Fund Summary Page. There is no guarantee the Fund will achieve its objective.

The Fund offers Class A shares, Class C shares, Class R6 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. The period for which the CDSC applies for the Fund is 18 months. 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, applicable if redeemed within one year of purchase. Class I shares are sold without a front-end sales charge or CDSC.

Class R6 shares are only available to participants in employer-sponsored retirement plans, such as 401(k) plans, profit sharing plans, defined benefit plans and other employer directed plans. Class R6 shares do not carry sales commissions or pay Rule 12b-1 fees.

Virtus Mutual Funds may impose an annual fee on accounts having balances of less than $2,500. The small account fee may be waived in certain circumstances, as disclosed in the prospectuses and/or statements of additional information. The fees collected will be used to offset certain expenses of the funds.

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 Rule 12b-1 and/or shareholder service plan (“12b-1 plan”) and has exclusive voting rights with respect to such plans. Class I shares and Class R6 shares are not subject to a 12b-1 plan. Income and other expenses as well as realized and unrealized gains and losses of the Fund are borne pro rata by the holders of each class of shares.

Note 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 amounts 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

Security valuation procedures for the Fund, which include nightly price variance, as well as back-testing such as bi-weekly unchanged price, monthly secondary source and

 

17

Table of Contents

VIRTUS FOREIGN OPPORTUNITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

transaction analysis, have been approved by the Board of Trustees (the “Board”, or the “Trustees”). All internally fair valued securities are approved by a valuation committee (the “Valuation Committee”) appointed by the Board. The Valuation Committee is comprised of certain members of management as identified to the Board and convenes independently from portfolio management. All internally fair valued securities are updated daily and reviewed in detail by the Valuation Committee monthly unless changes occur within the period. The Valuation Committee reviews the validity of the model inputs and any changes to the model. Quarterly fair valuations are reviewed by the Board.

The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The Fund’s policy is to recognize transfers at the end of the reporting period.

 

  •    Level 1 – quoted prices in active markets for identical securities (security types generally include listed equities).

 

  •    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 Valuation Committee’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 Valuation Committee, are generally categorized as Level 3 in the hierarchy.

Certain non-U.S. 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 non-U.S. markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (“NAV”) (at the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4 p.m. Eastern time) that may impact the value of securities traded in these non-U.S. markets. In such cases the Fund fair values non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. security to the intraday trading in the U.S. markets for investments such as ADRs, financial futures, exchange-traded funds (“ETFs”), 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 non-U.S. 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 derivative contracts, which include forward currency contracts and equity-linked instruments, do

 

18

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VIRTUS FOREIGN OPPORTUNITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

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 NAV. Investments in closed-end funds are valued as of the close of regular trading on the NYSE each business day. Both are categorized as Level 1 in the hierarchy.

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 methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

  B. Security Transactions and Investment Income

Security transactions are recorded on the trade date. Realized gains and losses from the sale of securities are determined on the identified cost basis. Dividend income is recognized 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.

 

  C. Income Taxes

The Fund is treated as a separate taxable entity. It is the intention 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.

Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. As of September 30, 2015, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2012 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 that 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 together by the Fund and other affiliated mutual funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately used.

 

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VIRTUS FOREIGN OPPORTUNITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

In addition to the net operating expenses that the Fund bears directly, the shareholders of the Fund indirectly bear the Fund’s pro-rata expenses of any underlying mutual funds in which the Fund invests.

 

  F. Foreign Currency Translation

Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at 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 Fund does not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

 

  G. Securities Lending

($ reported in thousands)

The Fund may loan securities to qualified brokers through an agreement with Brown Brothers Harriman (“BBH”), as a third party lending agent. Under the terms of the agreement, the Fund doing so 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 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 BBH 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 declining value of the collateral.

At September 30, 2015, the Fund had securities on loan with a market value of $8,835 and cash collateral of $9,259.

Note 3. Investment Advisory Fees and Related Party Transactions

($ reported in thousands except as noted)

 

  A. Adviser

Virtus Investment Advisers, Inc. (the “Adviser”), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the adviser to the Trust. The Adviser manages the Fund’s investment program and general operations of the Fund, including oversight of the Fund’s subadviser.

As compensation for its services to the Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of the Fund:

 

First $2 Billion

  

$2+ Billion –
$4 Billion

  

$4+ Billion

0.85%   0.80%   0.75%

 

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VIRTUS FOREIGN OPPORTUNITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

  B. Subadviser

Vontobel Asset Management, Inc. (the “Subadviser”) is the Subadviser to the Fund. The Subadviser manages the investments of the Fund for which it is paid a fee by the Adviser.

 

  C. Distributor

VP Distributors, LLC (“VP Distributors”), an indirect wholly-owned subsidiary of Virtus, serves as the distributor of the Fund’s shares. VP Distributors has advised the Fund that for the fiscal year (the “period”) ended September 30, 2015, it retained net commissions of $21 for Class A shares and deferred sales charges of $1 for Class A shares and $16 for Class C shares.

In addition, the Fund pays VP Distributors distribution and/or service fees under a 12b-1 plan, as a percentage of the average daily net assets of each respective class at the annual rates as follows: Class A shares 0.25% and Class C shares 1.00%. Class R6 shares and 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 NAV 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.

 

  D. Administrator and Transfer Agent

Virtus Fund Services, LLC, an indirect wholly-owned subsidiary of Virtus, serves as the administrator and transfer agent to the Fund.

For the period ended September 30, 2015, the Fund incurred administration fees totaling $1,852 which are included in the Statement of Operations.

For the period ended September 30, 2015, the Fund incurred transfer agent fees totaling $2,889 which are included in the Statement of Operations. A portion of these fees was paid to outside entities that also provide services to the Trust.

 

  E. Affiliated Shareholders

At September 30, 2015, 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:

 

     Shares        Aggregate
Net Asset
Value		  

Class R6 shares

      3,530         $ 96   

Note 4. Purchases and Sales of Securities

($ reported in thousands)

Purchases and sales of securities (excluding U.S. Government and agency securities, and short-term securities) during the period ended September 30, 2015, were as follows:

 

     Purchases        Sales  
   $ 612,468         $ 602,640   

 

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VIRTUS FOREIGN OPPORTUNITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

There were no purchases or sales of long-term U.S. Government and agency securities for the Fund during the period ended September 30, 2015.

Note 5. Borrowings

($ reported in thousands)

On July 2, 2015, the Fund and other affiliated Funds entered into a $50,000 secured Line of Credit Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Fund to borrow cash from the Bank to manage large unexpected redemptions and trade fails, up to a limit of one-third of the Fund’s total net assets in accordance with the Agreement. Interest is charged at the higher of the LIBOR (London Interbank Offered Rate) or the Federal Funds rate plus an additional percentage rate on the amount borrowed. Commitment fees are charged on the undrawn balance. The Funds are individually, and not jointly, liable for their particular advances, if any, under the line of credit. The Bank has the ability to require repayment of outstanding borrowings under the Agreement upon certain circumstances such as an event of default.

The Fund had no outstanding borrowings at any time during the period ended September 30, 2015.

Note 6. 10% Shareholders

As of September 30, 2015, the Fund had individual shareholder account(s) and/or omnibus shareholder account(s) (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
Outstanding		        Number
of
Accounts		  
     31 %         2   

The shareholders are not affiliated with Virtus.

Note 7. Credit Risk and Asset Concentrations

In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as the Fund’s ability to repatriate such amounts.

The Fund may invest a high percentage of its assets in specific sectors of the market in the pursuit of its investment objective. 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, 2015, the Fund held securities issued by various companies in the Consumer Staples Sector representing 39% of the total investments of the Fund.

Note 8. Indemnifications

Under the Trust’s organizational documents, its Trustees and officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Each Trustee has also entered into an indemnification agreement with the Trust. In addition, in the normal course of business, the Fund enters into contracts that provide a variety of

 

22

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VIRTUS FOREIGN OPPORTUNITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

indemnifications to other parties. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund and that have not occurred. However, the Fund has not had prior claims or losses pursuant to these arrangements and expects the risk of loss to be remote.

Note 9. Federal Income Tax Information

($ reported in thousands)

At September 30, 2015, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows:

 

Federal
Tax Cost

  

Unrealized
Appreciation

  

Unrealized
(Depreciation)

  

Net Unrealized
Appreciation
(Depreciation)

$1,423,438  

$402,623

   $(40,549)   $362,074

The Fund has capital loss carryovers available to offset future realized capital gains, through the indicated expiration dates shown below:

 

    2018    

  

    No Expiration    

  

    Total    

Short-Term

  

Long-Term

  

Short-Term

  

Long-Term

  

Short-Term

  

Long-Term

183,071   —   860   10,250   183,931   10,250

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 the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized for tax years beginning after December 22, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

Capital losses realized after October 31 and certain late year losses may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2015 the Fund deferred post-October capital loss of $45,251 and qualified late-year ordinary losses of $0 and recognized post-October capital losses of $0 and qualified late-year ordinary losses of $0 .

The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) (which is disclosed above) consist of undistributed ordinary income of $11,583 and undistributed long-term capital gains of $0.

The tax character of dividends and distributions paid during the years ended September 30,

2015 and 2014 was as follows:

 

     Year Ended  
     2015        2014  
Ordinary Income    $ 19,119         $ 13,067   
  

 

 

       

 

 

  
Total    $ 19,119         $ 13,067   
  

 

 

       

 

 

  

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.

 

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VIRTUS FOREIGN OPPORTUNITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

Note 10. 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, 2015, the Fund recorded reclassifications to increase (decrease) the accounts as listed below:

 

Capital Paid
in on Shares of
Beneficial
Interest

  

Undistributed
Net Investment
Income (Loss)

  

Accumulated
Net Realized
Gain (Loss)

$—   $(232)   $232

Note 11. Regulatory Matters and Litigation

From time to time, the Fund’s investment adviser and/or its affiliates and/or subadvisers may be involved in litigation and arbitration as well as examinations and investigations by various regulatory bodies, including the SEC, involving compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting their products and other activities. At this time, the Fund’s investment adviser believes that the outcomes of such matters are not likely, either individually or in the aggregate, to be material to these financial statements.

As part of an SEC non-public, confidential investigation of a matter entitled – In the Matter of F-Squared Investments Inc., the SEC staff informed the Fund’s investment adviser that it was inquiring into whether it had violated securities laws or regulations with respect to circumstances related to that matter. On November 16, 2015, without admitting or denying the SEC’s findings, the Fund’s investment adviser consented to the entry of an order providing that it cease and desist from committing or causing any violations and future violations of Sections 204, 206(2) and 206(4) of the Investment Advisers Act of 1940, as amended, and Rules 204-2, 206(4)-1, 206(4)-7 and 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940, as amended; agreed to a censure; and paid $16.5 million, which included a civil money penalty of $2 million, disgorgement of $13.4 million and prejudgment interest of $1.1 million.

On February 20, 2015, a putative class action complaint (In re Virtus Investment Partners, Inc. Securities Litigation; formerly styled as Tom Cummins v. Virtus Investment Partners Inc. et al) alleging violation of the federal securities laws was filed by an individual shareholder against Virtus and certain of its officers (the “defendants”) in the United States District Court for the Southern District of New York. On August 21, 2015, the lead plaintiff filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint and adding the Trust as a defendant. The Consolidated Complaint was purportedly filed on behalf of all purchasers of Virtus common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint

 

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VIRTUS FOREIGN OPPORTUNITIES FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

alleges that during the Class Period, the defendants knowingly disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds previously subadvised by F-Squared Investments, Inc. and/or its affiliates (“F-Squared”). The plaintiff seeks to recover unspecified damages. Virtus and its affiliates, including the Fund’s adviser, believe that the suit is without merit and intend to defend it vigorously. A motion to dismiss the Consolidated Complaint was filed on behalf of the defendants on October 21, 2015. The Trust believes that the risk of loss to the Fund as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Fund.

On May 8, 2015, a putative class action complaint (Mark Youngers v. Virtus Investment Partners, Inc. et al) alleging violations of certain provisions of the federal securities laws was filed in the United States District Court for the Central District of California. The complaint, which was purportedly filed on behalf of purchasers of certain Virtus Funds previously subadvised by F-Squared between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”), alleges claims against Virtus, certain Virtus officers and affiliates (including the Fund’s investment adviser, Euclid Advisors LLC and VP Distributors, LLC), the trustees and certain officers of the Trust, and certain other parties (the “defendants”). The complaint alleges that during the Class Period the defendants knowingly disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On October 1, 2015, the plaintiff filed a First Amended Class Action Complaint which, among other things, added a derivative claim for breach of fiduciary duty on behalf of the Trust. On October 19, 2015, the Court entered an order transferring the action to the Southern District of New York. Virtus and its affiliates, including the Fund’s adviser, believe the plaintiff’s claims asserted in the complaint are frivolous and intend to defend them vigorously. The Trust believes that the risk of loss to the Fund as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Fund.

Note 12. Subsequent Events

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there are no subsequent events requiring recognition or disclosure in the financial statements.

 

25

Table of Contents

LOGO

Report of Independent Registered Public

Accounting Firm

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 the Virtus Foreign Opportunities Fund (one of the funds constituting Virtus Opportunities Trust, hereafter referred to as the “Fund”) at September 30, 2015, 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 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, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

November 20, 2015

 

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VIRTUS FOREIGN OPPORTUNITIES FUND

TAX INFORMATION NOTICE

SEPTEMBER 30, 2015 (Unaudited)

 

For the fiscal year ended September 30, 2015, 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 amounts below as long-term capital gains dividends (“LTCG”) taxable at a 20% rate, or lower depending on the shareholder’s income ($ reported in thousands). LTCG amounts, if subsequently different, will be designated in the next annual report.

 

    QDI    

  

    DRD    

  

    LTCG    

100%   18%   $—

For the fiscal year ended September 30, 2015, the Fund recognized $42,743 ($ reported in thousands), of foreign source income on which the Fund paid foreign taxes of $2,556 ($ 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.

 

27

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FUND MANAGEMENT TABLES (UNAUDITED)

Information pertaining to the Trustees and officers of the Trust as of September 30, 2015, 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) 243-1574. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust.

Independent Trustees

 

Name, Year of Birth,
Year Elected and
Number of Funds
Overseen		  

Principal Occupation(s)
During Past 5 Years and

Other Directorships Held by Trustee

McClellan, Hassell H.

YOB: 1945

Elected: 2015

55 Portfolios

   Retired. Professor (1984 to 2013), Wallace E. Carroll School of Management, Boston College; Trustee, Virtus Variable Insurance Trust (9 portfolios) (since 2008); Trustee (since 2015), Virtus Mutual Fund Complex (46 portfolios); Trustee, John Hancock Fund Complex (since 2000), John Hancock Funds (collectively, 234 portfolios); and Director (since 2010), Barnes Group, Inc. (diversified global components manufacturer and logistical services company).

McLoughlin, Philip

YOB: 1946

Elected: 2006

69 Portfolios

   Director (since 1991) and Chairman (since 2010), World Trust Fund (closed-end investment firm in Luxembourg); Director (since 1995), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); Chairman (since 2002) and Trustee (since 1989), Virtus Mutual Fund Complex (46 portfolios); Chairman and Trustee (since 2003), Virtus Variable Insurance Trust (9 portfolios); Trustee/Director and Chairman (since 2011), Virtus Closed-End Funds (3 portfolios); Trustee and Chairman (since 2013), Virtus Alternative Solutions Trust (7 portfolios); Partner (2006 to 2010), Cross Pond Partners, LLC (investment management consultant); and Managing Director (2008 to 2010), SeaCap Partners, LLC (investment management).

McNamara, Geraldine M.

YOB: 1951

Elected: 2006

59 Funds

   Retired. Trustee (since 2001), Virtus Mutual Fund Complex (46 portfolios); and Director (since 2003), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); and Trustee (since 2015), Virtus Variable Insurance Trust (9 portfolios).

Oates, James M.

YOB: 1946

Elected: 2006

56 Funds

   Managing Director (since 1994), Wydown Group (consulting firm). Trustee (since 1987), Virtus Mutual Fund Complex (46 portfolios); Director (since 1996), Stifel Financial; Director (1998 to 2014), Connecticut River Bancorp; Chairman and Director (1999 to 2014), Connecticut River Bank; Chairman (since 2000), Emerson Investment Management, Inc.; Director (2002 to 2014), New Hampshire Trust Company; Chairman and Trustee (since 2005), John Hancock Fund Complex (228 portfolios); Non-Executive Chairman (2007 to 2011), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services); Trustee/Director (since 2013), Virtus Closed-End Funds (3 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

Segerson, Richard E.

YOB: 1948

Elected: 2006

46 Funds

   Trustee (since 1983), Virtus Mutual Fund Complex (46 portfolios); and Managing Director (1998 to 2013), Northway Management Company.

Verdonck, Ferdinand L.J.

YOB: 1942

Elected: 2006

46 Funds

   Trustee (since 2002), Virtus Mutual Fund Complex (46 portfolios).

 

28

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FUND MANAGEMENT TABLES (UNAUDITED) (Continued)

 

Interested Trustee

The individual listed below is an “interested person” of the Trust, as defined in Section 2(a)(19) of the 1940 Act, as amended, and the rules and regulations thereunder.

 

Name, Year of Birth,
Year Elected and
Number of Funds
Overseen		   Principal Occupation(s)
During Past 5 Years and
Other Directorships Held by Trustee

Aylward, George R.*

Trustee and President

YOB: 1964

Elected: 2006

67 Funds

   Director, President and Chief Executive Officer (since 2008), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions with Virtus affiliates (since 2005); Trustee (since 2006), Virtus Mutual Funds (46 portfolios); Chairman, President and Chief Executive Officer (since 2006), The Zweig Closed-End Funds (2 portfolios); Trustee (since 2012) and President (since 2010), Virtus Variable Insurance Trust (9 portfolios); Trustee and President (since 2011), Virtus Closed-End Funds (3 portfolios); Director (since 2013), Virtus Global Funds, PLC (2 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

 

29

Table of Contents

FUND MANAGEMENT TABLES (UNAUDITED) (Continued)

 

Officers of the Trust Who Are Not Trustees

 

Name, Address and

Year of Birth

  

Position(s) Held with
Trust and Length of

Time Served

   Principal Occupation(s)
During Past 5 Years

Waltman, Francis G.

YOB: 1962

   Executive Vice President (since 2013); Senior Vice President (2008-2013).   Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2006) with Virtus affiliates; Executive Vice President (since 2013), Senior Vice President (2008 to 2013), Virtus Mutual Fund Complex; Executive Vice President (since 2013), Senior Vice President (2010 to 2013), Virtus Variable Insurance Trust; Executive Vice President (since 2013), Senior Vice President (2011 to 2013), Virtus Closed-End Funds; Director (since 2013), Virtus Global Funds PLC; and Executive Vice President (since 2013), Virtus Alternative Solutions Trust.

Bradley, W. Patrick

YOB: 1972

   Senior Vice President (since 2013); Vice President (2011 to 2013); Chief Financial Officer and Treasurer
(since 2006).		   Senior Vice President, Fund Services (since 2010), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2006) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2004), Virtus Variable Insurance Trust; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2006), Virtus Mutual Fund Complex; Senior Vice President (since 2013), Vice President (2012 to 2013) and Treasurer (Chief Financial Officer) (since 2007), The Zweig Closed-End Funds; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2011), Virtus Closed-End Funds; Vice President and Assistant Treasurer (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Director (since 2013), Virtus Global Funds, PLC; and Senior Vice President, Chief Financial Officer and Treasurer (since 2013), Virtus Alternative Solutions Trust.

 

30

Table of Contents

FUND MANAGEMENT TABLES (UNAUDITED) (Continued)

 

Name, Address and

Year of Birth

  

Position(s) Held with
Trust and Length of

Time Served

   Principal Occupation(s)
During Past 5 Years

Carr, Kevin J.

YOB: 1954

   Senior Vice President, since 2013; Vice President (2005-2013); Chief Legal Officer, Counsel and Secretary (since 2005).   Senior Vice President (since 2009), Vice President, Counsel and Secretary (2008 to 2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2005) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2005 to 2013), Chief Legal Officer, Counsel and Secretary (since 2005), Virtus Mutual Fund Complex; Senior Vice President (2013 to 2014), Vice President (2012 to 2013) and Assistant Secretary (since 2012), Secretary and Chief Legal Officer (2005 to 2012), The Zweig Closed-End Funds; Assistant Secretary (since 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2010 to 2013), Virtus Variable Insurance Trust; Vice President and Assistant Secretary (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Senior Vice President and Assistant Secretary (2013 to 2014), Vice President and Assistant Secretary (2012 to 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2011 to 2012), Virtus Closed-End Funds; and Assistant Secretary (since 2013), Virtus Alternative Solutions Trust.

Engberg, Nancy J.

YOB: 1956

   Vice President and Chief Compliance Officer since 2011.   Vice President (since 2008) and Chief Compliance Officer (2008 to 2011), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2003) with Virtus affiliates; Vice President and Chief Compliance Officer (since 2011), Virtus Mutual Fund Complex; Vice President (since 2010), Chief Compliance Officer (since 2011), Virtus Variable Insurance Trust; Vice President and Chief Compliance Officer (since 2011), Virtus Closed-End Funds; Vice President and Chief Compliance Officer (since 2012), The Zweig Closed-End Funds; and Vice President and Chief Compliance Officer (since 2013), Virtus Alternative Solutions Trust.

 

31

Table of Contents

VIRTUS OPPORTUNITIES TRUST

101 Munson Street

Greenfield, MA 01301-9668

 

Trustees

George R. Aylward

Hassell H. McClellan

Philip R. McLoughlin, Chairman

Geraldine M. McNamara

James M. Oates

Richard E. Segerson

Ferdinand L.J. Verdonck

Officers

George R. Aylward, President

Francis G. Waltman, Executive Vice President

W. Patrick Bradley, Senior Vice President, Chief Financial Officer and Treasurer

Kevin J. Carr, Senior Vice President, Chief Legal Officer, Counsel and Secretary

Nancy J. Engberg, Vice President and Chief Compliance Officer

Investment Adviser

Virtus Investment Advisers, Inc.

100 Pearl Street

Hartford, CT 06103-4506

Principal Underwriter

VP Distributors, LLC

100 Pearl Street

Hartford, CT 06103-4506

Administrator and Transfer Agent

Virtus Fund Services, LLC

100 Pearl Street

Hartford, CT 06103-4506

Custodian

JPMorgan Chase Bank, NA

1 Chase Manhattan Plaza

New York, NY 10005-1401

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   

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.

Table of Contents

 

For more information about

Virtus Mutual Funds, please call

your financial representative, or

contact us at 1-800-243-1574

or Virtus.com

 

8011    11-15

 

LOGO

 

Table of Contents

LOGO

 

 

ANNUAL REPORT

 

 

Virtus Multi-Sector Short Term Bond Fund*

September 30, 2015

TRUST NAME: VIRTUS OPPORTUNITIES TRUST

 

* Prospectus supplement applicable to the Fund appears at the back of this Annual Report.

Not FDIC Insured

No Bank Guarantee

May Lose Value

 

LOGO

Table of Contents

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   

Key Investment Terms

     4   

Fund Summary

     5   

Schedule of Investments

     8   

Statement of Assets and Liabilities

     38   

Statement of Operations

     39   

Statements of Changes in Net Assets

     40   

Financial Highlights

     41   

Notes to Financial Statements

     43   

Report of Independent Registered Public Accounting Firm

     54   

Tax Information Notice

     55   

Fund Management Tables

     56   

 

PROXY VOTING PROCEDURES AND VOTING RECORD (FORM N-PX)

The subadviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Board of Trustees of the Trust (“Trustees,” or the “Board”). 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, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission’s (the “SEC”) website at http://www.sec.gov.

FORM N-Q INFORMATION

The Trust files a complete schedule of portfolio holdings for the Fund with 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, the Fund’s record and other pertinent information.

Table of Contents

MESSAGE TO SHAREHOLDERS

 

To My Fellow Shareholders of Virtus Mutual Funds:

 

LOGO   

I am pleased to present this annual report that reviews the performance of your fund for the twelve months ended September 30, 2015.

 

During this period, global equity markets were challenged by falling oil prices, China’s economic slowdown, Greece’s debt crisis, and the growing likelihood of an interest rate hike by the Federal Reserve (the “Fed”). Volatility took its toll on major U.S. equity indices for the twelve months ended September 30, 2015. The large-cap S&P 500® Index and Dow Jones Industrial AverageSM moderately declined 0.61% and 2.11%, respectively, while the technology-heavy NASDAQ Composite Index® gained 4.00%. By comparison, international equities were down even further, with emerging markets hit particularly hard.

Against this backdrop, U.S. Treasuries remained an attractive “safe haven” among global investors. The bellwether 10-year U.S. Treasury yield declined from 2.52% at September 30, 2014 to 2.06% at September 30, 2015. Fixed income assets experienced slight losses in anticipation of the Fed’s stated intention to raise interest rates at the end of 2015. The Barclays U.S. Aggregate Bond Index, which tracks Treasuries and other investment-grade debt securities, gained 2.94% for the twelve-month period ended September 30, 2015, while non-investment grade bonds underperformed, with the Barclays U.S. Corporate High Yield Bond Index down 3.43% for the same period.

 

The strength of the global economy is likely to remain a concern for the markets in the months ahead. Actions by the Fed and other global central banks will be watched with great interest. Following the weak start to the year, the U.S. economy exhibited growth over the second and third quarters of 2015 – including stronger jobs, housing, and consumer spending data – and gives investors reason for optimism. Future market direction will be determined largely by the ability of corporations to continue to produce robust earnings.

 

Market uncertainty serves as a constant reminder of the importance of portfolio diversification, including exposure to both traditional and alternative asset classes. While diversification cannot guarantee a profit or prevent a loss, owning a variety of asset classes may provide a cushion against inevitable market fluctuations. Your financial advisor can help you ensure that your portfolio is adequately diversified across asset classes and investment strategies.

 

As always, thank you for entrusting Virtus with your assets. Should you have questions about your account or require assistance, please visit our website at www.Virtus.com, or call our customer service team at 1-800-243-1574. We appreciate your business and remain committed to your long-term financial success.

 

Sincerely,

 

LOGO

George R. Aylward

President, Virtus Mutual Funds

 

October 2015

 

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

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

DISCLOSURE OF FUND EXPENSES (Unaudited)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Virtus Multi-Sector Short Term Bond Fund (the “Fund”) you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class B and Class T shares; and (2) ongoing costs, including investment advisory fees, distribution and service fees, and other expenses. Class C shares are sold without a sales charge. Class I shares are sold without a sales charge and do not incur distribution and service fees. For further information regarding applicable sales charges, see Note 1 in the Notes to Financial Statements. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your Fund’s costs in two ways.

Actual Expenses

The first section of the accompanying table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes

The second section of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the accompanying table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

 

2

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

DISCLOSURE OF FUND EXPENSES (Unaudited) (Continued)

FOR THE SIX-MONTH PERIOD OF APRIL 1, 2015 TO SEPTEMBER 30, 2015

 

Expense Table                                
        Beginning
Account
Value
April 1, 2015		        Ending
Account Value
September 30, 2015		        Annualized
Expense
Ratio		        Expenses
Paid
During
Period*		  

Actual

                    
Class A      $ 1,000.00         $    994.90           0.99 %       $ 4.95   
Class B        1,000.00           992.30           1.48           7.39   
Class C        1,000.00           993.70           1.24           6.20   
Class T        1,000.00           991.20           1.74           8.69   
Class I        1,000.00           998.20           0.74           3.71   

Hypothetical (5% return before expenses)

  

     
Class A        1,000.00           1,020.04           0.99           5.03   
Class B        1,000.00           1,017.56           1.48           7.51   
Class C        1,000.00           1,018.77           1.24           6.29   
Class T        1,000.00           1,016.24           1.74           8.83   
Class I        1,000.00           1,021.31           0.74           3.76   

 

* 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

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SEPTEMBER 30, 2015 (Unaudited)

 

KEY INVESTMENT TERMS

BofA Merrill Lynch 1–2.99 Year Medium Quality Corporate Bonds Index

The BofA Merrill Lynch 1–2.99 Year Medium Quality Corporate Bonds Index measures performance of U.S. investment grade corporate bond issues rated “BBB” and “A” by Standard & Poor’s/Moody’s with maturities between one and three years. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges and it is not available for direct investment.

Barclays U.S. Aggregate Bond Index

The Barclays U.S. Aggregate Bond Index measures the U.S. investment-grade fixed-rate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Barclays U.S. Corporate High Yield Bond Index

The Barclays U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Dow Jones Industrial AverageSM

A price weighted average of 30 blue chip stocks. The index is calculated on total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Exchange-Traded Funds (ETF)

An open-end fund that is traded on a stock exchange. Most ETFs have a portfolio of stocks or bonds that track a specific market index.

Federal Reserve (the “Fed”)

The Central Bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable. Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system.

NASDAQ Composite Index®

A market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. Unlike other market indexes, the NASDAQ composite is not limited to companies that have U.S. headquarters. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Real Estate Investment Trust (REIT)

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® Index

The S&P 500® 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 index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

 

4

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MULTI-SECTOR SHORT TERM BOND FUND

Fund Summary

Portfolio Manager Commentary by

Newfleet Asset Management, LLC

   

Ticker Symbols:

Class A: NARAX

Class B: PBARX

Class C: PSTCX

Class T: PMSTX

Class I: PIMSX

 

¢   The Fund is diversified and has an investment objective of providing high current income while attempting to limit changes in the Fund’s net asset value per share caused by interest rate changes.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -0.23%; Class B shares returned -0.73%; Class C shares returned -0.27%; Class T shares returned -0.98%; and Class I shares returned 0.02%. For the same period, the Barclays U.S. Aggregate Bond Index, a broad-based fixed income index, returned 2.94%; and the BofA Merrill Lynch 1–2.99 Year Medium Quality Corporate Bonds Index, the Fund’s style-specific index appropriate for comparison, returned 1.07%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown.

How did the market perform during the Fund’s fiscal year?

 

¢   Most spread sectors underperformed U.S. Treasuries during the fiscal year. Plummeting oil prices dominated market volatility and investor concerns in the first half of the fiscal year, especially during the fourth quarter of 2014. Brent crude, the international benchmark for oil prices, fell about 50% between September 2014 (when the price was roughly $93 a barrel) and September 2015, ending the period at roughly $47 a barrel. Brent crude oil hit a 12-month low of roughly $40 a barrel on August 24, 2015.

 

 

¢   Globally, concerns over slowing growth in China and the Greek debt crisis weighed on the fixed income markets. A looming U.S. Federal Reserve (“Fed”) rate hike, with negative implications for capital flows and debt
   

financing, added to the turmoil, with some emerging market central banks (unlike the International Monetary Fund and the World Bank) calling for the Fed to raise rates and remove the uncertainty that could prove to be more harmful than the actual impact.

 

¢   The waiting game for the Fed to raise interest rates from their near-zero level maintained since December 2008 continued through the end of the fiscal year. As of its September 17 meeting, the Fed decided to leave its benchmark rate unchanged, balancing relatively strong U.S. growth and labor market conditions against a lack of inflation, a strengthening U.S. dollar, and a shaky global economy.

 

¢   Over the last 12 months, yields increased on the short end of the U.S. Treasury curve and decreased on the intermediate to long end, and the curve flattened overall.

What factors affected the Fund’s performance during its fiscal year?

 

¢   The outperformance of U.S. Treasuries and agency mortgages relative to most fixed income spread sectors was the key driver of the Fund’s underperformance for the fiscal year.

 

¢   Among fixed income sectors, the Fund’s allocation to structured products – asset-backed securities, commercial mortgage-backed securities, and non-agency residential mortgages – were positive contributors to performance for the fiscal year.

 

¢   During the fiscal year, the Fund’s allocation to non-U.S. dollar, corporate high yield, and emerging markets debt detracted from performance.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results,

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms on page 4.

 

5

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MULTI-SECTOR SHORT TERM BOND FUND (Continued)   

 

and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

ABS/MBS: Changes in interest rates can cause both extension and prepayment risks for asset- and mortgage-backed securities. These securities are also subject to risks associated with the repayment of underlying collateral.

Bank Loans: Loans may be unsecured or not fully collateralized, may be subject to restrictions on resale and/or trade infrequently on the secondary market. Loans can carry significant credit and call risk, can be difficult to value and have longer settlement times than other investments, which can make loans relatively illiquid at times.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 
Asset Allocations  
 

The following table presents the portfolio holdings within certain sectors as a percentage of total investments as of September 30, 2015.

 

     

Corporate Bonds and Notes

     36 % 

Mortgage-Backed Securities

     25   

Asset-Backed Securities

     18   

Loan Agreements

     15   

Foreign Government Securities

     2   

Other (includes short-term investments)

     4   
   

 

 

  

Total

     100 % 
   

 

 

  
 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms on page 4.

 

6

Table of Contents
MULTI-SECTOR SHORT TERM BOND FUND (Continued)   

 

Average Annual Total Returns1 for periods ended 9/30/15  
     1
Year		     5
Years		     10
Years		     Since
Inception		     Inception
Date		  
Class A Shares at NAV2      -0.23 %      3.38 %      4.59 %      —        —   
Class A Shares at POP3,4      -2.47        2.91        4.35        —        —   
Class B Shares at NAV2      -0.73        2.85        4.05        —        —   
Class B Shares with CDSC4      -2.18        2.85        4.05        —        —   
Class C Shares at NAV2      -0.27        3.13        4.32        —        —   
Class T Shares at NAV2 and with CDSC4      -0.98        2.58        3.79        —        —   
Class I Shares at NAV      0.02        3.64        —        5.36 %      6/6/08   
Barclays U.S. Aggregate Bond Index      2.94        3.10        4.64        4.505        —   
BofA Merrill Lynch 1–2.99 Year Medium Quality Corporate Bonds Index      1.07        2.27        3.76        3.375        —   

Fund Expense Ratios6: A Shares: 0.99%; B Shares: 1.49%; C Shares: 1.24%; T Shares: 1.74%; I Shares: 0.74%.

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 gain 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 The since inception index returns are from the inception date of Class I shares.
6  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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, 2005, for Class A, Class B, Class C and Class T shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions.

 

LOGO

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.

 

7

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE     VALUE  
U.S. GOVERNMENT SECURITIES—0.9%   

U.S. Treasury Note

    

0.750%, 4/15/18

   $ 29,000      $ 28,957   

1.625%, 12/31/19

     4,000        4,060   

1.500%, 5/31/20

     32,925        33,219   
TOTAL U.S. GOVERNMENT SECURITIES   
(Identified Cost $65,858)        66,236   
MUNICIPAL BONDS—0.0%   
Virginia—0.0%  

Tobacco Settlement Financing Corp.
Series A-1, Taxable
6.706%, 6/1/46

     4,635        3,555   
TOTAL MUNICIPAL BONDS
(Identified Cost $4,295)		         3,555   
FOREIGN GOVERNMENT SECURITIES—2.0%   

Argentine Republic
Series NY,
8.280%, 12/31/33(10)

     24,360        24,908   

Bolivarian Republic of Venezuela

    

RegS
5.750%, 2/26/16(4)

     4,165        3,519   

RegS
7.000%, 12/1/18(4)

     20,999        7,770   

RegS
7.750%, 10/13/19(4)

     19,501        6,777   

Mongolia 144A
4.125%, 1/5/18(3)

     12,680        11,761   

Republic of Chile
5.500%, 8/5/20

     11,647,000 CLP      17,311   

Republic of Colombia Treasury Note,
Series B,
11.250%, 10/24/18

     21,072,000 COP      7,672   

Republic of Latvia RegS
2.750%, 1/12/20(4)

     8,560        8,720   

Republic of Panama
5.200%, 1/30/20

     3,800        4,099   

Republic of Romania 144A
6.750%, 2/7/22(3)

     7,000        8,260   
    PAR VALUE     VALUE  
FOREIGN GOVERNMENT SECURITIES (continued)   

Republic of South Africa
Series R203,
8.250%, 9/15/17

     134,520 ZAR    $ 9,879   

Republic of Sri Lanka 144A
6.000%, 1/14/19(3)

   $ 17,450        17,712   

Russian Federation 144A
7.850%, 3/10/18(3)

     1,005,000 RUB      14,339   

State of Qatar 144A
3.125%, 1/20/17(3)

     12,000        12,318   
TOTAL FOREIGN GOVERNMENT SECURITIES   
(Identified Cost $185,766)        155,045   
MORTGAGE-BACKED SECURITIES—24.6%   
Agency—3.3%  

FHLMC 14-DN2, M2
1.849%, 4/25/24(2)

     13,365        13,257   

FNMA

    

5.500%, 1/1/17

     26        26   

6.000%, 5/1/17

     8        8   

4.500%, 4/1/18

     114        118   

5.000%, 10/1/19

     337        351   

5.500%, 2/1/20

     67        68   

5.500%, 3/1/20

     124        131   

5.500%, 3/1/20

     15        15   

5.500%, 3/1/20

     42        44   

5.500%, 3/1/20

     70        73   

5.500%, 4/1/20

     203        216   

5.000%, 6/1/20

     333        349   

4.000%, 8/1/25

     11,765        12,525   

3.000%, 6/1/27

     1,061        1,110   

2.500%, 5/1/28

     16,733        17,222   

6.000%, 12/1/32

     44        50   

5.500%, 2/1/33

     66        74   

5.500%, 5/1/34

     321        362   

6.000%, 8/1/34

     252        288   

5.500%, 11/1/34

     388        433   

5.500%, 11/1/34

     143        160   

6.000%, 11/1/34

     220        248   

5.500%, 12/1/34

     136        153   

5.500%, 1/1/35

     286        322   

5.500%, 7/1/37

     6        7   

6.000%, 7/1/37

     44        50   

6.000%, 4/1/38

     203        230   

5.000%, 12/1/39

     7,082        7,826   
 

 

See Notes to Financial Statements

 

 

8

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
MORTGAGE-BACKED SECURITIES (continued)   
Agency (continued)  

4.500%, 4/1/40

   $ 8,969       $ 9,735   

5.000%, 8/1/40

     14,214         15,741   

4.000%, 10/1/40

     182         194   

4.000%, 3/1/41

     5,748         6,140   

4.500%, 5/1/41

     6,356         6,914   

3.500%, 4/1/42

     11,636         12,173   

3.500%, 12/1/42

     34,201         35,779   

3.000%, 3/1/43

     58,029         58,999   

3.000%, 5/1/43

     17,698         18,000   

4.000%, 10/1/44

     29,642         31,649   

GNMA

     

6.500%, 11/15/31

     20         23   

6.500%, 2/15/32

     23         27   
    

 

 

  
       251,090   
    

 

 

  
Non-Agency—21.3%             

A-10 Securitization LLC

     

13-1, A 144A
2.400%, 11/15/25(3)

     974         977   

14-1, A1 144A
1.720%, 4/15/33(3)

     12,909         12,883   

ABN AMRO Mortgage Corp. 02-9, M
5.750%, 12/25/32

     594         570   

Access Point Financial, Inc.
15-A, A 144A
2.610%, 4/15/20(3)

     11,237         11,234   

American Homes 4 Rent

     

14-SFR1, A 144A
1.250%, 6/17/31(2)(3)

     7,294         7,154   

15-SFR1, A 144A
3.467%, 4/17/45(3)

     7,886         7,840   

Americold LLC Trust 10-ARTA, A1 144A
3.847%, 1/14/29(3)

     8,498         8,875   

Ameriquest Mortgage Securities, Inc.
03-10, AF6
5.210%, 11/25/33(2)

     1,026         1,056   

Asset Backed Funding Certificates
05-AQ1, A6
4.780%, 6/25/35(2)

     3,475         3,568   
    PAR VALUE      VALUE  
Non-Agency (continued)   

B2R Mortgage Trust 15-1, A1 144A
2.524%, 5/15/48(3)

   $ 11,690       $ 11,652   

Banc of America (Merrill Lynch) Commercial Mortgage, Inc. 07-2, A4
5.784%, 4/10/49(2)

     18,643         19,344   

Banc of America Alternative Loan Trust

     

03-2, CB3
5.750%, 4/25/33

     16,926         17,534   

03-10, 2A1
6.000%, 12/25/33

     3,258         3,511   

Banc of America Funding Corp.
04-4, 3A1
4.750%, 10/25/19

     2,211         2,248   

Banc of America Funding Trust

     

04-B, 2A1
2.568%, 11/20/34(2)

     896         886   

05-1, 1A1
5.500%, 2/25/35

     603         609   

06-2, 3A1
6.000%, 3/25/36

     3,212         3,278   

Banc of America Mortgage Trust 04-11, 5A1
6.500%, 8/25/32

     889         903   

Banc of America Mortgage Trust

     

04-7, 6A3
4.500%, 8/25/19

     862         862   

04-11, 2A1
5.750%, 1/25/35

     1,773         1,813   

05-3, 1A15
5.500%, 4/25/35

     1,979         2,008   

Bank of America (Merrill Lynch – Countrywide) Alternative Loan Trust 04-22CB, 1A1
6.000%, 10/25/34

     27,323         28,781   
 

 

See Notes to Financial Statements

 

 

9

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
MORTGAGE-BACKED SECURITIES (continued)   
Non-Agency (continued)   

Bank of America (Merrill Lynch – Countrywide) Asset-Backed Certificates

     

04-10, AF6
4.485%, 12/25/34(2)

   $ 1,007       $ 1,033   

05-1 AF5A
5.211%, 7/25/35(2)

     13,627         13,488   

05-12, 2A3
4.791%, 2/25/36(2)

     4,191         4,299   

Bank of America (Merrill Lynch – Countrywide) Commercial Mortgage Trust 06-4, A3
5.172%, 12/12/49

     8,533         8,783   

Bank of America (Merrill Lynch – Countrywide) Home Loan Mortgage Pass-Through-Trust

     

04-6, 1A2
2.610%, 5/25/34(2)

     1,683         1,675   

04-4, A6
5.500%, 5/25/34

     1,249         1,279   

Bank of America (Merrill Lynch – Countrywide) Mortgage Trust 06-C1, AM
5.865%, 5/12/39(2)

     7,570         7,714   

Bank of America (Merrill Lynch – Deutsche Bank Trust)
12-OSI, A2FX 144A
3.352%, 4/13/29(3)

     19,916         20,347   

Bank of America (Merrill Lynch) Mortgage Investors, Inc. 98-C1, B
6.750%, 11/15/26(2)

     10,000         10,642   

Bank of America (Merrill Lynch) Commercial Mortgage Trust 06-3, A4
5.414%, 7/12/46(2)

     10,005         10,250   
    PAR VALUE      VALUE  
Non-Agency (continued)   

Barclays (Lehman Brothers) – UBS Commercial Mortgage Trust

     

06-C3, AM
5.712%, 3/15/39(2)

   $ 7,615       $ 7,723   

07-C2, A3
5.430%, 2/15/40

     6,369         6,636   

07-C6, A4
5.858%, 7/15/40(2)

     13,473         14,045   

07-C7, A3
5.866%, 9/15/45(2)

     11,008         11,855   

Bayview Commercial Asset Trust

     

07-5A, A2 144A
1.094%, 10/25/37(2)(3)

     2,676         3,059   

08-1, A3 144A
1.694%, 1/25/38(2)(3)

     32,808         31,582   

Bayview Financial Acquisition Trust 07-A, 1A2
6.205%, 5/28/37(2)

     7,796         8,189   

Bayview Financial Mortgage-Pass-Through Trust

     

06-A, 1A2
5.483%, 2/28/41(2)

     41         43   

06-A, 1A4
6.087%, 2/28/41(2)

     16,408         17,200   

BCRR Trust 09-1, 2A1 5.858%, 7/17/40(2)

     2,871         2,934   

Citicorp Mortgage Securities, Inc. 07-1,A1
5.500%, 1/25/22

     203         204   

Citicorp Residential Mortgage Securities, Inc.
07-12, A6
5.503%, 6/25/37

     5,576         5,764   

Citigroup – Deutsche Bank Commercial Mortgage Trust

     

06-CD2, A4
5.488%, 1/15/46(2)

     1,672         1,673   

07-CD4, A4
5.322%, 12/11/49

     4,505         4,651   

07-CD4, AMFX
5.366%, 12/11/49(2)

     13,955         14,425   
 

 

See Notes to Financial Statements

 

 

10

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
MORTGAGE-BACKED SECURITIES (continued)   
Non-Agency (continued)   

Citigroup Commercial Mortgage Trust

     

07-C6, A1A
5.900%, 12/10/49(2)

   $ 26,496       $ 27,989   

07-C6, A4
5.900%, 12/10/49(2)

     388         410   

08-C7, AM
6.349%, 12/10/49(2)

     12,335         13,271   

10-RR3, MLSR 144A
5.810%, 6/14/50(2)(3)

     3,134         3,282   

Citigroup Mortgage Loan Trust, Inc.

     

03-UP3, A2
7.000%, 9/25/33

     841         884   

04-UST1, A3
2.248%, 8/25/34(2)

     1,622         1,625   

04-NCM2, 2CB2
6.750%, 8/25/34

     12,524         13,283   

14-A, A 144A
4.000%, 1/25/35(2)(3)

     16,322         16,878   

05-5, 2A3
5.000%, 8/25/35

     624         621   

Colony Multi-Family Commercial Mortgage-Backed Securities 14-1, A 144A
2.543%, 4/20/50(3)

     19,232         19,226   

Commercial Mortgage Trust

     

10-C1, D 144A
6.188%, 7/10/46(2)(3)

     6,669         7,307   

07-GG11, AM
5.867%, 12/10/49(2)

     19,989         21,111   

Credit Suisse Commercial Mortgage Trust

     

07-C1, A1A
5.361%, 2/15/40

     37,912         39,351   

07-C5, A1AM
5.870%, 9/15/40(2)

     21,039         21,389   

14-LVR2, A2 144A
3.927%, 4/25/44(2)(3)

     14,150         14,573   

07-C2, A3
5.542%, 1/15/49(2)

     12,995         13,575   
    PAR VALUE      VALUE  
Non-Agency (continued)   

Credit Suisse First Boston Mortgage Securities Corp.

     

03-27, 5A3
5.250%, 11/25/33

   $ 1,817       $ 1,853   

04-8, 7A1
6.000%, 12/25/34

     6,049         6,383   

Deutsche Bank-UBS Mortgage Trust 11-LC3A, D 144A
5.583%, 8/10/44(2)(3)

     6,306         6,733   

Extended Stay America Trust 13-ESH7, A17 144A
2.295%, 12/5/31(3)

     16,230         16,254   

Fannie Mae Connecticut Avenue Securities
14-C02, 2M2
2.799%, 5/25/24(2)

     1,420         1,276   

FDIC Trust 13-N1, A 144A
4.500%, 10/25/18(3)

     2,548         2,553   

GAHR Commercial Mortgage Trust 15-NRF, CFX 144A
3.495%, 12/15/19(2)(3)

     16,875         16,826   

GMAC Mortgage Corp. Loan Trust

     

06-HLTV, A4
5.810%, 10/25/29

     1,710         1,720   

03-J7, A10
5.500%, 11/25/33

     1,321         1,354   

04-AR1, 12A
3.038%, 6/25/34(2)

     9,022         9,175   

05-AR1, 5A
3.273%, 3/18/35(2)

     2,867      

 

2,829

  

Goldman Sachs Mortgage Securities Trust

     

07-GG,10
5.989%, 8/10/45(2)

     2,976         3,166   

II 07-GG10, A4
5.989%, 8/10/45(2)

     18,831         19,860   

Goldman Sachs Residential Mortgage Loan Trust

     

05-5F, B1
5.752%, 6/25/35(2)

     2,862         2,783   
 

 

See Notes to Financial Statements

 

 

11

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
MORTGAGE-BACKED SECURITIES (continued)   
Non-Agency (continued)   

07-1F, 2A2
5.500%, 1/25/37

   $ 470       $ 447   

GSAA Home Equity Trust

     

05-1, AF4
5.303%, 11/25/34(2)

     609         641   

05-12, AF3W
4.999%, 9/25/35(2)

     4,851         4,979   

Hilton USA Trust 13-HLT, EFX 144A
4.602%, 11/5/30(2)(3)

     21,980         22,193   

Home Equity Loan Trust 07-HSA3, AI4
6.110%, 6/25/37(2)

     9,928         10,051   

IMC Home Equity Loan Trust 97-5, A9
7.310%, 11/20/28

     2,976         2,987   

Jefferies Resecuritization Trust

     

14-R1, 1A1 144A
4.000%, 12/27/37(3)

     9,828         9,836   

14-R1, 2A1 144A
4.000%, 12/27/37(3)

     7,664         7,659   

JPMorgan Chase (Bear Stearns) Adjustable Rate Mortgage Trust 04-10, 14A1 144A
2.754%, 1/25/35(2)(3)

     1,645         1,607   

JPMorgan Chase (Bear Stearns) Asset Backed Securities Trust 03-AC4. A
5.500%, 9/25/33(2)

     7,841         8,095   

JPMorgan Chase (Bear Stearns) Commercial Mortgage Securities, Inc.

     

06-T22, AM
5.795%, 4/12/38(2)

     10,700         10,852   

06-PW12, AM
5.940%, 9/11/38(2)

     9,250         9,468   

06-PW14, AM
5.243%, 12/11/38

     5,000         5,194   
    PAR VALUE      VALUE  
Non-Agency (continued)   

05-PW10, AM
5.449%, 12/11/40(2)

   $ 14,480       $ 14,518   

06-PWR13, AM
5.582%, 9/11/41(2)

     3,272         3,377   

07- PW15, AM
5.363%, 2/11/44

     13,247         13,608   

07- PW17, A4
5.694%, 6/11/50(2)

     21,890         23,116   

07-PW18, AM
6.084%, 6/11/50(2)

     12,400         13,374   

JPMorgan Chase (Washington Mutual) Mortgage Pass-Through Certificates Trust

     

04-CB1, 5A
5.000%, 6/25/19

     1,215         1,242   

03-AR6, A1
2.555%, 6/25/33(2)

     1,065         1,066   

03-AR4, 2A1
2.258%, 8/25/33(2)

     332         328   

04-CB1, 2A
5.000%, 6/25/34

     3,445         3,560   

JPMorgan Chase Commercial Mortgage Securities Trust

     

09-IWST, A1 144A
4.314%, 12/5/27(3)

     5,770         6,107   

10-CNTR, A2 144A
4.311%, 8/5/32(3)

     11,503         12,561   

10-CNTR, D 144A
6.390%, 8/5/32(2)(3)

     765         865   

15-SGP, B 144A
2.944%, 7/15/36(2)(3)

     13,925         13,925   

14-1, 1A1 144A
4.000%, 1/25/44(2)(3)

     26,408         27,671   

06-LDP7, AM
6.100%, 4/15/45(2)

     22,312         22,829   

06-LDP7, A4
6.100%, 4/15/45(2)

     8,734         8,867   

06-LDP9, A3
5.336%, 5/15/47

     19,732         20,390   

06-LDP9, AM
5.372%, 5/15/47

     24,850         25,471   

07-LDPX, AM
5.464%, 1/15/49(2)

     32,275         33,175   
 

 

See Notes to Financial Statements

 

 

12

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
MORTGAGE-BACKED SECURITIES (continued)   
Non-Agency (continued)   

07-LD12, A4
5.882%, 2/15/51(2)

   $ 15,529       $ 16,331   

JPMorgan Chase Mortgage Trust 15-5, A2 144A
2.912%, 5/25/45(2)(3)

     13,675         13,806   

JPMorgan Chase Mortgage Trust

     

14-2, 2A2 144A
3.500%, 6/25/29(2)(3)

     13,985         14,415   

06-A2, 4A1 144A
2.718%, 8/25/34(2)(3)

     2,147         2,154   

04-A4, 2A1
2.545%, 9/25/34(2)(3)

     3,945         4,008   

05-A1, 4A1 144A
2.739%, 2/25/35(2)(3)

     855         862   

05-A2, 4A1 144A
2.139%, 4/25/35(2)(3)

     1,187         1,160   

05-A4, 3A1 144A
2.310%, 7/25/35(2)(3)

     5,822         5,806   

06-A6, 3A3L 144A
5.055%, 10/25/36(2)(3)

     1,781         1,548   

14-IVR3, 2A1 144A
3.000%, 9/25/44(2)(3)

     5,777         5,807   

MASTR Adjustable Rate Mortgages Trust 04-12,3A1
2.749%, 11/25/34(2)

     1,677         1,665   

MASTR Alternative Loan Trust

     

04-7, 4A1
4.500%, 7/25/19

     2,913         2,967   

03-8, 2A1
5.750%, 11/25/33

     6,463         6,776   

04-4, 6A1
5.500%, 4/25/34

     3,580         3,759   

04-6, 7A1
6.000%, 7/25/34

     6,318         6,429   

04-7, 9A1
6.000%, 8/25/34

     15,372         16,102   

05-2, 2A1
6.000%, 1/25/35

     3,748         3,984   

05-2, 1A1
6.500%, 3/25/35

     10,571         11,068   
    PAR VALUE      VALUE  
Non-Agency (continued)   

MASTR Asset Securitization Trust 05-1, 1A1
5.000%, 5/25/20

   $ 605       $ 610   

MASTR Reperforming Loan Trust
05-1, 1A2 144A
6.500%, 8/25/34(3)

     1,825         1,833   

Morgan Stanley Capital I Trust

     

06-T23, AM
6.017%, 8/12/41(2)

     10,575         10,894   

08-T29, AM
6.461%, 1/11/43(2)

     1,610         1,768   

06-IQ12, A4
5.332%, 12/15/43

     13,356         13,755   

07-IQ14, A4
5.692%, 4/15/49(2)

     17,390         18,142   

07-IQ14, AM
5.865%, 4/15/49(2)

     15,932         16,545   

07- LQ16, A4
5.809%, 12/12/49

     21,232         22,582   

Morgan Stanley Mortgage Loan Trust

     

04-2AR, 3A
2.171%, 2/25/34(2)

     1,796         1,793   

04-2AR, 4A
2.569%, 2/25/34(2)

     1,415         1,429   

Morgan Stanley Residential Mortgage Loan Trust 14-1A, A1 144A
2.987%, 6/25/44(2)(3)

     8,255         8,413   

Motel 6 Trust 15-MTL6, B 144A
3.298%, 2/5/30(3)

     9,275         9,346   

New Residential Mortgage Loan Trust

     

14-1A, A 144A
3.750%, 1/25/54(2)(3)

     8,487         8,764   

14-2A, 3A 144A
3.750%, 5/25/54(2)(3)

     2,513         2,621   

14-3A, AFX3 144A
3.750%, 11/25/54(2)(3)

     6,939         7,180   

Nomura Asset Acceptance Corp. 04-R3, A1 144A
6.500%, 2/25/35(3)

     7,630         7,790   
 

 

See Notes to Financial Statements

 

 

13

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
MORTGAGE-BACKED SECURITIES (continued)   
Non-Agency (continued)   

Residential Accredit Loans, Inc.

     

03-QS6, A4
4.250%, 3/25/33

   $ 952       $ 960   

03-QS17, CB5
5.500%, 9/25/33

     1,368         1,409   

05-QS1, A5
5.500%, 1/25/35

     1,176         1,186   

Residential Asset Mortgage Products, Inc.

     

04-SL2, A3
7.000%, 10/25/31

     2,095         2,203   

04-SL1, A8
6.500%, 11/25/31

     2,374         2,438   

05-SL2, A4
7.500%, 2/25/32

     2,100         2,195   

04-SL4, A3
6.500%, 7/25/32

     1,469         1,511   

03-RS8, AI7
5.015%, 9/25/33(2)

     541         547   

Residential Asset Securitization Trust

     

03-A11, A9
5.750%, 11/25/33

     2,813         2,887   

04-A1, A5
5.500%, 4/25/34

     13,366         13,558   

Residential Funding Mortgage Securities I, Inc.

     

06-S12, 1A1
5.500%, 12/25/21

     1,237         1,257   

05-S1, 1A2
5.500%, 2/25/35

     943         950   

Residential Funding Mortgage Securities II Home Loan Trust 06-H11, M1
6.010%, 2/25/36(2)

     1,088         1,088   

Sequoia Mortgage Trust

     

14-2, A1 144A
4.000%, 7/25/44(2)(3)

     10,687         11,014   

15-1, A1 144A
3.500%, 1/25/45(2)(3)

     10,544         10,641   
    PAR VALUE      VALUE  
Non-Agency (continued)   

Structured Adjustable Rate Mortgage Loan Trust

     

03-30, 2A1
5.071%, 10/25/33(2)

   $ 4,145       $ 4,234   

04-4, 3A1
2.513%, 4/25/34(2)

     817         810   

04-4, 3A4
2.513%, 4/25/34(2)

     2,788         2,763   

04-4, 3A2
2.513%, 4/25/34(2)

     3,613         3,614   

04-5, 3A2
2.453%, 5/25/34(2)

     1,755         1,750   

04-14, 7A
2.439%, 10/25/34(2)

     12,752         12,786   

Structured Asset Securities Corp. Assistance Loan Trust 03-AL1, A 144A
3.357%, 4/25/31(3)

     9,020         8,877   

Structured Asset Securities Corp. Mortgage Pass-Through Certificates

     

02-AL1, A3
3.450%, 2/25/32

     11,064         10,935   

03-33H, 1A1
5.500%, 10/25/33

     3,901         3,981   

03-34A, 6A
2.637%, 11/25/33(2)

     2,833         2,774   

04-15, 3A3
5.500%, 9/25/34

     2,688         2,726   

Towd Point Mortgage Trust 15-3, A1B 144A
3.000%, 3/25/54(2)(3)

     7,159         7,209   

Vericrest Opportunity Loan Trust

     

15-NP11, A1 144A
3.625%, 7/25/45(3)

     7,910         7,894   

14-NP10, A1 144A
3.375%, 10/25/54(3)

     2,761         2,752   

14-NPL9, A1 144A
3.375%, 11/25/54(3)

     9,278         9,264   

15-NPL4, A1 144A
3.500%, 2/25/55(3)

     5,533         5,521   
 

 

See Notes to Financial Statements

 

 

14

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
MORTGAGE-BACKED SECURITIES (continued)   
Non-Agency (continued)   

15-NPL3, A1 144A
3.375%, 10/25/58(3)

   $ 16,936       $ 16,885   

VFC LLC 14-2, A 144A
2.750%, 7/20/30(3)

     3,271         3,270   

Wells Fargo (Royal Bank of Scotland plc) Commercial Mortgage Trust 11-C5, C 144A
5.822%, 11/15/44(2)(3)

     1,800         1,988   

Wells Fargo (Wachovia Bank Commercial Mortgage Trust)

     

04-C15, B
4.892%, 10/15/41

     7,573         7,587   

06-C25, A4
5.900%, 5/15/43(2)

     6,563         6,615   

07-31, AM
5.591%, 4/15/47(2)

     34,000         35,736   

Wells Fargo (Wachovia Bank) Commercial Mortgage Trust

     

06-C25, AM
5.900%, 5/15/43(2)

     18,625         18,986   

07-C30, A5
5.342%, 12/15/43

     39,765         41,140   

07-C30, AM
5.383%, 12/15/43

     25,695         26,707   

07-C31, A4
5.509%, 4/15/47

     14,562         14,859   

07-C32, A3
5.901%, 6/15/49(2)

     22,577         23,665   

07-C33, A5
6.150%, 2/15/51(2)

     1,265         1,357   

Wells Fargo Mortgage Backed Securities Trust

     

06-17, A1
5.500%, 11/25/21

     168         170   

03-G, A1
2.616%, 6/25/33(2)

     1,390         1,404   

03-J, 5A1
2.615%, 10/25/33(2)

     501         506   
    PAR VALUE      VALUE  
Non-Agency (continued)   

04-4, A9
5.500%, 5/25/34

   $ 2,080       $ 2,139   

04-U, A1
2.669%, 10/25/34(2)

     1,125         1,123   

04-Z, 2A1
2.617%, 12/25/34(2)

     6,918         6,918   

04-CC, A1
2.623%, 1/25/35(2)

     2,905         2,935   

05-12, 1A1
5.500%, 11/25/35

     4,678         4,766   

05-14, 2A1
5.500%, 12/25/35

     3,569         3,634   

06-6, 1A15
5.750%, 5/25/36

     442         437   

07-16, 1A1
6.000%, 12/28/37

     3,667         3,777   

07-AR10, 2A1
5.956%, 1/25/38(2)

     4,554         4,479   

WinWater Mortgage Loan Trust 14-1, A1 144A
3.992%, 6/20/44(2)(3)

     14,735         15,241   
    

 

 

  
               1,644,848   
TOTAL MORTGAGE-BACKED SECURITIES   
(Identified Cost $1,864,345)         1,895,938   
ASSET-BACKED SECURITIES—18.5%   

American Credit Acceptance Receivables Trust 14-3, C 144A
3.430%, 6/10/20(3)

     19,200         19,351   

AmeriCredit Automobile Receivables Trust

     

12-1, C
2.670%, 1/8/18

     2,636         2,646   

12-3, D
3.030%, 7/9/18

     19,762         20,075   

12-4, D
2.680%, 10/9/18

     7,150         7,241   

13-2, D
2.420%, 5/8/19

     23,090         23,284   

14-1, D
2.540%, 5/8/20

     18,320         18,457   

14-2, C
2.180%, 6/8/20

     19,450         19,538   
 

 

See Notes to Financial Statements

 

 

15

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

15-3, C
2.730%, 3/8/21

   $ 9,730       $ 9,775   

Applebee’s LLC 14-1, A2 144A
4.277%, 9/5/44(3)

     20,471         20,941   

Ascentium Equipment Receivables 15-A1, B 144A
2.260%, 6/10/21(3)

     5,400         5,469   

Associates Manufactured Housing Pass-Through Certificates 96-1, B1
8.000%, 3/15/27(2)

     1,527         1,637   

Avant Loans Funding Trust 2015-A 144A
4.000%, 8/16/21(3)

     4,113         4,113   

Avis Budget Rental Car Funding LLC

     

(AESOP) 11-3A, A 144A
3.410%, 11/20/17(3)

     12,848         13,136   

(AESOP) 12-3A, A 144A
2.100%, 3/20/19(3)

     23,085         23,254   

(AESOP) 13-2A, A 144A
2.970%, 2/20/20(3)

     2,635         2,713   

BankAmerica Manufactured Housing Contract Trust 98-1, B1
7.810%, 8/10/25(2)

     2,625         2,727   

Barclays (Lehman Brothers) Manufactured Housing Contract Trust 01-B, A3
4.350%, 4/15/40

     3,317         3,407   

BCC Funding VIII LLC

     

14-A, B 144A
3.123%, 8/20/20(3)

     2,799         2,823   

14-1A, C 144A
4.216%, 8/20/20(3)

     5,519         5,571   

Beacon Container Finance LLC 12-1A, A 144A
3.720%, 9/20/27(3)

     20,384         20,681   
    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

BXG Receivables Note Trust

     

10-A, A 144A
5.100%, 3/2/26(3)

   $ 1,794       $ 1,849   

12-A, A 144A
2.660%, 12/2/27(3)

     4,201         4,193   

13-A, A 144A
3.010%, 12/4/28(3)

     7,234         7,296   

15-A, A 144A
2.880%, 5/2/30(3)

     3,294         3,302   

California Republic Auto Receivables Trust

     

12-1, B 144A
1.760%, 1/16/18(3)

     13,570         13,640   

13-1, B 144A
2.240%, 1/15/19(3)

     11,600         11,748   

14-2, B
2.340%, 4/15/20

     7,090         7,121   

14-2, C
3.290%, 3/15/21

     2,700         2,704   

15-3, B
2.700%, 9/15/21

     3,705         3,711   

Capital Auto Receivables Asset Trust

     

13-1, C
1.740%, 10/22/18

     5,425         5,446   

13-4, C
2.670%, 2/20/19

     2,950         2,989   

15-2, C
2.670%, 8/20/20

     7,250         7,285   

CarFinance Capital Auto Trust

     

13-1A, B 144A
2.750%, 11/15/18(3)

     5,541         5,572   

13-A1, C 144A
3.450%, 3/15/19(3)

     2,210         2,234   

13-2A, B 144A
3.150%, 8/15/19(3)

     19,350         19,596   

14-1A, B 144A
2.720%, 4/15/20(3)

     5,550         5,568   

14-2A, B 144A
2.640%, 11/16/20(3)

     3,455         3,483   

14-2A, C 144A
3.240%, 11/16/20(3)

     2,765         2,783   

15-A1, B 144A
2.910%, 6/15/21(3)

     6,000         6,077   
 

 

See Notes to Financial Statements

 

 

16

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

CarMax Auto Owner Trust

     

14-2, B
1.880%, 11/15/19

   $ 1,000       $ 1,007   

15-2, C
2.390%, 3/15/21

     2,275         2,280   

CarNow Auto Receivables Trust

     

14-1A, D 144A
4.160%, 11/15/18(3)

     3,000         2,959   

14-1A, E 144A
5.530%, 1/15/20(3)

     3,650         3,620   

15-2,C 144A
3.880%, 4/15/20(3)

     5,000         5,000   

CCG Receivables Trust

     

14-1, B 144A
2.150%, 11/15/21(3)

     5,080         5,103   

15-1, A3 144A
1.920%, 1/17/23(3)

     4,000         4,014   

Centre Point Funding LLC 12-2A, 1 144A
2.610%, 8/20/21(3)

     10,467         10,432   

Cheesecake Restaurant Holdings, Inc. 13-1A, A2 144A
4.474%, 3/20/43(3)

     23,788         24,638   

CLI Funding LLC 14-2A, A 144A
3.380%, 10/18/29(3)

     7,721         7,791   

CNH Equipment Trust 12-B, B
1.780%, 6/15/20

     4,000         4,019   

Conseco Financial Corp.

     

94-1, A5
7.650%, 4/15/19

     68         70   

01-3, A4
6.910%, 5/1/33(2)

     10,396         11,456   

DB Master Finance LLC

     

15-1A, A2I 144A
3.262%, 2/20/45(3)

     4,975         5,004   

15-A1, A2II 144A
3.980%, 2/20/45(3)

     18,922         19,081   

Diamond Resorts Owner Trust 14-1, A 144A
2.540%, 5/20/27(3)

     7,312         7,387   
    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

Direct Capital Funding IV LLC

     

13-1, D 144A
4.599%, 10/20/19(3)

   $ 3,555       $ 3,598   

13-A1, C 144A
4.830%, 11/20/20(3)

     5,000         5,074   

Domino’s Pizza Master Issuer LLC 12-1A, A2 144A
5.216%, 1/25/42(3)

     19,325         19,905   

Drive Auto Receivables Trust

     

15-DA, B 144A
2.590%, 12/16/19(3)

     3,920         3,920   

14-AA, C 144A
3.060%, 5/17/21(3)

     18,650         18,858   

15-AA, D 144A
4.120%, 6/15/22(3)

     7,920         8,044   

Drug Royalty LP II 14-1, A2 144A
3.484%, 7/15/23(3)

     21,706         22,049   

DT Auto Owner Trust

     

13-1A, C 144A
2.730%, 2/15/19(3)

     6,527         6,536   

13-2A, C 144A
3.060%, 9/16/19(3)

     17,500         17,607   

14-1A, C 144A
2.640%, 10/15/19(3)

     18,900         19,007   

14-2A, C 144A
2.460%, 1/15/20(3)

     14,370         14,370   

14-3A, C 144A
3.040%, 9/15/20(3)

     4,840         4,897   

15-1A, C 144A
2.870%, 11/16/20(3)

     7,000         7,060   

Exeter Automobile Receivables Trust

     

12-1A, C 144A
5.270%, 10/16/17(3)

     4,427         4,463   

12-2A, C 144A
3.060%, 7/16/18(3)

     8,050         8,076   

13-2A, B 144A
3.090%, 7/16/18(3)

     17,820         17,956   

14-1A, B 144A
2.420%, 1/15/19(3)

     9,220         9,270   

13-1A, C 144A
3.520%, 2/15/19(3)

     20,725         21,034   

14-1A, C 144A
3.570%, 7/15/19(3)

     15,830         16,017   
 

 

See Notes to Financial Statements

 

 

17

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

14-2A, C 144A
3.260%, 12/16/19(3)

   $ 14,615       $ 14,634   

15-A1, C 144A
4.100%, 12/15/20(3)

     14,505         14,785   

15-2A, C 144A
3.900%, 3/15/21(3)

     17,705         17,947   

14-3A, D 144A
5.690%, 4/15/21(3)

     13,875         14,211   

Fairway Outdoor Funding LLC 12-1A, A2 144A
4.212%, 10/15/42(3)

     20,914         21,131   

First Investors Auto Owner Trust 15-1A, C 144A
2.710%, 6/15/21(3)

     5,000         4,967   

Flagship Credit Auto Trust

     

14-2, D 144A
5.210%, 2/15/21(3)

     9,560         9,664   

15-2, C 144A
4.080%, 12/15/21(3)

     6,495         6,522   

Foursight Capital Automobile Receivables Trust

     

14-1, B 144A
3.560%, 11/22/21(3)

     4,704         4,784   

15-1, B 144A
4.120%, 9/15/22(3)

     5,589         5,656   

Global Science Finance S.A.R.L.

     

13-1A, A 144A
2.980%, 4/17/28(3)

     11,716         11,811   

13-2A, A 144A
3.670%, 11/17/28(3)

     5,656         5,649   

Gold Key Resorts LLC 14-A, A 144A
3.220%, 5/17/31(3)

     10,312         10,383   

GreatAmerica Leasing Receivables Funding, LLC 13-1, A4 144A
1.160%, 5/15/18(3)

     2,235         2,238   

Greater Capital Association of Realtors 15-1A, C
9.790%, 10/15/25

     8,195         8,183   
    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

Hertz Vehicle Financing LLC

     

11-1A, A2 144A
3.290%, 3/25/18(3)

   $ 12,290       $ 12,603   

15-2A, A 144A
2.020%, 9/25/19(3)

     6,705         6,704   

Hilton Grand Vacations Trust

     

13-A, A 144A
2.280%, 1/25/26(3)

     10,191         10,271   

14-AA, A 144A
1.770%, 11/25/26(3)

     13,908         13,757   

Hyundai Auto Receivables Trust

     

14-B, D
2.510%, 12/15/20

     9,675         9,653   

15-A, D
2.730%, 6/15/21

     8,950         9,117   

IndyMac Manufactured Housing Contract 98-1, A3
6.370%, 9/25/28

     998         1,023   

LEAF II Receivables Funding LLC 13-1, C 144A
3.460%, 9/15/21(3)

     6,850         6,873   

LEAF Receivables Funding 10 LLC

     

15-1, D 144A
3.740%, 5/17/21(3)

     800         793   

15-1, E1 144A
5.210%, 7/15/21(3)

     4,500         4,458   

15-1, E2 144A
6.000%, 6/15/23(3)

     2,455         2,370   

LEAF Receivables Funding 8 LLC
12-1, D 144A
4.680%, 9/15/20(3)

     5,859         5,938   

LEAF Receivables Funding 9 LLC
13-1, D 144A
5.110%, 9/15/21(3)

     655         673   

Marriott Vacation Club Owner Trust

     

12-1A, A 144A
2.510%, 5/20/30(3)

     16,412         16,529   
 

 

See Notes to Financial Statements

 

 

18

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

10-1A, A 144A
3.540%, 10/20/32(3)

   $ 534       $ 547   

10-1A, B 144A
4.520%, 10/20/32(3)

     1,041         1,074   

MVW Owner Trust 15-1A, B 144A
2.960%, 12/20/32(3)

     2,177         2,192   

National City Mortgage Capital Trust 08-1, 2A1
6.000%, 3/25/38

     2,432         2,548   

Nations Equipment Finance Funding I LLC

     

13-1A, B 144A
3.818%, 5/20/21(3)

     1,054         1,056   

13-1A, C 144A
5.500%, 5/20/21(3)

     7,833         7,850   

OneMain Financial Issuance Trust

     

14-1A, A 144A
2.430%, 6/18/24(3)

     16,940         16,939   

15-2A, A 144A
2.570%, 7/18/25(3)

     19,675         19,630   

15-A1, A 144A
3.190%, 3/18/26(3)

     11,875         11,995   

Orange Lake Timeshare Trust

     

12-AA, A 144A
3.450%, 3/10/27(3)

     5,200         5,347   

14-AA, A 144A
2.290%, 7/9/29(3)

     4,181         4,197   

Prestige Auto Receivables Trust 14-1A, C 144A
2.390%, 5/15/20(3)

     7,000         7,066   

Santander Drive Auto Receivables Trust

     

12-2, D
3.870%, 2/15/18

     31,045         31,618   

12-6, C
1.940%, 3/15/18

     7,358         7,382   

12-5, C
2.700%, 8/15/18

     4,850         4,885   

12-6, D
2.520%, 9/17/18

     17,455         17,642   

13-1, D
2.270%, 1/15/19

     23,445         23,590   
    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

13-3, C
1.810%, 4/15/19

   $ 17,215       $ 17,261   

13-5, D
2.730%, 10/15/19

     20,100         20,336   

14-3, C
2.130%, 8/17/20

     16,400         16,525   

14-4, D
3.100%, 11/16/20

     6,650         6,715   

Sierra Timeshare Receivables Funding LLC

     

10-3A, B 144A
4.440%, 11/20/25(3)

     2,016         2,023   

11-1A, B 144A
4.230%, 4/20/26(3)

     1,887         1,897   

12-2A, B 144A
3.420%, 3/20/29(3)

     2,719         2,756   

12-3A, A 144A
1.870%, 8/20/29(3)

     9,847         9,880   

13-1A, A 144A
1.590%, 11/20/29(3)

     3,736         3,709   

14-1A, A 144A
2.070%, 3/20/30(3)

     3,914         3,937   

14-2A, A 144A
2.050%, 6/20/31(3)

     5,803         5,848   

Silverleaf Finance LLC

     

XV 12-D, A 144A
3.000%, 3/17/25(3)

     5,720         5,783   

XVII 13-12, A1 144A
2.680%, 3/16/26(3)

     4,879         4,897   

XVIII 14-A, A 144A
2.810%, 1/15/27(3)

     3,635         3,649   

SLM Private Education Loan Trust

     

13-B, A2A 144A
1.850%, 6/17/30(3)

     4,500         4,491   

13-C, A2A 144A
2.940%, 10/15/31(3)

     5,000         5,166   

SNAAC Auto Receivables Trust 14-1A, C 144A
2.210%, 1/15/20(3)

     11,085         11,118   

SoFi Professional Loan Program LLC

     

14-A, A2 144A
3.020%, 10/25/27(3)

     2,180         2,219   

14-B, 2A 144A
2.550%, 8/27/29(3)

     1,705         1,713   
 

 

See Notes to Financial Statements

 

 

19

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

15-A, A2 144A
2.420%, 3/25/30(3)

   $ 6,625       $ 6,618   

SolarCity LMC
Series III LLC
14-2, A 144A
4.020%, 7/20/44(3)

     8,287         8,166   

Structured Asset Securities Corp. 01-SB1, A2
3.375%, 8/25/31

     2,043         2,015   

SVO VOI Mortgage Corp.

     

10-AA, A 144A
3.650%, 7/20/27(3)

     3,150         3,184   

12-AA, A 144A
2.000%, 9/20/29(3)

     6,937         6,910   

TAL Advantage V LLC

     

13-1A A 144A
2.830%, 2/22/38(3)

     12,416         12,499   

14-3A, A 144A
3.270%, 11/21/39(3)

     11,990         12,154   

TCF Auto Receivables Owner Trust

     

14-1A, B 144A
2.330%, 5/15/20(3)

     1,733         1,757   

14-1A, C 144A
3.120%, 4/15/21(3)

     2,035         2,080   

Textainer Marine Containers Ltd.

     

13-1A, A 144A
3.900%, 9/20/38(3)

     16,000         16,000   

14-1A, A 144A
3.270%, 10/20/39(3)

     4,133         4,197   

Tidewater Auto Receivables Trust

     

12-AA, B 144A
2.430%, 4/15/19(3)

     3,387         3,390   

14-AA, C 144A
2.560%, 8/15/19(3)

     3,500         3,513   

Trip Rail Master Funding LLC

     

11-1A, A1A 144A
4.370%, 7/15/41(3)

     14,496         15,052   

14-1A, A1 144A
2.863%, 4/15/44(3)

     4,165         4,213   

U-Haul S Fleet LLC 10-BT1A, 1 144A
4.899%, 10/25/23(3)

     22,728         23,640   
    PAR VALUE      VALUE  
ASSET-BACKED SECURITIES (continued)   

Volvo Financial Equipment LLC

     

13-1A, B 144A
1.240%, 8/15/19(3)

   $ 15,835       $ 15,840   

14-1A, C 144A
1.940%, 11/15/21(3)

     6,000         6,037   

Welk Resorts LLC

     

13-A, A 144A
3.100%, 3/15/29(3)

     4,420         4,462   

15-AA, A 144A
2.790%, 6/16/31(3)

     7,473         7,503   

Wendy’s Funding LLC 15-1A, A2II 144A
4.080%, 6/15/45(3)

     18,420         18,580   

Westgate Resorts LLC 12-2A, A 144A
3.000%, 1/20/25(3)

     345         346   

Westlake Automobile Receivables Trust

     

14-1A, C 144A
1.700%, 11/15/19(3)

     6,165         6,158   

15-1A, C 144A
2.290%, 11/16/20(3)

     8,500         8,523   
TOTAL ASSET-BACKED SECURITIES   
(Identified Cost $1,414,982)         1,426,683   
CORPORATE BONDS AND NOTES—36.5%   
Consumer Discretionary—2.5%  

Alibaba Group Holding Ltd. 144A
2.500%, 11/28/19(3)

     6,600         6,477   

Boyd Gaming Corp.

     

9.000%, 7/1/20

     5,350         5,712   

6.875%, 5/15/23

     1,340         1,367   

Brookfield Residential Properties, Inc. 144A
6.500%, 12/15/20(3)

     5,810         5,767   

Caesars Entertainment Operating Co., Inc.
9.000%, 2/15/20(10)

     3,625         2,991   

CCO Holdings LLC
7.375%, 6/1/20

     6,700         6,976   

CCO Safari II LLC 144A
4.464%, 7/23/22(3)

     2,605         2,605   
 

 

See Notes to Financial Statements

 

 

20

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Consumer Discretionary (continued)  

Clear Channel Worldwide Holdings, Inc. Series B
7.625%, 3/15/20

   $ 14,945       $ 15,038   

Columbus International, Inc.
series B, 144A
7.375%, 3/30/21(3)

     2,330         2,420   

International Game Technology plc

     

7.500%, 6/15/19

     1,115         1,176   

144A
5.625%, 2/15/20(3)

     3,245         3,164   

144A
6.250%, 2/15/22(3)

     8,185         7,653   

Landry’s, Inc. 144A
9.375%, 5/1/20(3)

     8,530         9,138   

Marriott International, Inc. Series N,
3.125%, 10/15/21

     13,545         13,746   

MGM Resorts International
6.750%, 10/1/20

     6,500         6,744   

Nielsen Finance LLC (Nielsen Finance Co.) 144A
5.000%, 4/15/22(3)

     19,395         18,837   

Numericable Group SA 144A
4.875%, 5/15/19(3)

     8,295         8,046   

QVC, Inc.
3.125%, 4/1/19

     12,765         12,737   

Scientific Games International, Inc. 144A
7.000%, 1/1/22(3)

     12,535         12,441   

Toll Brothers Finance Corp.

     

4.000%, 12/31/18

     14,890         15,337   

6.750%, 11/1/19

     14,716         16,776   

TRI Pointe Holdings, Inc.
4.375%, 6/15/19

     13,872         13,664   
    PAR VALUE      VALUE  
Consumer Discretionary (continued)  

Wyndham Worldwide Corp.
2.500%, 3/1/18

   $ 2,960       $ 2,964   
    

 

 

  
       191,776   
    

 

 

  
Consumer Staples—0.2%  

CVS Health Corp.
2.800%, 7/20/20

     11,400         11,596   

Kraft Heinz Foods Co.

     

144A
2.800%, 7/2/20(3)

     2,680         2,697   

144A
3.500%, 7/15/22(3)

     2,855         2,917   
    

 

 

  
       17,210   
    

 

 

  
Energy—4.4%  

Afren plc 144A
11.500%, 2/1/16(3)(10)

     4,790         120   

Antero Resources Corp. 144A
5.625%, 6/1/23(3)

     6,835         6,032   

Blue Racer Midstream LLC (Blue Racer Finance Corp.) 144A
6.125%, 11/15/22(3)

     4,595         4,388   

CNOOC Finance Propriety Ltd.
2.625%, 5/5/20

     5,800         5,717   

Denbury Resources, Inc.
5.500%, 5/1/22

     7,225         4,317   

Energy Transfer Partners LP
4.150%, 10/1/20

     14,620         14,789   

EP Energy LLC (Everest Acquisition Finance, Inc.)
9.375%, 5/1/20

     15,345         13,273   

FTS International, Inc.
6.250%, 5/1/22

     2,245         707   

Gazprom OAO (Gaz Capital SA) 144A
4.950%, 5/23/16(3)(5)

     5,000         5,075   

IPIC GMTN Ltd. RegS
3.750%, 3/1/17(4)

     10,000         10,300   

Kinder Morgan, Inc.

     

3.050%, 12/1/19

     4,805         4,718   
 

 

See Notes to Financial Statements

 

 

21

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Energy (continued)  

144A
5.625%, 11/15/23(3)

   $ 15,495       $ 15,198   

Kunlun Energy Co., Ltd. 144A
2.875%, 5/13/20(3)

     5,000         4,919   

Linn Energy LLC
6.500%, 5/15/19

     9,980         2,794   

Lukoil OAO International Finance BV 144A
3.416%, 4/24/18(3)

     6,000         5,760   

Markwest Energy Partners LP (Markwest Energy Finance Corp.)
5.500%, 2/15/23

     11,935         11,622   

Midcontinent Express Pipeline LLC 144A
6.700%, 9/15/19(3)

     7,500         7,350   

Newfield Exploration Co.

     

5.750%, 1/30/22

     1,640         1,591   

5.625%, 7/1/24

     7,925         7,529   

NGL Energy Partners LP (NGL Energy Finance Corp.)
5.125%, 7/15/19

     18,475         16,905   

Pacific Exploration and Production Corp. 144A
5.375%, 1/26/19(3)

     13,565         5,189   

Petrobras Global Finance BV

     

3.250%, 3/17/17

     21,600         19,062   

3.000%, 1/15/19

     13,420         9,696   

Petroleos de Venezuela SA

     

RegS
8.500%, 11/2/17(4)

     41,325         27,791   

144A
6.000%, 5/16/24(3)

     12,980         4,210   

Petroleos Mexicanos
4.875%, 1/24/22

     10,000         9,938   

Petronas Capital Ltd. 144A
3.125%, 3/18/22(3)

     5,000         4,883   

PHI, Inc.
5.250%, 3/15/19

     6,275         5,428   
    PAR VALUE     VALUE  
Energy (continued)  

Pride International, Inc.
8.500%, 6/15/19

   $ 4,065      $ 4,209   

QEP Resources, Inc.
6.875%, 3/1/21

     22,275        20,604   

QGOG Constellation SA 144A
6.250%, 11/9/19(3)

     7,925        3,527   

Regency Energy Partners LP (Regency Energy Finance Corp.)
5.750%, 9/1/20

     12,815        13,756   

Rosneft Finance SA RegS
7.500%, 7/18/16(4)

     13,235        13,582   

Sabine Oil & Gas Corp.
7.250%, 6/15/19(10)

     9,035        1,310   

Sabine Pass Liquefaction LLC

    

5.625%, 2/1/21

     8,000        7,460   

6.250%, 3/15/22

     8,415        7,868   

Sinopec Capital Ltd. 144A
1.875%, 4/24/18(3)

     11,750        11,623   

Sunoco LP (Sunoco Finance Corp.) 144A
5.500%, 8/1/20(3)

     15,750        15,592   

Transocean, Inc.
6.875%, 12/15/21

     13,020        9,700   

Weatherford International Ltd.
9.625%, 3/1/19

     4,110        4,403   
   

 

 

  
      342,935   
   

 

 

  
Financials—16.8%  

ABN AMRO Bank N.V. 144A
4.250%, 2/2/17(3)

     4,425        4,581   

Aercap Ireland Capital Ltd. (Aercap Global Aviation Trust)
3.750%, 5/15/19

     5,930        5,841   

Air Lease Corp.
2.625%, 9/4/18

     5,495        5,488   

Akbank TAS 144A
7.500%, 2/5/18(3)

     12,140 TRY      3,487   
 

 

See Notes to Financial Statements

 

 

22

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Financials (continued)  

Allstate Corp.
6.125%, 5/15/37(2)

   $ 4,730       $ 4,765   

Ally Financial, Inc.
3.250%, 2/13/18

     4,285         4,226   

American Campus Communities Operating Partnership LP
3.350%, 10/1/20

     2,040         2,064   

American Tower Trust I 144A
1.551%, 3/15/18(3)

     6,900         6,846   

Ares Capital Corp.
3.875%, 1/15/20

     5,715         5,891   

Associated Banc Corp.
5.125%, 3/28/16

     8,635         8,767   

Aviation Capital Group Corp.

     

144A
3.875%, 9/27/16(3)

     10,380         10,497   

144A
2.875%, 9/17/18(3)

     4,415         4,411   

Banco Continental SA (Continental Senior Trustees II Cayman Ltd.) 144A
5.750%, 1/18/17(3)(5)

     10,000         9,875   

Banco de Credito del Peru 144A
2.750%, 1/9/18(3)

     15,836         15,757   

Banco Santander Brasil SA

     

144A
8.000%, 3/18/16(3)

     28,335BRL         6,790   

144A
4.625%, 2/13/17(3)

     9,300         9,300   

Banco Santander Chile 144A
2.209%, 6/7/18(2)(3)

     5,300         5,340   

Bangkok Bank PCL 144A
2.750%, 3/27/18(3)

     16,550         16,729   

Bank of America Corp.

     

(Countrywide Financial Corp.)
6.250%, 5/15/16

     9,110         9,369   

2.000%, 1/11/18

     14,905         14,961   

5.490%, 3/15/19

     2,868         3,151   
    PAR VALUE      VALUE  
Financials (continued)  

Bank of Baroda 144A
4.875%, 7/23/19(3)

   $ 23,575       $ 25,143   

Bank of Georgia JSC 144A
7.750%, 7/5/17(3)

     10,110         10,506   

Bank of India

     

144A
3.250%, 4/18/18(3)

     22,470         22,874   

144A
3.625%, 9/21/18(3)

     10,200         10,400   

Barclays Bank plc 144A
6.050%, 12/4/17(3)

     13,130         14,199   

BBVA Banco Continental SA 144A
3.250%, 4/8/18(3)

     8,270         8,342   

Blackstone Holdings Finance Co. LLC 144A
6.625%, 8/15/19(3)

     7,105         8,273   

Block Financial LLC
4.125%, 10/1/20

     11,380         11,390   

Brixmor Operating Partnership LP
3.875%, 8/15/22

     5,570         5,621   

Capital One NA
2.400%, 9/5/19

     5,000         4,968   

China Cinda Finance Ltd. 144A
4.000%, 5/14/19(3)

     12,775         12,899   

Citigroup, Inc.

     

0.603%, 6/9/16(2)

     3,400         3,383   

5.500%, 2/15/17

     23,460         24,699   

2.500%, 9/26/18

     10,000         10,132   

Comerica Bank, Inc.
5.750%, 11/21/16

     5,940         6,233   

Corpbanca SA

     

3.125%, 1/15/18

     8,000         7,982   

144A
3.875%, 9/22/19(3)

     4,000         4,037   

Corrections Corp of America
5.000%, 10/15/22

     6,845         6,896   

Daimler Finance North America LLC 144A
2.625%, 9/15/16(3)

     11,000         11,113   

Digital Delta Holdings LLC 144A
3.400%, 10/1/20(3)

     11,735         11,780   
 

 

See Notes to Financial Statements

 

 

23

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Financials (continued)  

Digital Realty Trust LP
3.950%, 7/1/22

   $ 8,175       $ 8,167   

Discover Bank
8.700%, 11/18/19

     1,750         2,091   

DNB Bank ASA 144A
3.200%, 4/3/17(3)

     24,700         25,341   

Drawbridge Special Opportunities Fund LP 144A
5.000%, 8/1/21(3)

     14,685         14,355   

Fidelity National Financial, Inc.
6.600%, 5/15/17

     6,475         6,922   

Fifth Third Bancorp
4.500%, 6/1/18

     6,745         7,177   

First Tennessee Bank N.A.

     

5.650%, 4/1/16

     15,664         15,970   

2.950%, 12/1/19

     4,500         4,553   

Ford Motor Credit Co. LLC

     

4.207%, 4/15/16

     10,000         10,157   

5.000%, 5/15/18

     10,000         10,636   

FS Investment Corp.
4.250%, 1/15/20

     7,725         7,860   

General Motors Financial Co., Inc.

     

4.750%, 8/15/17

     25,655         26,627   

3.500%, 7/10/19

     9,715         9,825   

Genworth Holdings, Inc.

     

7.200%, 2/15/21

     5,000         5,013   

7.625%, 9/24/21

     13,825         13,514   

GLP Capital LP (GLP Financing II, Inc.)
4.875%, 11/1/20

     18,265         18,493   

Goldman Sachs Group, Inc. (The)

     

5.625%, 1/15/17

     14,000         14,703   

2.900%, 7/19/18

     8,200         8,409   

7.500%, 2/15/19

     2,451         2,865   

Government Properties Income Trust
3.750%, 8/15/19

     2,905         2,979   
    PAR VALUE      VALUE  
Financials (continued)  

Guanay Finance Ltd. 144A
6.000%, 12/15/20(3)

   $ 26,900       $ 26,530   

HBOS plc 144A
6.750%, 5/21/18(3)

     685         755   

HCP, Inc.
3.750%, 2/1/19

     4,940         5,158   

Health Care REIT, Inc.
4.125%, 4/1/19

     4,100         4,334   

HSBC USA, Inc.
2.625%, 9/24/18

     19,485         19,829   

Huntington Bancshares, Inc.
7.000%, 12/15/20

     17,065         20,146   

Hutchison Whampoa International Ltd.
Series 12, 144A
6.000%(2)(3)(6)(7)

     13,210         13,737   

Hyundai Capital Services, Inc.

     

144A
3.750%, 4/6/16(3)

     500         506   

144A
1.450%, 2/6/17(3)

     8,000         7,996   

144A
2.125%, 10/2/17(3)

     2,940         2,950   

ICAHN Enterprises LP (ICAHN Enterprises Finance Corp.)

     

3.500%, 3/15/17

     965         968   

4.875%, 3/15/19

     1,520         1,522   

ICICI Bank Ltd. RegS
4.700%, 2/21/18(4)

     13,000         13,636   

Industrial & Commercial Bank of China Ltd.
3.231%, 11/13/19

     6,275         6,394   

ING Bank NV 144A
1.375%, 3/7/16(3)

     9,000         9,022   

International Lease Finance Corp.
3.875%, 4/15/18

     18,635         18,588   

Intesa San Paolo S.p.A
3.125%, 1/15/16

     12,190         12,255   

iStar Financial, Inc.

     

4.000%, 11/1/17

     12,900         12,448   

4.875%, 7/1/18

     12,250         11,898   

5.000%, 7/1/19

     2,440         2,329   
 

 

See Notes to Financial Statements

 

 

24

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Financials (continued)  

Itau Unibanco Holding SA 144A
2.850%, 5/26/18(3)

   $ 17,300       $ 16,262   

Jefferies Group LLC

     

5.125%, 4/13/18

     6,541         6,867   

6.875%, 4/15/21

     3,725         4,187   

JPMorgan Chase & Co.

     

Series Z,
5.300%(2)(6)(7)

     3,985         3,925   

6.125%, 6/27/17

     8,850         9,512   

Korea Development Bank
3.500%, 8/22/17

     9,750         10,086   

Lazard Group LLC
4.250%, 11/14/20

     7,765         8,226   

Lincoln National Corp.

     

8.750%, 7/1/19

     15,040         18,371   

6.050%, 4/20/67(2)(7)

     2,885         2,423   

Macquarie Group Ltd.

     

144A
3.000%, 12/3/18(3)

     4,870         4,938   

144A
6.000%, 1/14/20(3)

     10,950         12,287   

McGraw Hill Financial, Inc. 144A
3.300%, 8/14/20(3)

     15,097         15,362   

MDC-GMTN B.V. 144A
3.750%, 4/20/16(3)

     4,000         4,062   

Morgan Stanley

     

5.550%, 4/27/17

     10,200         10,824   

144A
10.090%, 5/3/17(3)

     22,595BRL         5,300   

MPT Operating Partnership LP (MPT Finance Corp.)
6.375%, 2/15/22

     1,150         1,202   

MUFG Union Bank NA

     

Series CD,
1.500%, 9/26/16

     2,000         2,008   

2.625%, 9/26/18

     2,700         2,746   

New York Life Global Funding 144A
1.950%, 2/11/20(3)

     2,855         2,842   

ORIX Corp.
5.000%, 1/12/16

     5,228         5,283   
    PAR VALUE      VALUE  
Financials (continued)  

Phosagro OAO (Phosagro Bond Funding Ltd.) 144A
4.204%, 2/13/18(3)(5)

   $ 14,800       $ 14,676   

PNC Funding Corp.
5.625%, 2/1/17

     3,130         3,296   

Principal Life Global Funding II 144A
2.250%, 10/15/18(3)

     17,580         17,858   

Prudential Financial, Inc.
8.875%, 6/15/38(2)(7)

     11,200         12,855   

QBE Insurance Group Ltd. 144A
2.400%, 5/1/18(3)

     7,750         7,802   

Regions Bank
7.500%, 5/15/18

     2,369         2,659   

Royal Bank of Scotland Group plc (The)
6.400%, 10/21/19

     3,130         3,517   

Russian Agricultural Bank OJSC (RSHB Capital SA)

     

144A
5.298%, 12/27/17(3)

     13,655         13,563   

144A
5.100%, 7/25/18(3)(5)

     8,750         8,531   

Sabra Health Care LP
5.500%, 2/1/21

     9,610         10,042   

Santander Holdings USA, Inc.
2.650%, 4/17/20

     7,540         7,404   

Santander U.S. Debt S.A.U. Unipersonal 144A
3.781%, 10/7/15(3)

     8,000         8,001   

SBA Tower Trust 144A
2.933%, 12/15/17(3)

     13,275         13,478   

Select Income REIT
4.150%, 2/1/22

     18,910         18,639   

Senior Housing Properties Trust

     

4.300%, 1/15/16

     6,875         6,889   

3.250%, 5/1/19

     6,685         6,727   

Shinhan Bank

     

144A
4.375%, 7/27/17(3)

     11,700         12,235   
 

 

See Notes to Financial Statements

 

 

25

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Financials (continued)  

144A
1.875%, 7/30/18(3)

   $ 1,000       $ 993   

Skandinaviska Enskilda Banken AB 144A
1.750%, 3/19/18(3)

     6,775         6,770   

Societe Generale S.A. 144A
3.500%, 1/15/16(3)

     6,895         6,948   

Springleaf Finance Corp.
5.250%, 12/15/19

     18,055         17,694   

State Street Corp.
4.956%, 3/15/18(7)

     24,025         25,626   

SunTrust Bank, Inc.

     

6.000%, 9/11/17

     4,925         5,325   

5.450%, 12/1/17

     3,750         4,056   

Svenska Handelsbanken AB
3.125%, 7/12/16

     10,000         10,178   

TIAA Asset Management Finance Co. LLC 144A
2.950%, 11/1/19(3)

     2,850         2,890   

Turkiye Garanti Bankasi AS 144A
4.750%, 10/17/19(3)

     8,500         8,351   

Turkiye Is Bankasi 144A
3.750%, 10/10/18(3)

     12,630         12,178   

Turkiye Vakiflar Bankasi Tao 144A
3.750%, 4/15/18(3)

     4,000         3,854   

Unum Group
7.125%, 9/30/16

     6,620         6,980   

Ventas Realty LP (Ventas Capital Corp.)

     

4.000%, 4/30/19

     7,100         7,470   

2.700%, 4/1/20

     2,948         2,935   

Vnesheconombank (VEB Finance plc) 144A
4.224%, 11/21/18(3)(5)

     16,710         15,958   

Voya Financial, Inc.
2.900%, 2/15/18

     12,620         12,887   
    PAR VALUE      VALUE  
Financials (continued)  

VTB Bank OJSC (VTB Capital SA) 144A
6.000%, 4/12/17(3)(5)

   $ 6,785       $ 6,951   

Wachovia Corp.
5.625%, 10/15/16

     2,500         2,616   

Wells Fargo & Co.
5.125%, 9/15/16

     5,000         5,189   

West Europe Finance LLC 144A
3.250%, 10/5/20(3)

     4,065         4,104   

Willis Group
Holdings plc
4.125%, 3/15/16

     6,000         6,074   

North America, Inc.
6.200%, 3/28/17

     4,960         5,242   

XLIT Ltd. Series E,
2.300%, 12/15/18

     9,730         9,821   

Zions Bancorp
4.500%, 3/27/17

     8,120         8,337   
    

 

 

  
       1,299,976   
    

 

 

  
Health Care—2.1%             

AbbVie, Inc.

     

2.500%, 5/14/20

     895         890   

3.200%, 11/6/22

     1,940         1,928   

Actavis Funding SCS

     

3.000%, 3/12/20

     2,825         2,828   

3.450%, 3/15/22

     3,815         3,763   

Alere, Inc.
6.500%, 6/15/20

     6,175         6,298   

Community Health Systems, Inc.
5.125%, 8/1/21

     4,790         4,886   

Endo Finance LLC (Endo Finco, Inc.) 144A
6.000%, 7/15/23(3)

     720         714   

Forest Laboratories, Inc. 144A
4.375%, 2/1/19(3)

     13,430         14,227   

Fresenius US Finance II, Inc. 144A
4.500%, 1/15/23(3)

     2,590         2,590   

HCA, Inc.

     

3.750%, 3/15/19

     9,580         9,551   

6.500%, 2/15/20

     19,575         21,337   

Hologic, Inc. 144A
5.250%, 7/15/22(3)

     1,575         1,595   
 

 

See Notes to Financial Statements

 

 

26

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Health Care (continued)  

inVentiv Health, Inc. 144A
9.000%, 1/15/18(3)

   $ 8,625       $ 8,921   

Mallinckrodt International Finance S.A. 144A
4.875%, 4/15/20(3)

     930         892   

Owens & Minor, Inc.
3.875%, 9/15/21

     2,485         2,510   

Quintiles Transnational Corp. 144A
4.875%, 5/15/23(3)

     4,175         4,144   

Tenet Healthcare Corp.

     

4.750%, 6/1/20

     4,650         4,717   

144A
3.837%, 6/15/20(2)(3)

     4,045         4,025   

6.000%, 10/1/20

     9,560         10,110   

8.125%, 4/1/22

     8,265         8,805   

Valeant Pharmaceuticals International, Inc.

     

144A
5.375%, 3/15/20(3)

     9,750         9,500   

144A
5.625%, 12/1/21(3)

     7,310         6,963   

144A
5.875%, 5/15/23(3)

     1,210         1,163   

Zimmer Biomet Holdings, Inc.

     

2.700%, 4/1/20

     12,805         12,853   

3.150%, 4/1/22

     12,805         12,680   

Zoetis, Inc.
1.875%, 2/1/18

     1,975         1,969   
    

 

 

  
       159,859   
    

 

 

  
Industrials—5.3%  

ADT Corp. (The)
6.250%, 10/15/21

     23,265         24,108   

Air Canada Pass-Through-Trust, 13-1, B 144A
5.375%, 5/15/21(3)

     16,320         16,790   
    PAR VALUE      VALUE  
Industrials (continued)  

America West Airlines Pass-Through-Trust

     

98-1, A
6.870%, 1/2/17

   $ 865       $ 894   

99-1, G
7.930%, 1/2/19

     7,627         8,199   

01-1, G
7.100%, 4/2/21

     47,977         52,355   

American Airlines Group, Inc. 144A
4.625%, 3/1/20(3)

     1,655         1,618   

American Airlines Pass-Through-Trust

     

13-2, B 144A
5.600%, 7/15/20(3)

     8,993         9,173   

14-1, B
4.375%, 10/1/22

     9,539         9,551   

AWAS Aviation Capital Ltd. 144A
7.000%, 10/17/16(3)

     6,439         6,463   

Bombardier, Inc. 144A
4.750%, 4/15/19(3)

     15,692         12,711   

British Airways Pass-Through-Trust 13-1, B 144A
5.625%, 6/20/20(3)

     11,538         12,028   

Builders FirstSource, Inc. 144A
7.625%, 6/1/21(3)

     8,670         9,060   

Continental Airlines Pass-Through-Trust

     

99-1, A
6.545%, 2/2/19

     9,395         10,111   

09-2, A
7.250%, 11/10/19

     3,532         3,965   

99-2, C2 AMBC
6.236%, 3/15/20

     10,964         11,705   

12-1, B
6.250%, 4/11/20

     3,887         4,052   

00-1, A1
8.048%, 11/1/20

     5,086         5,735   

01-1, A1
6.703%, 6/15/21

     13,833         14,490   

07-1, B
6.903%, 4/19/22

     7,459         7,879   

Delta Air Lines Pass-Through-Trust 12-1, A
4.750%, 5/7/20

     25,647         27,058   
 

 

See Notes to Financial Statements

 

 

27

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Industrials (continued)  

Hawaiian Airlines Pass-Through Certificates 13-1, B
4.950%, 1/15/22

   $ 3,716       $ 3,590   

Masco Corp.
5.950%, 3/15/22

     20,970         22,884   

Northwest Airlines Pass-Through-Trust

     

07-1, B
8.028%, 11/1/17

     5,268         5,762   

02-1, G2
6.264%, 11/20/21

     12,242         12,739   

Penske Truck Leasing Co. LP 144A
3.375%, 2/1/22(3)

     8,365         8,178   

Toledo Edison Co. (The)
7.250%, 5/1/20

     224         263   

Transnet SOC Ltd. 144A
4.500%, 2/10/16(3)

     9,000         9,056   

U.S. Airways Pass-Through-Trust

     

12-2, C
5.450%, 6/3/18

     8,180         8,272   

01-1, G
7.076%, 3/20/21

     15,014         16,327   

UAL Pass-Through-Trust

     

09-2A
9.750%, 1/15/17

     16,496         17,941   

07-01, A
6.636%, 7/2/22

     17,409         18,551   

United Rentals North America, Inc.
4.625%, 7/15/23

     16,600         16,081   

Virgin Australia Trust 13-1A 144A
5.000%, 10/23/23(3)

     22,732         23,642   
    

 

 

  
       411,231   
    

 

 

  
Information Technology—0.6%  

Dun & Bradstreet Corp. (The)

     

3.250%, 12/1/17

     12,110         12,296   

4.000%, 6/15/20

     4,660         4,759   
    PAR VALUE      VALUE  
Information Technology (continued)  

First Data Corp.
11.750%, 8/15/21

   $ 11,439       $ 12,726   

Hewlett Packard Enterprise Co.

     

144A
2.850%, 10/5/18(3)

     4,615         4,609   

144A
3.600%, 10/15/20(3)

     1,845         1,845   

Juniper Networks, Inc.
3.300%, 6/15/20

     4,645         4,715   

Oracle Corp.
2.500%, 5/15/22

     6,545         6,451   
    

 

 

  
       47,401   
    

 

 

  
Materials—1.9%  

Airgas, Inc.
3.050%, 8/1/20

     890         904   

Allegheny Technologies, Inc.
9.375%, 6/1/19

     7,245         7,680   

Anglo American Capital plc

     

144A
9.375%, 4/8/19(3)

     1,950         2,062   

144A
3.625%, 5/14/20(3)

     5,205         4,542   

Ardagh Packaging Finance plc 144A
6.250%, 1/31/19(3)

     2,705         2,705   

Cemex SAB de CV RegS
6.500%, 12/10/19(4)

     9,800         9,702   

CRH America, Inc.
8.125%, 7/15/18

     4,770         5,548   

EuroChem Mineral & Chemical Co. OJSC 144A
5.125%, 12/12/17(3)(5)

     11,920         11,885   

Freeport-McMoRan Copper & Gold, Inc.
2.375%, 3/15/18

     4,500         3,937   

Gerdau Holdings, Inc. 144A
7.000%, 1/20/20(3)

     8,330         7,820   

Trade, Inc. 144A
5.750%, 1/30/21(3)

     1,700         1,479   

Hexion U.S. Finance Corp.
6.625%, 4/15/20

     12,240         10,465   
 

 

See Notes to Financial Statements

 

 

28

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Materials (continued)  

Huntsman International LLC
4.875%, 11/15/20

   $ 3,910       $ 3,417   

INEOS Group Holdings SA 144A
5.875%, 2/15/19(3)

     5,870         5,481   

Packaging Corp. of America
3.900%, 6/15/22

     7,215         7,376   

Reynolds Group Issuer, Inc.

     

5.750%, 10/15/20

     12,945         13,107   

8.250%, 2/15/21

     3,120         3,128   

Severstal OAO (Steel Capital SA) 144A
6.700%, 10/25/17(3)(5)

     5,975         6,281   

Sinopec Group Overseas Development Ltd. 144A
2.750%, 5/17/17(3)

     10,000         10,140   

Tronox Finance LLC
6.375%, 8/15/20

     9,405         6,019   

Union Andina de Cementos SAA 144A
5.875%, 10/30/21(3)

     1,690         1,631   

Vedanta Resources plc

     

144A
9.500%, 7/18/18(3)

     10,640         8,946   

144A
6.000%, 1/31/19(3)

     14,955         10,915   
    

 

 

  
       145,170   
    

 

 

  
Telecommunication Services—1.6%  

AT&T, Inc.
5.800%, 2/15/19

     11,000         12,242   

CenturyLink, Inc.
Series V
5.625%, 4/1/20

     12,735         11,828   

Crown Castle Towers LLC

     

144A
5.495%, 1/15/17(3)

     5,915         6,081   

144A
3.222%, 5/15/22(3)

     3,000         2,925   
    PAR VALUE      VALUE  
Telecommunication Services (continued)  

Digicel Group Ltd. 144A
8.250%, 9/30/20(3)

   $ 15,680       $ 14,582   

Frontier Communications Corp.

     

7.125%, 3/15/19

     12,200         12,011   

144A
8.875%, 9/15/20(3)

     3,380         3,321   

144A
10.500%, 9/15/22(3)

     3,650         3,559   

Level 3 Financing, Inc.
7.000%, 6/1/20

     4,065         4,217   

Sprint Corp.
7.250%, 9/15/21

     4,080         3,351   

T-Mobile USA, Inc.

     

6.464%, 4/28/19

     7,630         7,782   

6.542%, 4/28/20

     7,905         8,053   

Telefonica Emisiones SAU
3.192%, 4/27/18

     2,805         2,869   

Verizon Communications, Inc.

     

2.500%, 9/15/16

     4,044         4,099   

3.650%, 9/14/18

     13,800         14,541   

Windstream Corp.
7.750%, 10/15/20

     12,125         10,352   
    

 

 

  
       121,813   
    

 

 

  
Utilities—1.1%  

AmeriGas Partners LP

     

6.750%, 5/20/20

     3,374         3,433   

7.000%, 5/20/22

     9,275         9,553   

Exelon Corp.
2.850%, 6/15/20

     1,875         1,892   

Israel Electric Corp. Ltd. 144A
5.625%, 6/21/18(3)

     14,735         15,711   

Korea Western Power Co., Ltd. 144A
3.125%, 5/10/17(3)

     9,800         10,013   

Majapahit Holding BV 144A
7.750%, 1/20/20(3)

     8,800         9,812   

PPL WEM Holdings plc 144A
3.900%, 5/1/16(3)

     5,495         5,567   
 

 

See Notes to Financial Statements

 

 

29

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
CORPORATE BONDS AND NOTES (continued)   
Utilities (continued)  

State Grid Overseas Investment Ltd.

     

144A
1.750%, 5/22/18(3)

   $ 5,000       $ 4,973   

144A
2.750%, 5/7/19(3)

     9,370         9,521   

Talen Energy Supply LLC 144A
4.625%, 7/15/19(3)

     12,340         11,291   
    

 

 

  
               81,766   
TOTAL CORPORATE BONDS AND NOTES   
(Identified Cost $2,906,458)         2,819,137   
LOAN AGREEMENTS(2)—15.2%   
Consumer Discretionary—4.4%  

Allison Transmission Tranche B-3,
3.500%, 8/23/19

     2,097         2,100   

Aristocrat Leisure Ltd.
4.750%, 10/20/21

     13,296         13,329   

Boyd Gaming Corp. Tranche B,
4.000%, 8/14/20

     6,544         6,549   

Caesars Entertainment Operating Co., Inc.

     

Tranche B-4,
11.250%, 10/31/16(10)

     3,616         3,397   

Tranche B-6,
9.500%, 3/1/17(10)

     3,861         3,594   

Tranche B-7,
11.500%, 1/28/18(10)

     1,741         1,583   

Caesars Entertainment Resort Properties LLC Tranche B,
7.000%, 10/11/20

     7,860         7,363   

Caesars Growth Properties Holdings LLC Tranche B, First Lien,
6.250%, 5/8/21

     4,296         3,791   

Cequel Communications LLC
3.500%, 2/14/19

     12,902         12,765   
    PAR VALUE      VALUE  
Consumer Discretionary (continued)  

Charter Communications Operations LLC

     

Tranche E,
3.000%, 7/1/20

   $ 9,362       $ 9,267   

Tranche F,
3.000%, 1/3/21

     14,379         14,169   

Tranche H,
3.250%, 8/24/21

     3,221         3,209   

Tranche I,
3.500%, 1/24/23

     2,879         2,868   

Cirque Du Soleil
5.000%, 7/8/22

     5,736         5,745   

CityCenter Holdings LLC Tranche B,
4.250%, 10/16/20

     9,919         9,907   

CSC Holdings, Inc.

     

Tranche B,
2.694%, 4/17/20

     5,273         5,242   

0.000%, 9/23/22(8)

     16,748         16,677   

Delta 2 (Lux) S.A.R.L. Tranche B-3,
4.750%, 7/30/21

     9,421         9,271   

El Dorado Resorts, Inc.
4.250%, 7/25/22

     2,771         2,773   

Hanesbrands, Inc. Tranche B,
3.250%, 4/29/22

     940         946   

Hilton Worldwide Finance LLC
3.500%, 10/26/20

     13,077         13,065   

iHeartCommunications, Inc. (Clear Channel Communications, Inc.) Tranche D,
6.944%, 1/30/19

     15,735         13,092   

Intelsat Jackson Holdings S.A. Tranche B-2,
3.750%, 6/30/19

     12,912         12,586   

Jarden

     

Tranche B-1,
2.944%, 9/30/20

     676         679   

Tranche B-2
2.944%, 7/30/22

     4,745         4,749   

Key Safety Systems, Inc.
4.750%, 8/29/21

     6,563         6,428   
 

 

See Notes to Financial Statements

 

 

30

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
LOAN AGREEMENTS (continued)   
Consumer Discretionary (continued)  

Las Vegas Sands LLC Tranche B,
3.250%, 12/19/20

   $ 12,592       $ 12,494   

Libbey Glass, Inc.
3.750%, 4/9/21

     5,887         5,880   

Life Time Fitness, Inc.
4.250%, 6/10/22

     10,103         10,077   

MGM Resort International Tranche B
3.500%, 12/20/19

     7,062         7,020   

Mohegan Tribal Gaming Authority Tranche B,
5.500%, 6/15/18

     3,341         3,332   

PetSmart, Inc. Tranche B-1
4.250%, 3/11/22

     17,640         17,629   

PVH Corp. Tranche B
3.250%, 2/13/20

     10,513         10,572   

Scientific Games International, Inc.

     

6.000%, 10/18/20

     2,792         2,761   

Tranche B-2,
6.000%, 10/1/21

     3,400         3,363   

Seminole Tribe of Florida, Inc.
3.000%, 4/29/20

     13,158         13,139   

ServiceMaster Co. LLC (The)
4.250%, 7/1/21

     8,419         8,424   

Sinclair Television Group, Inc. Tranche B-1,
3.500%, 7/30/21

     11,631         11,551   

Six Flags Theme Parks, Inc. Tranche B,
3.500%, 6/30/22

     5,790         5,800   

SRAM LLC First Lien,
5.250%, 4/10/20

     1,841         1,745   

Staples, Inc. First Lien,
0.000%, 4/23/21(8)

     10,659         10,620   

Station Casinos LLC Tranche B,
4.250%, 3/2/20

     11,390         11,385   
    PAR VALUE      VALUE  
Consumer Discretionary (continued)  

TI Group Auto Systems LLC
4.500%, 6/30/22

   $ 1,033       $ 1,022   

Tribune Media Co. Tranche B,
3.750%, 12/28/20

     8,988         8,924   

TWCC Holding Corp. Second Lien,
7.000%, 6/26/20

     10,125         9,473   
    

 

 

  
       340,355   
    

 

 

  
Consumer Staples—1.6%  

Albertson’s LLC Tranche B-4,
5.500%, 8/25/21

     16,079         16,103   

ARAMARK Corp.

     

Tranche E,
3.250%, 9/7/19

     16,976         16,964   

Tranche F,
3.250%, 2/24/21

     14,632         14,606   

Charger OpCo B.V. (Oak Tea, Inc.) Tranche B-1,
4.250%, 7/2/22

     3,785         3,791   

Hostess Brands LLC Tranche B, First Lien,
4.500%, 8/3/22

     13,733         13,770   

Kronos Acquisition Intermediate, Inc. (KIK Custom Products, Inc.)

     

First Lien,
4.500%, 10/30/19

     22,237         22,188   

Second Lien,
9.750%, 4/30/20

     17,280         17,648   

Prestige Brands, Inc. Tranche B-3,
5.000%, 9/3/21

     1,406         1,408   

Rite Aid Corp.

     

Tranche 1
5.750%, 8/21/20

     720         729   

Tranche 2, Second Lien,
4.875%, 6/21/21

     14,688         14,725   

Spectrum Brands, Inc.
3.750%, 6/23/22

     2,229         2,239   
    

 

 

  
       124,171   
    

 

 

  
 

 

See Notes to Financial Statements

 

 

31

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
LOAN AGREEMENTS (continued)   
Energy—0.4%  

Arch Coal, Inc.
6.250%, 5/16/18

   $ 16,295       $ 9,306   

Drillships Ocean Ventures, Inc.
5.500%, 7/25/21

     6,164         4,145   

EP Energy LLC (Everest Acquisition LLC)

     

Tranche B-3,
3.500%, 5/24/18

     4,100         3,828   

Tranche B-2,
4.500%, 4/30/19

     768         743   

FTS International, Inc.
5.750%, 4/16/21

     1,520         475   

Paragon Offshore Finance Co.
3.750%, 7/16/21

     9,958         4,058   

Seadrill Operating LP
4.000%, 2/21/21

     21,586         13,239   
    

 

 

  
       35,794   
    

 

 

  
Financials—1.3%  

Asurion LLC

     

Tranche B-1,
5.000%, 5/24/19

     4,884         4,672   

Tranche B-4,
5.000%, 8/4/22

     6,336         6,006   

Capital Automotive LP

     

Tranche B-1,
4.000%, 4/10/19

     3,549         3,552   

Second Lien,
6.000%, 4/30/20

     6,047         6,102   

Clipper Acquisitions Corp. Tranche B,
3.000%, 2/6/20

     6,204         6,111   

Delos Finance S.A.R.L. 3.500%, 3/6/21

     21,956         21,935   

iStar Financial, Inc. Tranche A-2,
7.000%, 3/19/17

     2,892         2,965   

Realogy Corp. Tranche B,
3.750%, 3/5/20

     17,603         17,584   

TransUnion LLC Tranche B-2,
3.500%, 4/9/21

     20,059         19,889   
    PAR VALUE      VALUE  
Financials (continued)  

Walter Investment Management Corp. Tranche B,
4.750%, 12/18/20

   $ 11,771       $ 10,937   
    

 

 

  
       99,753   
    

 

 

  
Health Care—1.6%  

Alere, Inc. Tranche B,
4.250%, 6/20/22

     5,197         5,204   

American Renal Holdings, Inc. Tranche B, First Lien,
4.500%, 8/20/19

     9,041         8,992   

AmSurg Corp.
3.500%, 7/16/21

     2,565         2,570   

CHG Healthcare Services, Inc. First Lien,
4.250%, 11/19/19

     9,926         9,918   

Community Health Systems, Inc. (CHS) Incremental 2018, Tranche F,
3.575%, 12/31/18

     8,963         8,966   

Concentra, Inc. First Lien, Tranche B
4.625%, 6/1/22

     455         455   

Convatec, Inc.
4.250%, 6/15/20

     327         327   

DaVita HealthCare Partners, Inc. Tranche B,
3.500%, 6/24/21

     3,878         3,878   

Emdeon, Inc. Tranche B-2,
3.750%, 11/2/18

     5,276         5,257   

Endo Luxembourg Finance Co. I S.A.R.L.

     

   Tranche B,
3.750%, 6/27/22

     5,571         5,563   

Envision Healthcare Corp. (F/K/A Emergency Medical Services Corp.)
4.000%, 5/25/18

     6,610         6,617   

Hill-Rom Tranche B,
3.500%, 9/8/22

     739         741   
 

 

See Notes to Financial Statements

 

 

32

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
LOAN AGREEMENTS (continued)   
Health Care (continued)  

Iasis Healthcare LLC Tranche B-2,
4.500%, 5/3/18

   $ 5,702       $ 5,713   

InVentiv Health, Inc. Tranche B-4,
7.750%, 5/15/18

     8,750         8,777   

Kinetic Concepts, Inc.

     

Tranche E-2,
4.000%, 11/4/16

     6,602         6,605   

Tranche E-1,
4.500%, 5/4/18

     1,557         1,555   

Mallinckrodt International Finance S.A. Tranche B-1,
3.500%, 3/19/21

     1,638         1,621   

NVA Holdings, Inc. First Lien,
4.750%, 8/14/21

     2,831         2,834   

Quintiles Transnational Corp. Tranche B,
3.250%, 5/12/22

     2,471         2,476   

RPI Finance Trust

     

Tranche B-3,
3.250%, 11/9/18

     10,601         10,628   

Tranche B-4,
3.500%, 11/9/20

     5,922         5,912   

Surgery Center Holdings, Inc. First Lien,
5.250%, 11/3/20

     1,419         1,421   

U.S. Renal Care, Inc. Tranche B-2, First Lien,
4.250%, 7/3/19

     4,558         4,556   

Valeant Pharmaceuticals International, Inc.
Series D-2, Tranche B,
3.500%, 2/13/19

     12,168         11,998   
    

 

 

  
       122,584   
    

 

 

  
Industrials—2.0%  

American Airlines, Inc.

     

3.250%, 6/27/20

     35,214         34,919   

3.500%, 10/10/21

     10,996         10,976   
    PAR VALUE      VALUE  
Industrials (continued)  

AWAS Finance Luxembourg SA
3.500%, 7/16/18

   $ 7,387       $ 7,371   

Brock Holdings III, Inc. First Lien,
6.000%, 3/16/17

     9,774         9,493   

Ceridian HCM Holding, Inc.
4.500%, 9/15/20

     18,510         17,596   

DigitalGlobe, Inc.
3.750%, 1/31/20

     3,572         3,562   

DynCorp International, Inc.
6.250%, 7/7/16

     9,906         9,699   

Husky Injection Molding Systems Ltd.
4.250%, 6/30/21

     5,232         5,170   

McJunkin Red Man Corp.
4.750%, 11/8/19

     598         585   

Nortek, Inc. Incremental-1,
3.500%, 10/30/20

     9,634         9,580   

U.S. Airways, Inc. Tranche B-1,
3.500%, 5/23/19

     24,868         24,814   

United Airlines, Inc. (Continental Airlines, Inc.) Tranche B-1,
3.500%, 9/15/21

     12,154         12,139   

Waste Industries USA, Inc.
4.250%, 2/27/20

     9,899         9,955   
    

 

 

  
       155,859   
    

 

 

  
Information Technology—2.2%  

Activision Blizzard, Inc.
3.250%, 10/13/20

     9,842         9,861   

Applied Systems, Inc. Second Lien,
7.500%, 1/24/22

     2,727         2,710   

Avago Technologies Cayman Ltd.
3.750%, 5/6/21

     17,285         17,295   

Blue Coat Systems, Inc.
4.500%, 5/20/22

     5,418         5,381   
 

 

See Notes to Financial Statements

 

 

33

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE      VALUE  
LOAN AGREEMENTS (continued)   
Information Technology (continued)  

CCC Information Services
4.000%, 12/20/19

   $ 5,782       $ 5,763   

Deltek, Inc.

     

First Lien
5.000%, 6/25/22

     519         520   

Second Lien
9.500%, 6/26/23

     3,678         3,690   

Epicor Software Corp. Tranche B,
4.750%, 6/1/22

     4,988         4,963   

Evergreen Skills Lux S.A.R.L. First Lien,
5.750%, 4/28/21

     3,885         3,513   

Excelitas Technologies Corp. Tranche B,
6.000%, 11/2/20

     5,297         5,144   

First Data Corp.

     

2018 Term Loan
3.696%, 3/23/18

     44,210         43,913   

2022 Term Loan
3.946%, 7/8/22

     2,520         2,513   

Infinity Acquisition Ltd.
4.000%, 8/6/21

     12,158         12,044   

Interactive Data Corp.
4.750%, 5/2/21

     8,039         8,024   

Mitchell International, Inc.

     

4.500%, 10/13/20

     5,032         5,021   

Second Lien,
8.500%, 10/11/21

     19,067         19,051   

Presidio, Inc. Refinancing Term
5.250%, 2/2/22

     8,526         8,524   

Riverbed Technologies, Inc.
6.000%, 4/25/22

     5,807         5,824   

SS&C Technologies, Inc.

     

Tranche A-1,
2.944%, 7/8/20

     894         893   

Tranche A-2,
2.944%, 7/8/20

     1,386         1,385   

Tranche B-1,
4.000%, 7/8/22

     5,874         5,893   
    PAR VALUE      VALUE  
Information Technology (continued)  

Tranche B-2,
4.000%, 7/8/22

   $ 929       $ 932   
    

 

 

  
       172,857   
    

 

 

  
Materials—0.6%  

AZ Chem US, Inc. First Lien,
5.750%, 6/11/21

     2,571         2,571   

Berry Plastics Groups, Inc.
0.000%, 9/16/22(8)

     8,743         8,738   

CPI Acquisition, Inc. First Lien,
6.750%, 8/17/22

     12,000         11,933   

Fairmount Minerals Ltd. Tranche B-2,
4.500%, 9/5/19

     3,821         3,009   

Fortescue Metals Group (FMG) Resources Property Ltd.
3.750%, 6/30/19

     13,237         10,859   

INEOS U.S. Finance LLC 2022 Dollar
4.250%, 3/31/22

     5,740         5,588   

Owens-Illinois Tranche B,
3.500%, 9/1/22

     1,995         2,005   
    

 

 

  
       44,703   
    

 

 

  
Telecommunication Services—0.3%  

Global Tel*Link Corp. First Lien,
5.000%, 5/23/20

     9,038         8,882   

Level 3 Financing, Inc.

     

Tranche B-III,
4.000%, 8/1/19

     6,319         6,327   

Tranche B-II,
3.500%, 5/31/22

     5,842         5,805   
    

 

 

  
       21,014   
    

 

 

  
Utilities—0.8%             

Atlantic Power LP
4.750%, 2/24/21

     2,502         2,493   

Calpine Construction Finance Co. LP Tranche B-1,
3.000%, 5/3/20

     8,342         8,155   
 

 

See Notes to Financial Statements

 

 

34

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR VALUE     VALUE  
LOAN AGREEMENTS (continued)   
Utilities (continued)            

Granite Acquisition, Inc.

    

Tranche B, First Lien,
5.000%, 12/17/21

   $ 10,646      $ 10,451   

Tranche C, First Lien,
5.000%, 12/17/21

     472        463   

NRG Energy, Inc.
2.750%, 7/1/18

     23,666        23,213   

State of Santa Catarina (The)
4.000%, 12/27/22

     13,931        12,245   

Texas Competitive Electric Holdings Co. LLC 2017 Extended,
4.683%, 10/10/17(11)

     5,925        2,283   
   

 

 

  
              59,303   
TOTAL LOAN AGREEMENTS
(Identified Cost $1,217,930)		         1,176,393   
    SHARES        
PREFERRED STOCKS—0.8%   
Energy—0.1%  

PTT Exploration & Production PCL
144A, 4.875%(3)

     8,645 (9)      8,332   
   

 

 

  
Financials—0.7%  

Ally Financial, Inc. Series G,
144A 7.000%(3)

     351        352   

Banco Bilbao Vizcaya Argentaria S.A. International S.A. Unipersonal
5.919%

     2,295 (9)      2,324   

Bank of New York Mellon Corp. (The) Series E, 4.950%

     16,070 (9)      15,829   

JPMorgan Chase & Co. Series V, 5.000%

     4,395 (9)      4,274   
    SHARES     VALUE  
Financials (continued)  

Wells Fargo & Co. Series K, 7.980%

     16,155 (9)    $ 17,064   

XLIT Group plc 6.50%(2)

     12,790 (9)      10,155   
   

 

 

  
              49,998   
TOTAL PREFERRED STOCKS
(Identified Cost $61,462)		         58,330   
EXCHANGE-TRADED FUNDS—0.3%   

SPDR S&P 500® ETF Trust(13)

     114,000        21,846   
TOTAL EXCHANGE-TRADED FUNDS   
(Identified Cost $21,590)        21,846   
AFFILIATED MUTUAL FUNDS—0.9%   

Virtus Credit Opportunities Fund(13)

     6,934,641        67,751   
TOTAL AFFILIATED MUTUAL FUNDS   
(Identified Cost $69,338)        67,751   
TOTAL LONG TERM INVESTMENTS—99.7%   
(Identified Cost $7,812,024)        7,690,914 (12) 
SHORT-TERM INVESTMENTS—0.7%   
Money Market Mutual Fund—0.7%  

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     57,560,109        57,560   
TOTAL SHORT-TERM INVESTMENTS   
(Identified Cost $57,560)        57,560   
TOTAL INVESTMENTS—100.4%
(Identified Cost $7,869,584)		         7,748,474 (1) 

Other assets and liabilities, net—(0.4)%

   

     (33,102 ) 
   

 

 

  
NET ASSETS—100.0%      $ 7,715,372   
   

 

 

  
 

 

See Notes to Financial Statements

 

 

35

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

Abbreviations:

ETF Exchange-Traded Fund
FDIC Federal Deposit Insurance Corporation
FHLMC Federal Home Loan Mortgage Corporation (“Freddie Mac”).
FNMA Federal National Mortgage Association (“Fannie Mae”).
GNMA Government National Mortgage Association (“Ginnie Mae”)
REIT Real Estate Investment Trust
SPDR S&P Depositary Receipt

FOOTNOTE LEGEND:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Variable or step coupon security; interest rate shown reflects the rate in effect at September 30, 2015.
(3)  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, 2015, these securities amounted to a value of $2,759,860 or 35.8% of net assets.
(4)  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.
(5)  This Note was issued for the sole purpose of funding a loan agreement between the issuer and the borrower. As the credit risk for this security lies solely with the borrower, the name represented here is that of the borrower.
(6)  No contractual maturity date.
(7)  Interest payments may be deferred.
(8)  This loan will settle after September 30, 2015, at which time the interest rate, based on the London Interbank Offered Rate (“LIBOR”) and the agreed upon spread on trade date, will be reflected.
(9)  Value shown as par value.
(10)  Security in default.
(11)  Security in default, interest payments are being received during the bankruptcy proceedings.
(12)  All or a portion of the Fund’s assets have been segregated for delayed delivery security.
(13)  This fund is a public fund and the prospectus and annual report are publicly available.

Foreign Currencies:

BRL Brazilian Real
CLP Chilean Peso
COP Colombian Peso
RUB Russian Ruble
TRY Turkish Lira
ZAR South African Rand

 

Country Weightings (Unaudited)†        

United States

      83 % 

Australia

      1   

Canada

      1   

Chile

      1   

India

      1   

Luxembourg

      1   

United Kingdom

      1   

Other

      11   

Total

      100 % 

 

 

† % of total investments as of September 30, 2015

 

 

 

See Notes to Financial Statements

 

 

36

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total Value at
September 30, 2015		      Level 1
Quoted Prices		      Level 2
Significant
Observable
Inputs		      Level 3
Significant
Unobservable
Inputs		  

Debt Securities:

            

Asset-Backed Securities

    $ 1,426,683       $ —       $ 1,414,387       $ 12,296   

Corporate Bonds and Notes

      2,819,137         —         2,819,137         —   

Foreign Government Securities

      155,045         —         155,045         —   

Loan Agreements

      1,176,393         —         1,164,148         12,245   

Mortgage-Backed Securities

      1,895,938         —         1,895,938         —   

Municipal Bonds

      3,555         —         3,555         —   

U.S. Government Securities

      66,236         —         66,236         —   

Equity Securities:

            

Affiliated Mutual Fund

      67,751         67,751         —         —   

Exchange-traded Fund

      21,846         21,846         —         —   

Preferred Stocks

      58,330         —         58,330         —   

Short-Term Investments

      57,560         57,560         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Investments

    $ 7,748,474       $ 147,157       $ 7,576,776       $ 24,541   
  

 

 

     

 

 

     

 

 

     

 

 

  

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

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.

 

     Total     Asset-
Backed
Securities		     Loan
Agreements		  

Investments in Securities

       

Balance as of September 30, 2014:

    $ 14,320      $ —      $ 14,320   

Accrued discount/(premium)

      (127 )      4        (131 ) 

Realized gain (loss)

      (59 )      —        (59 ) 

Change in unrealized appreciation/(depreciation)(c)

      (1,040 )      (15 )      (1,025 ) 

Purchases

      12,558        12,558        —   

Sales(b)

      (1,111 )      (251 )      (860 ) 

Transfers into Level 3(a)

      —        —        —   

Transfers from Level 3(a)

      —        —        —   
  

 

 

    

 

 

    

 

 

  

Balance as of September 30, 2015

    $ 24,541      $ 12,296      $ 12,245   
  

 

 

    

 

 

    

 

 

  

 

(a)  “Transfers into and/or from” represent the ending value as of September 30, 2015, for any investment security where a change in the pricing level occurred from the beginning to the end of the period.
(b)  Includes paydowns on securities.
(c)  Included in the related net change in unrealized appreciation/(depreciation) in the Statement of Operations. The change in unrealized appreciation/(depreciation) on investments still held as of September 30, 2015 was $(1,025).

None of the securities in the table are internally fair valued at September 30, 2015.

 

See Notes to Financial Statements

 

37

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

STATEMENT OF ASSETS AND LIABILITIES

SEPTEMBER 30, 2015

(Reported in thousands except shares and per share amounts)

 

Assets   

Investment in unaffiliated securities at value(1)

    $ 7,680,723   

Investments in affiliated fund at value(2)

      67,751   

Foreign currency at value(3)

      2   

Cash

      10,206   
Receivables   

Investment securities sold

      11,863   

Fund shares sold

      15,028   

Dividends and interest receivable

      56,795   

Tax reclaims

      19   

Prepaid expenses

      222   

Prepaid trustee retainer

      60   
  

 

 

  

Total assets

      7,842,669   
  

 

 

  
Liabilities   
Payables   

Fund shares repurchased

      36,376   

Investment securities purchased

      81,366   

Dividend distributions

      2,318   

Investment advisory fees

      2,987   

Distribution and service fees

      1,421   

Administration fees

      822   

Transfer agent fees and expenses

      1,589   

Professional fees

      43   

Trustees’ fees and expenses

      14   

Other accrued expenses

      361   
  

 

 

  

Total liabilities

      127,297   
  

 

 

  
Net Assets    $ 7,715,372   
  

 

 

  
Net Assets Consist of:   

Capital paid in on shares of beneficial interest

    $ 7,903,054   

Accumulated undistributed net investment income (loss)

      (3,391 ) 

Accumulated undistributed net realized gain (loss)

      (62,973 ) 

Net unrealized appreciation (depreciation) on investments

      (121,318 ) 
  

 

 

  
Net Assets    $ 7,715,372   
  

 

 

  
Class A   

Net asset value (net assets/shares outstanding) per share

    $ 4.69   

Maximum offering price per share NAV/(1–2.25%)

    $ 4.80   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      335,979,268   

Net Assets

    $ 1,575,629   
Class B   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 4.66   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      82,039   

Net Assets

    $ 382   
Class C   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 4.75   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      307,541,074   

Net Assets

    $ 1,460,120   
Class T   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 4.73   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      123,290,045   

Net Assets

    $ 583,694   
Class I   

Net asset value (net assets/shares outstanding) and offering price per share

    $ 4.69   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      872,349,502   

Net Assets

    $ 4,095,547   

(1) Investment in unaffiliated securities at cost.

    $ 7,800,246   

(2) Investment in affiliated fund at cost

    $ 69,338   

(3) Foreign currency at cost.

    $ — (4) 

(4) Amount is less than $500.

   

 

See Notes to Financial Statements

 

38

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

STATEMENT OF OPERATIONS

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

Investment Income   

Dividends

    $ 568   

Interest

      348,803   

Dividends from affiliated fund

      338   

Foreign taxes withheld

      (389 ) 
  

 

 

  

Total investment income

      349,320   
  

 

 

  
Expenses   

Investment advisory fees

      39,612   

Service fees, Class A

      4,377   

Distribution and service fees, Class B

      7   

Distribution and service fees, Class C

      8,017   

Distribution and service fees, Class T

      6,534   

Administration fees

      10,344   

Transfer agent fees and expenses

      9,136   

Registration fees

      419   

Printing fees and expenses

      453   

Trustees’ fees and expenses

      363   

Custodian fees

      234   

Professional fees

      84   

Miscellaneous expenses

      653   
  

 

 

  

Total expenses

      80,233   

Less expenses reimbursed and/or waived by investment adviser

      (96 ) 
  

 

 

  

Net expenses

      80,137   
  

 

 

  
Net investment income (loss)      269,183   
  

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments   

Net realized gain (loss) on unaffiliated investments

      (126,120 ) 

Net realized gain (loss) on foreign currency transactions

      (1,794 ) 

Net change in unrealized appreciation (depreciation) on investments

      (149,459 ) 

Net change in unrealized appreciation (depreciation) on affiliated funds

      (1,587 ) 

Net change in unrealized appreciation (depreciation) on foreign currency translation

      287   
  

 

 

  
Net gain (loss) on investments      (278,673 ) 
  

 

 

  
Net increase (decrease) in net assets resulting from operations    $ (9,490 ) 
  

 

 

  

 

See Notes to Financial Statements

 

39

Table of Contents

VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

STATEMENTS OF CHANGES IN NET ASSETS

(Reported in thousands)

 

     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
INCREASE/(DECREASE) IN NET ASSETS     
From Operations     

Net investment income (loss)

    $ 269,183      $ 281,430   

Net realized gain (loss)

      (127,914 )      2,448   

Net change in unrealized appreciation (depreciation)

      (150,759 )      (38,011 ) 
  

 

 

    

 

 

  
Increase (decrease) in net assets resulting from operations      (9,490 )      245,867   
  

 

 

    

 

 

  
From Distributions to Shareholders     

Net investment income, Class A

      (42,497 )      (105,722 ) 

Net investment income, Class B

      (18 )      (56 ) 

Net investment income, Class C

      (34,290 )      (46,403 ) 

Net investment income, Class T

      (10,794 )      (17,738 ) 

Net investment income, Class I

      (119,152 )      (100,400 ) 

Net realized long-term gains, Class A

      —        (630 ) 

Net realized long-term gains, Class B

      —        (— )(1) 

Net realized long-term gains, Class C

      —        (306 ) 

Net realized long-term gains, Class T

      —        (140 ) 

Net realized long-term gains, Class I

      —        (562 ) 

Return of capital Class A

      (8,732 )      —   

Return of capital Class B

      (4 )      —   

Return of capital Class C

      (7,997 )      —   

Return of capital Class T

      (3,261 )      —   

Return of capital Class I

      (22,250 )      —   
  

 

 

    

 

 

  
Decrease in net assets from distributions to shareholders      (248,995 )      (271,957 ) 
  

 

 

    

 

 

  
From Share Transactions     
Sale of shares     

Class A (91,590 and 213,985 shares, respectively)

      438,116        1,043,710   

Class B (9 and 11 shares, respectively)

      45        52   

Class C (82,833 and 148,857 shares, respectively)

      401,212        735,299   

Class T (9,811 and 23,586 shares, respectively)

      47,392        116,148   

Class I (269,095 and 672,603 shares, respectively)

      1,287,295        3,291,503   
Reinvestment of distributions     

Class A (9,714 and 20,365 shares, respectively)

      46,369        99,389   

Class B (4 and 11 shares, respectively)

      21        53   

Class C (8,562 and 9,071 shares, respectively)

      41,374        44,772   

Class T (1,870 and 2,309 shares, respectively)

      9,014        11,365   

Class I (25,004 and 15,682 shares, respectively)

      119,514        76,553   
Shares repurchased     

Class A (157,118 and 580,132 shares, respectively)

      (750,068 )      (2,835,996 ) 

Class B (227 and 260 shares, respectively)

      (1,080 )      (1,262 ) 

Class C (135,370 and 126,206 shares, respectively)

      (654,153 )      (622,784 ) 

Class T (35,882 and 32,030 shares, respectively)

      (172,911 )      (157,686 ) 

Class I (406,378 and 202,225 shares, respectively)

      (1,940,913 )      (987,226 ) 
  

 

 

    

 

 

  
Increase (decrease) in net assets from share transactions      (1,128,773 )      813,890   
  

 

 

    

 

 

  
Net increase (decrease) in net assets      (1,387,258 )      787,800   
Net Assets     

Beginning of period

      9,102,630        8,314,830   
  

 

 

    

 

 

  
End of period    $ 7,715,372      $ 9,102,630   
  

 

 

    

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ (3,391 )    $ (544 ) 

 

(1)  Amount is less than $500.

 

See Notes to Financial Statements

 

40

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

    Net Asset Value,
Beginning of Period		   Net Investment Income
(Loss)(2)		   Capital Gain Distributions
Received from Affiliated Funds		   Net Realized and
Unrealized Gain (Loss)		   Total from
Investment Operations		   Dividends from Net
Investment Income		   Distributions from Net
Realized Gains		   Return of Capital   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total
Return(1)		   Net Assets, End of Period
(000’s)		   Ratio of Expenses to
Average Net Assets(3)		   Ratio of Gross Expenses to
Average Net Assets		   Ratio of Net Investment Income
to Average Net Assets		   Portfolio Turnover Rate

Class A

                                                                                                                                                                          
10/1/14 to 9/30/15     $ 4.84         0.15         —         (0.16 )       (0.01 )       (0.11 )       —      

 

(0.03

)

       (0.14 )       (0.15 )     $ 4.69         (0.23 )%     $ 1,575,629         0.97 %       0.97 %       3.15 %       37 %
10/1/13 to 9/30/14       4.85         0.16         —         (0.01 )       0.15         (0.16 )       — (4)       — (4)       (0.16 )       (0.01 )       4.84         3.03         1,894,633         0.99         —         3.30         39  
10/1/12 to 9/30/13       4.94         0.18         —         (0.09 )       0.09         (0.18 )       —         — (4)       (0.18 )       (0.09 )       4.85         1.84         3,574,450         0.99         —         3.65         49  
10/1/11 to 9/30/12       4.67         0.21         —         0.27         0.48         (0.21 )       —         — (4)       (0.21 )       0.27         4.94         10.58         3,038,093         1.01         —         4.31         52  
10/1/10 to 9/30/11       4.80         0.22         —         (0.12 )       0.10         (0.23 )       —         — (4)       (0.23 )       (0.13 )       4.67         2.02         2,463,360         1.05         —         4.59         35  

Class B

                                                                    
10/1/14 to 9/30/15     $ 4.81         0.13         —         (0.16 )       (0.03 )       (0.09 )       —      

 

(0.03

)

       (0.12 )       (0.15 )     $ 4.66         (0.73 )%     $ 382         1.46 %       1.47 %       2.67 %       37 %
10/1/13 to 9/30/14       4.82         0.14         —         (0.02 )       0.12         (0.13 )       — (4)       — (4)       (0.13 )       (0.01 )       4.81         2.53         1,421         1.49         —         2.80         39  
10/1/12 to 9/30/13       4.91         0.16         —         (0.09 )       0.07         (0.16 )       —         — (4)       (0.16 )       (0.09 )       4.82         1.34         2,572         1.49         —         3.17         49  
10/1/11 to 9/30/12       4.65         0.18         —         0.27         0.45         (0.19 )       —         — (4)       (0.19 )       0.26         4.91         9.87         3,590         1.51         —         3.86         52  
10/1/10 to 9/30/11       4.78         0.20         —         (0.12 )       0.08         (0.21 )       —         — (4)       (0.21 )       (0.13 )       4.65         1.53         5,550         1.55         —         4.10         35  

Class C

                                                                    
10/1/14 to 9/30/15     $ 4.89         0.14         —         (0.15 )       (0.01 )       (0.10 )       —         (0.03 )       (0.13 )       (0.14 )     $ 4.75         (0.27 )%     $ 1,460,120         1.22 %       1.22 %       2.90 %       37 %
10/1/13 to 9/30/14       4.90         0.15         —         (0.02 )       0.13         (0.14 )       — (4)       — (4)       (0.14 )       (0.01 )       4.89         2.73         1,720,245         1.24         —         3.03         39  
10/1/12 to 9/30/13       4.99         0.17         —         (0.09 )       0.08         (0.17 )       —         — (4)       (0.17 )       (0.09 )       4.90         1.56         1,567,725         1.24         —         3.40         49  
10/1/11 to 9/30/12       4.72         0.20         —         0.27         0.47         (0.20 )       —         — (4)       (0.20 )       0.27         4.99         10.19         1,067,276         1.27         —         4.04         52  
10/1/10 to 9/30/11       4.85         0.21         —         (0.12 )       0.09         (0.22 )       —         — (4)       (0.22 )       (0.13 )       4.72         1.75         616,170         1.30         —         4.33         35  

The footnote legend is at the end of the financial highlights

 

See Notes to Financial Statements

 

41

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

FINANCIAL HIGHLIGHTS (Continued)

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

    Net Asset Value,
Beginning of Period		   Net Investment Income
(Loss)(2)		   Capital Gain Distributions
Received from Affiliated Funds		   Net Realized and
Unrealized Gain (Loss)		   Total from
Investment Operations		   Dividends from Net
Investment Income		   Distributions from Net
Realized Gains		   Return of Capital   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total
Return(1)		   Net Assets, End of Period
(000’s)		   Ratio of Expenses to
Average Net Assets(3)		   Ratio of Gross Expenses to
Average Net Assets		   Ratio of Net Investment Income
to Average Net Assets		   Portfolio Turnover Rate

Class T

                                                                                                                                                                          
10/1/14 to 9/30/15     $ 4.88         0.12         —         (0.17 )       (0.05 )       (0.07 )       —         (0.03 )       (0.10 )       (0.15 )     $ 4.73         (0.98 )%     $ 583,694         1.72 %       1.72 %       2.40 %       37 %
10/1/13 to 9/30/14       4.89         0.12         —         (0.01 )       0.11         (0.12 )       — (4)       — (4)       (0.12 )       (0.01 )       4.88         2.23         719,840         1.74         —         2.53         39  
10/1/12 to 9/30/13       4.98         0.14         —         (0.09 )       0.05         (0.14 )       —         — (4)       (0.14 )       (0.09 )       4.89         1.06         751,220         1.74         —         2.91         49  
10/1/11 to 9/30/12       4.71         0.17         —         0.28         0.45         (0.18 )       —         — (4)       (0.18 )       0.27         4.98         9.67         704,225         1.76         —         3.56         52  
10/1/10 to 9/30/11       4.84         0.19         —         (0.13 )       0.06         (0.19 )       —         — (4)       (0.19 )       (0.13 )       4.71         1.24         530,162         1.80         —         3.84         35  

Class I

                                                                    
10/1/14 to 9/30/15     $ 4.84         0.16         —         (0.16 )       —         (0.12 )       —         (0.03 )       (0.15 )       (0.15 )     $ 4.69         0.02 %     $ 4,095,547         0.72 %       0.72 %       3.40 %       37 %
10/1/13 to 9/30/14       4.85         0.17         —         (0.01 )       0.16         (0.17 )       — (4)       — (4)       (0.17 )       (0.01 )       4.84         3.28         4,766,491         0.74         —         3.51         39  
10/1/12 to 9/30/13       4.94         0.19         —         (0.09 )       0.10         (0.19 )       —         — (4)       (0.19 )       (0.09 )       4.85         2.09         2,418,863         0.74         —         3.90         49  
10/1/11 to 9/30/12       4.68         0.22         —         0.27         0.49         (0.23 )       —         — (4)       (0.23 )       0.26         4.94         10.62         1,606,957         0.77         —         4.55         52  
10/1/10 to 9/30/11       4.81         0.23         —         (0.12 )       0.11         (0.24 )       —         — (4)       (0.24 )       (0.13 )       4.68         2.28         901,528         0.80         —         4.83         35  

Footnote Legend

(1) Sales charges, where applicable, are not reflected in the total return calculation.
(2) Computed using average shares outstanding.
(3) The Fund may invest in other funds and the annualized expense ratios do not reflect fees and expenses associated with the underlying funds.
(4)  Amount is less than $0.005.

 

See Notes to Financial Statements

 

42

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

Note 1. Organization

Virtus Opportunities Trust (the “Trust”) is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company.

As of the date of this report, 32 funds of the Trust 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. There is no guarantee the Fund will achieve its objective.

The Fund offers Class A shares, Class C shares, Class T shares and Class I shares. 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. The period for which the CDSC applies for the Fund is 18 months. The CDSC period begins on the last day of the month preceding the month in which the purchase was made.

Class B shares generally 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 are sold with a 1% CDSC, applicable if redeemed within one year of purchase. Class I shares are sold without a front-end sales charge or CDSC.

Virtus Mutual Funds may impose an annual fee on accounts having balances of less than $2,500. The small account fee may be waived in certain circumstances, as disclosed in the prospectuses and/or statements of additional information. The fees collected will be used to offset certain expenses of the funds.

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 Rule 12b-1 and/or shareholder service plan (“12b-1 plan”) and has exclusive voting rights with respect to such plans. Class I shares are not subject to a 12b-1 plan. Income and other expenses as well as realized and unrealized gains and losses of the Fund are borne pro rata by the holders of each class of shares.

Note 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 amounts 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

Security valuation procedures for the Fund, which include nightly price variance, as well as back-testing such as bi-weekly unchanged price, monthly secondary source and

 

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

transaction analysis, have been approved by the Board of Trustees (the “Board”, or the “Trustees”). All internally fair valued securities are approved by a valuation committee (the “Valuation Committee”) appointed by the Board. The Valuation Committee is comprised of certain members of management as identified to the Board and convenes independently from portfolio management. All internally fair valued securities are updated daily and reviewed in detail by the Valuation Committee monthly unless changes occur within the period. The Valuation Committee reviews the validity of the model inputs and any changes to the model. Quarterly fair valuations are reviewed by the Board.

The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. It is the Fund’s policy to recognize transfers at the end of reporting period.

 

  •    Level 1 – quoted prices in active markets for identical securities (security types generally include listed equities).

 

  •    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 Valuation Committee’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 Valuation Committee, are generally categorized as Level 3 in the hierarchy.

Certain non-U.S. 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 non-U.S. markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (“NAV”) (at the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4 p.m. Eastern time) that may impact the value of securities traded in these non-U.S. markets. In such cases the Fund fair values non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. security to the intraday trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, ETFs, 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 non-U.S. 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

 

44

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

markets in such securities. For most bond types, the pricing service utilizes matrix pricing that 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 such as mortgage-backed and asset-backed securities 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 Valuation Committee, 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 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 NAV. Investments in closed-end funds are valued as of the close of regular trading on the NYSE each business day. Both are categorized as Level 1 in the hierarchy.

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 methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

  B. Security Transactions and Investment Income

Security transactions are recorded on the trade date. Realized gains and losses from the sale of securities are determined on the identified cost basis. Dividend income is recognized 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. Any distributions from underlying funds are recorded in accordance with the character of the disbursements as designated by the underlying fund.

 

  C. Income Taxes

The Fund is treated as a separate taxable entity. It is the intention 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.

Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. As of September 30, 2015, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2012 forward (with limited exceptions).

 

45

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

  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 that 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 together by the Fund and other affiliated mutual funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately used.

In addition to the net annual operating expenses that the Fund bears directly, the shareholders of the Fund indirectly bear the Fund’s pro-rata expenses of any underlying mutual funds in which the Fund invests.

 

  F. Foreign Currency Translation

Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at 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 Fund does not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

 

  G. When-issued Purchases and Forward Commitments (Delayed Delivery)

The Fund may engage in when-issued or forward commitment 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.

 

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

  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. Loan agreements are generally non-investment grade and often involve borrowers that are highly leveraged. The Fund may invest in obligations of borrowers who are in bankruptcy proceedings. Loan agreements are typically senior in the corporate capital structure of the borrower. 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. 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. When investing in loan participations, 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 participation 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.

The Fund may invest in multiple series or tranches of a loan, which may have varying terms and carry different associated risks. Loan agreements may involve foreign borrowers, and investments may be denominated in foreign currencies. 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 loan agreements have floating rate loan interests which generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally LIBOR (London Interbank Offered Rate), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. When a loan agreement is purchased the Fund may pay an assignment fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan agreement. Prepayment penalty fees are received upon the prepayment of a loan agreement by a borrower. Prepayment penalty, facility, commitment, consent and amendment fees are recorded to income as earned or paid.

At September 30, 2015, all loan agreements held by the Fund are assignment loans.

Note 3. Investment Advisory Fees and Related Party Transactions

($ reported in thousands except as noted)

 

  A. Adviser

Virtus Investment Advisers, Inc. (the “Adviser”), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the adviser to the Trust. The Adviser manages the Fund’s investment program and general operations of the Fund, including oversight of the Fund’s subadviser.

 

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

As compensation for its services to the Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of the Fund:

 

First $1 Billion

  

$1+ Billion –
$2 Billion

  

$2+ Billion –

10 Billion

  

$10+ Billion

0.55%   0.50%   0.45%   0.425%

During the period covered by these financial statements, the Fund invested a portion of its assets in Virtus Credit Opportunities Fund, an affiliated mutual fund. In order to avoid any duplication of advisory fees, the Adviser has voluntarily waived its advisory fees in an amount equal to that which would otherwise be paid by the Fund on the assets invested in the Credit Opportunities Fund. For the period covered by these financial statements, the waiver amounted to $96. This waiver is in addition to the expense limitation and/or fee waiver covered elsewhere in these financial statements and is included in the Statement of Operations in “expenses reimbursed and/or waived by the investment adviser”.

 

  B. Subadviser

Newfleet Asset Management, LLC (the “Subadviser”), an indirect, wholly-owned subsidiary of Virtus, is the subadviser to the Fund. The Subadviser manages the investments of the Fund for which it is paid a fee by the Adviser.

 

  C. Expense Limitations

Effective September 1, 2015, the Adviser has contractually agreed to limit the Fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, leverage expenses, extraordinary expenses and acquired fund fees and expenses, if any) so that such expenses do not exceed, on an annualized basis, the following percentages of the Fund’s average net asset values: 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 through January 31, 2017. For the period of October 1, 2014 through August 31, 2015, the waiver was voluntary. The Fund is currently below its expense cap.

 

  D. Distributor

VP Distributors, LLC (“VP Distributors”), an indirect wholly-owned subsidiary of Virtus, serves as the distributor of the Fund’s shares. VP Distributors has advised the Fund that for the fiscal (the “period”) ended September 30, 2015, it retained net commissions of $38 for Class A shares and deferred sales charges of $74, $—(1), $7 and $62 for Class A shares, Class B shares, Class C shares and Class T shares, respectively.

 

  (1)  Amount is less than $500.

In addition, the Fund pays VP Distributors distribution and/or service fees under a 12b-1 plan as a percentage of the average daily net assets of each respective class, 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. 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 NAV 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.

 

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

 

  E. Administrator and Transfer Agent

Virtus Fund Services LLC, an indirect wholly-owned subsidiary of Virtus, serves as the administrator and transfer agent to the Fund.

For the period ended September 30, 2015, the Fund incurred administration fees totaling $8,134 which are included in the Statement of Operations.

For the period ended September 30, 2015, the Fund incurred transfer agent fees totaling $8,903 which are included in the Statement of Operations. A portion of these fees is paid to outside entities that also provide services to the Trust.

 

  F. Affiliated Shareholders

At September 30, 2015, 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 to the following:

 

     Shares        Aggregate
Net Asset Value		  

Class I Shares

      2,022,361         $ 9,485   

 

  G. Investments in Affiliates

A summary of the Multi-Sector Short Term Bond Fund’s total long-term and short-term purchases and sales of affiliated underlying funds during the period ended September 30, 2015, is as follows:

 

    Value,
beginning
of period		     Purchases     Sales
Proceeds		     Value, end
of period		     Dividend
Income		     Distributions
of Realized
Gains		  

Virtus Credit Opportunities Fund

   $ —      $ 69,338      $ —      $ 67,751      $ 338      $ —   

The Multi-Sector Short Term Bond Fund does not invest in the underlying fund for the purpose of exercising management or control; however the 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, 2015, the Fund was the owner of record of approximately 71% of the Credit Opportunities Fund.

Note 4. Purchases and Sales of Securities

($ reported in thousands)

Purchases and sales of securities for the Fund (excluding U.S. Government and agency securities, and short-term securities) during the period ended September 30, 2015, were as follows:

 

     Purchases        Sales  
   $ 2,572,430         $ 3,584,499   

Purchases and sales of long-term U.S. Government and agency securities for the Fund during the period ended September 30, 2015, were as follows:

 

     Purchases        Sales  
   $ 514,106         $ 507,434   

 

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

Note 5. Borrowings

($ reported in thousands)

On July 2, 2015, the Fund and other affiliated Funds entered into a $50,000 secured Line of Credit Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Fund to borrow cash from the Bank to manage large unexpected redemptions and trade fails, up to a limit of one-third of the Fund’s total net assets in accordance with the Agreement. Interest is charged at the higher of the LIBOR (London Interbank Offered Rate) or the Federal Funds rate plus an additional percentage rate on the amount borrowed. Commitment fees are charged on the undrawn balance. The Funds are individually, and not jointly, liable for their particular advances, if any, under the line of credit. The Bank has the ability to require repayment of outstanding borrowings under the Agreement upon certain circumstances such as an event of default.

The Fund had no outstanding borrowings at any time during the period ended September 30, 2015.

Note 6. 10% Shareholders

As of September 30, 2015, the Fund had individual shareholder account(s) and/or omnibus shareholder account(s) (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
Outstanding		        Number
of
Accounts		  
     30 %         2   

The shareholders are not affiliated with Virtus.

Note 7. Credit Risk and Asset Concentrations

In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as the 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/high-risk 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 the pursuit of its investment objective. 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.

Note 8. Illiquid and Restricted Securities

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

 

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

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. However, a portion of such footnoted securities could be liquid where the Subadviser determines that some, though not all, of the position could 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.

Restricted securities are illiquid securities, as defined above, not registered under the Securities Act of 1933, as amended (the “1933 Act”). Generally, 144A securities are excluded from this category, except where defined as illiquid.

The Fund will bear any costs, including those involved in registration under the 1933 Act, in connection with the disposition of such securities.

At September 30, 2015, the Fund did not hold any securities that are both illiquid and restricted.

Note 9. Indemnifications

Under the Trust’s organizational documents, its Trustees and officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Each Trustee has also entered into an indemnification agreement with the Trust. In addition, in the normal course of business the Fund enters into contracts that provide a variety of indemnifications to other parties. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund and that have not occurred. However, the Fund has not had prior claims or losses pursuant to these arrangements and expects the risk of loss to be remote.

Note 10. Federal Income Tax Information

($ reported in thousands)

At September 30, 2015, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows:

 

Federal
Tax Cost

  

Unrealized
Appreciation

  

Unrealized
(Depreciation)

  

Net Unrealized
Appreciation
(Depreciation)

$7,873,288   $101,470   $(226,287)   $(124,817)

The Fund has capital loss carryovers available to offset future realized gains, through the indicated expiration date shown below:

 

No Expiration

  

Total

Short-Term

  

Long-Term

  

Short-Term

  

Long-Term

$5,915   $—   $5,915   $—

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized for tax years beginning after December 22, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses.

Capital losses realized after October 31 and certain late year losses may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2015, the Fund deferred post-October capital loss of $56,744 and qualified late year ordinary losses of $0 and recognized post-October capital losses of $0 and qualified late year ordinary losses of $0 .

 

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) (which are disclosed above) consist of undistributed ordinary income of $0 and undistributed long-term capital gains of $0.

The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. The Fund has distributed more than its income and capital gains; therefore, a portion of the distribution is a taxable return of capital (“ROC”) the ROC amounts are reflected in the Statement of Changes and Financial Highlights.

The tax character of dividends and distributions paid during the years ended September 30, 2015 and 2014 was as follows:

 

     Year Ended  
     2015      2014  

Ordinary Income

    $ 206,751       $ 270,319   

Long-Term Capital Gains

      —         1,638   

Return of Capital

      42,244         —   
  

 

 

     

 

 

  

Total

    $ 248,995       $ 271,957   
  

 

 

     

 

 

  

Note 11. Reclassifications of Capital Accounts

($ reported in thousands)

For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Fund. As of September 30, 2015, the Fund recorded reclassifications to increase (decrease) the accounts as listed below:

 

Capital Paid in
on Shares of
Beneficial
Interest

  

Undistributed
Net Investment
Income (Loss)

  


Accumulated
Net Realized
Gain (Loss)

$—   $(65,278)   $65,278

Note 12. Regulatory Matters and Litigation

From time to time, the Fund’s investment adviser and/or its affiliates and/or subadvisers may be involved in litigation and arbitration as well as examinations and investigations by various regulatory bodies, including the SEC, involving compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting their products and other activities. At this time, the Fund’s investment adviser believes that the outcomes of such matters are not likely, either individually or in the aggregate, to be material to these financial statements.

As part of an SEC non-public, confidential investigation of a matter entitled – In the Matter of F-Squared Investments Inc., the SEC staff informed the Fund’s investment adviser that it

 

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

was inquiring into whether it had violated securities laws or regulations with respect to circumstances related to that matter. On November 16, 2015, without admitting or denying the SEC’s findings, the Fund’s investment adviser consented to the entry of an order providing that it cease and desist from committing or causing any violations and future violations of Sections 204, 206(2) and 206(4) of the Investment Advisers Act of 1940, as amended, and Rules 204-2, 206(4)-1, 206(4)-7 and 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940, as amended; agreed to a censure; and paid $16.5 million, which included a civil money penalty of $2 million, disgorgement of $13.4 million and prejudgment interest of $1.1 million.

On February 20, 2015, a putative class action complaint (In re Virtus Investment Partners, Inc. Securities Litigation; formerly styled as Tom Cummins v. Virtus Investment Partners Inc. et al) alleging violation of the federal securities laws was filed by an individual shareholder against Virtus and certain of its officers (the “defendants”) in the United States District Court for the Southern District of New York. On August 21, 2015, the lead plaintiff filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint and adding the Trust as a defendant. The Consolidated Complaint was purportedly filed on behalf of all purchasers of Virtus common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint alleges that during the Class Period, the defendants knowingly disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds previously subadvised by F-Squared Investments, Inc. and/or its affiliates (“F-Squared”). The plaintiff seeks to recover unspecified damages. Virtus and its affiliates, including the Fund’s adviser, believe that the suit is without merit and intend to defend it vigorously. A motion to dismiss the Consolidated Complaint was filed on behalf of the defendants on October 21, 2015. The Trust believes that the risk of loss to the Fund as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Fund.

On May 8, 2015, a putative class action complaint (Mark Youngers v. Virtus Investment Partners, Inc. et al) alleging violations of certain provisions of the federal securities laws was filed in the United States District Court for the Central District of California. The complaint, which was purportedly filed on behalf of purchasers of certain Virtus Funds previously subadvised by F-Squared between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”), alleges claims against Virtus, certain Virtus officers and affiliates (including the Fund’s investment adviser, Euclid Advisors LLC and VP Distributors, LLC), the trustees and certain officers of the Trust, and certain other parties (the “defendants”). The complaint alleges that during the Class Period the defendants knowingly disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On October 1, 2015, the plaintiff filed a First Amended Class Action Complaint which, among other things, added a derivative claim for breach of fiduciary duty on behalf of the Trust. On October 19, 2015, the Court entered an order transferring the action to the Southern District of New York. Virtus and its affiliates, including the Fund’s adviser, believe the plaintiff’s claims asserted in the complaint are frivolous and intend to defend them vigorously. The Trust believes that the risk of loss to the Fund as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Fund.

Note 13. Subsequent Events

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there are no subsequent events requiring recognition or disclosure in the financial statements.

 

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LOGO

Report of Independent Registered Public

Accounting Firm

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 the Virtus Multi-Sector Short Term Bond Fund (one of the funds constituting Virtus Opportunities Trust, hereafter referred to as the “Fund”) at September 30, 2015, 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 five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

November 20, 2015

 

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VIRTUS MULTI-SECTOR SHORT TERM BOND FUND

TAX INFORMATION NOTICE

SEPTEMBER 30, 2015 (Unaudited)

 

For the fiscal year ended September 30, 2015, 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 as long-term capital gains dividends (“LTCG”) taxable at a 20% rate, or lower depending on the shareholder’s income ($ reported in thousands). LTCG amount, if subsequently different, will be designated in the next annual report.

 

    QDI    

  

    DRD    

  

    LTCG    

—%   —%   $—

 

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FUND MANAGEMENT TABLES (UNAUDITED)

Information pertaining to the Trustees and officers of the Trust as of September 30, 2015, 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) 243-1574. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust.

Independent Trustees

 

Name, Year of Birth,
Year Elected and
Number of Funds
Overseen		  

Principal Occupation(s)
During Past 5 Years and

Other Directorships Held by Trustee

McClellan, Hassell H.

YOB: 1945

Elected: 2015

55 Portfolios

   Retired. Professor (1984 to 2013), Wallace E. Carroll School of Management, Boston College; Trustee, Virtus Variable Insurance Trust (9 portfolios) (since 2008); Trustee (since 2015), Virtus Mutual Fund Complex (46 portfolios); Trustee, John Hancock Fund Complex (since 2000), John Hancock Funds (collectively, 234 portfolios); and Director (since 2010), Barnes Group, Inc. (diversified global components manufacturer and logistical services company).

McLoughlin, Philip

YOB: 1946

Elected: 2006

69 Portfolios

   Director (since 1991) and Chairman (since 2010), World Trust Fund (closed-end investment firm in Luxembourg); Director (since 1995), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); Chairman (since 2002) and Trustee (since 1989), Virtus Mutual Fund Complex (46 portfolios); Chairman and Trustee (since 2003), Virtus Variable Insurance Trust (9 portfolios); Trustee/Director and Chairman (since 2011), Virtus Closed-End Funds (3 portfolios); Trustee and Chairman (since 2013), Virtus Alternative Solutions Trust (7 portfolios); Partner (2006 to 2010), Cross Pond Partners, LLC (investment management consultant); and Managing Director (2008 to 2010), SeaCap Partners, LLC (investment management).

McNamara, Geraldine M.

YOB: 1951

Elected: 2006

59 Funds

   Retired. Trustee (since 2001), Virtus Mutual Fund Complex (46 portfolios); and Director (since 2003), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); and Trustee (since 2015), Virtus Variable Insurance Trust (9 portfolios)

Oates, James M.

YOB: 1946

Elected: 2006

56 Funds

   Managing Director (since 1994), Wydown Group (consulting firm). Trustee (since 1987), Virtus Mutual Fund Complex (46 portfolios); Director (since 1996), Stifel Financial; Director (1998 to 2014), Connecticut River Bancorp; Chairman and Director (1999 to 2014), Connecticut River Bank; Chairman (since 2000), Emerson Investment Management, Inc.; Director (2002 to 2014), New Hampshire Trust Company; Chairman and Trustee (since 2005), John Hancock Fund Complex (228 portfolios); Non-Executive Chairman (2007 to 2011), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services); Trustee/Director (since 2013), Virtus Closed-End Funds (3 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

Segerson, Richard E.

YOB: 1948

Elected: 2006

46 Funds

   Trustee (since 1983), Virtus Mutual Fund Complex (46 portfolios); and Managing Director (1998 to 2013), Northway Management Company.

Verdonck, Ferdinand L.J.

YOB: 1942

Elected: 2006

46 Funds

   Trustee (since 2002), Virtus Mutual Fund Complex (46 portfolios).

 

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FUND MANAGEMENT TABLES (UNAUDITED) (Continued)

 

Interested Trustee

The individual listed below is an “interested person” of the Trust, as defined in Section 2(a)(19) of the 1940 Act, as amended, and the rules and regulations thereunder.

 

Name, Year of Birth,
Year Elected and
Number of Funds
Overseen		  

Principal Occupation(s)

During Past 5 Years and
Other Directorships Held by Trustee

Aylward, George R.*

Trustee and President

YOB: 1964

Elected: 2006

67 Funds

   Director, President and Chief Executive Officer (since 2008), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions with Virtus affiliates (since 2005); Trustee (since 2006), Virtus Mutual Funds (46 portfolios); Chairman, President and Chief Executive Officer (since 2006), The Zweig Closed-End Funds (2 portfolios); Trustee (since 2012) and President (since 2010), Virtus Variable Insurance Trust (9 portfolios); Trustee and President (since 2011), Virtus Closed-End Funds (3 portfolios); Director (since 2013), Virtus Global Funds, PLC (2 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

 

57

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FUND MANAGEMENT TABLES (UNAUDITED) (Continued)

 

Officers of the Trust Who Are Not Trustees

 

Name, Address and
Year of Birth		   Position(s) Held with
Trust and Length of
Time Served		   Principal Occupation(s)
During Past 5 Years

Waltman, Francis G.

YOB: 1962

   Executive Vice President (since 2013); Senior Vice President (2008-2013).   Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2006) with Virtus affiliates; Executive Vice President (since 2013), Senior Vice President (2008 to 2013), Virtus Mutual Fund Complex; Executive Vice President (since 2013), Senior Vice President (2010 to 2013), Virtus Variable Insurance Trust; Executive Vice President (since 2013), Senior Vice President (2011 to 2013), Virtus Closed-End Funds; Director (since 2013), Virtus Global Funds PLC; and Executive Vice President (since 2013), Virtus Alternative Solutions Trust.

Bradley, W. Patrick

YOB: 1972

  

Senior Vice President (since 2013); Vice President (2011 to 2013); Chief Financial Officer and Treasurer

(since 2006).

   Senior Vice President, Fund Services (since 2010), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2006) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2004), Virtus Variable Insurance Trust; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2006), Virtus Mutual Fund Complex; Senior Vice President (since 2013), Vice President (2012 to 2013) and Treasurer (Chief Financial Officer) (since 2007), The Zweig Closed-End Funds; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2011), Virtus Closed-End Funds; Vice President and Assistant Treasurer (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Director (since 2013), Virtus Global Funds, PLC; and Senior Vice President, Chief Financial Officer and Treasurer (since 2013), Virtus Alternative Solutions Trust.

 

58

Table of Contents

FUND MANAGEMENT TABLES (UNAUDITED) (Continued)

 

Name, Address and
Year of Birth		   Position(s) Held with
Trust and Length of
Time Served		   Principal Occupation(s)
During Past 5 Years

Carr, Kevin J.

YOB: 1954

   Senior Vice President, since 2013; Vice President (2005-2013); Chief Legal Officer, Counsel and Secretary
(since 2005).		   Senior Vice President (since 2009), Vice President, Counsel and Secretary (2008 to 2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2005) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2005 to 2013), Chief Legal Officer, Counsel and Secretary (since 2005), Virtus Mutual Fund Complex; Senior Vice President (2013 to 2014), Vice President (2012 to 2013) and Assistant Secretary (since 2012), Secretary and Chief Legal Officer (2005 to 2012), The Zweig Closed-End Funds; Assistant Secretary (since 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2010 to 2013), Virtus Variable Insurance Trust; Vice President and Assistant Secretary (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Senior Vice President and Assistant Secretary (2013 to 2014), Vice President and Assistant Secretary (2012 to 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2011 to 2012), Virtus Closed-End Funds; and Assistant Secretary (since 2013), Virtus Alternative Solutions Trust.

Engberg, Nancy J.

YOB: 1956

   Vice President and Chief Compliance Officer
since 2011.		   Vice President (since 2008) and Chief Compliance Officer (2008 to 2011), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2003) with Virtus affiliates; Vice President and Chief Compliance Officer (since 2011), Virtus Mutual Fund Complex; Vice President (since 2010), Chief Compliance Officer (since 2011), Virtus Variable Insurance Trust; Vice President and Chief Compliance Officer (since 2011), Virtus Closed-End Funds; Vice President and Chief Compliance Officer (since 2012), The Zweig Closed-End Funds; and Vice President and Chief Compliance Officer (since 2013), Virtus Alternative Solutions Trust.

 

59

Table of Contents

Virtus Multi-Sector Short Term Bond Fund,

a series of Virtus Opportunities Trust

Supplement dated September 1, 2015 to the Summary Prospectuses

and the Virtus Opportunities Trust Statutory Prospectus,

each dated January 28, 2015, as supplemented.

IMPORTANT NOTICE TO INVESTORS

The first paragraph and the information in the first table in the section “More Information About Fund Expenses” on page 139 of the statutory prospectus are hereby revised with the following information for the above referenced fund:

Virtus Investment Advisers, Inc. (“VIA”) has contractually agreed to limit the total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, leverage expenses, extraordinary expenses and acquired fund fees and expenses, if any) of certain of the funds so that expenses do not exceed, on an annualized basis, the amounts indicated in the following table.

 

     Class A
Shares		     Class B
Shares		     Class C
Shares		     Class I
Shares		     Class R6
Shares		     Class T
Shares		     Through Date  

Virtus Multi-Sector Short Term Bond Fund(1)

     1.10 %      1.60 %      1.35 %      0.85 %      N/A        1.85 %      January 31, 2017   

 

(1)  Fund expenses currently below the capped level.

Investors should retain this supplement with the Prospectuses for future reference.

 

 

VOT 8020/MSSTBNewExpCap&Waiver (09/15)

Table of Contents

VIRTUS OPPORTUNITIES TRUST

101 Munson Street

Greenfield, MA 01301-9668

 

Trustees

George R. Aylward

Hassell H. McClellan

Philip R. McLoughlin, Chairman

Geraldine M. McNamara

James M. Oates

Richard E. Segerson

Ferdinand L.J. Verdonck

Officers

George R. Aylward, President

Francis G. Waltman, Executive Vice President

W. Patrick Bradley, Senior Vice President, Chief Financial Officer and Treasurer

Kevin J. Carr, Senior Vice President, Chief Legal Officer, Counsel and Secretary

Nancy J. Engberg, Vice President and Chief Compliance Officer

Investment Adviser

Virtus Investment Advisers, Inc.

100 Pearl Street

Hartford, CT 06103-4506

Principal Underwriter

VP Distributors, LLC

100 Pearl Street

Hartford, CT 06103-4506

Administrator and Transfer Agent

Virtus Fund Services, LLC

100 Pearl Street

Hartford, CT 06103-4506

Custodian

JPMorgan Chase Bank, NA

1 Chase Manhattan Plaza

New York, NY 10005-1401

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   

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.

Table of Contents

 

For more information about

Virtus Mutual Funds, please call

your financial representative, or

contact us at 1-800-243-1574

or Virtus.com

 

8010    11-15

 

LOGO

 

Table of Contents

LOGO

 

ANNUAL REPORT

 

 

Virtus Emerging Markets Debt Fund*

Virtus Emerging Markets Equity Income Fund*

Virtus Emerging Markets Small-Cap Fund*

Virtus Global Infrastructure Fund

Virtus Global Opportunities Fund*

Virtus Global Real Estate Securities Fund*

Virtus Greater European Opportunities Fund*

Virtus International Equity Fund*

Virtus International Real Estate Securities Fund*

Virtus International Small-Cap Fund*

Virtus International Wealth Masters Fund

September 30, 2015

TRUST NAME: VIRTUS OPPORTUNITIES TRUST

* Prospectus supplement applicable to these Funds appears at the back of this annual report.

LOGO

Not FDIC Insured

No Bank Guarantee

May Lose Value

Table of Contents

Table of Contents

 

Message to Shareholders

  

      1   

Disclosure of Fund Expenses

  

      2   

Key Investment Terms

  

      4   
Fund   Fund
Summary		      Schedule
of
Investments		  

Virtus Emerging Markets Debt Fund (“Emerging Markets Debt Fund”)

     7         36   

Virtus Emerging Markets Equity Income Fund (“Emerging Markets Equity Income Fund”)

     9         40   

Virtus Emerging Markets Small-Cap Fund (“Emerging Markets Small-Cap Fund”)

     12         42   

Virtus Global Infrastructure Fund (fka Virtus Global Dividend Fund) (“Global Infrastructure Fund”)

     14         43   

Virtus Global Opportunities Fund (“Global Opportunities Fund”)

     17         44   

Virtus Global Real Estate Securities Fund (“Global Real Estate Securities Fund”)

     20         45   

Virtus Greater European Opportunities Fund (“Greater European Opportunities Fund”)

     23         47   

Virtus International Equity Fund (“International Equity Fund”)

     26         49   

Virtus International Real Estate Securities Fund (“International Real Estate Securities Fund”)

     29         51   

Virtus International Small-Cap Fund (“International Small-Cap Fund”)

     32         53   

Virtus International Wealth Masters Fund (“International Wealth Masters Fund”)

     34         54   

Statements of Assets and Liabilities

        58   

Statements of Operations

        62   

Statements of Changes in Net Assets

        66   

Financial Highlights

        72   

Notes to Financial Statements

        78   

Report of Independent Registered Public Accounting Firm

        92   

Tax Information Notice

        93   

Fund Management Tables

        94   

 

 

Proxy Voting Procedures and Voting Record (Form N-PX)

The subadvisers vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Board of Trustees of the Trust (“Trustees,” or the “Board”). 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, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission’s (the “SEC”) website at http://www.sec.gov.

Form N-Q Information

The Trust files a complete schedule of portfolio holdings for each Fund with 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.

Table of Contents

MESSAGE TO SHAREHOLDERS

To My Fellow Shareholders of Virtus Mutual Funds:

 

  LOGO   

I am pleased to present this annual report that reviews the performance of your fund for the twelve months ended September 30, 2015.

 

During this period, global equity markets were challenged by falling oil prices, China’s economic slowdown, Greece’s debt crisis, and the growing likelihood of an interest rate hike by the Federal Reserve (the “Fed”). Volatility took its toll on major U.S. equity indices for the twelve months ended September 30, 2015. The large-cap S&P 500® Index and Dow Jones Industrial AverageSM moderately declined 0.61% and 2.11%, respectively, while the technology-heavy NASDAQ Composite Index® gained 4.00%. By

 

comparison, international equities were down even further, with emerging markets hit particularly hard.

 

Against this backdrop, U.S. Treasuries remained an attractive “safe haven” among global investors. The bellwether 10-year U.S. Treasury yield declined from 2.52% at September 30, 2014 to 2.06% at September 30, 2015. Fixed income assets experienced slight losses in anticipation of the Fed’s stated intention to raise interest rates at the end of 2015. The Barclays U.S. Aggregate Bond Index, which tracks Treasuries and other investment-grade debt securities, gained 2.94% for the twelve-month period ended September 30, 2015, while non-investment grade bonds underperformed, with the Barclays U.S. Corporate High Yield Bond Index down 3.43% for the same period.

 

The strength of the global economy is likely to remain a concern for the markets in the months ahead. Actions by the Fed and other global central banks will be watched with great interest. Following the weak start to the year, the U.S. economy exhibited growth over the second and third quarters of 2015 – including stronger jobs, housing, and consumer spending data – and gives investors reason for optimism. Future market direction will be determined largely by the ability of corporations to continue to produce robust earnings.

 

Market uncertainty serves as a constant reminder of the importance of portfolio diversification, including exposure to both traditional and alternative asset classes. While diversification cannot guarantee a profit or prevent a loss, owning a variety of asset classes may provide a cushion against inevitable market fluctuations. Your financial advisor can help you ensure that your portfolio is adequately diversified across asset classes and investment strategies.

 

As always, thank you for entrusting Virtus with your assets. Should you have questions about your account or require assistance, please visit our website at www.Virtus.com, or call our customer service team at 1-800-243-1574. We appreciate your business and remain committed to your long-term financial success.

 

Sincerely,

 

LOGO

 

George R. Aylward

President, Virtus Mutual Funds

 

October 2015

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

Table of Contents

VIRTUS OPPORTUNITIES TRUST

Disclosure of Fund Expenses (Unaudited)

For the six-month period of April 1, 2015 to September 30, 2015

 

We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of a Virtus Opportunities Trust Fund (each, a “Fund”), you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class B and Class C shares; and (2) ongoing costs, including investment advisory fees, distribution and service fees, and other expenses. Class I shares and Class R6 shares are sold without sales charges and do not incur distribution and service fees. For further information regarding applicable sales charges, see Note 1 in the Notes to Financial Statements. These examples are intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your Fund’s costs in two ways.

Actual Expenses

The first section of the accompanying table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes

The second section of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the accompanying table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

Expense Table                       
     Beginning
Account Value
April 1, 2015		     Ending
Account Value
September 30, 2015		     Annualized
Expense
Ratio		     Expenses Paid
During
Period*		  

Emerging Markets Debt Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 963.50        1.35 %    $ 6.64   

Class C

     1,000.00        959.80        2.10        10.32   

Class I

     1,000.00        964.70        1.10        5.42   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,018.22        1.35        6.85   

Class C

     1,000.00        1,014.41        2.10        10.66   

Class I

     1,000.00        1,019.48        1.10        5.58   

Emerging Markets Equity Income Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 842.60        1.75 %    $ 8.08   

Class C

     1,000.00        839.10        2.50        11.53   

Class I

     1,000.00        843.10        1.50        6.93   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,016.18        1.75        8.88   

Class C

     1,000.00        1,012.38        2.50        12.69   

Class I

     1,000.00        1,017.45        1.50        7.61   

Emerging Markets Small-Cap Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 827.20        1.85 %    $ 8.47   

Class C

     1,000.00        825.40        2.60        11.90   

Class I

     1,000.00        828.60        1.60        7.33   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,015.68        1.85        9.39   

Class C

     1,000.00        1,011.87        2.60        13.20   

Class I

     1,000.00        1,016.95        1.60        8.12   

Global Infrastructure Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 920.00        1.23 %    $ 5.92   

Class C

     1,000.00        916.80        1.98        9.51   

Class I

     1,000.00        921.30        0.98        4.72   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,018.82        1.23        6.24   

Class C

     1,000.00        1,015.02        1.98        10.05   

Class I

     1,000.00        1,020.09        0.98        4.98   

Global Opportunities Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 973.90        1.46 %    $ 7.22   

Class B

     1,000.00        969.60        2.21        10.91   

Class C

     1,000.00        970.30        2.22        10.97   

Class I

     1,000.00        975.50        1.21        5.99   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,017.66        1.46        7.41   

Class B

     1,000.00        1,013.85        2.21        11.22   

Class C

     1,000.00        1,013.80        2.22        11.27   

Class I

     1,000.00        1,018.93        1.21        6.14   

Global Real Estate Securities Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 939.40        1.40 %    $ 6.81   

Class C

     1,000.00        935.60        2.15        10.43   

Class I

     1,000.00        940.40        1.15        5.59   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,017.96        1.40        7.11   

Class C

     1,000.00        1,014.15        2.15        10.91   

Class I

     1,000.00        1,019.23        1.15        5.84   
 

 

2

Table of Contents

VIRTUS OPPORTUNITIES TRUST

Disclosure of Fund Expenses (Unaudited) (Continued)

For the six-month period of April 1, 2015 to September 30, 2015

 

Expense Table                       
     Beginning
Account Value
April 1, 2015		     Ending
Account Value
September 30, 2015		     Annualized
Expense
Ratio		     Expenses Paid
During
Period*		  

Greater European Opportunities Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 994.10        1.45 %    $ 7.25   

Class C

     1,000.00        990.10        2.20        10.98   

Class I

     1,000.00        995.40        1.20        6.00   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,017.71        1.45        7.36   

Class C

     1,000.00        1,013.90        2.20        11.17   

Class I

     1,000.00        1,018.98        1.20        6.09   

International Equity Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 904.90        1.50 %    $ 7.16   

Class C

     1,000.00        901.40        2.25        10.72   

Class I

     1,000.00        906.40        1.25        5.97   

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   

International Real Estate Securities Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 956.70        1.50 %    $ 7.36   

Class C

     1,000.00        952.30        2.25        11.01   

Class I

     1,000.00        958.20        1.25        6.14   

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   

International Small-Cap Fund

  

        

Actual

  

  

Class A

   $ 1,000.00      $ 886.40        1.60 %    $ 7.57   

Class C

     1,000.00        883.00        2.35        11.09   

Class I

     1,000.00        888.30        1.35        6.39   

Class R6

     1,000.00        888.30        1.25        5.92   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,016.95        1.60        8.12   

Class C

     1,000.00        1,013.14        2.35        11.93   

Class I

     1,000.00        1,018.22        1.35        6.85   

Class R6

     1,000.00        1,018.72        1.25        6.35   

International Wealth Masters Fund

  

        

Actual

        

Class A

   $ 1,000.00      $ 926.10        1.55 %    $ 7.48   

Class C

     1,000.00        922.00        2.30        11.08   

Class I

     1,000.00        927.10        1.30        6.28   

Hypothetical (5% return before expenses)

  

  

Class A

     1,000.00        1,017.20        1.55        7.87   

Class C

     1,000.00        1,013.39        2.30        11.68   

Class I

     1,000.00        1,018.47        1.30        6.60   
* Expenses are equal to the relevant 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.

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.

 

 

3

Table of Contents

KEY INVESTMENT TERMS

 

American Depositary Receipt (ADR)

Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a U.S. bank or a trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares.

Barclays U.S. Aggregate Bond Index

The Barclays U.S. Aggregate Bond Index measures the U.S. investment-grade fixed-rate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Barclays U.S. Corporate High Yield Bond Index

The Barclays U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Dow Jones Industrial AverageSM

A price weighted average of 30 blue chip stocks. The index is calculated on total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Exchange-Traded Funds (ETF)

An open-end fund that is traded on a stock exchange. Most ETFs have a portfolio of stocks or bonds that track a specific market index.

European Central Bank (“ECB”)

The European Central Bank (ECB) is responsible for conducting monetary policy for the euro area. The ECB was established as the core of the Eurosystem and the European System of Central Banks (ESCB). The ESCB comprises the ECB and the National Central Banks (NCBs) of all 17 EU Member States whether they have adopted the Euro or not.

Federal Reserve (the “Fed”)

The Central Bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable. Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system.

FTSE EPRA/NAREIT Developed Rental ex U.S. Index (net)

The FTSE EPRA/NAREIT Developed Rental ex U.S. Index (net) is a free-float market capitalization-weighted index measuring international real estate securities, which meet minimum size, liquidity and investment focus criteria. The index is a sub-set of the FTSE EPRA/NAREIT Investment Focus Index Series, which separates the existing constituents into both Rental and Non-Rental Indices. A company is classified as Rental if the rental revenue from properties is greater than or equal to 70% of total revenue. The classification is based on revenue sources as disclosed in the latest published financial statement. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

FTSE EPRA/NAREIT Developed Rental Index (net)

The FTSE EPRA/NAREIT Developed Rental Index (net) is a free-float market capitalization-weighted index measuring global real estate securities, which meet minimum size, liquidity and investment focus criteria. The index is a sub-set of the FTSE EPRA/NAREIT Investment Focus Index Series, which separates the existing constituents into both Rental and Non-Rental Indices. A company is classified as Rental if the rental revenue from properties is greater than or equal to 70% of total revenue. The classification is based on revenue sources as disclosed in the latest published financial statement. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Global Infrastructure Linked Benchmark

The Global Infrastructure Linked Benchmark consists of the MSCI World Infrastructure Sector Capped Index, a market capitalization weighted index that measures performance of global infrastructure companies by capturing broad and diversified opportunities across telecommunication, utilities, energy, transportation and social infrastructure sectors. The

 

4

Table of Contents

KEY INVESTMENT TERMS (Continued)

 

telecommunication infrastructure and utilities sector each represent one-third of the index weight, while energy, transportation and social infrastructure sectors have a combined weight of the remaining one-third of the index. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment. Performance of the Global Infrastructure Linked Benchmark prior to 9/1/2008 represents an allocation consisting of 65% MSCI USA/Utilities Index, 20% MSCI World Telecom Services Index, and 15% MSCI World ex USA/Utilities Index.

Horizon Kinetics ISE Wealth Index (RCH)

Is a public index published by International Securities Exchange, LLC. The index is composed of companies with wealthy individuals in positions of influence or control who have a substantial amount of their personal wealth invested in the business. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

JPMorgan Corporate Emerging Markets Bond Index (CEMBI)

The JPMorgan Corporate Emerging Markets Bond Index (CEMBI) is a global, liquid corporate emerging markets benchmark that tracks U.S. dollar-denominated corporate bonds issued by emerging markets entities.

JPMorgan Emerging Markets Bond Index Global Diversified (EMBI Global Diversified)

The JPMorgan Emerging Markets Bond Global Diversified Index (EMBI Global Diversified) is a uniquely-weighted version of the JPMorgan EMBI Global Index. The index limits the weights of those countries with larger debt stock by only including specified portions of these countries’ eligible current face amounts of debt outstanding. The countries covered in the EMBI Global Diversified Index are identical to those covered by the EMBI Global Index. The EMBI Global Index tracks total returns for U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

JPMorgan Government Bond Index-Emerging Markets (GBI-EM)

The GBI-EM is the first comprehensive, global local emerging markets index, and consists of regularly traded, liquid fixed rate, domestic currency government bonds. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI All Country World ex U.S. Small Cap Index (net)

The MSCI All Country World Index ex U.S. Small Cap Index (net) is a free float-adjusted market capitalization-weighted index that measures small cap equity performance of developed and emerging markets, excluding the U.S. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI All Country World Index (net)

The MSCI All Country World Index (net) is a free float-adjusted market capitalization-weighted index that measures equity performance of developed and emerging markets. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI EAFE® Index (net)

The MSCI EAFE® (Europe, Australasia, Far East) Index (net) is a free float-adjusted market capitalization-weighted index that measures developed foreign market equity performance, excluding the U.S. and Canada. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI Emerging Markets Index (net)

The MSCI Emerging Markets Index (net) is a free float-adjusted market capitalization-weighted index designed to measure equity market performance in the global emerging markets. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

 

5

Table of Contents

KEY INVESTMENT TERMS (Continued)

 

MSCI Emerging Markets Small Cap Index (net)

The MSCI Emerging Markets Small Cap Index (net) is a free float-adjusted market capitalization-weighted index designed to measure small cap equity market performance in the global emerging markets. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI Europe Index (net)

The MSCI Europe Index (net) is a free float-adjusted market capitalization weighted index that measures equity market performance of the developed markets in Europe. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

MSCI World Index (net)

The MSCI World Index (net) is a free float-adjusted market capitalization-weighted index that measures developed global market equity performance. The index is calculated on a total return basis with net dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

NASDAQ Composite Index®

A market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. Unlike other market indexes, the NASDAQ composite is not limited to companies that have U.S. headquarters. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Organization of the Petroleum Exporting Countries (OPEC)

The Organization of the Petroleum Exporting Countries was originally organized in September 1960 with 5 member countries and there are currently 12 member countries. The organization’s objective is to co-ordinate and unify petroleum policies among member countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.

Payment-in-Kind Security (PIK)

A bond which pays interest in the form of additional bonds, or preferred stock which pays dividends in the form of additional preferred stock.

Quantitative Easing (QE)

A government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

Real Estate Investment Trust (REIT)

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® Index

The S&P 500® 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 index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.

Sponsored ADR (American Depositary Receipt)

An ADR which is issued with the cooperation of the company whose stock will underlie the ADR. Sponsored ADRs generally carry the same rights normally given to stockholders, such as voting rights. ADRs must be sponsored to be able to trade on a major U.S. exchange such as the New York Stock Exchange (“NYSE”).

 

6

Table of Contents

Emerging Markets Debt Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VEDAX

Class C: VEDCX

Class I: VIEDX

 

Portfolio Manager Commentary by Newfleet Asset Management, LLC

 

¢   The Fund is non-diversified and has an investment objective of total return from current income and capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -7.85%, Class C shares returned -8.44%, and Class I shares returned -7.52%. For the same period, the Barclays U.S. Aggregate Bond Index, a broad-based fixed income index, returned 2.94%, and the JPMorgan Emerging Markets Bond Global Diversified Index, the Fund’s style-specific benchmark appropriate for comparison, returned -0.62%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

Emerging market (EM) dollar-denominated debt returns lagged U.S. investment grade and Treasury sectors while outperforming the U.S. high yield corporate sector during the fiscal year ended September 30, 2015. EM sovereign dollar-denominated debt, as represented by the J.P. Morgan EMBI Global Diversified Index (EMBI), returned -0.62% for the period. EM dollar-denominated corporate debt, as represented by the J.P. Morgan CEMBI Diversified Index (CEMBI), returned -0.51% for the period while local market returns as measured by the J.P. Morgan GBI-EM Diversified Index returned -18.17%.

EM debt market returns were negatively impacted by the deceleration in China economic growth and lower commodity prices. The slowdown in the Chinese economy has been focused on the manufacturing sector and resulted in a meaningful decline in trade activity which has impacted a host of emerging market economies. Meanwhile, the decline in commodity prices has largely reflected oversupply across a number of hard commodities including most importantly within the oil market. Pressure on oil prices intensified post the November 2014 OPEC meeting when the group determined it would maintain production levels. Subsequently, oil prices fell sharply

into mid-January 2015 before staging a modest recovery through June before once again falling toward multi-year low levels in September 2015.

The deterioration in Brazil’s credit quality during the period and a strong U.S. dollar also contributed to negative returns across the EM asset class. In Brazil, the corruption investigation surrounding Petrobras and elevated political turmoil led to rating downgrades to below investment grade at both Petrobras (by two agencies) and at the Brazil sovereign level (by one agency) as fundamentals deteriorated.

Within the JPMorgan Emerging Markets Bond Index Global Diversified (EMBI Global Diversified) sovereign universe, investment grade bonds outperformed led by the Asia and European regions including China and Russia. Meanwhile, high yield sovereign debt and commodity exporters underperformed led by Venezuela and Brazil. The JPMorgan Corporate Emerging Market Bond Index (CEMBI) universe experienced similar trends to the sovereign index with negative performance led by the Brazil corporate sector and the commodity sectors and partially offset by Asia and Europe regions. EM technical factors moderated during the period with more modest supply somewhat offset by a decline in inflows to the sector.

What factors affected the Fund’s performance during its fiscal year?

The Fund’s overall return performance for the period lagged its style-specific benchmark. Country exposure to China, India, Hong Kong, Thailand, Peru, Poland, Romania, and Hungary and within the Middle East region contributed positively to the Fund’s relative performance. The move during the period to overweight high quality sovereign and corporate sectors also helped relative performance. While Russia country exposure was accretive to Fund returns, the decision to move to a modest underweight hurt relative performance versus the benchmark index during the period.

Exposure to commodity-related issuers, including a relative overweight in Venezuela, detracted from overall performance during the period with significant mark-to-market losses on a handful of oil and mining-related corporate issues. Exposure to the Brazil corporate sector, in particular to Petrobras and a drill rig operator, also detracted from the Fund’s

relative performance as did out-of-index local market non-dollar exposure. During the period, the Fund reduced its exposure to local markets, to Brazil issuers, and to commodity-linked issuers which contributed to improved relative performance in the last six months of the period.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Corporate Bonds and Notes

       70 % 

Financials

     28 %     

Energy

     16       

Materials

     9       

Industrials

     5       

All other Corporate Bonds
and Notes

     12       

Foreign Government Securities

       27   

Other (includes short-term investments)

       3   
     

 

 

  

Total

       100 % 
           

 

 

  

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

7

Table of Contents

Emerging Markets Debt Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        Since
Inception		       

Inception

Date

  
Class A Shares at NAV2        -7.85 %         -0.52 %         9/5/12   
Class A Shares at POP3,4        -11.30           -1.75           9/5/12   
Class C Shares at NAV2 and with CDSC4        -8.44           -1.24           9/5/12   
Class I Shares at NAV        -7.52           -0.27           9/5/12   
Barclays U.S. Aggregate Bond Index        2.94           1.74 5         —   
JPMorgan Emerging Markets Bond Global Diversified Index        -0.62           1.84 5         —   

Fund Expense Ratios6: A Shares: Gross 1.52%, Net 1.35%; C Shares: Gross 2.27%, Net 2.10%; I Shares: Gross 1.27%, Net 1.10%.

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 3.75% 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on September 5, 2012 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

8

Table of Contents

Emerging Markets Equity Income Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VEIAX

Class C: VEICX

Class I: VEIIX

 

Portfolio Manager Commentary by Kleinwort Benson Investors, International, Ltd.

 

¢   The Fund is diversified and has investment objectives of seeking capital appreciation and income.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -19.13%, Class C shares returned -19.78%, and Class I shares returned -18.95%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the MSCI Emerging Markets Index (net), the Fund’s style-specific benchmark appropriate for comparison, returned -19.28%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

During the Fund’s fiscal year, all regional markets ended the 12-month period in negative territory, with emerging markets, and Latin America in particular, being the worst performer. The MSCI Emerging Markets Index (net) returned -19.28% over the year.

Emerging markets had a difficult period as a strengthening U.S. dollar, expectations that the Federal Reserve would raise interest rates sooner than expected, and slowing global growth outside the U.S. dampened investor enthusiasm for the region. Investors have been concerned about the impact of rising U.S. interest rates on emerging market economies. Fortunately, emerging market governments have been given a long time to prepare for this eventuality and have generally implemented sensible reforms. Export growth continued to disappoint across the region as growth outside the U.S. remained lackluster, increasing the need for appropriate self-help measures.

Commodity-dependent countries such as Russia, Brazil, and Colombia struggled due to further sharp declines in commodity prices during the period under review. Poor market performance was exacerbated by currency losses with the Mexican peso, South African rand, Brazilian real, and Malaysia ringgit all posting

sharp declines. While we are concerned regarding corporate profitability, the ongoing commodity price weakness has taken some of the pressure off margins. Also, slower economic growth has dampened wage demands, and this will in time enable companies to generate superior returns.

What factors affected the Fund’s performance during its fiscal year?

In constructing the portfolio, we seek to ensure that all excess value is delivered through security selection rather than through regional or sector bets. This is due to our conviction that the characteristics exhibited by companies and managements that are committed to paying and growing their dividends are powerful indicators of a company’s future health and profitability. The Fund’s strategy moderately outperformed the benchmark during the fiscal year. Style factors inevitably have an impact. In terms of style, despite the sharp declines registered by equity markets, growth outperformed value over the 12-month period. This acted as a headwind for our strategy during the period. We inherently have a value tilt in the portfolio, as one of the key market inefficiencies that we exploit is the underpricing by investors of the earnings growth delivered by higher payout companies.

In addition, during the 12-month period, investors did not favor traditional high-yield stocks. The Fund’s relative outperformance was driven by the fact that we focus on quality companies (those with superior capital management, subsequently superior return on equity, and return on invested capital). The other key reason we kept pace with the markets was that while we like dividend-paying and dividend-growing companies, we do so in an unconventional way; we do not fall into the traditional income traps of concentrating our risk budget on specific sectors and regions. Our all-cap, all-region, all-industry investment approach allows us to look for companies with a strong dividend discipline where others do not.

Regionally our performance was strongest in Asia, followed by Europe, Middle East and Africa, with Latin America the only region where we underperformed. The reason that Latin America underperformed is because the outperformance of growth over value was so pronounced in this region. In term of industry groups, relative performance contributed very positively to performance in both banks and real

estate. In banks, our selection of a number of Chinese banks in the portfolio was vindicated as investors rewarded their strong balance sheets, especially their robust capital positions. In real estate, our top performing stock was a Chinese stock which benefited from government reforms in the domestic real estate sector. Relative performance was particularly disappointing in capital goods and energy. These industry groups were hit by concerns over global capital investment and by the sharp decline in global oil prices. The largest stock detractor from our relative performance versus the index was a Chinese Internet stock that we did not hold as investors sought refuge in low yielding growth stocks.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Financials

     31 % 

Information Technology

     17   

Industrials

     9   

Consumer Discretionary

     9   

Energy

     8   

Telecommunication Services

     8   

Consumer Staples

     6   

Other (includes short-term investments)

     12   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

9

Table of Contents
Emerging Markets Equity Income Fund (Continued)

 

Geographic Concentration: A fund that focuses its investments in a particular geographic location will be highly sensitive to financial, economic, political, and other developments affecting the fiscal stability of that location.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

10

Table of Contents

Emerging Markets Equity Income Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -19.13 %         -3.77 %         9/5/12   
Class A Shares at POP3,4        -23.78           -5.61           9/5/12   
Class C Shares at NAV2 and with CDSC4        -19.78           -4.50           9/5/12   
Class I Shares at NAV        -18.95           -3.54           9/5/12   

S&P 500® Index

        -0.61           13.12 5        
 —
   
MSCI Emerging Markets Index (net)        -19.28           -3.08 5         —   

Fund Expense Ratios6: A Shares: Gross 2.01%, Net 1.75%; C Shares: Gross 2.76%, Net 2.50%; I Shares: Gross 1.76%, Net 1.50%.

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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on September 5, 2012 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

11

Table of Contents

Emerging Markets Small-Cap Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VAESX

Class C: VCESX

Class I: VIESX

 

Portfolio Manager Commentary by Kayne Anderson Rudnick Investment Management, LLC

 

¢   The Fund is diversified and has an investment objective of capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -21.20%, Class C shares returned -21.68%, and Class I shares returned -20.96%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the MSCI Small Cap Index (net), the Fund’s style-specific benchmark appropriate for comparison, returned -15.23%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

The MSCI Emerging Markets Small Cap Index declined during the fiscal year. Fears over slowing growth in China, the dramatic rise and fall of the Shanghai Stock Exchange, falling commodity prices, and uncertainty surrounding the Federal Reserve policy caused emerging market assets to decline sharply. The decline was magnified in dollar terms, as many emerging market currencies depreciated significantly over the past 12 months.

In China, the shift from an investment-driven economy to a consumption-driven economy is ongoing and has been bumpy. As such, markets more closely tied to China were the biggest underperformers during the period. This included countries with significant commodity exposure, such as Brazil, Russia, Colombia, South Africa, and Indonesia. It also included markets closely tied to China economically, such as Hong Kong and Taiwan. Accordingly, the strongest performing markets during the period were India and South Korea, both of which have relatively low exposure to commodity prices and less linkage to the Chinese economy.

The strongest sector during the period was healthcare. The weakest sectors were energy and materials.

 

What factors affected the Fund’s performance during its fiscal year?

The Fund underperformed the MSCI Emerging Markets Small Cap Index over the fiscal year. Country and currency mismatches relative to the benchmark detracted from performance, created by our relatively higher exposure in Brazil, Malaysia, South Africa, and Turkey, which experienced sharp currency devaluations and heightened volatility. Relative underweight positions in India and South Korea also detracted from performance. We emphasize that our country selection is driven not by trying to predict macroeconomic outcomes, but by our bottom-up search for the highest quality companies with the best risk-reward in our universe. We tend to own larger positions than most managers, and many of these positions are not highly correlated with the markets in which they trade. This will, at times, result in performance for the Fund that varies materially from the benchmark. We believe that our concentrated, high-quality approach will achieve excess returns over a complete market cycle.

In addition to mismatches in geographic and currency weights, one particular stock, Tegma Gestao Logistica, was a significant detractor from performance. As the largest provider of logistic services for the automotive industry in Brazil, the company struggled as automotive sales and production in Brazil declined dramatically over the last two years as the challenging economic backdrop descended into a crisis. While the company has remained profitable and maintained its leading market share, we have been disappointed by the margin declines experienced this year and the departure of the company’s prior CEO.

The biggest contributor to performance over the past year was BFI Finance, a consumer finance company in Indonesia. The company’s stock rose during the period, driven by continued strong revenue and profit growth. BFI Finance maintains a unique distribution model in rural Indonesia, providing consumer lending services through its 225 outlets, the majority of which are located outside of the Java region in remote areas where client relationships are crucial. Trading at roughly half the valuation of other Indonesian banks and finance companies while still posting healthy growth and returns, we still find significant upside potential remaining for the stock.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Consumer Staples

     24 % 

Industrials

     19   

Financials

     16   

Information Technology

     15   

Materials

     11   

Consumer Discretionary

     8   

Telecommunication Services

     3   

Health Care

     2   

Other (includes short-term investments)

     2   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Limited Number of Investments: Because the Fund has a limited number of securities, it may be more susceptible to factors adversely affecting its securities than a less concentrated fund.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

12

Table of Contents

Emerging Markets Small-Cap Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year       

Since

Inception

       

Inception

Date

  
Class A Shares at NAV2        -21.20 %         -10.81 %         12/17/13   
Class A Shares at POP3,4        -25.73           -13.72           12/17/13   
Class C Shares at NAV2 and with CDSC4        -21.68           -11.42           12/17/13   
Class I Shares at NAV        -20.96           -10.56           12/17/13   
S&P 500® Index        -0.61           6.46 5         —   
MSCI Small Cap Index        -15.23           -4.15 5         —   

Fund Expense Ratios6: A Shares: Gross 4.84%, Net 1.85%; C Shares: Gross 5.59%, Net 2.60%; I Shares: Gross 4.59%, Net 1.60%.

All returns represent past performance which is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The above table and graph below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. Please visit Virtus.com for performance data current to the most recent month-end.

1  Total returns are historical and include changes in share price and the reinvestment of both dividends and capital gains distributions.
2  “NAV” (Net Asset Value) total returns do not include the effect of any sales charge.
3  “POP” (Public Offering Price) total returns include the effect of the maximum front-end 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on December 17, 2013 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

13

Table of Contents

Global Infrastructure Fund

 

Fund Summary

   

Ticker Symbols:

Class A: PGUAX

Class C: PGUCX

Class I: PGIUX

 

Portfolio Manager Commentary by Duff & Phelps Investment Management Co.

 

¢   The Fund is diversified and has investment objectives of both capital appreciation and current income.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -8.27%, Class C shares returned -8.94%, and Class I shares returned -7.98%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the Global Infrastructure Linked Benchmark, the Fund’s style-specific benchmark appropriate for comparison, returned -10.65%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

For the 12 months ended September 30, 2015, after heighten levels of volatility, most developed world equity markets finished in negative territory. Markets were subjected to multiple events that put investors on edge. The negative overtone began early in the period when OPEC refused to cut production levels, and oil prices and energy stocks sold off as a result. In Europe, equity markets see-sawed throughout the period with the fortunes of Greece as a eurozone collapse was once again narrowly averted. The recurring Greek crisis and an unsteady economic pace overshadowed the potential benefits from eurozone quantitative easing. Toward the end of the period, China devalued its currency as its economy was slowing and its stock market falling. In a domino effect, commodities sold off worldwide, and global stock markets tumbled.

The U.S. equity market, although still negative, performed better than many others over the last 12 months as its economy continued to be healthier than those of other developed nations. However, near the end of the period, after heavy anticipation and substantial speculation, the Federal Reserve chose not to raise interest rates, but instead held steady.

U.S. equity markets initially reacted negatively, jolted by fears of an unstable economic recovery. The stage is now set for a policy change before year-end, or even perhaps sometime into 2016.

What factors affected the Fund’s performance during its fiscal year?

The same negative sentiment that overtook broader equities markets over the past 12 months also contributed to the Fund posting negative performance. The Fund beat the benchmark during the period, but lagged behind global equities. Over the period, the performance of the Fund’s transportation and utilities holdings were positive. Communications declined modestly, while energy was significantly negative.

The primary contributor to the Fund’s outperformance versus the benchmark was stock selection within the utilities sector. Utilities experienced heighten volatility throughout the period, and rallied sharply near the end when the Fed opted to hold interest rates steady and treasury yields fell. Our favored U.S. regulated utility companies posted strong performance resulting in the significant positive contribution. We are attracted to the strong fundamental underpinning of robust capital spending programs and supportive regulatory environments in the U.S. We continue to avoid companies with power price exposure given that merchant power markets are difficult worldwide due to excess capacity and downward pressure of fuel related commodities. However, we expect continued volatility in U.S. utilities as the road to Fed tightening is paved with interest rate concerns among investors.

Transportation was the Fund’s largest overweight during the period and the second largest contributor to outperformance versus the benchmark. A positive allocation effect and strong stock selection were the drivers. Our transportation holdings, primarily located in Europe and Australia, continued to post strong traffic and passenger numbers, even given a backdrop of wavering economies. Long-term concession agreements with government authorities, attractive cash flows, and stable or growing dividends support our overweight investment thesis.

Communications, which was the Fund’s largest underweight, was neutral versus the benchmark over the last 12 months. A positive selection impact was

essentially offset by a negative allocation effect. The significant underweight is due to concerns about the wireless competitive environment for U.S. integrated telecommunications companies. European telecommunications fundamentals are mixed, and M&A seems to have run into a regulatory roadblock. We remain comfortable with the overweight position in U.S. tower and European satellite companies as the revenue growth profiles and high margins provide for attractive long-term investment opportunities. The portfolio benefits from the attractive dividend yields communications companies provide, which are generally well supported by cash flows.

The energy sector had a negative impact on performance versus the benchmark during the 12-month period, as we had an overweight position allocated to the worst performing sector. Energy stocks were hammered, first early in the period when OPEC decided not to cut production, and then again toward the end of the period due to the China-related global commodities pullback and fears of earnings weakness related to drilling cuts. Early on, we decided to maintain our overweight given that our midstream-oriented holdings (pipelines, gatherers, and processors) generally have little short- or intermediate-term exposure to oil prices. However, our thesis failed to bear fruit as investors did not distinguish the mid-stream companies from the oil-price dependent exploration and production companies. However, we are maintaining our midstream oriented energy overweight as we remain confident that multi-year contracts and regulatory agreements underpin attractive revenues, cash flows, and dividends going forward.

Another detractor from the Fund’s performance versus the benchmark for the period was the social services sector, which benefited from the strength of health care stocks. However, the Fund does not invest in health care or education services companies as we do not believe they meet our investment criteria for revenue visibility, dividend yield, and geographic diversification.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

14

Table of Contents
Global Infrastructure Fund (Continued)   

 

There is no guarantee that the Fund will meet its objectives.

 

 
Asset Allocation  
 

The following table presents asset allocations

within certain sectors and as a percentage of

total investments as of September 30, 2015.

 

  

  

  

Utilities

     37 % 

Energy

     21   

Telecommunication Services

     18   

Industrials

     14   

Financials

     5   

Consumer Discretionary

     3   

Other (includes short-term investments)

     2   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Foreign Investing: Investing internationally involves additional risks such as currency, political, accounting, economic, and market risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Income: Income received from the Fund may vary widely over the short- and long-term.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

15

Table of Contents

Global Infrastructure Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15                                
       1 year        5 years        10 years        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -8.27 %         8.36 %         6.29 %         —           —   
Class A Shares at POP3,4        -13.55           7.09           5.67           —           —   
Class C Shares at NAV2 and with CDSC4        -8.94           7.56           5.50           —           —   
Class I Shares at NAV        -7.98           8.63           —           3.88 %         6/6/08   
S&P 500® Index        -0.61           13.34           6.80           7.12 5         —   
Global Infrastructure Linked Benchmark        -10.65           6.58           5.01           2.09 5         —   

Fund Expense Ratios6: A Shares: 1.29%; C Shares: 2.04%, I Shares: 1.04%.

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 returns are from Class I inception date (6/6/08).
6  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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, 2005, for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

16

Table of Contents

Global Opportunities Fund

 

Fund Summary

   

Ticker Symbols:

Class A: NWWOX

Class B: WWOBX

Class C: WWOCX

Class I: WWOIX

 

Portfolio Manager Commentary by Vontobel Asset Management, Inc.

 

¢   The Fund is diversified and has an investment objective of capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned 2.15%, Class B shares returned 1.33%, Class C shares returned 1.42%, and Class I shares returned 2.37%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the MSCI AC World Index (net), the Fund’s style-specific benchmark appropriate for comparison, returned -6.66%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the market perform during the Fund’s fiscal year?

 

¢   The MSCI All Country World Index (Total Return Net Dividends) was essentially flat in fiscal Q1, positive in fiscal Q2, essentially flat again in fiscal Q3, and negative in fiscal Q4 as global markets sold off.

 

¢   The U.S. stock market fell sharply in October 2014 and again in December 2014. However, its quick rebound in both months signified its underlying economic strength as it entered 2015 with strong momentum. For the first half of 2015, U.S. stocks gained approximately 1% as disappointing economic data, lackluster corporate earnings, uncertainties about an initial Federal Reserve rate hike, and concerns regarding the Greek debt crisis contributed to U.S. equity market volatility. Despite a relatively solid economic backdrop in the U.S., stocks suffered losses in the last three months of the period, amid concerns over global growth and further uncertainty driven by the U.S. Federal Reserve’s decision in September to postpone the pending rate hike. U.S. equities (as represented by the S&P 500® Index) returned -0.61% over the one-year period ended September 30, 2015.

 

¢   Towards the end of 2014, European equities struggled, as disappointing economic data was released
   

and the European Central Bank lowered its growth forecasts for the eurozone economy. However, European equities entered positive territory in the beginning of 2015, bolstered by central bank bond purchases. By mid-year, the Greek debt crisis impacted European markets, which experienced losses through September, as the effects of the Chinese slowdown and a scandal at German auto manufacturer Volkswagen weighed on investor sentiment. Over the one-year period ended September 30, 2015, European equities (as represented by the MSCI Europe Index) returned -9.33% in U.S. dollar terms. The euro experienced a significant devaluation, declining more than 11.5% against the U.S. dollar over the period.

 

¢   Falling commodity prices and a strengthening U.S. dollar drove emerging markets to negative territory at the end of 2014. Emerging markets entered 2015 with positive momentum with promising developments occurring in India, where equities benefited from two unexpected central bank rate cuts and a greater government focus on infrastructure spending. After reaching highs in late April driven by soaring Chinese equity markets, emerging markets experienced steep declines as concerns over China’s weak macroeconomic data, Beijing’s unexpected move to devalue its currency, and substantial Chinese equity market volatility led to a global market sell-off in August. Emerging markets suffered far worse than their developed market counterparts. Currencies of many developing countries tumbled as well. Emerging market equities (as represented by the MSCI Emerging Markets Index) returned -19.28% (net) in U.S. dollar terms over the one-year period ended September 30, 2015.

What factors affected the Fund’s performance during its fiscal year?

The following discussion highlights specific stocks – those that provided the largest contribution to absolute performance and those that were the largest detractors for the quarter. As bottom-up stock pickers, we hope shareholders find this useful and gain a greater understanding of how we invest their capital.

Stocks that Helped Absolute Performance

MasterCard is the second largest global payment network and is gaining share in a secularly growing

industry. Global payments volume has grown at greater than 10% annually for more than five years, and MasterCard may be capable of growing its volume at a 10-12% rate annually for the next several years. Global card penetration relative to cash and check transactions had been about 36% in the recent past and may grow to 45-50% by 2018. Certainly the trend of consumers buying more and more goods online is a strong impetus for the continued preference of cards over cash. MasterCard continued to show strong underlying growth throughout the period, and concerns over any regulatory issues directly related to the company have faded for the time being.

Visa posted solid FY3Q2015 results, including a slight FY2015 EPS guidance raise. Visa is a leader in debit/credit transaction processing for card-issuing banks around the world. The company is a beneficiary of the secular shift from cash and checks to credit and debit cards. We like the transaction processing sector and believe Visa is well-positioned for continued strong growth.

Stocks that Hurt Absolute Performance

Baidu disappointed over the period, with continued weakness in margins as the company is spending heavily on marketing to drive adoption of its online-to-offline (“O2O”) platforms. We agree that over the longer term O2O is the right strategy, as it allows Baidu to take a higher share of revenues from completed transactions in local services areas, such as food delivery. Longer term, as search revenue slows down, we think O2O transactions will become a more important growth driver for the company; however, shorter term the investment required is impacting margins. We believe the majority of these investments are discretionary and will be pulled back over the years. The core search business continues to perform well, with revenue growth in the 30-35% range as the investments the company has made in promoting mobile search are coming to fruition. However, the O2O strategy is not driving incremental revenue growth for the near term and intense competition for the O2O markets continues to be strong. This is necessitating Baidu to spend more aggressively on marketing and promotion to try to win market share, which is not value added from a shareholder’s perspective, and continues to drag down margins.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

17

Table of Contents
Global Opportunities Fund (Continued)   

 

Las Vegas Sands, and other Macau-exposed gaming stocks, continued to be weak over the period due to the onslaught of incrementally bad news from a macroeconomic and policy standpoint. Macau is still under pressure as the Chinese government crackdown on corruption as well as the economic weakness on the mainland has hurt visitation growth and gambling appetite. In the July through September period, there was new negative news out of the junket space in Macau. Junkets are a key facilitator to the VIP business, which has already contracted meaningfully. Now, we have seen news of some higher profile weakness in the junket space – junkets closing or reducing operations. This does not shock us or change our investment thesis. In the coming year, we expect to see a turn in the underlying market performance as it lacks the previous year’s extreme weakness. We think the news regarding the crackdown on corruption and economic weakness in China will continue. We have, therefore, marginally reduced our exposure on the back of the inevitability of the ongoing pressure and have reallocated capital to better near-term opportunities. However, as we have detailed before, our conviction in the Macau space has not changed over the long term, even while the near- and medium-term horizon has been cloudy. We still believe it presents tremendous opportunities for highly profitable growth and strong cash returns for shareholders. In our opinion, continued patience, and the passage of time, is all that is needed here.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Consumer Staples

     31 % 

Financials

     20   

Health Care

     17   

Information Technology

     17   

Consumer Discretionary

     6   

Materials

     2   

Energy

     2   

Other (includes short-term investments)

     5   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Geographic Concentration: A fund that focuses its investments in a particular geographic location will be highly sensitive to financial, economic, political, and other developments affecting the fiscal stability of that location.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

18

Table of Contents

Global Opportunities Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15                                
       1 year        5 years        10 years       

Since

Inception

       

Inception

Date

  
Class A Shares at NAV2        2.15 %         10.22 %         4.94 %         —           —   
Class A Shares at POP3,4        -3.72           8.93           4.32           —           —   
Class B Shares at NAV2        1.33           9.40           4.17           —           —   
Class B Shares with CDSC4        -2.31           9.40           4.17           —           —   
Class C Shares at NAV2 and with CDSC4        1.42           9.42           4.17           —           —   
Class I Shares at NAV        2.37           —           —           9.79 %         8/8/12   
S&P 500® Index        -0.61           13.34           6.80           12.89 5         —   
MSCI AC World Index (net)        -6.66           6.82           4.58           7.70 5         —   

Fund Expense Ratios6: A Shares: 1.48%; B Shares: 2.23%; 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 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 Class I inception date (8/8/12).
6  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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, 2005, 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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

19

Table of Contents

Global Real Estate Securities Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VGSAX

Class C: VGSCX

Class I: VGISX

 

Portfolio Manager Commentary by Duff & Phelps Investment Management Co.

 

¢   The Fund is diversified and has a primary investment objective of long-term capital appreciation, with a secondary investment objective of income.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned 6.83%, Class C shares returned 6.07%, and Class I shares returned 7.11%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the FTSE EPRA/NAREIT Developed Rental Index (net), the Fund’s style specific benchmark appropriate for comparison, returned 5.32%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

The performance of global real estate equities significantly outperformed global equities as demonstrated by the 5.3% increase in the benchmark FTSE EPRA NAREIT Developed Rental Index versus the 5.1% drop in the MSCI World Index, both expressed in U.S. dollar terms. Global real estate equities also outperformed U.S. equities during the period, but by a smaller margin, as represented by the 0.6% decrease in the S&P 500® Index during the fiscal year.

Taking a closer look at the performance of individual countries represented within the FTSE EPRA NAREIT Developed Rental Index, the five top-performing countries during the fiscal year on a total return basis measured in U.S. dollars were Germany, the U.K., Italy, Sweden, and the U.S. Not surprisingly, the top performers had a decidedly European flavor. The launch of European style quantitative easing was a powerful force behind the performance of several of the top countries, and its strength was more than enough to offset the decline in the euro relative to the U.S. dollar. Germany finished the period in the number one spot driven by the ongoing positive performance of its apartment companies, which are disproportionately represented in the Index. A positive

fundamental landscape and a strong bid for German apartments drove capitalization rates lower and asset values higher.

Following the surprise May election win by the Conservative party, U.K. real estate equities and the British pound posted healthy rallies relative to their global developed market peers, helping drive the second best total returns by country during the fiscal year. Moreover, similar to German apartments, U.K. real estate continues to benefit from the dual tailwinds of a positive rental rate and capital cycle, which is only present in a few other countries on a global basis.

Italian, Swedish, and U.S. real estate shares also outperformed during the period as institutional real estate capital continued to flow into these markets looking to participate in better expected economic growth and real estate fundamentals in the case of Sweden and the U.S. and recovering real estate values in the case of Italy.

The five bottom-performing countries during the fiscal year were Norway, Greece, Singapore, Canada, and Finland. All five delivered negative total returns. During the fiscal year, the Norwegian krone and the Canadian dollar took it on the chin relative to the U.S dollar as oil prices collapsed. This was a significant factor behind Norway’s and Canada’s poor return performance. A deteriorating political situation in Greece and a continued decline in the euro relative to the U.S. dollar were contributors to the weak returns from Greece. Finnish returns experienced a knock-on effect from the growing problems in Russia, which weighed on the performance of its economy. Singapore was one of the weaker performing countries during the period given its ties to China and poor underlying real estate fundamentals.

Thematically, real estate companies remained active on the capital raising front, particularly in the U.S., Europe excluding the U.K., and Japan as they looked to fund redevelopment, development, and acquisitions of recently acquired companies or portfolios of assets. Portfolio pruning and asset recycling as an additional source of capital was more evident in the U.S than other markets, as is often the case. We also witnessed a pick-up in mergers and acquisition activity as several privatization deals were announced in the U.S., and public-to-public mergers were announced in the U.S. and Europe excluding the U.K. With the significant amount of real estate private

equity capital that has been raised, but currently remains unspent, and the more attractive valuations on offer by publicly traded real estate securities, we expect M&A activity to continue, if not accelerate, over the coming year.

Our global travels during the period brought us to several countries and cities in the U.S., European and Asia Pacific regions and were helpful in providing timely updates on the space and asset markets in each respective locale. Additionally, quality time was spent with existing strategy holdings and conducting due diligence on potential new investment opportunities. At a high level, the strong appetite for high-quality commercial real estate from a wide and deep pool of institutional capital sources was evident across most locations as reflected in recent asset market pricing trends. Space market trends were more varied throughout the markets visited, but were notably robust for U.S. self-storage, apartment, and industrial real estate; Central London real estate; German residential; and Dublin office. The Hong Kong office space market, particularly in the central region, was also surprisingly healthy, benefiting from an increase in demand from Mainland China firms. Among the noted property sectors and markets, new development over the visible horizon remains contained with the exception of Dublin office.

What factors affected the Fund’s performance during its fiscal year?

For the one-year period ended September 30, 2015, the Fund outperformed its style-specific benchmark. The Fund’s performance was driven solely by security selection, as country allocation detracted from performance over the period.

From a country perspective, the most significant positive contributor to relative performance was our stock selection within the U.S., which drove the majority of the Fund’s excess return. At the security level within the U.S., our overweight exposure to a mid-capitalization self-storage REIT had the largest positive impact on performance, as this company benefited from a positive fundamental backdrop for self-storage properties, property sector leading results, and a very active transaction market for self-storage properties at firm values. Lack of exposure to a large capitalization triple-net REIT that posted a significant negative total return also contributed positively to our U.S. stock selection.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

20

Table of Contents
Global Real Estate Securities Fund (Continued)   

 

The second most meaningful positive contributor at a country level to relative performance was our allocation to and stock selection within the U.K. At the security level within the U.K., our overweight exposure to a student housing real estate company had the largest positive impact on performance, as this company benefited from a positive fundamental backdrop for student housing and a very active transaction market for student housing properties at firm values. Overweight positions to the two largest publicly traded self-storage REITs in the U.K. also contributed positively to our U.K. stock selection.

From a country perspective, the most significant detractor from relative performance was our overweight allocation to Mexico. On a local currency basis, the combined performance of the Fund’s two Mexican industrial-focused REITs was positive; however, the significant decline in the Mexican peso over the period was a major headwind and drove the negative performance.

The second most meaningful detractor at a country level from relative performance was our overweight exposure to and stock selection within Singapore. Singapore real estate shares performed poorly over the period given its ties to China and generally weak real estate fundamentals. Our stock selection was negatively impacted by an overweight exposure to a global industrial real estate company based in Singapore, but with significant exposure to China.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Financials

     38 % 

Retail REITs

     17   

Office REITs

     12   

Diversified REITs

     9   

Residential REITs

     9   

Real Estate Operating Companies

     8   

Specialized REITs

     5   

Other (includes short-term investments)

     2   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Real Estate: The Fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

21

Table of Contents

Global Real Estate Securities Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        5 years        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        6.83 %         9.78 %         21.37 %         3/2/09   
Class A Shares at POP3,4        0.69           8.49           20.28           3/2/09   
Class C Shares at NAV2 and with CDSC4        6.07           8.97           20.47           3/2/09   
Class I Shares at NAV        7.11           10.07           21.69           3/2/09   
S&P 500® Index        -0.61           13.34           19.04 5         —   
FTSE EPRA/NAREIT Developed Rental Index (net)        5.32           9.09           21.07 5         —   

Fund Expense Ratios6: A Shares: Gross 1.57%, Net 1.40%; C Shares: Gross 2.32%, Net 2.15%; I Shares: Gross 1.32%, 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on March 2, 2009 (inception date of the Fund), for Class A, Class C, and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

22

Table of Contents

Greater European Opportunities Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VGEAX

Class C: VGECX

Class I: VGEIX

 

Portfolio Manager Commentary by Vontobel Asset Management, Inc.

 

¢   The Fund is diversified and has an investment objective of long-term capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned 1.19%, Class C shares returned 0.43%, and Class I shares returned 1.47%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the MSCI Europe Index (net), the Fund‘s style-specific benchmark appropriate for comparison, returned -9.33%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the market perform during the Fund’s fiscal year?

 

¢   The MSCI Europe Index, in U.S. dollar terms, was negative in fiscal Q1, up in fiscal Q2, essentially flat in fiscal Q3, and negative in fiscal Q4 as global markets sold off.

 

¢   Towards the end of 2014, European equities struggled, as disappointing economic data was released and the European Central Bank lowered its growth forecasts for the eurozone economy. However, European equities entered positive territory in the beginning of 2015, bolstered by central bank bond purchases. By mid-year, the Greek debt crisis impacted European markets, which experienced losses through September, as the effects of the Chinese slowdown and a scandal at German auto manufacturer Volkswagen weighed on investor sentiment. Over the one-year period ended September 30, 2015, European equities (as represented by the MSCI Europe Index) returned -9.33% (net) in U.S. dollar terms. The euro experienced a significant devaluation, declining more than 11.5% against the U.S. dollar over the period.

 

¢   Concerns over China’s weak macroeconomic data, Beijing’s unexpected move to devalue its currency, and substantial Chinese equity market volatility led to a global market sell-off in August. Slow global growth and uncertainty driven by the U.S. Federal
   

Reserve’s decision in September to postpone the pending rate hike also negatively impacted global equities at the end of the one-year period.

What factors affected the Fund’s performance during its fiscal year?

The following discussion highlights specific stocks – those that provided the largest contribution to absolute performance and those that were the largest detractors for the quarter. As bottom-up stock pickers, we hope that shareholders find this useful and gain a greater understanding of how we invest their capital.

Stocks that Helped Absolute Performance

SABMiller performed well as the potential acquisition by Anheuser-Busch Inbev (ABI), which has been long talked about, seemed to be getting closer. The companies acknowledged in the press that they are discussing a merger. From our point of view, it would be sad to lose SABMiller as an independent company, as we believe it has a long runway of growth ahead of it. Its exposure to the fast growing emerging markets is the largest of any of the major brewers, and it has high market share in many of those regions. Per capita consumption should grow, along with rising discretionary income, and pricing as well as a mix to more premium beer should drive growth as well.

Imperial Tobacco performed well, and we consider this outperformance to be sustainable, given expected growth in operating margins, free cash flow, and dividends. Imperial Tobacco PLC is a leading international tobacco company that manufactures, markets and sells a comprehensive range of tobacco products, including cigarettes and cigars. It is the second largest cigarette manufacturer in Europe, the leader in Spain and the U.K., while being second in Germany and France. Globally, it is the top cigar maker. On May 26, 2015, the Federal Trade Commission’s proposed order required Reynolds American to divest to Imperial Tobacco four established cigarette brands: Winston, Kool, Salem, and Maverick. With the acquisition of the divested assets, Imperial will become a more substantial competitor in the United States.

Stocks that Hurt Absolute Performance

UBS’s stock declined, mostly in July and August of 2015, along with other market-sensitive financials.

With a large portion of the company’s revenues tied to the trends in global asset prices, there is a direct impact on earnings when asset values fall. In addition, the stock’s weakness reflected investors’ expectation for slower net flows into UBS’s private banking business, particularly in the emerging markets. There has not been significant company-specific news in the quarter, and we continue to like the name longer term. UBS is one of the better capitalized banks in the world. With its growth shifting to the less-capital intensive wealth management and asset management businesses, UBS should become a powerful cash-generating machine, while still achieving healthy earnings growth. We expect the pace of capital returns to accelerate over the coming years. UBS is the largest global wealth manager, with two-thirds of its earnings expected to come from its asset-gathering businesses, after the company made a strategic decision to shrink its investment bank.

Roche’s stock suffered after a clinical trial showed that adding Kadcyla to the existing regimen of Herceptin and Perjeta failed to improve survival outcomes in breast cancer. Perjeta and Kadcyla represented Roche’s strategy of moving beyond Herceptin and onto next generation products. While Kadcyla’s failure was a disappointment, Perjeta has already established itself as part of the standard of care. With Perjeta and other formulations of Herceptin, Roche still has flexibility to grow its breast cancer franchise after the eventual introduction of biosimilars. More broadly, Roche remains a dominant oncology franchise, which gives it better understanding of disease biology while the in-house diagnostics business provides synergies with drug development. Roche is a leader in the emerging class of immunotherapy drugs, which has the potential to become another major franchise for the company, and also has a rich pipeline in other therapeutic areas.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

23

Table of Contents
Greater European Opportunities Fund (Continued)   

 

 

 
Asset Allocation  
 

The following table presents asset allocations

within certain sectors and as a percentage of

total investments as of September 30, 2015.

 

  

  

  

Consumer Staples

     38 % 

Health Care

     20   

Consumer Discretionary

     16   

Financials

     8   

Industrials

     5   

Materials

     5   

Information Technology

     3   

Other (includes short-term investments)

     5   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Foreign Investing: Investing internationally involves additional risks such as currency, political, accounting, economic, and market risk.

Geographic Concentration: A fund that focuses its investments in a particular geographic location will be highly sensitive to financial, economic, political, and other developments affecting the fiscal stability of that location.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

24

Table of Contents

Greater European Opportunities Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15                                
       1 year       

5 years

       

Since

Inception

       

Inception

Date

  
Class A Shares at NAV2        1.19 %         7.61 %         11.71 %         4/21/09   
Class A Shares at POP3,4        -4.63           6.34           10.69           4/21/09   
Class C Shares at NAV2 and with CDSC4        0.43           6.81           10.89           4/21/09   
Class I Shares at NAV        1.47           7.87           11.99           4/21/09   
S&P 500® Index        -0.61           13.34           15.90 5         —   
MSCI Europe Index (net)        -9.33           4.28           10.03 5         —   

Fund Expense Ratios6: A Shares: Gross 1.92%, Net 1.45%; C Shares: Gross 2.67%, Net 2.20%; I Shares: Gross 1.67%, 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect thru January 31, 2017. For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on April 21, 2009 (inception date of the Fund), for Class A, Class C, and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

25

Table of Contents

International Equity Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VIEAX

Class C: VIECX

Class I: VIIEX

 

Portfolio Manager Commentary by Euclid Advisors LLC

 

¢   The Fund is diversified and has an investment objective of long-term capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -9.43%, Class C shares returned -10.01%, and Class I shares returned -9.14%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the MSCI EAFE® Index (net), the Fund’s style-specific benchmark appropriate for comparison, returned -8.66%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

Developed international stock markets, as represented by the MSCI EAFE® Index (net), declined 8.7% during the Fund’s fiscal year. It was a volatile year as weakness in the first fiscal quarter, gave way to optimism over economic growth that erased the deficit and produced a 4.0% gain through the end of July. Unfortunately, that optimism faded quickly and the MSCI EAFE® Index lost 12.1% in the final two months of the year on fears of a global economic slowdown as China devalued the yuan in an attempt to boost its export-driven economy. To place the move into perspective, it was the worst consecutive two-month performance period since May 2012 when Europe was in the throes of a banking crisis and Japan was just months away from embracing the fiscal, monetary, and structural reforms that would become known as Abenomics. Portfolios that were positioned in defensive or consumer-related sectors, with the exception of utilities, benefited from the stability of cash flows and non-cyclical nature of many of their businesses.

Energy stocks continued the pattern of weakness recently that they exhibited when OPEC surprised the markets last Thanksgiving by voting not to curtail production despite weaker prices. Not much had changed as of the end of the fiscal year, as demand continued to grow but supply continued to grow

faster. Brent crude oil declined about 40% in the first fiscal quarter. Prices then stabilized in the spring and summer before falling another 30% to close the fiscal year. Basic materials were also victims of global economic slowdown concerns. Copper, iron ore, and nickel suffered double-digit declines and currencies of commodity-producing nations weakened relative to the U.S. dollar. In fact, the stronger dollar reduced international investors’ returns by roughly 7% as the MSCI EAFE® Index (net) returned -1.7% in local currency terms.

Japanese equity markets continued to benefit from policy changes brought on by Prime Minister Abe. Many companies have embraced better corporate governance and put cash to more productive use. This has been reflective in corporate earnings which grew 24% to a record ¥20 trillion ($170 billion). We believe that there is room for continued upside as strong bottom-up fundamentals are supported by the tailwinds of economic reform and monetary policy.

What factors affected the Fund’s performance during its fiscal year?

For the fiscal year ended September 30, 2015, the Fund performed in line with its primary benchmark and peer group. In a volatile year, strong relative sector allocation performance was partially offset by individual stock selection.

The Fund added the greatest amount of relative performance in the health care, telecommunications, and industrial sectors. Reflecting superior stock selection, all three sectors posted positive absolute returns in the Fund while corresponding returns in the benchmark were negative. In addition, the significant overweight positions in health care and telecommunications combined with an underweight to industrials also contributed to additional performance gains.

Conversely, the Fund’s holdings in energy, financials, and consumer staples underperformed their benchmark counterparts. Overweight positions in energy and financials also detracted from relative returns, and an underweight to consumer staples, which was the only sector in the benchmark which managed a positive return, was likewise a negative factor. The Fund reduced its weighting in energy and financials over the course of the year, and still maintains a meaningful underweight to consumer

staples. We believe that the sector remains expensive and that stable cash flows may be purchased more cheaply in other areas.

From a regional perspective, the Fund maintained a significant overweight position to Japan for reasons outlined above, and the country exposure was the largest source of absolute and relative returns for the period. An underweight to commodity producer Australia, which struggled, was negated by an overweight to select Canadian names, which were weak. In aggregate, emerging markets holdings detracted from performance and were gradually eliminated throughout the year and replaced with holdings in Europe and the U.K., regions in the midst of a cyclical recovery with less volatility than their peers in the developing world.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

 

 
Asset Allocation  
 

The following table presents asset allocations

within certain sectors and as a percentage of

total investments as of September 30, 2015.

 

  

  

  

Financials

     20 % 

Consumer Discretionary

     16   

Health Care

     15   

Telecommunication Services

     11   

Information Technology

     8   

Industrials

     6   

Consumer Staples

     3   

Energy

     2   

Other (includes short-term investments and securities lending collateral)

     19   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

26

Table of Contents
International Equity Fund (Continued)   

 

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment.

Geographic Concentration: A fund that focuses its investments in a particular geographic location will be highly sensitive to financial, economic, political, and other developments affecting the fiscal stability of that location.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

27

Table of Contents

International Equity Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        5 years       

Since

Inception

       

Inception

Date

  
Class A Shares at NAV2        -9.43 %         4.56 %         4.87 %         9/16/10   
Class A Shares at POP3,4        -14.63           3.32           3.64           9/16/10   
Class C Shares at NAV2 and with CDSC4        -10.01           3.72           4.02           9/16/10   
Class I Shares at NAV        -9.14           4.75           5.06           9/16/10   
S&P 500® Index        -0.61           13.34           13.56 5         —   
MSCI EAFE® Index (net)        -8.66           3.98           4.46 5         —   

Fund Expense Ratios6: A Shares: Gross 2.43%, Net 1.50%; C Shares: Gross 3.18%, Net 2.25%; I Shares: Gross 2.18%, 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on September 16, 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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

28

Table of Contents

International Real Estate Securities Fund

 

Fund Summary

   

Ticker Symbols:

Class A: PXRAX

Class C: PXRCX

Class I: PXRIX

 

Portfolio Manager Commentary by Duff & Phelps Investment Management Co.

 

¢   The Fund is diversified and has a primary investment objective of long-term capital appreciation, with a secondary investment objective of income.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned 0.94%, Class C shares returned 0.29%, and Class I shares returned 1.31%. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the FTSE EPRA/NAREIT Developed Rental ex U.S. Index (net), the Fund’s style-specific benchmark appropriate for comparison, returned 0.57%.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

The performance of international real estate equities significantly outperformed international equities as demonstrated by the 0.6% increase in the benchmark FTSE EPRA NAREIT Developed Rental ex U.S. Index versus the 8.7% drop in the MSCI EAFE® Index, both expressed in U.S. dollar terms. International real estate equities also outperformed U.S. equities during the period, but by a smaller margin, as represented by the 0.6% decrease in the S&P 500® Index during the fiscal year.

Taking a closer look at the performance of individual countries represented within the FTSE EPRA NAREIT Developed Rental ex U.S. Index, the five top-performing countries during the fiscal year on a total return basis measured in U.S. dollars were Germany, the U.K., Italy, Sweden, and Spain. Not surprisingly, the top performers had a decidedly European flavor. The launch of European style quantitative easing was a powerful force behind the performance for several of the top countries during the fiscal year, and its strength was more than enough to offset the decline in the euro relative to the U.S. dollar. Germany finished the period in the number one spot driven by the ongoing positive performance of its apartment companies, which are disproportionately represented in the Index. A positive fundamental landscape and a

strong bid for German apartments drove capitalization rates lower and asset values higher.

Following the surprise May election win by the Conservative party, U.K. real estate equities and the British pound posted healthy rallies relative to their global developed market peers, helping drive the second best total returns by country during the fiscal year. Moreover, similar to German apartments, U.K. real estate continues to benefit from the dual tailwinds of a positive rental rate and capital cycle, which is only present in a few other countries on a global basis.

Italian, Swedish, and Spanish real estate shares also outperformed during the period as institutional real estate capital continued to flow into these markets looking to participate in better expected economic growth in the case of Sweden and Spain and recovering real estate values in the case of Italy and Spain.

The five bottom-performing countries during the fiscal year were Norway, Greece, Singapore, Canada, and Finland. All five delivered negative total returns for the period. During the fiscal year, the Norwegian krone and the Canadian dollar took it on the chin relative to the U.S dollar as oil prices collapsed. This was a significant factor behind Norway and Canada’s poor return performance. A deteriorating political situation in Greece and a continued decline in the euro relative to the U.S. dollar were contributors to the weak returns from Greece. Finnish returns experienced a knock-on effect from the growing problems in Russia, which weighed on the performance of its economy. Singapore was one of the weaker performing countries during the period given its ties to China and poor underlying real estate fundamentals.

Thematically, real estate companies remained active on the capital raising front, particularly in the U.S., Europe excluding the U.K., and Japan as they looked to fund redevelopment, development, and acquisitions of recently acquired companies or portfolios of assets. Portfolio pruning and asset recycling as an additional source of capital was more evident in the U.S than other markets, as is often the case. We also witnessed a pick-up in mergers and acquisition activity as several privatization deals were announced in the U.S. and public-to-public mergers were announced in the U.S. and Europe excluding the

U.K. With the significant amount of real estate private equity capital that has been raised, but currently remains unspent, and the more attractive valuations on offer by publicly traded real estate securities, we expect M&A activity to continue, if not accelerate, over the coming year.

Our global travels during the period brought us to several countries and cities in the European and Asia Pacific regions and were helpful in providing timely updates on the space and asset markets in each respective locale. Additionally, quality time was spent with existing strategy holdings and conducting due diligence on potential new investment opportunities. At a high level, the strong appetite for high-quality commercial real estate from a wide and deep pool of institutional capital sources was evident across most locations as reflected in recent asset market pricing trends. Space market trends were more varied throughout the markets visited, but were notably robust for Central London real estate, German residential, and Dublin office. The Hong Kong office space market, particularly in the country’s central region, was also surprisingly healthy, benefiting from an increase in demand from Mainland China firms. Among the noted property sectors and markets, new development over the visible horizon remains contained with the exception of Dublin office.

What factors affected the Fund’s performance during its fiscal year?

For the one-year period ended September 30, 2015, the Fund outperformed its style-specific benchmark. The Fund’s performance was driven solely by security selection, as country allocation detracted from performance over the period.

From a country perspective, the most significant positive contributor to relative performance was our allocation to and stock selection within the U.K. At the security level within the U.K., our overweight exposure to a student housing real estate company had the largest positive impact on performance, as this company benefited from a positive fundamental backdrop for student housing and a very active transaction market for student housing properties at firm values. Overweight positions to the two largest publicly traded self-storage REITs in the U.K. also contributed positively to our U.K. stock selection.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

29

Table of Contents
International Real Estate Securities Fund (Continued)   

 

The second most meaningful positive contributor at a country level to relative performance was our underweight allocation to and stock selection within Canada. Canadian real estate shares delivered a negative total return over the period as a weak economy and the significant depreciation of the Canadian dollar relative to the U.S. dollar weighed on the performance of the shares.

From a country perspective, the most significant detractor from relative performance during the fiscal year was our overweight allocation to Mexico. On a local currency basis, the combined performance of the Fund’s two Mexican industrial-focused REITs was positive; however, the significant decline in the Mexican peso over the period was a major headwind and drove the negative performance.

The second most meaningful detractor at a country level from relative performance was our underweight exposure to and stock selection within Sweden. Swedish real estate shares posted a positive total return over the period and benefited from a healthier economy relative to Europe as a whole and the positive inflow of institutional capital into its real estate market, which lifted the asset market in the country, particularly its major capital city of Stockholm.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee that the Fund will meet its objectives.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Financials

     31 % 

Retail REITs

     30   

Real Estate Operating Companies

     13   

Diversified REITs

     12   

Office REITs

     9   

Specialized REITs

     3   

Industrial REITs

     2   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Real Estate: The Fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management.

Foreign Investing: Investing internationally involves additional risks such as currency, political, accounting, economic, and market risk.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

30

Table of Contents

International Real Estate Securities Fund (Continued)

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        5 years       

Since

Inception

       

Inception

Date

  
Class A Shares at NAV2        0.94 %         7.23 %         0.61 %         10/1/07   
Class A Shares at POP3,4        -4.87           5.97           -0.13           10/1/07   
Class C Shares at NAV2 and with CDSC4        0.29           6.42           -0.15           10/1/07   
Class I Shares at NAV        1.31           7.51           0.86           10/1/07   
S&P 500® Index        -0.61           13.34           4.99 5         —   
FTSE EPRA/NAREIT Developed Rental ex U.S. Index (net)        0.57           7.03           -0.58 5         —   

Fund Expense Ratios6: A Shares: Gross 1.73%, Net 1.50%; C Shares: Gross 2.48%, Net 2.25%; I Shares: Gross 1.48%, 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the 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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

31

Table of Contents

International Small-Cap Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VISAX

Class C: VCISX

Class I: VIISX

Class R6: VRISX

 

Portfolio Manager Commentary by Kayne Anderson Rudnick Investment Management, LLC

 

¢   The Fund is diversified and has an investment objective of capital appreciation.

 

¢   For the fiscal year ended September 30, 2015, the Fund’s Class A shares at NAV returned -12.58%, Class C shares returned -13.28%, Class I shares returned -12.43% and Class R6 shares from November 12, 2014 (inception date), through September 30, 2015, returned -10.41%*. For the same period, the S&P 500® Index, a broad-based equity index, returned -0.61%, and the MSCI AC World ex U.S. Small Cap Index (net), the Fund’s style-specific benchmark appropriate for comparison, returned -6.42%.

 

* Returns less than 1 year are not annualized.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

The MSCI All Country World ex USA Small Cap Index declined 6.42% in a volatile year for global equity markets. While the benchmark return was positive in local currencies, the strong appreciation of the dollar meant that the return in dollar terms was negative. The strong dollar was fueled by the anticipation of an eventual increase in interest rates in the United States while at the same time the European Central Bank and the Bank of Japan continued to pursue monetary stimulus to bolster their economies. In addition, as macroeconomic uncertainty increased, many investors sought out the relative safety of U.S. dollar denominated assets.

The best performing regions over the last fiscal year were Europe and Japan, which benefited from ongoing quantitative easing. Asia ex-Japan, Latin America, and Africa all had significant declines. In

general, markets tied to China in one way or another performed poorly. This included countries where commodities play a large role in the economy, such as Australia, Canada, and Brazil. It also included markets closely tied to China economically, such as Hong Kong and Taiwan.

In terms of sectors, energy and materials were the worst performers, driven by increased supply and slowing demand from China. More defensive sectors, such as consumer staples and healthcare, had positive returns and significantly outperformed.

What factors affected the Fund’s performance during its fiscal year?

The Fund underperformed its benchmark during the fiscal year. The primary driver of the underperformance was geographic allocation. In general, the Fund had higher weights in regions that underperformed, such as Latin America and Asia ex-Japan, and lower weights in regions that performed well, such as Europe and Japan.

Fund performance was also negatively impacted by the severe decline in the shares of Tegma Gestao Logistica, the largest automotive logistics company in Brazil. Automotive sales and production in Brazil declined dramatically over the last two years as the challenging economic backdrop descended into a crisis. While this development certainly had a negative impact on the near-term profitability of Tegma, the current valuation is extremely depressed relative to what we believe is the fair value of the business. For this reason, we continue to hold our position.

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market and or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee market forecasts will be realized.

There is no guarantee that the Fund will meet its objective.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Information Technology

     24 % 

Financials

     21   

Industrials

     16   

Consumer Discretionary

     13   

Consumer Staples

     8   

Materials

     7   

Health Care

     6   

Other (includes short-term investments)

     5   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Limited Number of Investments: Because the Fund has a limited number of securities, it may be more susceptible to factors adversely affecting its securities than a less concentrated fund.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

32

Table of Contents

International Small-Cap Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15  
       1 year        Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -12.58 %         7.30 %         9/5/12   
Class A Shares at POP3,4        -17.61           5.25           9/5/12   
Class C Shares at NAV2 and with CDSC4        -13.28           6.50           9/5/12   
Class I Shares at NAV        -12.43           7.57           9/5/12   
Class R6 Shares at NAV        —           -10.41           11/12/14   
S&P 500® Index        -0.61           — 5         —   
MSCI AC World ex U.S. Small Cap Index (net)        -6.42           — 6         —   

Fund Expense Ratios7: A Shares: Gross 1.75%, Net 1.60%; C Shares: Gross 2.50%, Net 2.35%; I Shares: Gross 1.50%, Net 1.35%; R6 Shares: Gross 1.41%, Net 1.26%.

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 returned -4.06% for Class R6 shares and 13.12% for Class I shares from the inception date of the respective share class.
6  The index returned -3.51% for Class R6 shares and 7.24% for Class I shares from the inception date of the respective share class.
7  The expense ratios of the Fund are set forth according to the prospectus for the Fund effective January 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2017. For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on September 5, 2012 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

33

Table of Contents

International Wealth Masters Fund

 

Fund Summary

   

Ticker Symbols:

Class A: VIWAX

Class C: VIWCX

Class I: VWIIX

 

Portfolio Manager Commentary by Horizon Asset Management, LLC

 

¢   The Fund is diversified and has an investment objective of capital appreciation.

 

¢   For the fiscal period November 17, 2014 (inception date) through September 30, 2015, the Fund’s Class A shares at NAV returned -4.80%*, Class C shares returned -5.40%*, and Class I shares returned -4.60%*. For the same period, the S&P 500® Index, a broad-based equity index, returned -4.23%, and the MSCI EAFE® Index (net), the Fund’s style-specific benchmark appropriate for comparison, returned -6.77%*.

 

* Returns less than 1 year are not annualized.

All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

How did the markets perform during the Fund’s fiscal year?

During the period between the Fund’s inception on November 17, 2014 and September 30, 2015, the MSCI EAFE® Index returned -6.77%, while the S&P 500® Index returned -4.23%. The MSCI EAFE® Index fell at the end of 2014 as oil prices fell, then appreciated in the first half of 2015. The MSCI EAFE® Index fell again in July as investors weighed the prospect of Greek insolvency, and again in August as investors weighed a variety of headwinds facing the markets: oil prices remained low, concerns continued to grow regarding the strength of the Chinese economy, and the U.S. Federal Reserve did not raise interest rates.

Domestic equity mutual funds continued to experience net outflows, while international equity mutual funds had net inflows. At the same time, exchange-traded funds (ETFs) continued to gather assets. Given the float-adjusted, market cap weighted methodology used by most of the major indexes, the lion’s share of flows into ETFs tend to support the stock prices of the largest, most liquid companies. However, in our opinion, the business results of these companies have not necessarily improved; in fact, many of the largest companies have experienced

slowing revenue growth, and we believe that it will be increasingly difficult for them to expand revenues at a meaningful rate, even by acquisition.

What factors affected the Fund’s performance during its fiscal year?

The Fund is designed to track the Horizon Kinetics ISE International Wealth Index (the “International Wealth Index”), an index composed of non-U.S., exchange-listed companies owned and operated by some of the wealthiest, most successful investors, business executives, and entrepreneurs in the world (“owner-operators”). The Fund allows investors to readily leverage the business acumen of the highly-skilled individuals represented in the Index.

The Fund outperformed the benchmark during the period from November 17, 2014 to September 30, 2015. At the sector level, underweight exposure to financials and stock representation within that sector contributed positively to relative returns, as did stock representation within the industrials sector. Overweight exposure to consumer discretionary stocks also contributed meaningfully to outperformance. Stock selection within the materials and information technology sectors detracted from relative returns.

At the stock level, the five largest contributors to relative performance (and their owner-operators) were ACOM Co. Ltd. (Shigeyoshi Kinoshita), Pola Orbis Holdings Inc. (Satoshi Suzuki), Regus PLC S.A. (Mark Dixon), Start Today Co. Ltd. (Yusaku Maezawa), and Nexon Co. Ltd. (Kim Jungju). The five largest detractors from relative performance were Genel Energy plc (Nathaniel Rothschild), ArcelorMittal SA (Lakshmi Mittal), Seven West Media Ltd. (Kerry Stokes), Glencore plc. (Ivan Glasenberg), and Gree Inc. (Yoshikazu Tanaka).

The preceding information is the opinion of portfolio management. Any such opinions are subject to change at any time based upon market or other conditions and should not be relied upon as investment advice. Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized.

There is no guarantee the Fund will meet its objective.

 

 
Asset Allocation  
 

The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2015.

 

    

Consumer Discretionary

     30 % 

Industrials

     15   

Financials

     14   

Consumer Staples

     11   

Information Technology

     9   

Materials

     6   

Health Care

     4   

Other (includes short-term investments and securities lending collateral)

     11   
   

 

 

  

Total

     100 % 
   

 

 

  

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.

Foreign Investing: Investing internationally involves additional risks such as currency, political, accounting, economic, and market risk.

Prospectus: For additional information on risks, please see the Fund’s prospectus.

 

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

34

Table of Contents

International Wealth Masters Fund (Continued)

 

 

Average Annual Total Returns1 for periods ended 9/30/15  
       Since
Inception		        Inception
Date		  
Class A Shares at NAV2        -4.80 %         11/17/14   
Class A Shares at POP3,4        -10.27           11/17/14   
Class C Shares at NAV2        -5.40           11/17/14   
Class C Shares with CDSC4        -6.35           11/17/14   
Class I Shares at NAV2        -4.60           11/17/14   
S&P 500® Index        -4.23 5         —   
MSCI EAFE® Index (net)        -6.77 5         —   

Fund Expense Ratios6: A Shares: Gross 1.85%, Net 1.55%; C Shares: Gross 2.60%, Net 2.30%; I Shares: Gross 1.60%, Net 1.30%.

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 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 28, 2015, as supplemented and revised, 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 the contractual fee waiver in effect through January 31, 2016. Gross Expense: Does not reflect the effect of the fee waiver.

Growth of $10,000 For periods ended 9/30

 

This chart assumes an initial investment of $10,000 made on November 17, 2014 (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.

 

LOGO

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.

 

For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 4.

 

35

Table of Contents

VIRTUS EMERGING MARKETS DEBT FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
FOREIGN GOVERNMENT SECURITIES—26.5%   

Argentine Republic Series NY,
8.280%, 12/31/33(11)

   $ 196      $ 201   

Bermuda RegS
4.854%, 2/6/24(4)

     200        209   

Bolivarian Republic of Venezuela

    

RegS
5.750%, 2/26/16(4)

     30        25   

RegS 7.750%, 10/13/19(4)

     140        49   

7.650%, 4/21/25

     285        95   

9.375%, 1/13/34

     325        115   

Commonwealth of Jamaica
6.750%, 4/28/28

     200        201   

Croatian Republic RegS
6.000%, 1/26/24(4)

     200        211   

Dominican Republic

    

144A
5.875%, 4/18/24(3)

     100        99   

144A
6.850%, 1/27/45(3)

     100        96   

Hellenic Republic
3.000%, 2/24/24(2)

     200 EUR      157   

Hungary

    

5.375%, 2/21/23

     146        159   

5.750%, 11/22/23

     22        25   

5.375%, 3/25/24

     60        65   

Kingdom of Bahrain 144A
6.000%, 9/19/44(3)

     200        169   

Kingdom of Morocco 144A
4.250%, 12/11/22(3)

     200        202   

Mongolia 144A
5.125%, 12/5/22(3)

     200        165   

Pakistan Government International Bond 144A
8.250%, 9/30/25(3)

     200        205   

Republic of Armenia 144A
7.150%, 3/26/25(3)

     200        189   

Republic of Azerbaijan 144A
4.750%, 3/18/24(3)

     200        187   

Republic of Chile
5.500%, 8/5/20

     70,000 CLP      104   

Republic of Colombia Treasury Note, Series B,
11.250%, 10/24/18

     100,000 COP      36   

Republic of Costa Rica 144A
7.000%, 4/4/44(3)

     200        177   

Republic of Cote d’Ivoire 144A
6.375%, 3/3/28(3)

     200        177   

Republic of El Salvador

    

144A 6.375%, 1/18/27(3)

     155        137   

144A 7.650%, 6/15/35(3)

     70        63   

Republic of Indonesia

    

Series FR30,
10.750%, 5/15/16

     785,000 IDR      54   

Series FR63,
5.625%, 5/15/23

     624,000 IDR      33   

144A
5.125%, 1/15/45(3)

     200        175   

Republic of Iraq RegS
5.800%, 1/15/28(4)

     250        173   

Republic of Kazakhstan 144A
4.875%, 10/14/44(3)

     200        159   

Republic of Kenya 144A
6.875%, 6/24/24(3)

     200        181   

Republic of Lithuania 144A
6.125%, 3/9/21(3)

     100        117   
    PAR
VALUE		     VALUE  
FOREIGN GOVERNMENT SECURITIES—continued   

Republic of Panama

    

5.200%, 1/30/20

   $ 200      $ 216   

3.750%, 3/16/25

     200        193   

Republic of Peru
4.125%, 8/25/27

     80        79   

Republic of Poland

    

Series 1021,
5.750%, 10/25/21

     300 PLN      93   

4.000%, 1/22/24

     149        158   

Republic of Romania

    

144A 6.750%, 2/7/22(3)

     150        177   

144A 4.875%, 1/22/24(3)

     84        91   

RegS
6.125%, 1/22/44(4)

     120        139   

Republic of South Africa

    

Series R203,
8.250%, 9/15/17

     758 ZAR      56   

Series R208,
6.750%, 3/31/21

     1,470 ZAR      100   

Republic of Sri Lanka 144A
5.875%, 7/25/22(3)

     200        194   

Republic of Turkey

    

5.125%, 3/25/22

     200        203   

6.750%, 5/30/40

     225        240   

Republic of Uruguay
5.100%, 6/18/50

     400 (8)      351   

Russian Federal Bond - Ofz
7.400%, 6/14/17

     4,800        69   

State of Qatar 144A
5.750%, 1/20/42(3)

     200        245   

United Mexican States Series M,
6.500%, 6/9/22

     614 MXN      38   
TOTAL FOREIGN GOVERNMENT SECURITIES   
(Identified Cost $7,896)        7,052   
CORPORATE BONDS AND NOTES—69.0%   
Barbados—0.8%    

Columbus International, Inc. series B, 144A
7.375%, 3/30/21(3)

     200        208   
   

 

 

  
Brazil—6.6%    

Banco Santander Brasil SA 144A
8.000%, 3/18/16(3)

     300 BRL      72   

Braskem America Finance Co.
RegS 7.125%, 7/22/41(4)

     205        143   

BRF SA
7.750%, 5/22/18

     400 BRL      82   

Fibria Overseas Finance Ltd.
5.250%, 5/12/24

     115        111   

Itau Unibanco Holding SA RegS
5.650%, 3/19/22(4)

     250        224   

JBS Investments GmbH 144A
7.250%, 4/3/24(3)

     200        193   

Marfrig Overseas Ltd. 144A
9.500%, 5/4/20(3)

     200        196   

Odebrecht Finance Ltd. 144A
4.375%, 4/25/25(3)

     200        115   
    PAR
VALUE		     VALUE  
Brazil—continued    

Odebrecht Offshore Drilling Finance Ltd. 144A
6.750%, 10/1/22(3)

   $ 181      $ 48   

Petrobras Global Finance BV

    

3.000%, 1/15/19

     80        58   

5.375%, 1/27/21

     290        211   

6.750%, 1/27/41

     100        64   

QGOG Constellation SA 144A
6.250%, 11/9/19(3)

     200        89   

Vale Overseas Ltd.
6.875%, 11/21/36

     200        159   
   

 

 

  
      1,765   
   

 

 

  
Canada—0.1%    

Eldorado Gold Corp. 144A
6.125%, 12/15/20(3)

     45        40   
   

 

 

  
Chile—3.8%    

Guanay Finance Ltd. 144A
6.000%, 12/15/20(3)

     250        247   

Inversiones CMPC S.A. 144A
4.375%, 5/15/23(3)

     200        195   

Latam Airlines Group SA 144A
7.250%, 6/9/20(3)

     200        177   

Transelec S.A. 144A
4.250%, 1/14/25(3)

     200        197   

VTR Finance B.V. 144A
6.875%, 1/15/24(3)

     200        182   
   

 

 

  
      998   
   

 

 

  
China—5.3%    

Bank of China Ltd. 144A
5.000%, 11/13/24(3)

     200        203   

BOC Aviation Pte Ltd.
3.875%, 5/9/19

     200        206   

China Cinda Finance Ltd. 144A
4.000%, 5/14/19(3)

     200        202   

CNOOC Finance USA LLC
3.500%, 5/5/25

     200        190   

Kunlun Energy Co., Ltd. 144A
3.750%, 5/13/25(3)

     200        192   

State Grid Overseas Investment Ltd. 144A
4.125%, 5/7/24(3)

     200        211   

Tencent Holdings Ltd. 144A
3.800%, 2/11/25(3)

     200        193   
   

 

 

  
      1,397   
   

 

 

  
Colombia—0.8%    

Bancolombia S.A.
5.125%, 9/11/22

     100        95   

Ecopetrol SA
5.375%, 6/26/26

     70        61   

Pacific Rubiales Energy Corp. 144A
5.125%, 3/28/23(3)

     200        70   
   

 

 

  
      226   
   

 

 

  
El Salvador—0.7%    

AES El Salvador Trust II 144A
6.750%, 3/28/23(3)

     200        179   
   

 

 

  
 

 

See Notes to Financial Statements

 

 

 

36

Table of Contents

VIRTUS EMERGING MARKETS DEBT FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
Georgia—0.8%    

Bank of Georgia JSC 144A
7.750%, 7/5/17(3)

   $ 200      $ 208   
   

 

 

  
Guatemala—0.7%    

Comcel Trust 144A
6.875%, 2/6/24(3)(5)

     200        197   
   

 

 

  
Hong Kong—2.1%    

Bank of China Hong Kong Ltd. 144A
5.550%, 2/11/20(3)

     200        216   

Hutchison Whampoa International Ltd. Series 12, 144A
6.000%(2)(3)(6)(7)

     325        338   
   

 

 

  
      554   
   

 

 

  
India—4.2%    

Bank of Baroda 144A
4.875%, 7/23/19(3)

     200        213   

Bharti Airtel International Netherlands BV 144A
5.125%, 3/11/23(3)

     200        212   

ICICI Bank Ltd. 144A
6.375%, 4/30/22(2)(3)

     300        305   

Reliance Holdings USA, Inc. 144A
5.400%, 2/14/22(3)

     250        273   

Vedanta Resources plc 144A
7.125%, 5/31/23(3)

     200        125   
   

 

 

  
      1,128   
   

 

 

  
Indonesia—3.8%    

Pelabuhan Indonesia II PT 144A
4.250%, 5/5/25(3)

     200        175   

Pertamina Persero PT

    

144A 4.875%, 5/3/22(3)

     200        191   

144A 6.000%, 5/3/42(3)

     275        229   

144A 5.625%, 5/20/43(3)

     200        156   

Perusahaan Listrik Negara PT 144A
5.500%, 11/22/21(3)

     250        252   
   

 

 

  
      1,003   
   

 

 

  
Ireland—0.8%    

Ardagh Finance Holdings SA PIK Interest Capitalization, 144A
8.625%, 6/15/19(3)(9)

     218        224   
   

 

 

  
Israel—0.8%    

Israel Electric Corp. Ltd. RegS
7.250%, 1/15/19(4)

     200        226   
   

 

 

  
Jamaica—0.7%    

Digicel Group Ltd. 144A
8.250%, 9/30/20(3)

     200        186   
   

 

 

  
    PAR
VALUE		     VALUE  
Kazakhstan—1.2%    

Development Bank of Kazakhstan OJSC 144A
4.125%, 12/10/22(3)

   $ 200      $ 171   

KazMunayGas National Co. JSC 144A
5.750%, 4/30/43(3)

     200        145   
   

 

 

  
      316   
   

 

 

  
Luxembourg—1.4%    

Altice Financing SA Luxemborg, 144A
7.625%, 2/15/25(3)

     200        176   

Millicom International Cellular SA
144A 6.625%, 10/15/21(3)

     200        199   
   

 

 

  
      375   
   

 

 

  
Mexico—7.0%   

Alfa SAB de CV
144A
5.250%, 3/25/24(3)

     200        204   

Alpek SA de C.V. 144A
5.375%, 8/8/23(3)

     200        206   

America Movil SAB de C.V.
Series 12
6.450%, 12/5/22

     2,000 MXN      113   

Banco Bilbao Vizcaya Argentaria Bancomer S.A. 144A
6.750%, 9/30/22(3)

     150        162   

Banco Santander Mexico SA 144A
5.950%, 1/30/24(2)(3)(7)

     200        206   

Cemex SAB de CV 144A
7.250%, 1/15/21(3)

     200        200   

Fermaca Enterprises S de RL de CV 144A
6.375%, 3/30/38(3)

     196        185   

Fomento Economico Mexicano SAB de CV
2.875%, 5/10/23

     150        140   

Grupo Televisa SAB
7.250%, 5/14/43

     2,000 MXN      100   

Petroleos Mexicanos

    

6.375%, 1/23/45

     200        180   

144A 5.625%, 1/23/46(3)

     200        164   
   

 

 

  
      1,860   
   

 

 

  
Morocco—0.8%   

Office Cherifien des Phosphates S.A. (OCP) 144A
5.625%, 4/25/24(3)

     200        204   
   

 

 

  
Netherlands—0.7%   

UPCB Finance IV Ltd. 144A
5.375%, 1/15/25(3)

     200        189   
   

 

 

  
Panama—0.6%   

Banco Latinoamericano de Comercio Exterior SA 144A
3.750%, 4/4/17(3)

     150        152   
   

 

 

  
    PAR
VALUE		     VALUE  
Peru—2.3%   

Banco de Credito del Peru

    

144A 5.375%, 9/16/20(3)

   $ 100      $ 107   

144A 6.125%, 4/24/27(2)(3)

     100        103   

Banco Internacional del Peru SAA

    

144A 5.750%, 10/7/20(3)

     100        107   

144A 6.625%, 3/19/29(2)(3)

     100        100   

Transportadora de Gas del Peru SA 144A
4.250%, 4/30/28(3)

     200        187   
   

 

 

  
      604   
   

 

 

  
Poland—0.8%   

PKO Finance AB 144A
4.630%, 9/26/22(3)(5)

     200        206   
   

 

 

  
Russia—5.5%   

AHML Finance Ltd. 144A
7.750%, 2/13/18(2)(3)

     5,000 RUB      69   

EuroChem Mineral & Chemical Co. OJSC 144A
5.125%, 12/12/17(3)(5)

     200        199   

Evraz Group S.A. 144A
6.500%, 4/22/20(3)

     200        187   

Gazprom OAO (Gaz Capital SA) 144A
6.000%, 11/27/23(3)(5)

     200        186   

Lukoil OAO International Finance BV 144A
4.563%, 4/24/23(3)

     200        178   

Metalloinvest Finance Ltd. 144A
5.625%, 4/17/20(3)

     200        189   

Sberbank of Russia (Sberbank Capital SA) 144A
5.125%, 10/29/22(3)(5)

     200        184   

Sberbank of Russia Via SB Capital SA REGS
5.500%, 2/26/24(4)(5)

     200        169   

Severstal OAO (Steel Capital SA) 144A
6.700%, 10/25/17(3)(5)

     100        105   
   

 

 

  
      1,466   
   

 

 

  
Singapore—0.8%   

Oversea-Chinese Banking Corp. Ltd. 144A
4.000%, 10/15/24(2)(3)

     200        205   
   

 

 

  
South Africa—2.2%   

Myriad International Holdings BV 144A
5.500%, 7/21/25(3)

     200        196   

Sappi Papier Holding GmbH 144A
6.625%, 4/15/21(3)

     200        203   

Transnet SOC Ltd. 144A
4.000%, 7/26/22(3)

     200        185   
   

 

 

  
      584   
   

 

 

  
 

 

See Notes to Financial Statements

 

 

 

37

Table of Contents

VIRTUS EMERGING MARKETS DEBT FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    PAR
VALUE		     VALUE  
South Korea—0.7%   

Export-Import Bank of Korea
2.875%, 1/21/25

   $ 200      $ 195   
   

 

 

  
Sri Lanka—0.8%   

Bank of Ceylon 144A
6.875%, 5/3/17(3)

     200        206   
   

 

 

  
Sultanate of Oman—0.7%   

Lamar Funding Ltd. 144A
3.958%, 5/7/25(3)

     200        187   
   

 

 

  
Supranational—2.3%   

Africa Finance Corp. 144A
4.375%, 4/29/20(3)

     200        201   

Corp Andina de Fomento
4.375%, 6/15/22

     200        217   

Eurasian Development Bank
144A
4.767%, 9/20/22(3)

     200        189   
   

 

 

  
      607   
   

 

 

  
Thailand—0.8%    

Bangkok Bank PLC 144A
3.300%, 10/3/18(3)

     200        205   
   

 

 

  
Trinidad and Tobago—0.2%   

Petroleum Co. of Trinidad & Tobago Ltd. RegS
6.000%, 5/8/22(4)

     58        56   
   

 

 

  
Turkey—1.5%    

Turkiye Garanti Bankasi AS 144A
5.250%, 9/13/22(3)

     200        192   

Turkiye Is Bankasi A.S 144A
7.850%, 12/10/23(3)

     200        209   
   

 

 

  
      401   
   

 

 

  
Ukraine—0.5%    

Ukreximbank Via Biz Finance plc 144A
9.625%, 4/27/22

     150        132   
   

 

 

  
United Arab Emirates—2.2%   

DP World Ltd. 144A
6.850%, 7/2/37(3)

     250        264   

IPIC GMTN Ltd. 144A
6.875%, 11/1/41(3)

     250        330   
   

 

 

  
      594   
   

 

 

  
United Kingdom—0.5%    

EnQuest plc 144A
7.000%, 4/15/22(3)

     200        125   
   

 

 

  
United States—1.6%    

Aircastle Ltd.
6.250%, 12/1/19

     100        108   

First Data Corp.
11.750%, 8/15/21

     107        119   

Mallinckrodt International Finance S.A. 144A
5.625%, 10/15/23(3)

     30        27   

Owens-Brockway Glass Container, Inc. 144A 6.375%, 8/15/25(3)

     70        71   
    PAR
VALUE		     VALUE  
United States—continued   

Parker Drilling Co.
6.750%, 7/15/22

   $ 50      $ 39   

Tronox Finance LLC
6.375%, 8/15/20

     80        51   
   

 

 

  
      415   
   

 

 

  
Venezuela—1.9%    

Petroleos de Venezuela SA

    

RegS 8.500%, 11/2/17(4)

     290        195   

144A 6.000%, 5/16/24(3)

     555        180   

RegS
6.000%, 11/15/26(4)

     400        129   
   

 

 

  
              504   
TOTAL CORPORATE BONDS AND NOTES
(Identified Cost $20,338)		         18,327   
LOAN AGREEMENTS(2)—0.6%   
Consumer Discretionary—0.6%   

Delta 2 (Lux) S.A.R.L. Tranche B-3,
4.750%, 7/30/21

     47        46   

Laureate Education, Inc. 2018 Extended,
5.000%, 6/15/18

     148        124   
TOTAL LOAN AGREEMENTS
(Identified Cost $193)		         170   
    SHARES        
PREFERRED STOCK—0.7%   
Energy—0.7%    

PTT Exploration & Production PCL 144A,
4.875%(2)(3)(10)

     200,000        193   
TOTAL PREFERRED STOCK
(Identified Cost $201)		         193   
AFFILIATED MUTUAL FUND—0.6%     

Virtus Credit Opportunities Fund

     14,824        144   
TOTAL AFFILIATED MUTUAL FUND (Identified Cost $148)         144   
TOTAL LONG TERM INVESTMENTS—97.4%   
(Identified Cost $28,776)        25,886   
SHORT-TERM INVESTMENTS—0.6%   
Money Market Mutual Fund—0.6%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield
0.170%)

     165,734        166   
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $166)         166   
TOTAL INVESTMENTS—98.0%
(Identified Cost $28,942)		         26,052 (1) 

Other assets and liabilities, net—2.0%

  

     524   
   

 

 

  
NET ASSETS—100.0%     $ 26,576   
   

 

 

  

Abbreviation:

PIK Payment-in-Kind Security

Footnote Legend:

(1) Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements. Non-income producing.
(2) Variable or step coupon security; interest rate shown reflects the rate in effect at September 30, 2015.
(3) 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, 2015, these securities amounted to a value of $17,952 or 67.5% of net assets.
(4) 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.
(5) This Note was issued for the sole purpose of funding a loan agreement between the issuer and the borrower. As the credit risk for this security lies solely with the borrower, the name represented here is that of the borrower.
(6) No contractual maturity date.
(7) Interest payments may be deferred.
(8) Principal amount is adjusted pursuant to the change in the Index.
(9) 100% of the income received was in cash.
(10) Value shown as par value.
(11) Security in default.

Foreign Currencies:

BRL Brazilian Real
CLP Chilean Peso
COP Colombian Peso
EUR Euro
IDR Indonesian Rupiah
MXN Mexican Peso
PLN Polish Zloty
RUB Russian Ruble
ZAR South African Rand

 

Country Weightings (Unaudited)†       

Brazil

     7 % 

Mexico

     7   

China

     6   

Russia

     6   

Indonesia

     5   

Chile

     4   

India

     4   

Other

     61   

Total

     100 % 

† % of total investments as of September 30, 2015

  

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

38

Table of Contents

VIRTUS EMERGING MARKETS DEBT FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

       Total
Value at
September 30,
2015		        Level 1
Quoted
Prices		        Level 2
Significant
Observable
Inputs		  

Debt Securities:

               

Corporate Bonds and Notes

      $ 18,327         $ —         $ 18,327   

Foreign Government Securities

        7,052           —           7,052   

Loan Agreements

        170           —           170   

Equity Securities:

               

Preferred Stock

        193           —           193   

Affiliated Mutual Fund

        144           144          
 —
   

Short-Term Investments

        166           166           —   
    

 

 

       

 

 

       

 

 

  

Total Investments

      $ 26,052         $ 310         $ 25,742   
    

 

 

       

 

 

       

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

See Notes to Financial Statements

 

39

Table of Contents

VIRTUS EMERGING MARKETS EQUITY INCOME FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
PREFERRED STOCKS—2.2%   
Financials—1.3%   

Banco Bradesco S.A. 0.660% (Brazil)

     77,300      $ 416   

Banco Davivienda S.A. 2.970% (Colombia)

     13,302        102   

Banco do Estado do Rio Grande do Sul S.A., Class B 0.310% (Brazil)

     41,100        58   
   

 

 

  
      576   
   

 

 

  
Materials—0.6%   

Braskem SA (Brazil)

     19,900        84   

Vale S.A. 8.250% (Brazil)

     51,900        174   
   

 

 

  
      258   
   

 

 

  
Utilities—0.3%   

Companhia Paranaense de Energia, Class B 2.560% (Brazil)

     15,900        132   
TOTAL PREFERRED STOCKS
(Identified Cost $1,650)		         966   
COMMON STOCKS—98.2%   
Consumer Discretionary—8.7%   

Astra International Tbk PT (Indonesia)

     478,000        171   

Bajaj Auto Ltd. (India)

     7,982        282   

Belle International Holdings Ltd. (China)

     198,000        172   

Cheng Shin Rubber Industry Co., Ltd. (Taiwan)

     96,000        158   

China Motor Corp. (Taiwan)

     338,000        238   

Coway Co., Ltd. (South Korea)

     2,578        182   

Cyrela Brazil Realty S.A. (Brazil)

     66,300        140   

Estacio Participacoes SA (Brazil)

     36,800        129   

Foschini Group Ltd. (The) (South Africa)

     23,592        239   

Great Wall Motor Co., Ltd. Class H (China)

     160,500        179   

Grupo Televisa S.A.B (Mexico)

     16,600        87   

Halla Visteon Climate Control Corp. (South Korea)

     7,076        235   

Kangwon Land, Inc. (South Korea)

     11,924        426   

Kia Motors Corp. (South Korea)

     5,593        254   

Lojas Americanas SA (Brazil)

     41,700        123   

Lojas Renner S.A. (Brazil)

     40,500        189   

Tofas Turk Otomobil Fabrikasi AS (Turkey)

     27,262        162   

Truworths International Ltd. (South Africa)

     30,065        184   

Tsogo Sun Holdings Ltd. (South Africa)

     132,372        231   
   

 

 

  
      3,781   
   

 

 

  
Consumer Staples—6.2%   

Ambev SA (Brazil)

     134,000        658   

Fomento Economico Mexicano S.A.B. de CV (Mexico)

     42,300        378   

Hindustan Unilever Ltd. (India)

     26,725        332   

KT&G Corp. (South Korea)

     6,401        603   
    SHARES     VALUE  
Consumer Staples—continued   

Raia Drogasil SA (Brazil)

     18,800      $ 185   

Spar Group Ltd. (The) (South Africa)

     28,600        382   

Want Want China Holdings Ltd. (China)

     205,000        169   
   

 

 

  
      2,707   
   

 

 

  
Energy—8.3%   

China Petroleum & Chemical Corp. Class H (China)

     453,800        278   

China Shenhua Energy Co., Ltd. Class H (China)

     190,000        292   

CNOOC Ltd. (China)

     408,000        420   

Coal India Ltd. (India)

     31,246        156   

Cosan S.A. Industria e Comercio (Brazil)

     19,500        98   

Empresas COPEC SA (Chile)

     12,825        116   

Gazprom PAO (Gazstream S.A.) Sponsored ADR (Russia)

     131,390        534   

Lukoil PJSC Sponsored ADR (Russia)

     4,700        160   

PTT PCL (Thailand)

     34,100        227   

Rosneft OJSC GDR (Russia)

     28,450        105   

Sasol Ltd. (South Africa)

     14,060        393   

Tambang Batubara Bukit Asam Persero Tbk PT (Indonesia)

     477,500        184   

Tatneft PAO Sponsored ADR (Russia)

     13,522        379   

Ultrapar Participacoes S.A. (Brazil)

     14,100        237   
   

 

 

  
      3,579   
   

 

 

  
Financials—30.0%   

Abu Dhabi Commercial Bank PJSC (United Arab Emirates)

     69,428        145   

Agricultural Bank of China Ltd. Class H (China)

     1,063,000        404   

AMMB Holdings Bhd (Malaysia)

     170,200        177   

Banco de Chile (Chile)

     3,400,519        354   

Banco do Brasil S.A. (Brazil)

     24,600        93   

Banco Santander Chile SA (Chile)

     6,440,786        292   

Bank of China Ltd. Class H (China)

     2,349,000        1,013   

Barclays Africa Group Ltd. (South Africa)

     36,092        443   

BB Seguridade Participacoes (Brazil)

     30,500        190   

China Construction Bank Corp. Class H (China)

     1,923,000        1,283   

China Everbright Bank Co., Ltd. (China)

     262,000        115   

China Everbright Ltd. (China)

     66,000        152   

China Life Insurance Co., Ltd. Class H (China)

     174,000        606   

China Minsheng Banking Corp., Ltd. Class H (China)

     152,500        141   

China Vanke Co., Ltd. Class H (China)

     87,500        188   

Commercial Bank QSC (The) (Qatar)

     7,690        119   

CTBC Financial Holding Co., Ltd. (Taiwan)

     732,236        379   
    SHARES     VALUE  
Financials—(continued)   

Doha Bank QSC (Qatar)

     11,701      $ 162   

Dongbu Insurance Co., Ltd. (South Korea)

     6,376        331   

Evergrande Real Estate Group Ltd. (China)

     608,000        347   

Far East Horizon Ltd. (China)

     250,000        194   

First Gulf Bank PJSC (United Arab Emirates)

     53,612        204   

FirstRand Ltd. (South Africa)

     116,263        412   

Gentera S.A.B de CV (Mexico)

     229,200        374   

Hanwha Life Insurance Co., Ltd. (South Korea)

     43,370        299   

Hyundai Marine & Fire Insurance Co., Ltd. (South Korea)

     17,217        439   

Industrial & Commercial Bank of China Ltd. Class H (China)

     1,903,000        1,099   

Komercni Banka A.S. (Czech Republic)

     1,796        389   

Liberty Holdings Ltd. (South Africa)

     8,825        80   

Malayan Banking Bhd (Malaysia)

     210,500        411   

MMI Holdings Ltd. (South Africa)

     106,534        183   

Power Finance Corp., Ltd. (India)

     79,324        279   

Powszechny Zaklad Ubezpieczen S.A. (Poland)

     1,705        175   

Qatar National Bank SAQ (Qatar)

     1,846        95   

Redefine Properties Ltd. REIT (South Africa)

     403,351        341   

Rural Electrification Corp., Ltd. (India)

     91,724        384   

Samsung Life Insurance Co., Ltd. (South Korea)

     2,068        173   

Siam Commercial Bank PCL (Thailand)

     37,500        139   

Standard Bank Group Ltd. (South Africa)

     27,574        269   

Sunac China Holdings Ltd. (China)

     298,000        156   
   

 

 

  
      13,029   
   

 

 

  
Health Care—2.8%   

Divi’s Laboratories Ltd. (India)

     22,996        392   

Kalbe Farma Tbk PT (Indonesia)

     2,491,400        234   

Richter Gedeon Nyrt (Hungary)

     22,424        356   

Sinopharm Group Co., Ltd. Class H (China)

     69,600        245   
   

 

 

  
      1,227   
   

 

 

  
Industrials—9.1%   

Aboitiz Equity Ventures, Inc. (Philippines)

     154,710        191   

Alfa S.A.B de C.V. Class A (Mexico)

     40,000        78   

CTCI Corp. (Taiwan)

     204,000        244   

Daewoo International Corp. (South Korea)

     17,859        314   

Industries Qatar Qsc (Qatar)

     5,463        185   

Jiangsu Expressway Co., Ltd. Class H (China)

     388,000        497   
 

 

See Notes to Financial Statements

 

 

 

40

Table of Contents

VIRTUS EMERGING MARKETS EQUITY INCOME FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
Industrials—(continued)   

LG Corp. (South Korea)

     6,781      $ 349   

LS Industrial Systems Co., Ltd. (South Korea)

     4,308        166   

Pegatron Corp. (Taiwan)

     227,000        556   

S-1 Corp. (South Korea)

     4,168        328   

Shanghai Industrial Holdings Ltd. (China)

     120,000        266   

Sinopec Engineering Group Co., Ltd. Class H (China)

     653,500        571   

TAV Havalimanlari Holding AS (Turkey)

     27,476        216   
   

 

 

  
      3,961   
   

 

 

  
Information Technology—17.3%   

Asustek Computer, Inc. (Taiwan)

     62,000        533   

Chicony Electronics Co., Ltd. (Taiwan)

     84,490        195   

Cielo S.A. (Brazil)

     9,268        86   

Compal Electronics, Inc. (Taiwan)

     294,000        167   

Hon Hai Precision Industry Co., Ltd. (Taiwan)

     480,900        1,256   

Infosys Ltd. (India)

     62,937        1,117   

Lite-On Technology Corp. (Taiwan)

     149,950        138   

NCSoft Corp. (South Korea)

     953        152   

Powertech Technology, Inc. (Taiwan)

     134,000        243   

Quanta Computer, Inc. (Taiwan)

     218,000        379   

Radiant Opto-Electronics Corp. (Taiwan)

     207,260        644   

Realtek Semiconductor Corp. (Taiwan)

     88,000        150   

Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan)

     233,000        934   

Tata Consultancy Services Ltd. (India)

     13,842        547   

Transcend Information, Inc. (Taiwan)

     55,000        139   

Vanguard International Semiconductor Corp. (Taiwan)

     143,000        163   

Wipro Ltd. (India)

     34,040        311   

WPG Holdings Ltd. (Taiwan)

     366,000        354   
   

 

 

  
      7,508   
   

 

 

  
    SHARES     VALUE  
Materials—4.8%   

Cementos Argos S.A. (Colombia)

     36,284      $ 111   

Eregli Demir Ve Celik Fabrikalari TAS (Turkey)

     68,108        84   

Gold Fields Ltd. (South Africa)

     73,617        191   

Grupo Mexico S.A.B. de C.V. Series B (Mexico)

     95,000        230   

Jiangxi Copper Co., Ltd. Class H (China)

     254,000        310   

MMC Norilsk Nickel PJSC ADR (Russia)

     14,597        210   

PTT Global Chemical PCL (Thailand)

     302,100        449   

Taiwan Cement Corp. (Taiwan)

     490,000        498   
   

 

 

  
      2,083   
   

 

 

  
Telecommunication Services—8.1%   

America Movil S.A.B. de C.V. Class C Series L (Mexico)

     599,200        498   

Axiata Group Bhd (Malaysia)

     103,400        136   

China Communications Services Corp. Ltd. (China)

     564,000        218   

China Mobile Ltd. (China)

     106,500        1,275   

MTN Group Ltd. (South Africa)

     44,146        567   

Rostelecom PJSC Sponsored ADR (Russia)

     10,838        86   

SK Telecom Co., Ltd. (South Korea)

     1,771        393   

Telekomunikasi Indonesia Persero Tbk PT (Indonesia)

     1,908,400        344   
   

 

 

  
      3,517   
   

 

 

  
Utilities—2.9%   

China Resources Power Holdings Co., Ltd. (China)

     122,000        280   

Enersis SA (Chile)

     284,195        72   

Huaneng Power International, Inc. Class H (China)

     630,000        682   
    SHARES     VALUE  
Utilities—(continued)   

Perusahaan Gas Negara Persero Tbk PT (Indonesia)

     1,372,000      $ 237   
   

 

 

  
              1,271   
TOTAL COMMON STOCKS
(Identified Cost $47,841)		         42,663   
TOTAL LONG TERM INVESTMENTS—100.4%   
(Identified Cost $49,491)             43,629   
TOTAL INVESTMENTS—100.4%     
(Identified Cost $49,491)        43,629 (1) 

Other assets and liabilities, net—(0.4)%

  

     (168 ) 
   

 

 

  
NET ASSETS—100.0%      $ 43,461   
   

 

 

  

Abbreviations:

ADR American Depositary Receipt
REIT Real Estate Investment Trust

Footnote Legend:

(1) Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2) Illiquid security.

 

Country Weightings (Unaudited)†       

China

     26 % 

Taiwan

     17   

South Korea

     11   

India

     9   

South Africa

     9   

Brazil

     7   

Mexico

     4   

Other

     17   

Total

     100 % 

† % of total investments as of September 30, 2015

  

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

       Total
Value at
September 30,
2015		        Level 1
Quoted
Prices		        Level 2
Significant
Observable
Inputs		  

Equity Securities:

               

Common Stocks

      $ 42,663         $ 11,817         $ 30,846   

Preferred Stock

        966           966           —   
    

 

 

       

 

 

       

 

 

  

Total Investments

      $ 43,629         $ 12,783         $ 30,846   
    

 

 

       

 

 

       

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

Securities held by the Fund with an end of period value of $19,345 were transferred from Level 1 to Level 2 based on our valuation procedures for non-U.S. securities.

(See Note 2A in the Notes to Financial Statements for more information.)

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

41

Table of Contents

VIRTUS EMERGING MARKETS SMALL-CAP FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—92.8%   
Consumer Discretionary—8.2%   

Ace Hardware Indonesia Tbk PT (Indonesia)

     1,487,000      $ 51   

Goldlion Holdings Ltd. (Hong Kong)

     256,000        105   

Pico Far East Holdings Ltd. (Hong Kong)

     697,780        162   

Truworths International Ltd. (South Africa)

     6,500        40   
   

 

 

  
      358   
   

 

 

  
Consumer Staples—23.6%   

AVI Ltd. (South Africa)

     23,200        147   

Compania Cervecerias Unidas SA Sponsored ADR (Chile)

     2,190        48   

Embotelladora Andina ADR S.A. Class-B (Chile)

     5,140        107   

Grupo Herdez Sab de CV (Mexico)

     36,925        98   

Guinness Anchor Bhd (Malaysia)

     30,200        95   

Massmart Holdings Ltd. (South Africa)

     4,900        38   

Oldtown Bhd (Malaysia)

     312,750        90   

Pinar SUT Mamulleri Sanayii AS (Turkey)

     15,100        100   

Premier Marketing PCL (Thailand)

     624,000        170   

Wawel SA (Poland)

     320        107   

Wumart Stores, Inc. Class-H (China)(2)

     58,000        24   
   

 

 

  
      1,024   
   

 

 

  
Financials—14.1%   

ARA Asset Management Ltd. (Singapore)

     166,000        154   

BFI Finance Indonesia Tbk PT (Indonesia)(3)

     727,000        149   

Bolsa Mexicana de Valores Sab de CV SA (Mexico)

     33,300        52   

Equity Group Holdings Ltd. (Kenya)

     205,600        89   

Korea Ratings Corp. (South Korea)

     3,000        104   

Tisco Financial Group PCL (Thailand)

     62,700        61   
   

 

 

  
      609   
   

 

 

  
Health Care—1.6%   

OdontoPrev S.A. (Brazil)

     28,400        70   
   

 

 

  
Industrials—19.0%   

Freight Management Holdings Bhd (Malaysia)

     211,029        73   

Prosegur Cia de Seguridad SA (Spain)

     23,500        113   

S-1 Corp. (South Korea)

     2,775        218   

Sinmag Equipment Corp. (Taiwan)

     26,520        97   

Taiwan Secom Co., Ltd. (Taiwan)

     53,874        151   

Tegma Gestao Logistica (Brazil)

     95,000        87   

Turk Traktor Ve Ziraat Makineleri AS (Turkey)

     3,500        85   
   

 

 

  
      824   
   

 

 

  
    SHARES     VALUE  
Information Technology—12.8%   

Autohome, Inc. ADR (China)(2)

     5,700      $ 186   

Bitauto Holdings Ltd. ADR (China)(2)

     1,285        38   

Lumax International Corp., Ltd. (Taiwan)

     101,800        134   

MercadoLibre, Inc. (United States)

     845        77   

TOTVS SA (Brazil)

     10,600        78   

Yandex NV Class A (Russia)(2)

     3,775        41   
   

 

 

  
      554   
   

 

 

  
Materials—10.8%   

Assore Ltd. (South Africa)

     9,900        53   

KPX Chemical Co. Ltd. (South Korea)

     2,470        114   

Synthos SA (Poland)

     37,000        37   

Transpaco Ltd. (South Africa)

     98,400        160   

Yung Chi Paint & Varnish Manufacturing Co. Ltd. (Taiwan)

     53,000        102   
   

 

 

  
      466   
   

 

 

  
Telecommunication Services—2.7%   

APT Satellite Holdings Ltd. (China)

     134,000        116   
TOTAL COMMON STOCKS
(Identified Cost $5,274)		         4,021   
WARRANTS—3.8%   
Financials—1.4%   

Crisil Ltd. Strike price $0.01 Expiration Date 06/06/16 (India)

     2,100        59   
   

 

 

  
Information Technology—2.4%   

EClerx Services Ltd. Strike price $0.01 Expiration Date 12/16/16 (India)

     1,600        39   

EClerx Services Ltd. Strike price $0.01 Expiration Date 12/31/18 (India)

     2,700        65   
              104   
TOTAL WARRANTS
(Identified Cost $147)		         163   
TOTAL LONG TERM INVESTMENTS—96.6%   
(Identified Cost $5,421)        4,184   
SHORT-TERM INVESTMENTS—1.6%   
Money Market Mutual Fund—1.6%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     69,440        69   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $69)		         69   
TOTAL INVESTMENTS—98.2%
(Identified Cost $5,490)		         4,253 (1) 

Other assets and liabilities, net—1.8%

  

     78   
   

 

 

  
NET ASSETS—100.0%      $ 4,331   
   

 

 

  

Abbreviation:

ADR American Depositary Receipt

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
(3)  Illiquid security.

 

Country Weightings (Unaudited)†  

Taiwan

     11 % 

South Africa

     10   

South Korea

     10   

China

     9   

Brazil

     6   

Hong Kong

     6   

Malaysia

     6   

Other

     42   

Total

     100 % 

† % of total investments as of September 30, 2015

   

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted
Prices		     Level 2
Significant
Observable
Inputs		  

Equity Securities:

      

Common Stocks

   $ 4,021      $ 2,475      $ 1,546   

Short-Term Invest
ments

     69        69        —   

Warrants

     163        —        163   
 

 

 

    

 

 

    

 

 

  

Total Invest
ments

   $ 4,253      $ 2,544      $ 1,709   
 

 

 

    

 

 

    

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

Securities held by the Fund with an end of period value of $1,169 were transferred from Level 1 to Level 2 based on our valuation procedures for non-U.S. securities.

(See Note 2A in the Notes to Financial Statements for more information.)

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

42

Table of Contents

VIRTUS GLOBAL INFRASTRUCTURE FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—98.8%   
Consumer Discretionary—2.5%   

Eutelsat Communications SA (France)

     57,245      $ 1,753   

SES SA (Luxembourg)

     67,155        2,114   
   

 

 

  
      3,867   
   

 

 

  
Energy—20.7%    

Columbia Pipeline Group, Inc. (United States)

     70,860        1,296   

Enbridge, Inc. (Canada)

     160,570        5,962   

Keyera Corp. (Canada)

     51,380        1,415   

Kinder Morgan, Inc. (United States)

     246,190        6,814   

Pembina Pipeline Corp. (Canada)

     78,865        1,898   

Plains GP Holdings LP Class A (United States)

     60,545        1,059   

Spectra Energy Corp. (United States)

     113,480        2,981   

Targa Resources Corp. (United States)

     17,870        921   

TransCanada Corp. (Canada)

     110,785        3,499   

Williams Cos., Inc. (The) (United States)

     155,280        5,722   
   

 

 

  
      31,567   
   

 

 

  
Financials—5.4%    

American Tower Corp. REIT (United States)

     43,395        3,818   

Crown Castle International Corp. REIT (United States)

     55,040        4,341   
   

 

 

  
      8,159   
   

 

 

  
Industrials—14.3%    

Abertis Infraestructuras SA (Spain)

     160,515        2,534   

Atlantia SpA (Italy)

     143,696        4,013   

Auckland International Airport Ltd. (New Zealand)

     548,404        1,717   

Aurizon Holdings Ltd. (Australia)

     436,465        1,542   

Ferrovial SA (Spain)

     87,820        2,094   

Flughafen Zuerich AG (Switzerland)

     2,845        1,979   

Sydney Airport (Australia)

     507,530        2,133   

Transurban Group (Australia)

     617,715        4,327   

Vinci SA (France)

     22,995        1,457   
   

 

 

  
      21,796   
   

 

 

  
Telecommunication Services—18.5%   

AT&T, Inc. (United States)

     199,095        6,486   

BCE, Inc. (Canada)

     31,435        1,288   

BT Group plc (United Kingdom)

     342,905        2,177   

Deutsche Telekom AG Registered Shares (Germany)

     119,515        2,121   

Nippon Telegraph & Telephone Corp. ADR (Japan)

     52,125        1,841   

Singapore Telecommunications Ltd. (Singapore)

     883,600        2,236   
    SHARES     VALUE  
Telecommunication Services—(continued)   

TELUS Corp. (Canada)

     61,350      $ 1,933   

Verizon Communications, Inc. (United States)

     144,194        6,274   

Vodafone Group plc Sponsored ADR (United Kingdom)

     118,916        3,774   
   

 

 

  
      28,130   
   

 

 

  
Utilities—37.4%    

ALLETE, Inc. (United States)

     32,385        1,635   

American Electric Power Co., Inc. (United States)

     31,080        1,767   

American Water Works Co., Inc. (United States)

     47,525        2,618   

APA Group (Australia)

     264,855        1,599   

Atmos Energy Corp. (United States)

     33,250        1,934   

CMS Energy Corp. (United States)

     57,740        2,039   

Dominion Resources, Inc. (United States)

     45,080        3,173   

DTE Energy Co. (United States)

     24,440        1,964   

Duke Energy Corp. (United States)

     41,685        2,999   

Edison International (United States)

     29,700        1,873   

Eversource Energy (United States)

     37,335        1,890   

Hera SpA (Italy)

     571,335        1,482   

Iberdrola SA (Spain)

     303,750        2,018   

National Grid plc (United Kingdom)

     400,995        5,574   

NextEra Energy, Inc. (United States)

     51,975        5,070   

NiSource, Inc. (United States)

     70,880        1,315   

Pennon Group plc (United Kingdom)

     138,850        1,632   

Portland General Electric Co. (United States)

     55,345        2,046   

Public Service Enterprise Group, Inc. (United States)

     52,225        2,202   

Questar Corp. (United States)

     57,235        1,111   

Sempra Energy (United States)

     39,995        3,868   

SevernTrent plc (United Kingdom)

     54,290        1,794   

Suez Environnement SA (France)

     76,410        1,369   

Vectren Corp. (United States)

     41,395        1,739   

Veolia Environnement SA (France)

     97,400        2,224   
   

 

 

  
              56,935   
TOTAL COMMON STOCKS
(Identified Cost $151,798)		         150,454   
TOTAL LONG TERM INVESTMENTS—98.8%   
(Identified Cost $151,798)             150,454   
    SHARES     VALUE  
SHORT-TERM INVESTMENTS—2.0%   
Money Market Mutual Fund—2.0%     

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     3,064,006      $ 3,064   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $3,064)		         3,064   
TOTAL INVESTMENTS—100.8% (Identified Cost $154,862)         153,518 (1) 

Other assets and liabilities, net—(0.8)%

  

     (1,213 ) 
   

 

 

  
NET ASSETS—100.0%      $ 152,305   
   

 

 

  

Abbreviations:

ADR American Depositary Receipt
REIT Real Estate Investment Trust

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.

 

Country Weightings (Unaudited)†       

United States

     53 % 

Canada

     10   

United Kingdom

     10   

Australia

     6   

France

     5   

Italy

     4   

Spain

     4   

Other

     8   

Total

     100 % 

† % of total investments as of September 30, 2015

   

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted
Prices		     Level 2
Significant
Observable
Inputs		  

Equity Securities:

      

Common Stocks

   $ 150,454      $ 136,900      $
 13,554
   

Short-Term Investments

     3,064        3,064       
 —
   
 

 

 

    

 

 

    

 

 

  

Total Investments

   $ 153,518      $ 139,964      $ 13,554   
 

 

 

    

 

 

    

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

Securities held by the Fund with an end of period value of $12,012 were transferred from Level 1 to Level 2 based on our valuation procedures for non-U.S. securities.

(See Note 2A in the Notes to Financial Statements for more information.)

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

43

Table of Contents

VIRTUS GLOBAL OPPORTUNITIES FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—95.9%   
Consumer Discretionary—6.2%   

Alimentation Couche-Tard, Inc. Class B (Canada)

     38,556      $ 1,773   

Naspers Ltd. Class N
(South Africa)

     11,331        1,415   

Priceline Group, Inc. (The) (United States)(2)

     2,517        3,113   

TJX Cos., Inc. (United States)

     34,313        2,451   
   

 

 

  
      8,752   
   

 

 

  
Consumer Staples—32.0%   

Altria Group, Inc. (United States)

     110,007        5,984   

British American Tobacco plc (United Kingdom)

     131,824        7,265   

Coca-Cola Co. (The)
(United States)

     108,351        4,347   

Hershey Co. (The) (United States)

     25,726        2,364   

ITC Ltd. (India)

     526,683        2,641   

Nestle S.A. Registered Shares (Switzerland)

     61,294        4,607   

Philip Morris International, Inc. (United States)

     84,743        6,723   

Reckitt Benckiser Group plc (United Kingdom)

     47,683        4,318   

Reynolds American, Inc.
(United States)

     77,868        3,447   

Unilever N.V. CVA (Netherlands)

     82,920        3,325   
   

 

 

  
      45,021   
   

 

 

  
Energy—1.6%   

Enbridge, Inc. (Canada)

     59,580        2,212   
   

 

 

  
Financials—20.8%   

American Tower Corp. REIT (United States)

     29,293        2,577   

Berkshire Hathaway, Inc. Class B (United States)(2)

     30,779        4,013   

CME Group, Inc. (United States)

     30,038        2,786   

Housing Development Finance Corp. (India)

     290,368        5,380   

Housing Development Finance Corp. Bank Ltd. (India)

     293,750        4,799   

Housing Development Finance Corp. Bank Ltd. ADR (India)

     5,596        342   

JPMorgan Chase & Co.
(United States)

     33,011        2,013   

Progressive Corp. (The)
(United States)

     76,301        2,338   

Wells Fargo & Co. (United States)

     97,460        5,004   
   

 

 

  
      29,252   
   

 

 

  
Health Care—16.8%   

Abbott Laboratories
(United States)

     45,761        1,840   

Bard (C.R.), Inc. (United States)

     7,322        1,364   

Becton, Dickinson & Co.
(United States)

     5,070        673   

Biogen, Inc. (United States)(2)

     4,738        1,383   
    SHARES     VALUE  
Health Care—(continued)   

Bristol-Myers Squibb Co. (United States)

     51,198      $ 3,031   

Celgene Corp.
(United States)(2)

     35,880        3,881   

Medtronic plc
(United States)

     26,957        1,804   

Novo Nordisk A/S Class B (Denmark)

     49,568        2,659   

Roche Holding AG (Switzerland)

     19,574        5,162   

UnitedHealth Group, Inc. (United States)

     16,288        1,890   
   

 

 

  
      23,687   
   

 

 

  
Information Technology—16.9%   

Apple, Inc. (United States)

     25,713        2,836   

Cognizant Technology Solutions Corp. Class A (United States)(2)

     37,591        2,354   

Google, Inc. Class C (United States)(2)

     7,694        4,681   

MasterCard, Inc. Class A (United States)

     78,230        7,050   

PayPal Holdings, Inc. (United States)(2)

     73,150        2,271   

Visa, Inc. Class A
(United States)

     66,760        4,650   
   

 

 

  
      23,842   
   

 

 

  
Materials—1.6%   

Martin Marietta Materials, Inc. (United States)

     15,247        2,317   
TOTAL COMMON STOCKS
(Identified Cost $107,627)		         135,083   
TOTAL LONG TERM INVESTMENTS—95.9%   
(Identified Cost $107,627)             135,083   
SHORT-TERM INVESTMENTS—5.7%   
Money Market Mutual Fund—5.7%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     7,958,713        7,959   
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $7,959)         7,959   
TOTAL INVESTMENTS—101.6% (Identified Cost $115,586)         143,042 (1) 

Other assets and liabilities, net—(1.6)%

  

     (2,264 ) 
   

 

 

  
NET ASSETS—100.0%      $ 140,778   
   

 

 

  

Abbreviations:

ADR American Depositary Receipt
REIT Real Estate Investment Trust

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.

 

Country Weightings (Unaudited)†       

United States

     68 % 

India

     9   

United Kingdom

     8   

Switzerland

     7   

Canada

     3   

Denmark

     2   

Netherlands

     2   

Other

     1   

Total

     100 % 

† % of total investments as of September 30, 2015

   

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted
Prices		     Level 2
Significant
Observable
Inputs		  

Equity Securities:

      

Common Stocks

   $ 135,083      $ 122,264      $ 12,819   

Short-Term Investments

     7,959        7,959        —   
 

 

 

    

 

 

    

 

 

  

Total Investments

   $ 143,042      $ 130,223      $ 12,819   
 

 

 

    

 

 

    

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

Securities held by the Fund with an end of period value of $12,819 were transferred from Level 1 to Level 2 based on our valuation procedures for non-U.S. securities.

(See Note 2A in the Notes to Financial Statements for more information.)

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

44

Table of Contents

VIRTUS GLOBAL REAL ESTATE SECURITIES FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—99.1%   
Australia—4.2%   

Dexus Property Group

     121,839      $ 614   

GPT Group

     115,300        367   

GPT Group (The) – In Specie(2)(3)(5)

     13,566        —   

Scentre Group

     402,789        1,109   

Westfield Corp.

     162,750        1,145   
   

 

 

  
      3,235   
   

 

 

  
Canada—3.1%   

Allied Properties Real Estate Investment Trust

     29,535        773   

Canadian Real Estate Investment Trust

     13,675        420   

First Capital Realty, Inc.

     25,180        353   

RioCan Real Estate Investment Trust

     43,562        831   
   

 

 

  
      2,377   
   

 

 

  
Finland—0.9%   

Citycon OYJ

     278,032        684   
   

 

 

  
France—2.3%   

Fonciere Des Regions

     2,454        213   

Klepierre

     24,020        1,087   

Mercialys SA

     22,300        482   
   

 

 

  
      1,782   
   

 

 

  
Germany—2.9%   

ADO Properties SA(2)(4)

     8,642        209   

Deutsche Annington Immobilien SE

     42,048        1,351   

LEG Immobilien AG

     8,454        697   
   

 

 

  
      2,257   
   

 

 

  
Hong Kong—2.4%   

Hysan Development Co. Ltd.

     87,000        362   

Link REIT (The)

     273,504        1,506   
   

 

 

  
      1,868   
   

 

 

  
Italy—0.2%   

Beni Stabili SpA

     179,062        139   
   

 

 

  
Japan—5.6%   

GLP J-REIT

     551        527   

Hulic Co., Ltd.

     77,200        698   

Industrial & Infrastructure Fund Investment Corp.

     133        579   

Japan Real Estate Investment Corp.

     111        511   

Japan Rental Housing Investments, Inc.

     482        315   

Kenedix Office Investment Corp.

     80        380   

Kenedix Retail Reit Corp.

     64        123   

Nippon Building Fund, Inc.

     108        523   

Nippon Prologis REIT, Inc.

     222        403   

Nomura Real Estate Office Fund, Inc.(5)

     59        266   
   

 

 

  
      4,325   
   

 

 

  
    SHARES     VALUE  
Mexico—1.2%   

PLA Administradora Industrial S de Rl de CV

     185,722      $ 339   

Prologis Property Mexico SA de CV

     367,800        565   
   

 

 

  
      904   
   

 

 

  
Netherlands—2.7%   

Unibail-Rodamco SE

     8,198        2,119   
   

 

 

  
Norway—0.4%   

Entra ASA(4)

     23,000        186   

Norwegian Property ASA(2)

     112,875        125   
   

 

 

  
      311   
   

 

 

  
Singapore—1.7%   

CapitaLand Mall Trust

     97,450        130   

CapitaLand Retail China Trust

     370,331        356   

Global Logistic Properties Ltd.

     553,500        796   
   

 

 

  
      1,282   
   

 

 

  
Spain—0.5%   

Axiare Patrimonio SOCIMI SA

     25,689        351   
   

 

 

  
Sweden—0.6%    

Castellum AB

     35,640        501   
   

 

 

  
United Kingdom—8.4%   

Big Yellow Group plc

     67,628        741   

British Land Co. plc

     67,000        850   

Derwent London plc

     9,110        501   

Great Portland Estates plc

     17,476        226   

Hammerson plc

     104,020        981   

Land Securities Group plc

     50,931        970   

Safestore Holdings plc

     134,457        600   

SEGRO plc

     95,490        620   

Unite Group plc (The)

     106,000        1,047   
   

 

 

  
      6,536   
   

 

 

  
United States—62.0%   

American Campus Communities, Inc.

     20,638        748   

American Homes 4 Rent Class A

     50,000        804   

AvalonBay Communities, Inc.

     14,465        2,529   

Boston Properties, Inc.

     11,378        1,347   

Brixmor Property Group, Inc.

     54,833        1,288   

Camden Property Trust

     14,506        1,072   

Cousins Properties, Inc.

     79,700        735   

CubeSmart

     24,550        668   

DCT Industrial Trust, Inc.

     53,698        1,808   

Douglas Emmett, Inc.

     42,295        1,215   

Duke Realty Corp.

     51,100        973   

Equity Lifestyle Properties, Inc.

     10,846        635   

Equity Residential

     37,315        2,803   

Essex Property Trust, Inc.

     11,854        2,648   

Extra Space Storage, Inc.

     23,595        1,821   

Federal Realty Investment Trust

     12,750        1,740   

General Growth Properties, Inc.

     69,019        1,792   

HCP, Inc.

     6,329        236   

Highwoods Properties, Inc.

     29,860        1,157   

Host Hotels & Resorts, Inc.

     96,508        1,526   

Kilroy Realty Corp.

     26,175        1,706   
    SHARES     VALUE  
United States—continued   

LaSalle Hotel Properties

     37,915      $ 1,076   

Liberty Property Trust

     39,167        1,234   

Macerich Co. (The)

     3,073        236   

Paramount Group, Inc.

     29,240        491   

Pebblebrook Hotel Trust

     34,509        1,223   

Prologis, Inc.

     59,648        2,320   

Public Storage

     11,134        2,356   

Regency Centers Corp.

     19,400        1,206   

RLJ Lodging Trust

     44,350        1,121   

Simon Property Group, Inc.

     24,731        4,544   

SL Green Realty Corp.

     5,386        583   

Tanger Factory Outlet Centers

     44,350        1,462   

Ventas, Inc.

     16,472        923   
   

 

 

  
              48,026   
TOTAL COMMON STOCKS
(Identified Cost $70,462)		         76,697   
TOTAL LONG TERM INVESTMENTS—99.1%   
(Identified Cost $70,462)             76,697   
SHORT-TERM INVESTMENTS—0.9%   
Money Market Mutual Fund—0.9%   

Fidelity Money Market
Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     706,177        706   
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $706)         706   
TOTAL INVESTMENTS—100.0% (Identified Cost $71,168)         77,403 (1) 

Other assets and liabilities, net—0.0%

  

     (8 ) 
   

 

 

  
NET ASSETS—100.0%      $ 77,395   
   

 

 

  

Abbreviation:

REIT Real Estate Investment Trust

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
(3)  Illiquid security.
(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, 2015, these securities amounted to a value of $395 or 0.5% of net assets.
(5)  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.
 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

45

Table of Contents

VIRTUS GLOBAL REAL ESTATE SECURITIES FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

Country Weightings (Unaudited)†       

United States

     63 % 

United Kingdom

     8   

Japan

     6   

Australia

     4   

Canada

     3   

Germany

     3   

Netherlands

     3   

Other

     10   

Total

     100 % 

† % of total investments as of September 30, 2015

   

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

       Total
Value at
September 30,
2015		        Level 1
Quoted
Prices		        Level 2
Significant
Observable
Inputs		        Level 3
Significant
Unobservable
Inputs		  

Equity Securities:

                    

Common Stocks

      $ 76,697         $ 65,987         $ 10,710         $ 0 (1) 

Short-Term Investments

        706           706           —           —   
    

 

 

       

 

 

       

 

 

       

 

 

  

Total Investments

      $ 77,403         $ 66,693         $ 10,710         $ 0 (1) 
    

 

 

       

 

 

       

 

 

       

 

 

  

 

(1)  Includes internally fair valued security currently priced at zero ($0).

Securities held by the Fund with an end of period value of $10,272 were transferred from Level 1 to Level 2 based on our valuation procedures for non-U.S. securities.

(See Note 2A in the Notes to Financial Statements for more information.)

See Notes to Financial Statements

 

 

46

Table of Contents

VIRTUS GREATER EUROPEAN OPPORTUNITIES FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—96.4%   
Consumer Discretionary—15.7%   

Barrat Developments plc
(United Kingdom)

     47,649      $ 464   

Compagnie Financiere Richemont SA Registered Shares (Switzerland)

     2,063        160   

Domino’s Pizza Group plc
(United Kingdom)

     21,109        284   

Hermes International SA (France)

     1,566        569   

Paddy Power plc (Ireland)

     3,528        407   

Persimmon plc (United Kingdom)

     12,888        391   

Priceline Group, Inc. (The)
(United States)(2)

     591        731   

William Hill plc (United Kingdom)

     44,859        238   
   

 

 

  
      3,244   
   

 

 

  
Consumer Staples—38.5%    

Anheuser-Busch InBev N.V. (Belgium)

     3,758        399   

British American Tobacco plc (United Kingdom)

     24,391        1,344   

Chocoladefabrike Lindt & Spruengli AG (Switzerland)

     43        252   

Diageo plc (United Kingdom)

     9,095        244   

Imperial Tobacco Group plc (United Kingdom)

     12,904        666   

L’Oreal SA (France)

     2,061        357   

Nestle S.A. Registered Shares (Switzerland)

     14,039        1,055   

Pernod-Ricard SA (France)

     2,476        250   

Philip Morris International, Inc. (United States)

     12,205        968   

Reckitt Benckiser Group plc (United Kingdom)

     11,736        1,063   

SABMiller plc (United Kingdom)

     10,832        612   

Unilever N.V. CVA (Netherlands)

     17,918        719   
   

 

 

  
      7,929   
   

 

 

  
Financials—8.0%    

Banco Bilbao Vizcaya Argentaria S.A. (Spain)

     42,935        364   

Lloyds Banking Group plc
(United Kingdom)

     254,783        290   

Reinet Investments SCA (Luxembourg)

     8,716        170   

Svenska Handelsbanken AB Class A (Sweden)

     16,652        238   

UBS Group AG (Switzerland)

     32,200        595   
   

 

 

  
      1,657   
   

 

 

  
Health Care—19.9%    

Bayer AG Registered Shares (Germany)

     4,280        547   

Coloplast A/S Class B (Denmark)

     2,723        193   

Essilor International SA (France)

     4,227        514   

Fresenius Medical Care AG & Co. KGaA (Germany)

     4,014        313   

Grifols SA (Spain)

     9,973        411   
    SHARES     VALUE  
Health Care—continued    

Novartis AG Registered Shares (Switzerland)

     1,335      $ 123   

Novo Nordisk A/S Class B (Denmark)

     11,901        639   

Novozymes A/S Class B (Denmark)

     4,503        196   

Roche Holding AG (Switzerland)

     4,433        1,169   
   

 

 

  
      4,105   
   

 

 

  
Industrials—5.1%   

Aena SA (Spain)(2)(3)

     2,655        293   

Bureau Veritas SA (France)

     16,656        350   

DKSH Holding AG (Switzerland)

     3,551        225   

Zardoya Otis S.A. (Spain)

     16,054        173   
   

 

 

  
      1,041   
   

 

 

  
Information Technology—3.1%   

Accenture plc Class A
(United States)

     1,370        135   

SAP SE (Germany)

     7,789        504   
   

 

 

  
      639   
   

 

 

  
Materials—5.0%   

Air Liquide SA (France)

     4,961        586   

HeidelbergCement AG (Germany)

     2,275        156   

Randgold Resources Ltd. (Jersey)

     2,773        162   

Randgold Resources Ltd. ADR (Jersey)

     2,269        134   
   

 

 

  
      1,038   
   

 

 

  
Retail REIT—1.1%   

Unibail-Rodamco SE (Netherlands)

     859        222   
TOTAL COMMON STOCKS
(Identified Cost $17,525)		         19,875   
TOTAL LONG TERM INVESTMENTS—96.4%   
(Identified Cost $17,525)             19,875   
SHORT-TERM INVESTMENTS—3.8%   
Money Market Mutual Fund—3.8%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     781,625        782   
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $782)		         782   
TOTAL INVESTMENTS—100.2% (Identified Cost $18,307)         20,657 (1) 

Other assets and liabilities, net—(0.2)%

  

     (36 ) 
   

 

 

  
NET ASSETS—100.0%     $ 20,621   
   

 

 

  

Abbreviations:

ADR American Depositary Receipt
REIT Real Estate Investment Trust

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
(3)  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, 2015, these securities amounted to a value of $293 or 1.4% of net assets.

 

Country Weightings (Unaudited)†       

United Kingdom

     27 % 

Switzerland

     17   

France

     13   

United States

     13   

Germany

     7   

Spain

     6   

Denmark

     5   

Other

     12   

Total

     100 % 

† % of total investments as of September 30, 2015

   

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

47

Table of Contents

VIRTUS GREATER EUROPEAN OPPORTUNITIES FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

       Total
Value at
September 30,
2015		        Level 1
Quoted
Prices		  

Equity Securities:

          

Common Stocks

      $ 19,875         $ 19,875   

Short-Term Investments

        782           782   
    

 

 

       

 

 

  

Total Investments

      $ 20,657         $ 20,657   
    

 

 

       

 

 

  

There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.

There were no transfers between Level 1 and Level 2 related to securities held at September 30, 2015.

 

See Notes to Financial Statements

 

48

Table of Contents

VIRTUS INTERNATIONAL EQUITY FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—93.1%   
Consumer Discretionary—17.5%   

Bridgestone Corp. (Japan)

     6,370      $ 220   

Fuji Heavy Industries Ltd. (Japan)

     7,560        272   

RELX plc (United Kingdom)

     13,070        224   

Sony Corp. Sponsored ADR (Japan)(2)

     9,630        236   

Toyota Motor Corp. Sponsored ADR (Japan)

     1,830        215   

WPP PLC (United Kingdom)

     10,670        221   
   

 

 

  
      1,388   
   

 

 

  
Consumer Staples—3.1%   

Marine Harvest ASA Sponsored ADR (Norway)(3)

     19,530        247   
   

 

 

  
Energy—2.7%   

Cameco Corp. (Canada)

     17,420        212   
   

 

 

  
Financials—21.9%   

Aegon NV American Registered Shares (Netherlands)

     32,940        189   

Aviva plc (United Kingdom)

     30,512        209   

Credit Agricole SA (France)

     16,527        189   

ING Groep N.V. Sponsored ADR (Netherlands)

     15,430        218   

Intesa Sanpaolo SpA (Italy)

     72,243        255   

Mitsubishi Estate Co. (Japan)

     11,580        237   

ORIX Corp. (Japan)

     16,360        211   

Societe Generale SA (France)

     5,140        229   
   

 

 

  
      1,737   
   

 

 

  
Health Care—16.1%   

Allergan plc (Ireland)

     860        234   

Icon plc (Ireland)

     3,800        270   

Novartis AG Sponsored ADR (Switzerland)

     2,260        208   

Shire plc ADR (United Kingdom)

     980        201   

Teva Pharmaceutical Industries Ltd. Sponsored ADR (Israel)

     2,540        143   

Valeant Pharmaceuticals International, Inc. (Canada)(2)

     1,240        221   
   

 

 

  
      1,277   
   

 

 

  
    SHARES     VALUE  
Industrials—6.4%   

CK Hutchison Holdings Ltd.
(Hong Kong)

     19,122      $ 249   

Nidec Corp. (Japan)

     3,820        262   
   

 

 

  
      511   
   

 

 

  
Information Technology—8.4%   

Avago Technologies Ltd. (Singapore)

     1,560        195   

NXP Semiconductors NV (Netherlands)

     2,730        238   

SAP SE Sponsored ADR (Germany)(3)

     3,660        237   
   

 

 

  
      670   
   

 

 

  
Materials—2.4%   

Nitto Denko Corp. (Japan)

     3,200        192   
   

 

 

  
Telecommunication Services—12.3%   

KDDI Corp. (Japan)

     10,590        237   

Nippon Telegraph & Telephone Corp. ADR (Japan)

     7,880        278   

Spark New Zealand Ltd.
(New Zealand)

     127,731        244   

Vodafone Group plc Sponsored ADR (United Kingdom)

     6,920        220   
   

 

 

  
      979   
   

 

 

  
Utilities—2.3%   

Veolia Environnement SA (France)

     7,880        180   
TOTAL COMMON STOCKS (Identified Cost $7,295)             7,393   
TOTAL LONG TERM INVESTMENTS—93.1%   
(Identified Cost $7,295)             7,393   
SHORT-TERM INVESTMENTS—10.6%   
Money Market Mutual Fund—10.6%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     841,231        841   
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $841)         841   
    SHARES     VALUE  
SECURITIES LENDING COLLATERAL—5.7%   

INVESCO Trust Short-Term Investments Liquid Assets Portfolio (The) Institutional Shares (seven-day effective yield 0.160%)(4)

     452,408      $ 452   
TOTAL SECURITIES LENDING COLLATERAL (Identified Cost $452)         452   
TOTAL INVESTMENTS—109.4%
(Identified Cost $8,588)		         8,686 (1) 

Other assets and liabilities, net—(9.4)%

  

     (750 ) 
   

 

 

  
NET ASSETS—100.0%      $ 7,936   
   

 

 

  

Abbreviation:

ADR American Depositary Receipt

Footnote Legend:

(1) Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2) Non-income producing.
(3) All or a portion of security is on loan.
(4) Represents security purchased with cash collateral received for securities on loan.
 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

49

Table of Contents

VIRTUS INTERNATIONAL EQUITY FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

 

Country Weightings (Unaudited)†       

Japan

     27 % 

United States

     15   

United Kingdom

     12   

France

     7   

Netherlands

     7   

Ireland

     6   

Canada

     5   

Other

     21   

Total

     100 % 

† % of total investments as of September 30, 2015

   

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

     Total
Value at
September 30,
2015		        Level 1
Quoted
Prices		        Level 2
Significant
Observable
Inputs		  

Equity Securities:

             

Common Stocks

    $ 7,393         $ 5,269         $ 2,124   

Securities Lending Collateral

      452           452           —   

Short-Term Investments

      841           841           —   
  

 

 

       

 

 

       

 

 

  

Total Investments

    $ 8,686         $ 6,562         $ 2,124   
  

 

 

       

 

 

       

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

Securities held by the Fund with an end of period value of $1,447 were transferred from Level 1 to Level 2 based on our valuation procedures for non-U.S. securities.

(See Note 2A in the Notes to Financial Statements for more information.)

See Notes to Financial Statements

 

 

50

Table of Contents

VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—99.9%    
Australia—11.7%    

Dexus Property Group

     166,018      $ 837   

GPT Group

     160,400        510   

GPT Group (The) – In Specie(2)(3)(4)

     588,920        —   

Scentre Group

     608,071        1,674   

Westfield Corp.

     229,973        1,618   
   

 

 

  
      4,639   
   

 

 

  
Canada—7.9%    

Allied Properties Real Estate Investment Trust

     39,415        1,032   

Canadian Real Estate Investment Trust

     19,195        589   

First Capital Realty, Inc.

     33,805        474   

RioCan Real Estate Investment Trust

     54,150        1,033   
   

 

 

  
      3,128   
   

 

 

  
Finland—2.3%    

Citycon OYJ

     374,691        921   
   

 

 

  
France—6.5%    

Fonciere Des Regions

     3,460        301   

Klepierre

     34,856        1,577   

Mercialys SA

     31,800        687   
   

 

 

  
      2,565   
   

 

 

  
Germany—7.9%    

ADO Properties SA(2)(5)

     9,522        230   

Deutsche Annington Immobilien SE

     60,445        1,942   

LEG Immobilien AG

     11,861        978   
   

 

 

  
      3,150   
   

 

 

  
Hong Kong—6.1%    

Hysan Development Co. Ltd.

     123,000        512   

Link REIT (The)

     348,441        1,919   
   

 

 

  
      2,431   
   

 

 

  
Italy—0.5%    

Beni Stabili SpA

     248,164        193   
   

 

 

  
Japan—14.4%    

GLP J-REIT

     755        722   

Hulic Co., Ltd.

     111,500        1,009   
    SHARES     VALUE  
Japan—continued    

Industrial & Infrastructure Fund Investment Corp.

     173      $ 753   

Japan Real Estate Investment Corp.

     145        668   

Japan Rental Housing Investments, Inc.

     653        426   

Kenedix Office Investment Corp.

     92        437   

Kenedix Retail Reit Corp.

     86        166   

Nippon Building Fund, Inc.

     145        702   

Nippon Prologis REIT, Inc.

     278        504   

Nomura Real Estate Office Fund, Inc.

     70        316   
   

 

 

  
      5,703   
   

 

 

  
Mexico—2.7%    

PLA Administradora Industrial S de Rl de CV

     226,852        414   

Prologis Property Mexico SA de CV

     439,200        675   
   

 

 

  
      1,089   
   

 

 

  
Netherlands—7.7%    

Unibail-Rodamco SE

     11,810        3,052   
   

 

 

  
Norway—1.1%    

Entra ASA(5)

     30,000        242   

Norwegian Property ASA(2)

     172,000        191   
   

 

 

  
      433   
   

 

 

  
Singapore—4.6%    

CapitaLand Mall Trust

     130,650        175   

CapitaLand Retail China Trust

     518,868        498   

Global Logistic Properties Ltd.

     802,000        1,153   
   

 

 

  
      1,826   
   

 

 

  
Spain—1.3%    

Axiare Patrimonio SOCIMI SA

     36,858        504   
   

 

 

  
Sweden—1.8%    

Castellum AB

     49,366        694   
   

 

 

  
United Kingdom—23.4%    

Big Yellow Group plc

     100,188        1,097   

British Land Co. plc

     97,305        1,234   

Derwent London plc

     13,346        735   

Great Portland Estates plc

     24,918        322   

Hammerson plc

     142,109        1,341   

Land Securities Group plc

     71,885        1,369   

Safestore Holdings plc

     192,276        857   

SEGRO plc

     135,557        881   
    SHARES     VALUE  
United Kingdom—continued    

Unite Group plc (The)

     146,800      $ 1,450   
   

 

 

  
              9,286   
TOTAL COMMON STOCKS
(Identified Cost $32,315)		         39,614   
TOTAL LONG TERM INVESTMENTS—99.9%   
(Identified Cost $32,315)             39,614   
TOTAL INVESTMENTS—99.9%   
(Identified Cost $32,315)        39,614 (1) 

Other assets and liabilities, net—0.1%

  

     26   
   

 

 

  
NET ASSETS—100.0%     $ 39,640   
   

 

 

  

Abbreviation:

REIT Real Estate Investment Trust

Footnote Legend:

(1) Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2) Non-income producing.
(3) Illiquid security.
(4) 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.
(5) 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, 2015, these securities amounted to a value of $472 or 1.2% of net assets.

 

Country Weightings (Unaudited)†       

United Kingdom

     23 % 

Japan

     14   

Australia

     12   

Germany

     8   

Canada

     8   

Netherlands

     8   

France

     7   

Other

     20   

Total

     100 % 

† % of total investments as of September 30, 2015

   

 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

51

Table of Contents

VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

       Total Value at
September 30,
2015		        Level 1
Quoted
Prices		        Level 2
Significant
Observable
Inputs		        Level 3
Significant
Unobservable
Inputs		  

Equity Securities:

                    

Common Stocks

      $ 39,614         $ 25,015         $ 14,599         $ 0 * 
    

 

 

       

 

 

       

 

 

       

 

 

  

Total Investments

      $ 39,614         $ 25,015         $ 14,599         $ 0 * 
    

 

 

       

 

 

       

 

 

       

 

 

  

 

*  Includes internally fair valued security currently priced at zero ($0).

Securities held by the Fund with an end of period value of $14,007 were transferred from Level 1 to Level 2 based on our valuation procedures for non-U.S. securities.

(See Note 2A in the Notes to Financial Statements for more information.)

 

See Notes to Financial Statements

 

52

Table of Contents

VIRTUS INTERNATIONAL SMALL-CAP FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—97.0%   
Consumer Discretionary—13.0%   

Colefax Group plc
(United Kingdom)

     4,490      $ 33   

Goldlion Holdings Ltd.
(Hong Kong)

     2,990,600        1,219   

Pico Far East Holdings Ltd. (Hong Kong)

     5,317,668        1,234   

REA Group Ltd. (Australia)

     72,000        2,255   

Rightmove plc (United Kingdom)

     8,000        441   

Watts Co. Ltd. (Japan)

     62,591        526   
   

 

 

  
      5,708   
   

 

 

  
Consumer Staples—7.5%   

Dongsuh Co., Inc. (South Korea)

     1        —   

Guinness Anchor Bhd (Malaysia)

     295,000        924   

Oldtown Bhd (Malaysia)

     1,797,550        520   

Premier Marketing PCL (Thailand)

     4,415,029        1,203   

Wawel SA (Poland)

     1,900        637   
   

 

 

  
      3,284   
   

 

 

  
Energy—4.0%   

Pason Systems, Inc. (Canada)

     47,500        667   

Schoeller-Bleckmann Oilfield Equipment AG (Austria)

     19,548        1,102   
   

 

 

  
      1,769   
   

 

 

  
Financials—20.8%   

ARA Asset Management Ltd. (Singapore)

     1,449,760        1,345   

Ashmore Group plc (United Kingdom)

     306,500        1,143   

Austbrokers Holdings Ltd. (Australia)

     124,742        776   

Euler Hermes Group (France)

     15,750        1,461   

Euroz Ltd. (Australia)

     2,264,878        1,386   

Financiere Marc de Lacharriere (France)

     5,811        544   

Korea Ratings Corp.
(South Korea)

     35,794        1,244   

LSL Property Services plc (United Kingdom)

     239,001        1,238   
   

 

 

  
      9,137   
   

 

 

  
Health Care—5.7%   

Haw Par Corp. Ltd. (Singapore)

     142,719        817   

Software Service, Inc. (Japan)

     11,753        462   

WIN-Partners Co. Ltd. (Japan)

     90,710        1,256   
   

 

 

  
      2,535   
   

 

 

  
Industrials—15.4%   

AIT Corp. (Japan)

     170,700        1,326   

Belimo Holding AG (Switzerland)

     380        799   

Freight Management Holdings Bhd (Malaysia)

     1,205,174        417   

Rotork plc. (United Kingdom)

     517,393        1,290   
    SHARES     VALUE  
Industrials—continued   

Tegma Gestao Logistica (Brazil)

     1,067,071      $ 974   

Thermador Groupe (France)

     10,762        931   

WABCO Holdings, Inc. (United States)(2)

     9,750        1,022   
   

 

 

  
      6,759   
   

 

 

  
Information Technology—23.7%   

Alten SA (France)

     16,700        857   

Autohome, Inc. ADR (China)(2)

     71,200        2,316   

Bouvet ASA (Norway)

     256,945        2,565   

carsales.com Ltd. (Australia)

     164,467        1,133   

Lumax International Corp., Ltd. (Taiwan)

     1,102,000        1,452   

MercadoLibre, Inc.
(United States)

     4,800        437   

Pro-Ship, Inc. (Japan)

     42,000        695   

Societe Pour L’informatique Industrielle (France)

     30,891        278   

TOTVS SA (Brazil)

     93,000        688   
   

 

 

  
      10,421   
   

 

 

  
Materials—6.9%   

KPX Chemical Co. Ltd. (South Korea)

     27,394        1,264   

Transpaco Ltd.
(South Africa)

     903,921        1,468   

Victrex plc
(United Kingdom)

     11,800        316   
   

 

 

  
              3,048   
TOTAL COMMON STOCKS
(Identified Cost $51,655)		         42,661   
TOTAL LONG TERM INVESTMENTS—97.0%   
(Identified Cost $51,655)             42,661   
SHORT-TERM INVESTMENTS—2.1%   
Money Market Mutual Fund—2.1%   

Fidelity Money Market Portfolio – Institutional Shares (seven-day effective yield 0.170%)

     940,851        941   
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $941)         941   
TOTAL INVESTMENTS—99.1%
(Identified Cost $52,596)		         43,602 (1) 

Other assets and liabilities, net—0.9%

  

     380   
   

 

 

  
NET ASSETS—100.0%      $ 43,982   
   

 

 

  

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
Country Weightings (Unaudited)†       

Australia

     13 % 

Japan

     10   

United Kingdom

     10   

France

     9   

Norway

     6   

South Korea

     6   

Hong Kong

     5   

Other

     41   

Total

     100 % 

† % of total investments as of September 30, 2015

   

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted
Prices		     Level 2
Significant
Observable
Inputs		  

Equity Securities:

      

Common Stocks

   $ 42,661      $ 23,797      $ 18,864   

Short-Term Investments

     941        941        —   
 

 

 

    

 

 

    

 

 

  

Total Investments

   $ 43,602      $ 24,738      $ 18,864   
 

 

 

    

 

 

    

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

Securities held by the Fund with an end of period value of $13,314 were transferred from Level 1 to Level 2 based on our valuation procedures for non-U.S. securities.

(See Note 2A in the Notes to Financial Statements for more information.)

 

 

See Notes to Financial Statements

 

 

 

53

Table of Contents

VIRTUS INTERNATIONAL WEALTH MASTERS FUND

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
COMMON STOCKS—99.3%   
Consumer Discretionary—30.4%   

Ainsworth Game Technology Ltd.

     9,809      $ 19   

Autogrill S.p.A(2)

     980        9   

Autoneum Holding AG

     115        21   

Axel Springer SE

     447        25   

Bayerische Motoren Werke AG

     300        27   

Benesse Holdings, Inc.

     1,450        39   

Brembo S.p.A

     231        9   

Brunello Cucinelli S.p.A

     503        9   

Carnival plc

     854        44   

Chow Tai Fook Jewellery Group Ltd.

     5,800        5   

Christian Dior SA

     81        15   

Compagnie Financiere Richemont SA Registered Shares

     281        22   

Continental AG

     132        28   

Crown Resorts Ltd.

     2,508        18   

CTS Eventim AG & Co. KGaA

     734        27   

Daily Mail & General Trust plc

     3,829        44   

De’ Longhi

     364        9   

Dixons Carphone plc

     6,971        45   

Domino’s Pizza Enterprises Ltd.

     674        19   

Don Quijote Holdings Co., Ltd.

     1,050        40   

Dufry AG(2)

     174        20   

Fast Retailing Co., Ltd.

     100        41   

Fielmann AG

     405        28   

Forbo Holding AG Registered Shares

     19        21   

Galaxy Entertainment Group Ltd.

     1,750        4   

Genting Singapore plc

     11,400        6   

Global Brands Group Holding Ltd.(2)

     24,000        5   

Harvey Norman Holdings Ltd.

     6,630        18   

Hennes & Mauritz AB Class B

     250        9   

Hermes International SA

     41        15   

Hikari Tsushin, Inc.

     560        39   

Inditex SA

     463        15   

Jardine Cycle & Carriage Ltd.

     300        6   

JCDecaux SA

     403        15   

Kering

     89        15   

Kingston Financial Group Ltd.(2)

     16,000        6   

L’Occitane International SA

     6,750        14   

Li & Fung Ltd.

     7,000        5   

Lifestyle International Holdings Ltd.

     3,500        5   

Luxottica Group S.p.A

     136        9   

LVMH Moet Hennessy Louis Vuitton SA

     89        15   

M6-Metropole Television SA

     752        14   

Man Wah Holdings Ltd.

     5,200        5   

Mediaset S.p.A.

     1,855        9   

Mekonomen AB

     389        9   

Melco Crown Entertainment Ltd. ADR

     306        4   

Melco International Development Ltd.

     3,500        4   

Melia Hotels International SA

     1,079        15   

MGM China Holdings Ltd.

     3,600        4   

Nitori Co., Ltd.

     485        38   

Ocado Group plc(2)

     8,727        42   

Osim International Ltd.

     5,200        6   

Plastic Omnium SA

     647        15   

Prada S.p.A

     2,100        8   

Premier Investments Ltd.

     2,036        18   

PT Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA

     424        3   
    SHARES     VALUE  
Consumer Discretionary—continued     

Publicis Groupe SA

     220      $ 15   

Puma SE

     133        27   

Rakuten, Inc.

     3,050        39   

Royal Caribbean Cruises Ltd.

     55        5   

SA International Holdings Ltd.

     12,000        5   

Salvatore Ferragamo S.p.A

     350        9   

Sands China Ltd.

     1,600        5   

Sankyo Co., Ltd.

     1,050        37   

Sega Sammy Holdings, Inc.

     3,700        36   

Seven West Media Ltd.

     35,418        18   

Shangri-La Asia Ltd.

     5,500        5   

Shimanura Co., Ltd.

     400        43   

Sincere Watch Ltd.(2)

     40,000        5   

SJM Holdings Ltd.

     6,000        4   

Societe Television Francaise 1

     990        14   

Sodexo

     181        15   

Sports Direct International plc(2)

     3,847        44   

Start Today Co., Ltd.

     1,300        43   

Steinhoff International Holdings Ltd.

     4,451        27   

Swatch Group AG (The)

     57        21   

Techtronics Industries Co., Ltd.

     1,350        5   

Tod’s S.p.A

     101        9   

Universal Entertainment Corp

     2,100        37   

Vivendi

     627        15   

Wynn Macau Ltd.

     4,000        5   

Yue Yuen Industrial Holdings Ltd.

     1,500        6   
   

 

 

  
      1,473   
   

 

 

  
Consumer Staples—11.5%   

AAK AB

     142        9   

Anheuser-Busch InBev N.V.

     449        48   

Associated British Foods plc(2)

     918        46   

Axfood AB

     566        9   

Beiersdorf AG

     323        29   

Carrefour SA

     495        15   

Casino Guichard Perrachon SA

     275        15   

Davide Campari-Milano S.p.A

     1,152        9   

First Resources Ltd.

     5,300        6   

Golden Agri-Resources Ltd.

     28,300        7   

Heineken Holding NV

     540        38   

Henkel AG & KGaA

     309        27   

Jeronimo Martins SPGS SA

     254        3   

L’Oreal SA

     90        16   

Marine Harvest ASA

     418        5   

MARR SpA

     481        9   

Metro AG

     981        27   

Orkla ASA

     670        5   

Pola Orbis Holdings, Inc.

     650        40   

Rallye SA

     841        14   

Remy Cointreau SA

     242        16   

Sonae SGPS SA

     2,824        3   

Sugi Holdings Co., Ltd.

     860        39   

Sundrug Co., Ltd.

     730        38   

Suntory Beverage & Food Ltd

     1,040        40   

Unicharm Corp.

     2,100        37   

Wilmar International Ltd.

     3,100        6   
   

 

 

  
      556   
   

 

 

  
Diversified REIT—0.3%   

Fonciere Des Regions

     175        15   
   

 

 

  
Energy—3.6%   

Akastor ASA(2)

     3,666        5   
    SHARES     VALUE  
Energy—continued     

Aker Solutions ASA

     1,325      $ 5   

Avance Gas Holding Ltd.(3)

     377        5   

Brightoil Petroleum Holdings Ltd.(2)

     13,000        5   

Delek Group Ltd.

     28        6   

Det Norske Oljeselskap ASA(2)

     881        5   

Galp Energia SGPS SA

     340        3   

Genel Energy plc(2)

     9,118        38   

Petrofac Ltd.

     3,731        43   

Saras S.p.A(2)

     3,850        8   

Seadrill Ltd.

     737        4   

Ship Finance International Ltd.

     307        5   

Tecnicas Reunidas SA

     328        14   

Tenaris S.A. ADR

     355        9   

Transocean Ltd.(4)

     1,467        19   
   

 

 

  
      174   
   

 

 

  
Financials—14.4%   

Abacus Property Group REIT

     8,430        19   

ACOM Co. Ltd.(2)

     8,700        45   

Admiral Group plc

     1,929        44   

Ashmore Group plc(4)

     11,298        42   

Assicurazioni Generali S.p.A

     508        9   

Banco Santander SA

     2,794        15   

Bank Hapoalim BM

     1,239        6   

Bank of East Asia Ltd.

     1,400        5   

Bankinter SA

     2,094        15   

Champion REIT

     10,000        5   

Cheung Kong Property Holdings Ltd.

     650        5   

China LNG Group Ltd.

     120,000        5   

City Developments Ltd.

     1,100        6   

Emperor International Group Ltd.

     60,000        5   

First Pacific Co., Ltd.

     8,000        5   

Fortune REIT

     5,000        5   

Goldin Financial Holdings Ltd.(2)

     2,400        5   

Groupe Bruxelles Lambert SA

     652        49   

Hang Lung Group Ltd.

     1,400        5   

Hang Lung Properties Ltd.

     2,000        4   

Hargreaves Lansdown plc

     2,389        44   

Henderson Land Development Co., Ltd.

     800        5   

Hongkong Land Holdings Ltd.

     900        6   

Hufvudstaden AB

     714        9   

Hysan Development Co. Ltd.

     1,200        5   

Industrivarden AB

     490        9   

Inmobiliaria Colonial SA(2)

     23,756        16   

Intu Properties plc REIT

     9,145        46   

Kerry Properties Ltd.

     1,800        5   

Lundbergforetagen AB Class B

     193        9   

Matsui Securities Co., Ltd.

     4,300        37   

Mediolanum S.p.A

     1,233        9   

New World Development Co., Ltd.

     5,000        5   

Oversea-Chinese Banking Corp.

     900        6   

Pargesa Holding SA

     361        21   

Platinum Asset Management Ltd.

     4,027        19   

Reinet Investments SCA

     21,147        45   

Schroders plc

     1,020        43   

Sino Land Co., Ltd.

     3,300        5   

Sun Hung Kai Properties Ltd.

     375        5   

Svenska Handelsbanken AB Class A

     624        9   

United Overseas Bank Ltd.

     450        6   

United Overseas Land Ltd.

     1,400        6   

Wendel

     124        14   
 

 

See Notes to Financial Statements

 

 

 

54

Table of Contents

VIRTUS INTERNATIONAL WEALTH MASTERS FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

    SHARES     VALUE  
Financials—continued     

Wharf Holdings Ltd. (The)

     900      $ 5   

Wheelock & Co., Ltd.

     1,175        5   

Yanlord Land Group Ltd.

     8,100        6   
   

 

 

  
      699   
   

 

 

  
Health Care—4.2%   

Barry Callebaut AG

     20        22   

BioMerieux

     133        14   

DiaSorin S.p.A

     200        9   

Eurofins Scientific SE

     46        14   

Galenica AG Registered Shares

     16        20   

Getinge AB

     402        9   

Ipsen SA

     217        14   

Meda AB

     623        9   

Roche Holding AG

     82        22   

Straumann Holding AG

     73        21   

Taisho Pharmaceutical Holdings Co., Ltd.

     650        37   

Taro Pharmaceutical Industries Ltd.(2)

     42        6   

Town Health International Medical Group Ltd.

     24,000        5   
   

 

 

  
      202   
   

 

 

  
Industrials—15.0%   

Abertis Infraestructuras SA

     985        16   

Actividades de Construccion y Servicios SA

     511        15   

Adecco SA Registered Shares

     292        21   

Alfa Laval AB

     585        10   

Alstom SA(2)

     473        15   

ANDRITZ AG

     548        25   

Assa Abloy AB

     499        9   

Bollore SA

     2,967        14   

Bouygues SA

     408        14   

Cargotec Oyj

     885        24   

Cheung Kong Infrastructure Holdings Ltd.

     550        5   

CK Hutchison Holdings Ltd.

     400        5   

Dassault Aviation SA

     12        14   

easyJet plc

     1,673        45   

Ferrovial SA

     635        15   

Fomento de Construcciones y Contratas SA(2)

     1,889        14   

Golden Ocean Group Ltd.

     1,750        4   

Hopewell Holdings Ltd.

     1,500        5   

Indutrade AB

     193        9   

Jardine Matheson Holdings Ltd.

     125        6   

Jardine Strategic Holdings Ltd.

     200        5   

Johnson Electric Holdings Ltd.

     1,500        5   

Kone Oyj Class B

     628        24   

Kuehne & Nagel International AG

     167        21   

Nidec Corp.

     510        35   

Noble Group Ltd.

     18,200        5   

Nordex SE(2)

     1,007        28   

NWS Holdings Ltd.

     4,000        5   

Obrascon Huarte Lain SA

     1,118        15   

OC Oerlikon Corp. AG Registered Shares(2)

     2,165        21   

Orient Overseas International Ltd.

     1,000        5   

Prosegur Cia de Seguridad SA

     3,320        16   

Regus plc

     9,279        43   

Rieter Holding AG

     150        22   
    SHARES     VALUE  
Industrials—continued     

Ryanair Holdings plc ADR

     546      $ 43   

Salini Impregilo S.p.A

     2,136        8   

Securitas AB Class B

     731        9   

Seven Group Holdings Ltd.

     5,555        17   

SGL Carbon SE(2)

     1,655        26   

SGS SA Registered Shares

     12        21   

Shun Tak Holdings Ltd.

     12,000        5   

Skanska AB Class B

     467        9   

Sulzer AG

     210        21   

Summit Ascent Holdings Ltd.(2)

     10,000        5   

Vossloh AG(2)

     368        27   
   

 

 

  
      726   
   

 

 

  
Information Technology—9.3%   

Check Point Software Technologies Ltd.

     79        6   

COLOPL, Inc.(2)(4)

     2,250        36   

Dassault Systemes

     204        15   

Gree, Inc.

     8,300        37   

GungHo Online Entertainment ,Inc.

     12,400        37   

Hexagon AB

     303        9   

Keyence Corp.

     85        38   

Konami Corp.

     1,800        39   

Lenovo Group Ltd.

     6,000        5   

Mixi, Inc.

     1,120        39   

Nexon Co., Ltd.

     2,900        39   

Otsuka Corp.

     800        39   

SAP SE

     420        27   

Silverlake Axis Ltd.

     15,000        6   

Tower Semiconductor Ltd.(2)

     463        6   

United Internet AG Registered Shares

     545        28   

VTech Holdings Ltd.

     400        5   

Yahoo Japan Corp.

     9,800        37   
   

 

 

  
      448   
   

 

 

  
Materials—6.3%    

APERAM SA(2)

     1,355        36   

ArcelorMittal

     6,206        32   

EMS-Chemie Holding AG

     52        21   

Evolution Mining Ltd

     22,174        20   

Fortescue Metals Group Ltd.

     13,779        18   

Frutarom Industries Ltd.

     163        6   

Glencore International plc

     26,751        37   

HeidelbergCement AG

     379        26   

Hexpol AB

     853        10   

Holcim Ltd. Registered Shares

     389        20   

Holmen AB B Shares

     334        9   

Imerys SA

     221        14   

Israel Corp. Ltd. (The)

     23        6   

OCI NV(2)

     1,352        35   

Vicat

     226        14   
   

 

 

  
      304   
   

 

 

  
Retail REITs—0.8%    

Scentre Group

     6,908        19   

Westfield Corp.

     2,679        19   
   

 

 

  
      38   
   

 

 

  
Telecommunication Services—2.3%   

HKT Trust & HKT Ltd.

     4,350        5   
    SHARES     VALUE  
Telecommunication Services—continued     

PCCW Ltd.

     10,000      $ 5   

Smartone Telecommunications Holdings Ltd.

     2,500        5   

Softbank Corp.

     730        34   

Talktalk Telecom Group plc

     9,113        43   

TPG Telecom Ltd.

     2,639        20   
   

 

 

  
      112   
   

 

 

  
Utilities—1.2%    

CLP Holdings Ltd.

     600        5   

GDF Suez

     896        15   

Hong Kong & China Gas Co., Ltd.

     2,600        5   

Iliad SA

     70        14   

Kenon Holdings Ltd.(2)

     458        6   

Rubis SCA

     200        15   
   

 

 

  
              60   
TOTAL COMMON STOCKS
(Identified Cost $5,187)		         4,807   
TOTAL LONG TERM INVESTMENTS—99.3%   
(Identified Cost $5,187)        4,807   
SECURITIES LENDING COLLATERAL—1.9%   

INVESCO Trust Short-Term Investments Liquid Assets Portfolio (The) Institutional Shares (seven-day effective yield 0.160%)(5)

     93,600        94   
TOTAL SECURITIES LENDING COLLATERAL
(Identified Cost $94)		         94   
TOTAL INVESTMENTS—101.2%
(Identified Cost $5,281)		         4,901 (1) 

Other assets and liabilities, net—(1.2)%

  

     (59 ) 
   

 

 

  
NET ASSETS—100.0%     $ 4,842   
   

 

 

  

Abbreviations:

ADR American Depositary Receipt
REIT Real Estate Investment Trust

Footnote Legend:

(1)  Federal Income Tax Information: For tax information at September 30, 2015, see Note 10 Federal Income Tax Information in the Notes to Financial Statements.
(2)  Non-income producing.
(3)  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, 2015, these securities amounted to a value of $5 or 0.1% of net assets.
(4)  All or a portion of security is on loan.
(5)  Represents security purchased with cash collateral received for securities on loan.
 

 

Security abbreviation definitions are located under the Key Investment Terms starting on page 4.

 

See Notes to Financial Statements

 

 

 

55

Table of Contents

VIRTUS INTERNATIONAL WEALTH MASTERS FUND

SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

($ reported in thousands)

 

 

Country Weightings (Unaudited)†       

Japan

     24 % 

United Kingdom

     17   

France

     10   

Germany

     9   

Switzerland

     8   

Australia

     5   

Hong Kong

     5   

Other

     22   

Total

     100 % 

† % of total investments as of September 30, 2015

   

The following table provides a summary of inputs used to value the Fund’s investments as of September 30, 2015 (See Security Valuation Note 2A in the Notes to Financial Statements):

 

    Total Value at
September 30,
2015		     Level 1
Quoted

Prices		     Level 2
Significant
Observable
Inputs		  

Equity Securities:

      

Common Stocks

   $ 4,807      $ 3,147      $ 1,660   

Securities Lending Collateral

     94        94        —   
 

 

 

    

 

 

    

 

 

  

Total Investments

   $ 4,901      $ 3,241      $ 1,660   
 

 

 

    

 

 

    

 

 

  

There are no Level 3 (significant unobservable inputs) priced securities.

 

See Notes to Financial Statements

 

 

 

56

Table of Contents

THIS PAGE INTENTIONALLY BLANK.

 

57

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES

SEPTEMBER 30, 2015

($ reported in thousands except shares and per share amounts)

 

  

 

 

    

 

 

    

 

 

  
     Emerging Markets
Debt Fund		     Emerging Markets
Equity
Income Fund		     Emerging Markets
Small-Cap Fund		  
             
Assets       

Investment in unaffiliated securities at value(1)

    $ 25,908      $ 43,629      $ 4,253   

Investment in affiliated funds at value(4)

      144        —        —   

Foreign currency at value(2)

      —        182        —   

Cash

      — (3)      —        —   

Receivables

       

Investment securities sold

      299        —        86   

Fund shares sold

      — (3)      31        —   

Receivable from adviser

      —        —        6   

Dividends and interest receivable

      458        125        6   

Tax reclaims

      1        —        — (3) 

Prepaid trustee retainer

      — (3)      — (3)      — (3) 

Prepaid expenses

      27        29        14   
  

 

 

    

 

 

    

 

 

  

Total assets

      26,837        43,996        4,365   
  

 

 

    

 

 

    

 

 

  
Liabilities       

Cash overdraft

      —        85        —   

Payables

       

Fund shares repurchased

      3        324        —   

Foreign capital gain taxes payable

      —        1        —   

Investment securities purchased

      194        —        —   

Dividend distributions

      — (3)      —        —   

Investment advisory fees

      18        31        —   

Distribution and service fees

      1        1        — (3) 

Administration fees

      3        5        1   

Transfer agent fees and expenses

      2        9        — (3) 

Trustees’ fees and expenses

      — (3)      — (3)      — (3) 

Professional fees

      37        29        29   

Other accrued expenses

      3        50        4   
  

 

 

    

 

 

    

 

 

  

Total liabilities

      261        535        34   
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 26,576      $ 43,461      $ 4,331   
  

 

 

    

 

 

    

 

 

  
Net Assets Consist of:       

Capital paid in on shares of beneficial interest

    $ 31,420      $ 56,390      $ 5,552   

Accumulated undistributed net investment income (loss)

      (19 )      860        77   

Accumulated undistributed net realized gain (loss)

      (1,933 )      (7,930 )      (61 ) 

Net unrealized appreciation (depreciation) on investments

      (2,892 )      (5,859 )      (1,237 ) 
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 26,576      $ 43,461      $ 4,331   
  

 

 

    

 

 

    

 

 

  
Class A       

Net asset value (net assets/shares outstanding) per share

    $ 8.54      $ 8.30      $ 7.85   

Maximum offering price per share NAV/(1–3.75%)

    $ 8.87      $ —      $ —   

Maximum offering price per share NAV/(1–5.75%)

    $ —      $ 8.81      $ 8.33   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      84,083        87,685        42,237   

Net Assets

    $ 718      $ 727      $ 332   
Class C       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 8.54      $ 8.26      $ 7.80   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      66,224        77,316        16,395   

Net Assets

    $ 565      $ 638      $ 128   
Class I       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 8.54      $ 8.31      $ 7.88   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      2,963,356        5,067,025        491,357   

Net Assets

    $ 25,293      $ 42,096      $ 3,871   

(1) Investment in unaffiliated securities at cost

    $ 28,794      $ 49,491      $ 5,490   

(2) Foreign currency at cost

    $ —      $ 180      $ —   

(3) Amount is less than $500.

       

(4) Investment in affiliated funds at cost

    $ 148      $ —      $ —   

 

See Notes to Financial Statements

 

58

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES (Continued)

SEPTEMBER 30, 2015

($ reported in thousands except shares and per share amounts)

 

  

 

 

    

 

 

  
     Global
Infrastructure
Fund		     Global
Opportunities
Fund		  
         
Assets     

Investment in securities at value(1)

    $ 153,518      $ 143,042   

Receivables

     

Fund shares sold

      136        319   

Dividends and interest receivable

      252        222   

Tax reclaims

      83        174   

Prepaid trustee retainer

      3        1   

Prepaid expenses

      34        37   
  

 

 

    

 

 

  

Total assets

      154,026        143,795   
  

 

 

    

 

 

  
Liabilities     

Payables

     

Fund shares repurchased

      1,493        32   

Investment securities purchased

      —        2,751   

Foreign capital gain taxes payable

      —        11   

Investment advisory fees

      85        98   

Distribution and service fees

      48        30   

Administration fees

      16        14   

Transfer agent fees and expenses

      39        30   

Trustees’ fees and expenses

      — (2)      — (2) 

Professional fees

      29        36   

Other accrued expenses

      11        15   
  

 

 

    

 

 

  

Total liabilities

      1,721        3,017   
  

 

 

    

 

 

  
Net Assets    $ 152,305      $ 140,778   
  

 

 

    

 

 

  
Net Assets Consist of:     

Capital paid in on shares of beneficial interest

    $ 146,192      $ 114,815   

Accumulated undistributed net investment income (loss)

      152        398   

Accumulated undistributed net realized gain (loss)

      7,316        (1,870 ) 

Net unrealized appreciation (depreciation) on investments

      (1,355 )      27,435   
  

 

 

    

 

 

  
Net Assets    $ 152,305      $ 140,778   
  

 

 

    

 

 

  
Class A     

Net asset value (net assets/shares outstanding) per share

    $ 13.62      $ 12.32   

Maximum offering price per share NAV/(1–5.75%)

    $ 14.45      $ 13.07   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      4,459,917        7,127,017   

Net Assets

    $ 60,744      $ 87,769   
Class B     

Net asset value (net assets/shares outstanding) and offering price per share

    $ —      $ 10.85   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      —        43,726   

Net Assets

    $ —      $ 474   
Class C     

Net asset value (net assets/shares outstanding) and offering price per share

    $ 13.57      $ 10.79   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      3,024,834        1,338,305   

Net Assets

    $ 41,039      $ 14,431   
Class I     

Net asset value (net assets/shares outstanding) and offering price per share

    $ 13.63      $ 12.32   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      3,706,969        3,094,042   

Net Assets

    $ 50,522      $ 38,104   

(1) Investment in securities at cost

    $ 154,862      $ 115,586   

(2) Amount is less than $500.

     

 

See Notes to Financial Statements

 

59

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES (Continued)

SEPTEMBER 30, 2015

($ reported in thousands except shares and per share amounts)

 

  

 

 

    

 

 

    

 

 

  
     Global
Real Estate
Securities Fund		     Greater
European
Opportunities Fund		     International
Equity
Fund		  
             
Assets       

Investment in securities at value(1)(2)

    $ 77,403      $ 20,657      $ 8,686   

Receivables

       

Investment securities sold

      124        19        —   

Fund shares sold

      122        73        1   

Receivable from adviser

      —        —        1   

Dividends and interest receivable

      275        17        23   

Tax reclaims

      9        40        26   

Securities lending receivable

      —        —        1   

Prepaid trustee retainer

      1        — (3)      — (3) 

Prepaid expenses

      24        20        27   
  

 

 

    

 

 

    

 

 

  

Total assets

      77,958        20,826        8,765   
  

 

 

    

 

 

    

 

 

  
Liabilities       

Cash overdraft

      —        —        337   

Collateral on securities loaned

      —        —        452   

Payables

       

Fund shares repurchased

      164        13        —   

Investment securities purchased

      278        133        —   

Investment advisory fees

      44        8        —   

Distribution and service fees

      14        4        2   

Administration fees

      8        2        1   

Transfer agent fees and expenses

      15        9        2   

Trustees’ fees and expenses

      — (3)      — (3)      — (3) 

Professional fees

      29        29        32   

Other accrued expenses

      11        7        3   
  

 

 

    

 

 

    

 

 

  

Total liabilities

      563        205        829   
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 77,395      $ 20,621      $ 7,936   
  

 

 

    

 

 

    

 

 

  
Net Assets Consist of:       

Capital paid in on shares of beneficial interest

    $ 70,196      $ 18,347      $ 8,816   

Accumulated undistributed net investment income (loss)

      298        126        (10 ) 

Accumulated undistributed net realized gain (loss)

      667        (200 )      (966 ) 

Net unrealized appreciation (depreciation) on investments

      6,234        2,348        96   
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 77,395      $ 20,621      $ 7,936   
  

 

 

    

 

 

    

 

 

  
Class A       

Net asset value (net assets/shares outstanding) per share

    $ 26.19      $ 15.20      $ 9.80   

Maximum offering price per share NAV/(1–5.75%)

    $ 27.79      $ 16.13      $ 10.40   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      1,386,616        875,418        196,192   

Net Assets

    $ 36,315      $ 13,306      $ 1,923   
Class C       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 25.71      $ 14.95      $ 9.60   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      327,545        104,595        176,012   

Net Assets

    $ 8,421      $ 1,564      $ 1,689   
Class I       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 26.37      $ 15.26      $ 9.78   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      1,238,348        376,847        442,267   

Net Assets

    $ 32,659      $ 5,751      $ 4,324   

(1) Investment in securities at cost

    $ 71,168      $ 18,307      $ 8,588   

(2) Market value of securities on loan

    $ —      $ —      $ 443   

(3) Amount is less than $500.

       

 

See Notes to Financial Statements

 

60

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF ASSETS AND LIABILITIES (Continued)

SEPTEMBER 30, 2015

($ reported in thousands except shares and per share amounts)

 

  

 

 

    

 

 

    

 

 

  
     International
Real Estate
Securities Fund		     International
Small-Cap
Fund		     International
Wealth Masters
Fund		  
             
Assets       

Investment in securities at value(1)(3)

    $ 39,614      $ 43,602      $ 4,901   

Foreign currency at value(2)

      —        — (4)      —   

Receivables

       

Investment securities sold

      132        541        419   

Fund shares sold

      31        122        —   

Receivable from adviser

      —        —        9   

Dividends and interest receivable

      86        68        11   

Tax reclaims

      14        22        5   

Securities lending receivable

      —        —        — (4) 

Prepaid trustee retainer

      — (4)      — (4)      — (4) 

Prepaid expenses

      31        41        25   
  

 

 

    

 

 

    

 

 

  

Total assets

      39,908        44,396        5,370   
  

 

 

    

 

 

    

 

 

  
Liabilities       

Cash overdraft

      68        —        20   

Collateral on securities loaned

      —        —        94   

Payables

       

Fund shares repurchased

      120        291        —   

Investment securities purchased

      —        36        367   

Investment advisory fees

      11        30        —   

Distribution and service fees

      4        2        — (4) 

Administration fees

      4        5        1   

Transfer agent fees and expenses

      8        7        — (4) 

Trustees’ fees and expenses

      17        — (4)      — (4) 

Professional fees

      28        29        29   

Other accrued expenses

      8        14        17   
  

 

 

    

 

 

    

 

 

  

Total liabilities

      268        414        528   
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 39,640      $ 43,982      $ 4,842   
  

 

 

    

 

 

    

 

 

  
Net Assets Consist of:       

Capital paid in on shares of beneficial interest

    $ 43,614      $ 51,646      $ 5,084   

Accumulated undistributed net investment income (loss)

      (1,123 )      516        64   

Accumulated undistributed net realized gain (loss)

      (10,148 )      817        74   

Net unrealized appreciation (depreciation) on investments

      7,297        (8,997 )      (380 ) 
  

 

 

    

 

 

    

 

 

  
Net Assets    $ 39,640      $ 43,982      $ 4,842   
  

 

 

    

 

 

    

 

 

  
Class A       

Net asset value (net assets/shares outstanding) per share

    $ 6.63      $ 10.85      $ 9.52   

Maximum offering price per share NAV/(1–5.75%)

    $ 7.03      $ 11.51      $ 10.10   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      1,873,258        176,617        13,285   

Net Assets

    $ 12,415      $ 1,916      $ 126   
Class C       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 6.59      $ 10.72      $ 9.46   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      337,874        136,538        12,027   

Net Assets

    $ 2,226      $ 1,464      $ 114   
Class I       

Net asset value (net assets/shares outstanding) and offering price per share

    $ 6.64      $ 10.89      $ 9.54   

Shares of beneficial interest outstanding, no par value, unlimited authorization

      3,767,465        3,721,201        482,490   

Net Assets

    $ 24,999      $ 40,512      $ 4,602   
Class R6       

Net asset value (net assets/shares outstanding) and offering price per share

    $ —      $ 10.89      $ —   

Shares of beneficial interest outstanding, no par value, unlimited authorizaton

      —        8,227        —   

Net Assets

    $ —      $ 90      $ —   

(1) Investment in securities at cost

    $ 32,315      $ 52,596      $ 5,281   

(2) Foreign currency at cost

    $ —      $ — (4)    $ —   

(3) Market value of securities on loan

    $ —      $ —      $ 89   

(4) Amount is less than $500.

       

 

See Notes to Financial Statements

 

61

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

  

 

 

    

 

 

     

 

 

  
     Emerging Markets
Debt Fund		     Emerging Markets
Equity Income
Fund		      Emerging Markets
Small-Cap
Fund		  
             
Investment Income        

Dividends

    $ 6      $ 2,867       $ 177   

Dividends from affiliated funds

      1        —         —   

Interest

      1,795        —         —   

Foreign taxes withheld

      (2 )      (360 )       (21 ) 
  

 

 

    

 

 

     

 

 

  

Total investment income

      1,800        2,507         156   
  

 

 

    

 

 

     

 

 

  
Expenses        

Investment advisory fees

      220        722         54   

Service fees, Class A

      2        3         1   

Distribution and service fees, Class C

      7        8         2   

Administration fees

      35        82         5   

Transfer agent fees and expenses

      18        68         3   

Interest expense

      —        1         —   

Registration fees

      40        44         44   

Printing fees and expenses

      4        8         2   

Custodian fees

      3        66         7   

Professional fees

      37        37         29   

Trustees’ fees and expenses

      2        3         — (1) 

Miscellaneous expenses

      3        5         6   
  

 

 

    

 

 

     

 

 

  

Total expenses

      371        1,047         153   

Less expenses reimbursed and/or waived by investment adviser

      (40 )      (6 )       (79 ) 
  

 

 

    

 

 

     

 

 

  

Net expenses

      331        1,041         74   
  

 

 

    

 

 

     

 

 

  

Net investment income (loss)

      1,469        1,466         82   
  

 

 

    

 

 

     

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments        

Net realized gain (loss) on unaffiliated investments

      (1,816 )      (7,537 )       (45 ) 

Net realized gain (loss) on foreign currency transactions

      (8 )      (75 )       (2 ) 

Net change in unrealized appreciation (depreciation) on unaffiliated investments

      (1,961 )      (6,281 )       (1,174 ) 

Net change in unrealized appreciation (depreciation) on affiliated investments

      (4 )      —         —   

Net change in unrealized appreciation (depreciation) on foreign currency translation

      — (1)      8         — (1) 
  

 

 

    

 

 

     

 

 

  
Net gain (loss) on investments      (3,789 )      (13,885 )       (1,221 ) 
  

 

 

    

 

 

     

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ (2,320 )    $ (12,419 )     $ (1,139 ) 
  

 

 

    

 

 

     

 

 

  

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

62

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS (Continued)

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

  

 

 

     

 

 

  
     Global
Infrastructure
Fund		      Global
Opportunities
Fund		  
         
Investment Income      

Dividends

    $ 6,642       $ 2,502   

Interest

      —         2   

Security lending

      —         4   

Foreign taxes withheld

      (324 )       (72 ) 
  

 

 

     

 

 

  

Total investment income

      6,318         2,436   
  

 

 

     

 

 

  
Expenses      

Investment advisory fees

      1,139         1,168   

Service fees, Class A

      179         225   

Distribution and service fees, Class B

      —         6   

Distribution and service fees, Class C

      421         90   

Administration fees

      211         165   

Transfer agent fees and expenses

      219         176   

Registration fees

      51         53   

Printing fees and expenses

      22         18   

Custodian fees

      17         16   

Professional fees

      31         43   

Trustees’ fees and expenses

      6         6   

Miscellaneous expenses

      9         9   
  

 

 

     

 

 

  

Total expenses

      2,305         1,975   
  

 

 

     

 

 

  

Net investment income (loss)

      4,013         461   
  

 

 

     

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments      

Net realized gain (loss) on investments

      8,520         611   

Net realized gain (loss) on foreign currency transactions

      (15 )       (24 ) 

Net change in unrealized appreciation (depreciation) on investments

      (28,057 )       1,196   

Net change in unrealized appreciation (depreciation) on foreign currency translation

      (4 )       (13 ) 

Net change in foreign taxes on unrealized capital gains

      —         17   
  

 

 

     

 

 

  
Net gain (loss) on investments      (19,556 )       1,787   
  

 

 

     

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ (15,543 )     $ 2,248   
  

 

 

     

 

 

  

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

63

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS (Continued)

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

  

 

 

    

 

 

    

 

 

  
     Global
Real Estate
Securities Fund		     Greater
European
Opportunities Fund		     International
Equity
Fund		  
             
             
Investment Income       

Dividends

    $ 2,747      $ 526      $ 188   

Security lending

      —        —        3   

Foreign taxes withheld

      (106 )      (33 )      (21 ) 
  

 

 

    

 

 

    

 

 

  

Total investment income

      2,641        493        170   
  

 

 

    

 

 

    

 

 

  
Expenses       

Investment advisory fees

      645        165        78   

Service fees, Class A

      81        33        7   

Distribution and service fees, Class C

      77        13        13   

Administration fees

      91        23        10   

Transfer agent fees and expenses

      112        41        12   

Registration fees

      40        41        41   

Printing fees and expenses

      11        4        2   

Custodian fees

      13        7        5   

Professional fees

      32        32        34   

Trustees’ fees and expenses

      3        1        1   

Miscellaneous expenses

      5        3        2   
  

 

 

    

 

 

    

 

 

  

Total expenses

      1,110        363        205   

Less expenses reimbursed and/or waived by investment adviser

      (79 )      (84 )      (71 ) 
  

 

 

    

 

 

    

 

 

  

Net expenses

      1,031        279        134   
  

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,610        214        36   
  

 

 

    

 

 

    

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments       

Net realized gain (loss) on investments

      450        (80 )      (878 ) 

Net realized gain (loss) on foreign currency transactions

      (1 )      (24 )      87   

Net change in unrealized appreciation (depreciation) on investments

      626        184        (293 ) 

Net change in unrealized appreciation (depreciation) on foreign currency translation

      — (1)      — (1)      — (1) 
  

 

 

    

 

 

    

 

 

  
Net gain (loss) on investments      1,075        80        (1,084 ) 
  

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ 2,685      $ 294      $ (1,048 ) 
  

 

 

    

 

 

    

 

 

  

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

64

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF OPERATIONS (Continued)

YEAR ENDED SEPTEMBER 30, 2015

($ reported in thousands)

 

  

 

 

     

 

 

     

 

 

  
     International
Real Estate
Securities Fund		      International
Small-Cap
Fund		      International
Wealth Masters
Fund(2)		  
             
Investment Income         

Dividends

    $ 2,505       $ 1,673       $ 120   

Security lending

      —         —         1   

Foreign taxes withheld

      (141 )       (164 )       (10 ) 
  

 

 

     

 

 

     

 

 

  

Total investment income

      2,364         1,509         111   
  

 

 

     

 

 

     

 

 

  
Expenses         

Investment advisory fees

      422         495         40   

Service fees, Class A

      31         5         — (1) 

Distribution and service fees, Class C

      23         12         1   

Administration fees

      50         59         6   

Transfer agent fees and expenses

      59         66         2   

Registration fees

      41         55         41   

Printing fees and expenses

      7         6         8   

Custodian fees

      10         16         20   

Professional fees

      30         31         39   

Trustees’ fees and expenses

      18         2         — (1) 

Miscellaneous expenses

      4         4         3   
  

 

 

     

 

 

     

 

 

  

Total expenses

      695         751         160   

Less expenses reimbursed and/or waived by investment adviser

      (114 )       (67 )       (101 ) 
  

 

 

     

 

 

     

 

 

  

Net expenses

      581         684         59   
  

 

 

     

 

 

     

 

 

  

Net investment income (loss)

      1,783         825         52   
  

 

 

     

 

 

     

 

 

  
Net Realized and Unrealized Gain (Loss) on Investments         

Net realized gain (loss) on investments

      (135 )       1,486         75   

Net realized gain (loss) on foreign currency transactions

      (5 )       (19 )       11   

Net change in unrealized appreciation (depreciation) on investments

      (1,402 )       (9,604 )       (380 ) 

Net change in unrealized appreciation (depreciation) on foreign currency translation

      1         1         — (1) 
  

 

 

     

 

 

     

 

 

  
Net gain (loss) on investments      (1,541 )       (8,136 )       (294 ) 
  

 

 

     

 

 

     

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ 242       $ (7,311 )     $ (242 ) 
  

 

 

     

 

 

     

 

 

  

(1) Amount is less than $500.

(2) From Inception date November 17, 2014.

 

See Notes to Financial Statements

 

65

Table of Contents

VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS

($ reported in thousands)

 

  

 

 

       

 

 

  
     Emerging Markets Debt Fund        Emerging Markets Equity Income Fund  
     Year Ended
September 30,
2015 		       Year Ended
September 30,
2014		        Year Ended
September 30,
2015 		       Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ 1,469         $ 1,522         $ 1,466         $ 1,712   

Net realized gain (loss)

      (1,824 )         (425 )         (7,612 )         183   

Net change in unrealized appreciation (depreciation)

      (1,965 )         1,072           (6,273 )         34   
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets resulting from operations

      (2,320 )         2,169           (12,419 )         1,929   
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (30 )         (104 )         (22 )         (20 ) 

Net investment income, Class C

      (20 )         (19 )         (11 )         (6 ) 

Net investment income, Class I

      (1,082 )         (1,338 )         (1,735 )         (586 ) 

Net realized short-term gains, Class A

      —           —           (6 )         —   

Net realized short-term gains, Class C

      —           —           (4 )         —   

Net realized short-term gains, Class I

      —           —           (397 )         —   

Tax return of capital, Class A

      (7 )         (3 )         —           —   

Tax return of capital, Class C

      (6 )         — (1)         —           —   

Tax return of capital, Class I

      (226 )         (44 )         —           —   
  

 

 

       

 

 

       

 

 

       

 

 

  

Decrease in net assets from distributions to shareholders

      (1,371 )         (1,508 )         (2,175 )         (612 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 6)                  

Change in net assets from share transactions, Class A

      (159 )         (2,299 )         (271 )         390   

Change in net assets from share transactions, Class C

      (137 )         410           10           373   

Change in net assets from share transactions, Class I

      (2,659 )         6,190           (24,438 )         70,772   
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets from share transactions

      (2,955 )         4,301           (24,699 )         71,535   
  

 

 

       

 

 

       

 

 

       

 

 

  

Net increase (decrease) in net assets

      (6,646 )         4,962           (39,293 )         72,852   
Net Assets                  

Beginning of period

      33,222           28,260           82,754           9,902   
  

 

 

       

 

 

       

 

 

       

 

 

  

End of period

    $ 26,576         $ 33,222         $ 43,461         $ 82,754   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ (19 )       $ (4 )       $ 860         $ 1,246   

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

  
     Emerging Markets Small-Cap Fund  
     Year Ended
September 30,
2015 		       From Inception
December 17, 2013
to September 30,
2014		  
         
INCREASE/(DECREASE) IN NET ASSETS        
From Operations        

Net investment income (loss)

    $ 82         $ 64   

Net realized gain (loss)

      (47 )         98   

Net change in unrealized appreciation (depreciation)

      (1,174 )         (63 ) 
  

 

 

       

 

 

  

Increase (decrease) in net assets resulting from operations

      (1,139 )         99   
  

 

 

       

 

 

  
From Distributions to Shareholders        

Net investment income, Class A

      (3 )         — (1) 

Net investment income, Class C

      (1 )         — (1) 

Net investment income, Class I

      (60 )         (7 ) 

Net realized short-term gains, Class A

      (5 )         —   

Net realized short-term gains, Class C

      (3 )         —   

Net realized short-term gains, Class I

      (102 )         —   
  

 

 

       

 

 

  

Decrease in net assets from distributions to shareholders

      (174 )         (7 ) 
  

 

 

       

 

 

  
From Share Transactions (See Note 6)        

Change in net assets from share transactions, Class A

      210           215   

Change in net assets from share transactions, Class C

      8           155   

Change in net assets from share transactions, Class I

      1,570           3,394   
  

 

 

       

 

 

  

Increase (decrease) in net assets from share transactions

      1,788           3,764   
  

 

 

       

 

 

  

Net increase (decrease) in net assets

      475           3,856   
Net Assets        

Beginning of period

      3,856           —   
  

 

 

       

 

 

  

End of period

    $ 4,331         $ 3,856   
  

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ 77         $ 61   

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

       

 

 

  
     Global Infrastructure Fund        Global Opportunities Fund  
     Year Ended
September 30,
2015 		       Year Ended
September 30,
2014		        Year Ended
September 30,
2015 		       Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ 4,013         $ 6,643         $ 461         $ 882   

Net realized gain (loss)

      8,505           11,967           587           5,221   

Net change in unrealized appreciation (depreciation)

      (28,061 )         1,563           1,200           5,240   
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets resulting from operations

      (15,543 )         20,173           2,248           11,343   
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (1,851 )         (2,550 )         (458 )         (512 ) 

Net investment income, Class B

      —           —           (1 )         — (1) 

Net investment income, Class C

      (809 )         (820 )         (9 )         (3 ) 

Net investment income, Class I

      (1,738 )         (2,785 )         (230 )         (313 ) 

Net realized long-term gains, Class A

      (600 )         —           —           —   

Net realized long-term gains, Class C

      (301 )         —           —           —   

Net realized long-term gains, Class I

      (524 )         —           —           —   
  

 

 

       

 

 

       

 

 

       

 

 

  

Decrease in net assets from distributions to shareholders

      (5,823 )         (6,155 )         (698 )         (828 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 6)                  

Change in net assets from share transactions, Class A

      8,660           1,908           8,610           (8,082 ) 

Change in net assets from share transactions, Class B

      —           —           (191 )         (213 ) 

Change in net assets from share transactions, Class C

      20,385           6,599           11,375           213   

Change in net assets from share transactions, Class I

      2,074           (21,781 )         3,672           1,594   
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets from share transactions

      31,119           (13,274 )         23,466           (6,488 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Net increase (decrease) in net assets

      9,753           744           25,016           4,027   
Net Assets                  

Beginning of period

      142,552           141,808           115,762           111,735   
  

 

 

       

 

 

       

 

 

       

 

 

  

End of period

    $ 152,305         $ 142,552         $ 140,778         $ 115,762   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ 152         $ 552         $ 398         $ 674   

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

       

 

 

  
     Global Real Estate Securities Fund        Greater European Opportunities Fund  
     Year Ended
September 30,
2015 		       Year Ended
September 30,
2014		        Year Ended
September 30,
2015 		       Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ 1,610         $ 720         $ 214         $ 95   

Net realized gain (loss)

      449           855           (104 )         140   

Net change in unrealized appreciation (depreciation)

      626           2,778           184           (600 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets resulting from operations

      2,685           4,353           294           (365 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (613 )         (230 )         (82 )         (52 ) 

Net investment income, Class C

      (119 )         (29 )         — (1)         (2 ) 

Net investment income, Class I

      (821 )         (440 )         (24 )         (12 ) 

Net realized short-term gains, Class A

      (21 )         (21 )         —           (197 ) 

Net realized short-term gains, Class C

      (5 )         (5 )         —           (15 ) 

Net realized short-term gains, Class I

      (26 )         (34 )         —           (30 ) 

Net realized long-term gains, Class A

      (66 )         (86 )         (153 )         (125 ) 

Net realized long-term gains, Class C

      (17 )         (20 )         (13 )         (9 ) 

Net realized long-term gains, Class I

      (81 )         (143 )         (31 )         (19 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Decrease in net assets from distributions to shareholders

      (1,769 )         (1,008 )         (303 )         (461 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 6)                  

Change in net assets from share transactions, Class A

      14,600           4,968           732           (83 ) 

Change in net assets from share transactions, Class C

      2,509           2,073           472           576   

Change in net assets from share transactions, Class I

      5,033           (232 )         2,842           959   
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets from share transactions

      22,142           6,809           4,046           1,452   
  

 

 

       

 

 

       

 

 

       

 

 

  

Net increase (decrease) in net assets

      23,058           10,154           4,037           626   
Net Assets                  

Beginning of period

      54,337           44,183           16,584           15,958   
  

 

 

       

 

 

       

 

 

       

 

 

  

End of period

    $ 77,395         $ 54,337         $ 20,621         $ 16,584   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ 298         $ 259         $ 126         $ 41   

(1) Amount is less than $500.

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

       

 

 

  
     International Equity Fund        International Real Estate Securities Fund  
     Year Ended
September 30,
2015 		       Year Ended
September 30,
2014		        Year Ended
September 30,
2015 		       Year Ended
September 30,
2014		  
                 
INCREASE/(DECREASE) IN NET ASSETS                  
From Operations                  

Net investment income (loss)

    $ 36         $ 94         $ 1,783         $ 1,103   

Net realized gain (loss)

      (791 )         (130 )         (140 )         2,034   

Net change in unrealized appreciation (depreciation)

      (293 )         247           (1,401 )         320   
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets resulting from operations

      (1,048 )         211           242           3,457   
  

 

 

       

 

 

       

 

 

       

 

 

  
From Distributions to Shareholders                  

Net investment income, Class A

      (30 )         (61 )         (778 )         (188 ) 

Net investment income, Class C

      (1 )         (7 )         (117 )         (27 ) 

Net investment income, Class I

      (54 )         (69 )         (1,837 )         (696 ) 

Net realized short-term gains, Class A

      —           (34 )         —           —   

Net realized short-term gains, Class C

      —           (2 )         —           —   

Net realized short-term gains, Class I

      —           (29 )         —           —   
  

 

 

       

 

 

       

 

 

       

 

 

  

Decrease in net assets from distributions to shareholders

      (85 )         (202 )         (2,732 )         (911 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  
From Share Transactions (See Note 6)                  

Change in net assets from share transactions, Class A

      (1,652 )         3,770           1,872           427   

Change in net assets from share transactions, Class C

      1,096           686           (182 )         525   

Change in net assets from share transactions, Class I

      (1,529 )         4,210           (2,108 )         (3,094 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Increase (decrease) in net assets from share transactions

      (2,085 )         8,666           (418 )         (2,142 ) 
  

 

 

       

 

 

       

 

 

       

 

 

  

Net increase (decrease) in net assets

      (3,218 )         8,675           (2,908 )         404   
Net Assets                  

Beginning of period

      11,154           2,479           42,548           42,144   
  

 

 

       

 

 

       

 

 

       

 

 

  

End of period

    $ 7,936         $ 11,154         $ 39,640         $ 42,548   
  

 

 

       

 

 

       

 

 

       

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ (10 )       $ 54         $ (1,123 )       $ (140 ) 

 

See Notes to Financial Statements

 

70

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VIRTUS OPPORTUNITIES TRUST

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

($ reported in thousands)

 

  

 

 

    

 

 

  
     International Small-Cap Fund     International Wealth Masters Fund  
     Year Ended
September 30,
2015 		    Year Ended
September 30,
2014		     From inception
November 17, 2014
to September 30,
2015		  
             
INCREASE/(DECREASE) IN NET ASSETS       
From Operations       

Net investment income (loss)

    $ 825      $ 1,120      $ 52   

Net realized gain (loss)

      1,467        2,642        86   

Net change in unrealized appreciation (depreciation)

      (9,603 )      (1,455 )      (380 ) 
  

 

 

    

 

 

    

 

 

  

Increase (decrease) in net assets resulting from operations

      (7,311 )      2,307        (242 ) 
  

 

 

    

 

 

    

 

 

  
From Distributions to Shareholders       

Net investment income, Class A

      (31 )      (45 )      —   

Net investment income, Class C

      (18 )      (14 )      —   

Net investment income, Class I

      (770 )      (815 )      —   

Net investment income, Class R6

      (2 )      —        —   

Net realized short-term gains, Class A

      (84 )      (8 )      —   

Net realized short-term gains, Class C

      (53 )      (9 )      —   

Net realized short-term gains, Class I

      (1,927 )      (316 )      —   

Net realized short-term gains, Class R6

      (4 )      —       
 —
   

Net realized long-term gains, Class A

      (46 )      —        —   

Net realized long-term gains, Class C

      (29 )      —        —   

Net realized long-term gains, Class I

      (1,050 )      —        —   

Net realized long-term gains, Class R6

      (2 )      —       
 —
   
  

 

 

    

 

 

    

 

 

  

Decrease in net assets from distributions to shareholders

      (4,016 )      (1,207 )      —   
  

 

 

    

 

 

    

 

 

  
From Share Transactions (See Note 6)       

Change in net assets from share transactions, Class A

      (107 )      2,059        135   

Change in net assets from share transactions, Class C

      612        802        124   

Change in net assets from share transactions, Class I

      4,425        27,409        4,825   

Change in net assets from share transactions, Class R6

      109        —        —   
  

 

 

    

 

 

    

 

 

  

Increase (decrease) in net assets from share transactions

      5,039        30,270        5,084   
  

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets

      (6,288 )      31,370        4,842   
Net Assets       

Beginning of period

      50,270        18,900        —   
  

 

 

    

 

 

    

 

 

  

End of period

    $ 43,982      $ 50,270      $ 4,842   
  

 

 

    

 

 

    

 

 

  

Accumulated undistributed net investment income (loss) at end of period

    $ 516      $ 526      $ 64   

 

See Notes to Financial Statements

 

71

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VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Tax Return of Capital   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets, End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(7)		   Ratio of Gross Expenses to Average    
Net Assets (before waivers and
reimbursements)(7)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate
Emerging Markets                                                                                                                                                                  

Debt Fund

                                                                  

Class A

                                                                  

10/1/14 to 9/30/15

       $ 9.69         0.44         (1.18 )       (0.74 )       (0.33 )       —         (0.08 )       (0.41 )       (1.15 )     $ 8.54         (7.85 )%     $ 718         1.35 %       1.48 %       4.80 %       47 %

10/1/13 to 9/30/14

         9.43         0.47         0.26         0.73         (0.46 )       —         (0.01 )       (0.47 )       0.26         9.69         7.83         982         1.35         1.52         4.88         39  

10/1/12 to 9/30/13

         10.09         0.48         (0.64 )       (0.16 )       (0.48 )       (0.02 )       —         (0.50 )       (0.66 )       9.43         (1.94 )       3,200         1.35         1.55         4.92         60  

9/5/12(6) to 9/30/12

         10.00         0.02         0.07         0.09         —         —         —         —         0.09         10.09         0.90 (4)       101         1.35 (3)       3.49 (3)       3.35 (3)       13 (4)

Class C

                                                                  

10/1/14 to 9/30/15

       $ 9.68         0.37         (1.17 )       (0.80 )       (0.26 )       —         (0.08 )       (0.34 )       (1.14 )     $ 8.54         (8.44 )%     $ 565         2.10 %       2.23 %       4.06 %       47 %

10/1/13 to 9/30/14

         9.42         0.40         0.25         0.65         (0.38 )       —         (0.01 )       (0.39 )       0.26         9.68         7.03         788         2.10         2.21         4.08         39  

10/1/12 to 9/30/13

         10.09         0.41         (0.66 )       (0.25 )       (0.40 )       (0.02 )       —         (0.42 )       (0.67 )       9.42         (2.68 )       374         2.10         2.32         4.11         60  

9/5/12(6) to 9/30/12

         10.00         0.02         0.07         0.09         —         —         —         —         0.09         10.09         0.90 (4)       110         2.10 (3)       4.26 (3)       2.63 (3)       13 (4)

Class I

                                                                  

10/1/14 to 9/30/15

       $ 9.68         0.46         (1.17 )       (0.71 )       (0.35 )       —         (0.08 )       (0.43 )       (1.14 )     $ 8.54         (7.52 )%     $ 25,293         1.10 %       1.23 %       5.05 %       47 %

10/1/13 to 9/30/14

         9.42         0.49         0.26         0.75         (0.48 )       —         (0.01 )       (0.49 )       0.26         9.68         8.11         31,452         1.10         1.23         5.09         39  

10/1/12 to 9/30/13

         10.10         0.50         (0.66 )       (0.16 )       (0.50 )       (0.02 )       —         (0.52 )       (0.68 )       9.42         (1.80 )       24,686         1.10         1.33         4.99         60  

9/5/12(6) to 9/30/12

         10.00         0.02         0.08         0.10         —         —         —         —         0.10         10.10         1.00 (4)       25,036         1.10 (3)       3.24 (3)       3.61 (3)       13 (4)
Emerging Markets                                                                  

Equity Income Fund

                                                                  

Class A

                                                                  

10/1/14 to 9/30/15

       $ 10.54         0.20         (2.18 )       (1.98 )       (0.21 )       (0.05 )       —         (0.26 )       (2.24 )     $ 8.30         (19.13 )%     $ 727         1.75 %       1.76 %       2.04 %       72 %

10/1/13 to 9/30/14

         10.57         0.21         (0.05 )       0.16         (0.19 )       —         —         (0.19 )       (0.03 )       10.54         1.54         1,210         1.75         1.95         1.96         72  

10/1/12 to 9/30/13

         10.59         0.31         (0.07 )       0.24         (0.07 )       (0.19 )       —         (0.26 )       (0.02 )       10.57         2.19         830         1.75         2.90         3.00         100  

9/5/12(6) to 9/30/12

         10.00         (0.01 )       0.60         0.59         —         —         —         —         0.59         10.59         5.90 (4)       106         1.75 (3)       10.28 (3)       (0.78 )(3)       37 (4)

Class C

                                                                  

10/1/14 to 9/30/15

       $ 10.50         0.14         (2.19 )       (2.05 )       (0.14 )       (0.05 )       —         (0.19 )       (2.24 )     $ 8.26         (19.78 )%     $ 638         2.50 %       2.52 %       1.42 %       72 %

10/1/13 to 9/30/14

         10.54         0.15         (0.07 )       0.08         (0.12 )       —         —         (0.12 )       (0.04 )       10.50         0.80         799         2.50         2.65         1.39         72  

10/1/12 to 9/30/13

         10.58         0.20         (0.03 )       0.17         (0.02 )       (0.19 )       —         (0.21 )       (0.04 )       10.54         1.48         417         2.50         3.77         1.89         100  

9/5/12(6) to 9/30/12

         10.00         (0.01 )       0.59         0.58         —         —         —         —         0.58         10.58         5.80 (4)       106         2.50 (3)       11.03 (3)       (1.54 )(3)       37 (4)

Class I

                                                                  

10/1/14 to 9/30/15

       $ 10.56         0.21         (2.17 )       (1.96 )       (0.24 )       (0.05 )       —         (0.29 )       (2.25 )     $ 8.31         (18.95 )%     $ 42,096         1.50 %       1.51 %       2.14 %       72 %

10/1/13 to 9/30/14

         10.58         0.27         (0.08 )       0.19         (0.21 )       —         —         (0.21 )       (0.02 )       10.56         1.87         80,745         1.50         1.51         2.60         72  

10/1/12 to 9/30/13

         10.59         0.27         (0.01 )       0.26         (0.08 )       (0.19 )       —         (0.27 )       (0.01 )       10.58         2.39         8,655         1.50         2.87         2.56         100  

9/5/12(6) to 9/30/12

         10.00         — (5)       0.59         0.59         —         —         —         —         0.59         10.59         5.90 (4)       5,082         1.50 (3)       10.03 (3)       (0.54 )(3)       37 (4)
Emerging Markets                                                                  

Small-Cap Fund

                                                                  

Class A

                                                                  

10/1/14 to 9/30/15

       $ 10.32         0.16         (2.28 )       (2.12 )       (0.12 )       (0.23 )       —         (0.35 )       (2.47 )     $ 7.85         (21.20 )%     $ 332         1.85 %       3.62 %       1.73 %       35 %

12/17/13(6) to 9/30/14

         10.00         0.18         0.16         0.34         (0.02 )       —         —         (0.02 )       0.32         10.32         3.45 (4)       217         1.85 (3)       4.82 (3)       2.25 (3)       44 (4)

Class C

                                                                  

10/1/14 to 9/30/15

       $ 10.26         0.07         (2.24 )       (2.17 )       (0.06 )       (0.23 )       —         (0.29 )       (2.46 )     $ 7.80         (21.68 )%     $ 128         2.60 %       4.34 %       0.76 %       35 %

12/17/13(6) to 9/30/14

         10.00         0.12         0.16         0.28         (0.02 )       —         —         (0.02 )       0.26         10.26         2.82 (4)       159         2.60 (3)       5.59 (3)       1.54 (3)       44 (4)

Class I

                                                                  

10/1/14 to 9/30/15

       $ 10.34         0.18         (2.28 )       (2.10 )       (0.13 )       (0.23 )       —         (0.36 )       (2.46 )     $ 7.88         (20.96 )%     $ 3,871         1.60 %       3.35 %       1.87 %       35 %

12/17/13(6) to 9/30/14

         10.00         0.20         0.17         0.37         (0.03 )       —         —         (0.03 )       0.34         10.34         3.66 (4)       3,480         1.60 (3)       4.64 (3)       2.50 (3)       44 (4)

The footnote legend is at the end of the financial highlights.

 

See Notes to Financial Statements

 

72

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets, End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(7)		   Ratio of Gross Expenses to Average    
Net Assets (before waivers and
reimbursements)(7)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate
Global Infrastructure                                                                                                                                                        

Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 15.38         0.36         (1.60 )       (1.24 )       (0.39 )       (0.13 )       (0.52 )       (1.76 )     $ 13.62         (8.27 )%     $ 60,744         1.22 %       1.22 %       2.38 %       27 %

10/1/13 to 9/30/14

         13.94         0.71         1.40         2.11         (0.67 )       —         (0.67 )       1.44         15.38         15.21         60,673         1.29         1.29         4.69         24  

10/1/12 to 9/30/13

         12.88         0.35         1.05         1.40         (0.34 )       —         (0.34 )       1.06         13.94         11.05         53,354         1.28         1.28         2.62         14  

10/1/11 to 9/30/12

         10.97         0.31         1.95         2.26         (0.35 )       —         (0.35 )       1.91         12.88         20.80         36,347         1.32         1.32         2.59         21  

10/1/10 to 9/30/11

         10.71         0.33         0.25         0.58         (0.32 )       —         (0.32 )       0.26         10.97         5.40         23,120         1.34         1.34         2.89         16  

Class C

                                                              

10/1/14 to 9/30/15

       $ 15.33         0.25         (1.59 )       (1.34 )       (0.29 )       (0.13 )       (0.42 )       (1.76 )     $ 13.57         (8.94 )%     $ 41,039         1.97 %       1.97 %       1.66 %       27 %

10/1/13 to 9/30/14

         13.90         0.58         1.41         1.99         (0.56 )       —         (0.56 )       1.43         15.33         14.37         26,322         2.04         2.04         3.82         24  

10/1/12 to 9/30/13

         12.85         0.25         1.05         1.30         (0.25 )       —         (0.25 )       1.05         13.90         10.23         17,969         2.03         2.03         1.85         14  

10/1/11 to 9/30/12

         10.95         0.23         1.93         2.16         (0.26 )       —         (0.26 )       1.90         12.85         19.97         9,117         2.07         2.07         1.88         21  

10/1/10 to 9/30/11

         10.69         0.24         0.26         0.50         (0.24 )       —         (0.24 )       0.26         10.95         4.51         6,138         2.09         2.09         2.11         16  

Class I

                                                              

10/1/14 to 9/30/15

       $ 15.38         0.39         (1.58 )       (1.19 )       (0.43 )       (0.13 )       (0.56 )       (1.75 )     $ 13.63         (7.98 )%     $ 50,522         0.97 %       0.97 %       2.61 %       27 %

10/1/13 to 9/30/14

         13.94         0.74         1.41         2.15         (0.71 )       —         (0.71 )       1.44         15.38         15.49         55,557         1.04         1.04         4.87         24  

10/1/12 to 9/30/13

         12.89         0.39         1.04         1.43         (0.38 )       —         (0.38 )       1.05         13.94         11.23         70,485         1.03         1.03         2.86         14  

10/1/11 to 9/30/12

         10.97         0.35         1.95         2.30         (0.38 )       —         (0.38 )       1.92         12.89         21.19         48,830         1.07         1.07         2.85         21  

10/1/10 to 9/30/11

         10.72         0.36         0.24         0.60         (0.35 )       —         (0.35 )       0.25         10.97         5.56         33,865         1.09         1.09         3.16         16  
Global Opportunities                                                              

Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 12.12         0.05         0.21         0.26         (0.06 )       —         (0.06 )       0.20       $ 12.32         2.15 %     $ 87,769         1.45 %       1.45 %       0.42 %       40 %

10/1/13 to 9/30/14

         11.07         0.08         1.04         1.12         (0.07 )       —         (0.07 )       1.05         12.12         10.18         77,738         1.48         1.46         0.70         41  

10/1/12 to 9/30/13

         9.91         0.07         1.12         1.19         (0.03 )       —         (0.03 )       1.16         11.07         12.05         78,434         1.55         1.50         0.69         61  

10/1/11 to 9/30/12

         7.91         0.05         1.99         2.04         (0.04 )       —         (0.04 )       2.00         9.91         25.80         71,592         1.55         1.55         0.53         73  

10/1/10 to 9/30/11

         7.79         0.05         0.15         0.20         (0.08 )       —         (0.08 )       0.12         7.91         2.54         54,916         1.55         1.67         0.65         56  

Class B

                                                              

10/1/14 to 9/30/15

       $ 10.73         (0.06 )       0.20         0.14         (0.02 )       —         (0.02 )       0.12       $ 10.85         1.33 %     $ 474         2.20 %       2.20 %       (0.50 )%       40 %

10/1/13 to 9/30/14

         9.81         (0.01 )       0.93         0.92         —         —         —         0.92         10.73         9.38         652         2.23         2.21         (0.09 )       41  

10/1/12 to 9/30/13

         8.82         (0.01 )       1.00         0.99         —         —         —         0.99         9.81         11.22         798         2.30         2.25         (0.10 )       61  

10/1/11 to 9/30/12

         7.06         (0.02 )       1.78         1.76         —         —         —         1.76         8.82         24.93         1,048         2.30         2.30         (0.28 )       73  

10/1/10 to 9/30/11

         6.97         (0.01 )       0.13         0.12         (0.03 )       —         (0.03 )       0.09         7.06         1.76         915         2.30         2.42         (0.14 )       56  

Class C

                                                              

10/1/14 to 9/30/15

       $ 10.66         (0.01 )       0.16         0.15         (0.02 )       —         (0.02 )       0.13       $ 10.79         1.42 %     $ 14,431         2.21 %       2.21 %       (0.13 )%       40 %

10/1/13 to 9/30/14

         9.76         — (5)       0.91         0.91         (0.01 )       —         (0.01 )       0.90         10.66         9.32         3,455         2.23         2.21         (0.04 )       41  

10/1/12 to 9/30/13

         8.77         — (5)       0.99         0.99         —         —         —         0.99         9.76         11.29         2,963         2.30         2.24         (0.03 )       61  

10/1/11 to 9/30/12

         7.02         (0.02 )       1.77         1.75         —         —         —         1.75         8.77         24.93         1,700         2.30         2.30         (0.25 )       73  

10/1/10 to 9/30/11

         6.93         (0.01 )       0.13         0.12         (0.03 )       —         (0.03 )       0.09         7.02         1.77         813         2.30         2.42         (0.11 )       56  

The footnote legend is at the end of the financial highlights.

 

See Notes to Financial Statements

 

73

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets, End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(7)		   Ratio of Gross Expenses to Average    
Net Assets (before waivers and
reimbursements)(7)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate
Global Opportunities                                                                                                                                                        

Fund (Continued)

                                                              

Class I

                                                              

10/1/14 to 9/30/15

       $ 12.11         0.08         0.21         0.29         (0.08 )       —         (0.08 )       0.21       $ 12.32         2.37 %     $ 38,104         1.20 %       1.20 %       0.67 %       40 %

10/1/13 to 9/30/14

         11.07         0.11         1.05         1.16         (0.12 )       —         (0.12 )       1.04         12.11         10.49         33,917         1.23         1.21         0.97         41  

10/1/12 to 9/30/13

         9.91         0.10         1.12         1.22         (0.06 )       —         (0.06 )       1.16         11.07         12.36         29,540         1.30         1.30         0.94         61  

8/8/12(6) to 9/30/12

         9.38         — (5)       0.53         0.53         —         —         —         0.53         9.91         5.54 (4)       23,617         1.30 (3)       1.30 (3)       0.02 (3)       73 (4)
Global Real Estate                                                              

Securities Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 25.18         0.66         1.08         1.74         (0.64 )       (0.09 )       (0.73 )       1.01       $ 26.19         6.83 %     $ 36,315         1.40 %       1.50 %       2.45 %       27 %

10/1/13 to 9/30/14

         23.14         0.38         2.19         2.57         (0.36 )       (0.17 )       (0.53 )       2.04         25.18         11.36         21,502         1.40         1.57         1.52         29  

10/1/12 to 9/30/13

         22.40         0.35         1.09         1.44         (0.70 )       —         (0.70 )       0.74         23.14         6.48         15,306         1.40         1.66         1.51         18  

10/1/11 to 9/30/12

         17.78         0.33         4.77         5.10         (0.11 )       (0.37 )       (0.48 )       4.62         22.40         29.21         8,695         1.40         2.37         1.61         31  

10/1/10 to 9/30/11

         19.84         0.50         (0.90 )       (0.40 )       (1.01 )       (0.65 )       (1.66 )       (2.06 )       17.78         (2.57 )       5,275         1.40         3.16         2.48         41  

Class C

                                                              

10/1/14 to 9/30/15

       $ 24.77         0.45         1.07         1.52         (0.49 )       (0.09 )       (0.58 )       0.94       $ 25.71         6.07 %     $ 8,421         2.15 %       2.26 %       1.68 %       27 %

10/1/13 to 9/30/14

         22.78         0.22         2.13         2.35         (0.19 )       (0.17 )       (0.36 )       1.99         24.77         10.51         5,850         2.15         2.32         0.92         29  

10/1/12 to 9/30/13

         22.14         0.18         1.08         1.26         (0.62 )       —         (0.62 )       0.64         22.78         5.70         3,545         2.15         2.41         0.80         18  

10/1/11 to 9/30/12

         17.65         0.17         4.72         4.89         (0.03 )       (0.37 )       (0.40 )       4.49         22.14         28.18         1,356         2.15         3.11         0.83         31  

10/1/10 to 9/30/11

         19.67         0.35         (0.88 )       (0.53 )       (0.84 )       (0.65 )       (1.49 )       (2.02 )       17.65         (3.25 )       486         2.15         3.91         1.73         41  

Class I

                                                              

10/1/14 to 9/30/15

       $ 25.33         0.73         1.10         1.83         (0.70 )       (0.09 )       (0.79 )       1.04       $ 26.37         7.11 %     $ 32,659         1.15 %       1.25 %       2.69 %       27 %

10/1/13 to 9/30/14

         23.28         0.41         2.22         2.63         (0.41 )       (0.17 )       (0.58 )       2.05         25.33         11.60         26,985         1.15         1.32         1.65         29  

10/1/12 to 9/30/13

         22.51         0.42         1.09         1.51         (0.74 )       —         (0.74 )       0.77         23.28         6.78         25,332         1.15         1.41         1.78         18  

10/1/11 to 9/30/12

         17.85         0.45         4.71         5.16         (0.13 )       (0.37 )       (0.50 )       4.66         22.51         29.50         12,063         1.15         1.93         2.04         31  

10/1/10 to 9/30/11

         19.91         0.63         (0.97 )       (0.34 )       (1.07 )       (0.65 )       (1.72 )       (2.06 )       17.85         (2.26 )       609         1.15         2.92         3.07         41  
Greater European                                                              

Opportunities Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 15.32         0.16         0.01         0.17         (0.10 )       (0.19 )       (0.29 )       (0.12 )     $ 15.20         1.19 %     $ 13,306         1.45 %       1.89 %       1.02 %       35 %

10/1/13 to 9/30/14

         15.87         0.09         (0.22 )       (0.13 )       (0.06 )       (0.36 )       (0.42 )       (0.55 )       15.32         (0.88 )       12,703         1.45         1.91         0.54         65  

10/1/12 to 9/30/13

         14.20         0.13         2.09         2.22         (0.12 )       (0.43 )       (0.55 )       1.67         15.87         15.92         13,433         1.45         2.22         0.86         75  

10/1/11 to 9/30/12

         11.80         0.16         2.87         3.03         (0.15 )       (0.48 )       (0.63 )       2.40         14.20         26.75         6,513         1.45         2.82         1.26         49  

10/1/10 to 9/30/11

         13.56         0.17         (0.36 )       (0.19 )       (0.29 )       (1.28 )       (1.57 )       (1.76 )       11.80         (2.09 )       4,571         1.45         3.03         1.26         46  

Class C

                                                              

10/1/14 to 9/30/15

       $ 15.08         0.05         0.01         0.06         — (5)       (0.19 )       (0.19 )       (0.13 )     $ 14.95         0.43 %     $ 1,564         2.20 %       2.64 %       0.34 %       35 %

10/1/13 to 9/30/14

         15.71         (0.02 )       (0.23 )       (0.25 )       (0.02 )       (0.36 )       (0.38 )       (0.63 )       15.08         (1.62 )       1,130         2.20         2.67         (0.12 )       65  

10/1/12 to 9/30/13

         14.10         0.03         2.07         2.10         (0.06 )       (0.43 )       (0.49 )       1.61         15.71         15.11         607         2.20         2.92         0.21         75  

10/1/11 to 9/30/12

         11.69         0.07         2.85         2.92         (0.03 )       (0.48 )       (0.51 )       2.41         14.10         25.73         187         2.20         3.57         0.52         49  

10/1/10 to 9/30/11

         13.45         0.07         (0.36 )       (0.29 )       (0.19 )       (1.28 )       (1.47 )       (1.76 )       11.69         (2.77 )       144         2.20         3.78         0.53         46  

The footnote legend is at the end of the financial highlights.

 

See Notes to Financial Statements

 

74

Table of Contents

VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets, End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(7)		   Ratio of Gross Expenses to Average    
Net Assets (before waivers and
reimbursements)(7)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate

Greater European

                                                                                                                                                        

Opportunities Fund (Continued)

                                                              

Class I

                                                              

10/1/14 to 9/30/15

       $ 15.38         0.24         (0.02 )       0.22         (0.15 )       (0.19 )       (0.34 )       (0.12 )     $ 15.26         1.47 %     $ 5,751         1.20 %       1.63 %       1.55 %       35 %

10/1/13 to 9/30/14

         15.92         0.14         (0.24 )       (0.10 )       (0.08 )       (0.36 )       (0.44 )       (0.54 )       15.38         (0.64 )       2,751         1.20         1.68         0.89         65  

10/1/12 to 9/30/13

         14.23         0.06         2.20         2.26         (0.14 )       (0.43 )       (0.57 )       1.69         15.92         16.19         1,918         1.20         1.96         0.39         75  

10/1/11 to 9/30/12

         11.83         0.17         2.90         3.07         (0.19 )       (0.48 )       (0.67 )       2.40         14.23         26.99         155         1.20         2.57         1.32         49  

10/1/10 to 9/30/11

         13.60         0.17         (0.34 )       (0.17 )       (0.32 )       (1.28 )       (1.60 )       (1.77 )       11.83         (1.84 )       206         1.20         2.78         1.33         46  

International Equity Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 10.90         0.03         (1.05 )       (1.02 )       (0.08 )       —         (0.08 )       (1.10 )     $ 9.80         (9.43 )%     $ 1,923         1.50 %       2.27 %       0.25 %       94 %

10/1/13 to 9/30/14

         10.50         0.13         0.64         0.77         (0.24 )       (0.13 )       (0.37 )       0.40         10.90         7.42         3,915         1.50         2.42         1.18         115  

10/1/12 to 9/30/13

         10.87         0.16         1.19         1.35         (0.25 )       (1.47 )       (1.72 )       (0.37 )       10.50         13.38         170         1.50         1.95         1.41         277  

10/1/11 to 9/30/12

         9.79         0.21         1.36         1.57         (0.30 )       (0.19 )       (0.49 )       1.08         10.87         16.58         193         1.50         1.80         2.02         25  

10/1/10 to 9/30/11

         10.17         0.29         (0.57 )       (0.28 )       (0.10 )       —         (0.10 )       (0.38 )       9.79         (2.85 )       952         1.50         2.11         2.73         65  

Class C

                                                              

10/1/14 to 9/30/15

       $ 10.68         (0.02 )       (1.05 )       (1.07 )       (0.01 )       —         (0.01 )       (1.08 )     $ 9.60         (10.01 )%     $ 1,689         2.25 %       3.06 %       (0.17 )%       94 %

10/1/13 to 9/30/14

         10.37         0.04         0.62         0.66         (0.22 )       (0.13 )       (0.35 )       0.31         10.68         6.56         804         2.25         3.13         0.38         115  

10/1/12 to 9/30/13

         10.77         0.08         1.20         1.28         (0.21 )       (1.47 )       (1.68 )       (0.40 )       10.37         12.53         124         2.25         2.73         0.70         277  

10/1/11 to 9/30/12

         9.76         0.20         1.25         1.45         (0.25 )       (0.19 )       (0.44 )       1.01         10.77         15.37         115         2.25         2.51         1.94         25  

10/1/10 to 9/30/11

         10.16         0.18         (0.53 )       (0.35 )       (0.05 )       —         (0.05 )       (0.40 )       9.76         (3.58 )       98         2.25         3.15         1.70         65  

Class I

                                                              

10/1/14 to 9/30/15

       $ 10.87         0.07         (1.06 )       (0.99 )       (0.10 )       —         (0.10 )       (1.09 )     $ 9.78         (9.14 )%     $ 4,324         1.25 %       2.02 %       0.61 %       94 %

10/1/13 to 9/30/14

         10.45         0.14         0.65         0.79         (0.24 )       (0.13 )       (0.37 )       0.42         10.87         7.67         6,435         1.25         2.19         1.24         115  

10/1/12 to 9/30/13

         10.82         0.22         1.16         1.38         (0.28 )       (1.47 )       (1.75 )       (0.37 )       10.45         13.68         2,185         1.25         1.54         1.97         277  

10/1/11 to 9/30/12

         9.80         0.30         1.26         1.56         (0.35 )       (0.19 )       (0.54 )       1.02         10.82         16.47         26,398         1.25         1.50         2.94         25  

10/1/10 to 9/30/11

         10.18         0.34         (0.60 )       (0.26 )       (0.12 )       —         (0.12 )       (0.38 )       9.80         (2.62 )       17,689         1.25         1.88         3.16         65  
International Real                                                              

Estate Securities Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 7.03         0.28         (0.21 )       0.07         (0.47 )       —         (0.47 )       (0.40 )     $ 6.63         0.94 %     $ 12,415         1.50 %       1.78 %       4.09 %       27 %

10/1/13 to 9/30/14

         6.61         0.16         0.39         0.55         (0.13 )       —         (0.13 )       0.42         7.03         8.61         11,257         1.50         1.73         2.38         32  

10/1/12 to 9/30/13

         6.50         0.15         0.45         0.60         (0.49 )       —         (0.49 )       0.11         6.61         9.39         10,234         1.50         1.75         2.23         22  

10/1/11 to 9/30/12

         5.23         0.16         1.24         1.40         (0.13 )       —         (0.13 )       1.27         6.50         27.35         3,916         1.50         1.85         2.69         41  

10/1/10 to 9/30/11

         6.30         0.31         (0.69 )       (0.38 )       (0.69 )       —         (0.69 )       (1.07 )       5.23         (7.15 )       3,243         1.50         1.77         5.03         41  

Class C

                                                              

10/1/14 to 9/30/15

       $ 6.97         0.23         (0.20 )       0.03         (0.41 )       —         (0.41 )       (0.38 )     $ 6.59         0.29 %     $ 2,226         2.25 %       2.52 %       3.36 %       27 %

10/1/13 to 9/30/14

         6.56         0.12         0.38         0.50         (0.09 )       —         (0.09 )       0.41         6.97         7.75         2,553         2.25         2.48         1.68         32  

10/1/12 to 9/30/13

         6.48         0.09         0.46         0.55         (0.47 )       —         (0.47 )       0.08         6.56         8.55         1,911         2.25         2.49         1.35         22  

10/1/11 to 9/30/12

         5.20         0.12         1.24         1.36         (0.08 )       —         (0.08 )       1.28         6.48         26.36         1,531         2.25         2.60         2.04         41  

10/1/10 to 9/30/11

         6.26         0.24         (0.67 )       (0.43 )       (0.63 )       —         (0.63 )       (1.06 )       5.20         (7.90 )       962         2.25         2.52         3.91         41  

The footnote legend is at the end of the financial highlights.

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

 

       Net Asset Value,
Beginning of Period		   Net Investment Income (Loss)(2)   Net Realized and
Unrealized Gain (Loss)		   Total from Investment Operations   Dividends from
Net Investment Income		   Distributions from
Net Realized Gains		   Total Distributions   Change in Net Asset Value   Net Asset Value, End of Period   Total Return(1)   Net Assets, End of Period
(in thousands)		   Ratio of Net Expenses to
Average Net Assets(7)		   Ratio of Gross Expenses to Average    
Net Assets (before waivers and
reimbursements)(7)		   Ratio of Net Investment Income
(Loss) to Average Net Assets		   Portfolio Turnover Rate
International Real                                                                                                                                                        

Estate Securities Fund (Continued)

                                                              

Class I

                                                              

10/1/14 to 9/30/15

       $ 7.03         0.30         (0.20 )       0.10         (0.49 )       —         (0.49 )       (0.39 )     $ 6.64         1.31 %     $ 24,999         1.25 %       1.52 %       4.36 %       27 %

10/1/13 to 9/30/14

         6.61         0.18         0.39         0.57         (0.15 )       —         (0.15 )       0.42         7.03         8.87         28,738         1.25         1.48         2.64         32  

10/1/12 to 9/30/13

         6.49         0.15         0.47         0.62         (0.50 )       —         (0.50 )       0.12         6.61         9.66         29,999         1.25         1.49         2.35         22  

10/1/11 to 9/30/12

         5.23         0.17         1.25         1.42         (0.16 )       —         (0.16 )       1.26         6.49         27.74         28,095         1.25         1.59         2.92         41  

10/1/10 to 9/30/11

         6.31         0.35         (0.72 )       (0.37 )       (0.71 )       —         (0.71 )       (1.08 )       5.23         (7.04 )       24,420         1.25         1.52         5.65         41  
International                                                              

Small-Cap Fund

                                                              

Class A

                                                              

10/1/14 to 9/30/15

       $ 13.70         0.17         (1.83 )       (1.66 )       (0.23 )       (0.96 )       (1.19 )       (2.85 )     $ 10.85         (12.58 )%     $ 1,916         1.60 %       1.74 %       1.41 %       64 %

10/1/13 to 9/30/14

         13.20         0.47         0.41         0.88         (0.25 )       (0.13 )       (0.38 )       0.50         13.70         6.65         2,477         1.60         1.73         3.31         44  

10/1/12 to 9/30/13

         10.09         0.30         2.91         3.21         (0.09 )       (0.01 )       (0.10 )       3.11         13.20         31.97         403         1.60         2.51         2.52         26  

9/5/12(6) to 9/30/12

         10.00         0.02         0.07         0.09         —         —         —         0.09         10.09         0.90 (4)       101         1.60 (3)       16.64 (3)       3.65 (3)       0 (4)

Class C

                                                              

10/1/14 to 9/30/15

       $ 13.63         0.08         (1.82 )       (1.74 )       (0.21 )       (0.96 )       (1.17 )       (2.91 )     $ 10.72         (13.28 )%     $ 1,464         2.35 %       2.49 %       0.65 %       64 %

10/1/13 to 9/30/14

         13.16         0.24         0.54         0.78         (0.18 )       (0.13 )       (0.31 )       0.47         13.63         5.89         1,194         2.35         2.49         1.73         44  

10/1/12 to 9/30/13

         10.09         0.19         2.93         3.12         (0.04 )       (0.01 )       (0.05 )       3.07         13.16         30.92         374         2.35         3.34         1.62         26  

9/5/12(6) to 9/30/12

         10.00         0.02         0.07         0.09         —         —         —         0.09         10.09         0.90 (4)       107         2.35 (3)       17.43 (3)       2.86 (3)       0 (4)

Class I

                                                              

10/1/14 to 9/30/15

       $ 13.74         0.21         (1.85 )       (1.64 )       (0.25 )       (0.96 )       (1.21 )       (2.85 )     $ 10.89         (12.43 )%     $ 40,512         1.35 %       1.49 %       1.70 %       64 %

10/1/13 to 9/30/14

         13.21         0.36         0.57         0.93         (0.27 )       (0.13 )       (0.40 )       0.53         13.74         7.04         46,599         1.35         1.49         2.57         44  

10/1/12 to 9/30/13

         10.10         0.34         2.89         3.23         (0.11 )       (0.01 )       (0.12 )       3.11         13.21         32.13         18,123         1.35         2.23         2.82         26  

9/5/12(6) to 9/30/12

         10.00         0.03         0.07         0.10         —         —         —         0.10         10.10         1.00 (4)       2,834         1.35 (3)       16.39 (3)       3.89 (3)       0 (4)

Class R6

                                                              

11/12/14(6) to 9/30/15

       $ 13.43         0.22         (1.55 )       (1.33 )       (0.25 )       (0.96 )       (1.21 )       (2.54 )     $ 10.89         (10.41 )%(4)     $ 90         1.27 %(3)       1.41 %(3)       2.02 %(3)       64 %(4)

International Wealth

                                                              

Masters Fund

                                                              

Class A

                                                              

11/17/14(6) to 9/30/15

       $ 10.00         0.08         (0.56 )       (0.48 )       —         —         —         (0.48 )     $ 9.52         (4.80 )%(4)     $ 126         1.55 %(3)       3.84 %(3)       0.91 %(3)       32 %(4)

Class C

                                                              

11/17/14(6) to 9/30/15

       $ 10.00         0.01         (0.55 )       (0.54 )       —         —         —         (0.54 )     $ 9.46         (5.40 )%(4)     $ 114         2.30 %(3)       4.59 %(3)       0.14 %(3)       32 %(4)

Class I

                                                              

11/17/14(6) to 9/30/15

       $ 10.00         0.11         (0.57 )       (0.46 )       —         —         —         (0.46 )     $ 9.54         (4.60 )%(4)     $ 4,602         1.30 %(3)       3.56 %(3)       1.19 %(3)       32 %(4)

The footnote legend is at the end of the financial highlights.

 

See Notes to Financial Statements

 

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FINANCIAL HIGHLIGHTS

SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING

THROUGHOUT EACH PERIOD

 

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)  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.

 

See Notes to Financial Statements

 

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

Note 1. Organization

Virtus Opportunities Trust (the “Trust”) is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.

As of the date of this report, 32 funds of the Trust are offered for sale, of which 11 (each a “Fund”) are reported in this annual report.

Each Fund has a distinct investment objective and ten Funds are diversified. The Emerging Markets Debt Fund is non-diversified.

The Funds’ investment objectives are outlined in each Fund’s summary page.

All of the Funds offer Class A shares, Class C shares, and Class I shares. Class B shares are no longer available for purchase by new or existing shareholders, except by existing shareholders through Qualifying Transactions. The International Small-Cap Fund also offers Class R6 shares. For information regarding Qualifying Transactions, refer to each Fund’s prospectus.

Class A shares of the Emerging Markets Debt Fund are sold with a front-end sales charge of up to 3.75%. 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. The period for which the CDSC applies for the Funds is 18 months. 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% CDSC, applicable if redeemed within one year of purchase. Class I shares and Class R6 shares are sold without a front-end sales charge or CDSC. Class R6 shares are only available to participants in employer-sponsored retirement plans, such as 401(k) plans, profit-sharing plans, defined benefit plans and other employer-directed plans. Class R6 shares do not carry sales commissions or pay Rule 12b-1 fees.

Virtus Mutual Funds may impose an annual fee on accounts having balances of less than $2,500. The small account fee may be waived in certain circumstances, as disclosed in the prospectuses and/or statements of additional information. The fees collected will be used to offset certain expenses of the Funds.

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 Rule 12b-1 and/or shareholder service plan (“12b-1 Plan”) and has exclusive voting rights with respect to such plans. Class I shares and Class R6 shares are not subject to a 12b-1 Plan. Income and other expenses as well as realized and unrealized gains and losses of each Fund are borne pro rata by the holders of each Class of shares.

 

Note 2. Significant Accounting Policies

The significant accounting policies consistently followed by the Trust in the preparation of its financial statements are summarized below and for derivatives, included in Note 3 below. 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 amounts 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

Security valuation procedures for each Fund, which include nightly price variance, as well as back-testing such as bi-weekly unchanged price, monthly secondary source and transaction analysis, have been approved by the Board of Trustees (the “Board”, or the “Trustees”). All internally fair valued securities are approved by a valuation committee (the “Valuation Committee”) appointed by the Board. The Valuation Committee is comprised of certain members of management as identified to the Board and convenes independently from portfolio management. All internally fair valued securities are updated daily and reviewed in detail by the Valuation Committee monthly unless changes occur within the period. The Valuation Committee reviews the validity of the model inputs and any changes to the model. Quarterly fair valuations are reviewed by the Board.

Each Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The Funds’ policy is to recognize transfers between levels at the end of the reporting period.

 

  •    Level 1 – quoted prices in active markets for identical securities (security types generally include listed equities).

 

  •    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 Valuation Committee’s own assumptions in determining the fair value of investments).

A description of the valuation techniques applied to a 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 Valuation Committee, are generally categorized as Level 3 in the hierarchy.

Certain non-U.S. 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 non-U.S. markets close (where the security is principally traded) and the time that a Fund calculates its net asset value (“NAV”) (at the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4 p.m. Eastern time)

 

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NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

that may impact the value of securities traded in these non-U.S. markets. In such cases the Funds fair value non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. security to the intraday trading in the U.S. markets for investments such as ADRs, financial futures, ETFs, 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 non-U.S. 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 that 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, such as mortgage-backed and asset-backed securities, 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 Valuation Committee, are generally categorized as Level 3 in the hierarchy.

Listed derivatives, such as treasury futures, 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 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 NAV. Investments in closed-end funds are valued as of the close of regular trading on the NYSE each business day. Both are categorized as Level 1 in the hierarchy.

A summary of the inputs used to value a Fund’s net assets by each major security type is disclosed at the end of the Schedule of Investments for each Fund. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

  B. Security Transactions and Investment Income

Security transactions are recorded on the trade date. Realized gains and losses from sales of securities are determined on the identified cost basis. Dividend income is recognized on the ex-dividend date or, in the case of certain foreign securities, as soon as a Fund is notified. Interest income is recorded on the accrual basis. Each Fund amortizes premiums and accretes discounts using the effective interest method. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.

Dividend income from REIT investments 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 Domestic 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 intention 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.

Certain Funds 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.

Management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. As of September 30, 2015, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2012 forward (with limited exceptions).

 

  D. Distributions to Shareholders

Distributions are recorded by each Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations that 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 together by a Fund and other affiliated mutual funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately used.

In addition to the net annual operating expenses that a Fund bears directly, the shareholders of a Fund indirectly bear the pro rata expenses of any underlying mutual funds in which the Fund invests.

 

  F. Foreign Currency Translation

Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at 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

 

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NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

the date income is accrued and the date it is paid is treated as a gain or loss on foreign currency. The Funds do not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

 

  G. 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. Loan agreements are generally non-investment grade and often involve borrowers that are highly leveraged. The Funds may invest in obligations of borrowers who are in bankruptcy proceedings. Loan agreements are typically senior in the corporate capital structure of the borrower. 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. A 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. When investing in loan participations, a 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 participation and only upon receipt by the lender of payments from the borrower. A Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, a Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When a Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan.

A Fund may invest in multiple series or tranches of a loan, which may have varying terms and carry different associated risks. Loan agreements may involve foreign borrowers and investments may be denominated in foreign currencies. 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 loan agreements have floating rate loan interests which generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally LIBOR (London Interbank Offered Rate), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. When a loan agreement is purchased a Fund may pay an assignment fee. On an ongoing basis, a Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan agreement. Prepayment penalty fees are received upon the prepayment of a loan agreement by a borrower. Prepayment penalty, facility, commitment, consent and amendment fees are recorded to income as earned or paid.

At September 30, 2015, the Funds only hold assignment loans.

 

  H. Securities Lending

Certain Funds may loan securities to qualified brokers through an agreement with Brown Brothers Harriman (“BBH”), as a third party lending agent. Under the terms of the agreement, a Fund doing so 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 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 a Fund net of fees and rebates charged by BBH 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 declining value of the collateral.

At September 30, 2015, the International Equity Fund and International Wealth Masters Fund had securities on loan with market values of $443 and $89 and cash collateral of $452 and $94, respectively ($ reported in thousands).

 

Note 3. Derivative Financial Instruments and Transactions

($ reported in thousands)

Disclosures about derivative instruments and hedging activities are intended to enable 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 such disclosures and accounting policies for each specific type of derivative instrument used by certain 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 the Funds as an unrealized gain or loss in the Statements of Operations. When the contract is closed or offset with the same counterparty, on settlement date, the Funds record 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 Statements 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 the 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 International Equity Fund invested in derivative instruments during the reporting period in the form of forward currency contracts. The primary type of risk associated with forward currency contracts is the risk associated with the conversion of foreign currency to U.S. dollars. The Fund may invest in forward currency contracts in an attempt to manage such risk and protect the U.S. dollar value of the portfolio.

These forward currency contracts were executed under the ISDA 2002 Master Agreement without any Schedule thereto and without the requirement of posting any collateral to the counterparty.

 

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For the period ended September 30, 2015, the International Equity Fund did not have any realized gain (loss) on foreign currency exchange contracts recognized in the Statement of Operations.

The Emerging Markets Small-Cap Fund invested in warrants during the reporting period. The primary type of risk associated with warrants is equity risk. As of September 30, 2015, the Emerging Markets Small-Cap Fund has an amount of $16 included in “unrealized appreciation (depreciation) on investments” in the Statements of Assets and Liabilities and Statements of Operations. As of September 30, 2015, the Emerging Markets Small-Cap Fund holds three warrants as disclosed in the Schedule of Investments with a value of $163. The amount of warrants outstanding at September 30, 2015, is indicative of the amount of warrants held during the year.

Emerging Markets Small-Cap Fund – Equity risk

 

      

Asset Derivatives

        Liability Derivatives  
      

Statement of Assets and
Liabilities Location

      Fair Value        Statement of Assets and
Liabilities Location		        Fair Value  

Warrants

      Investment in securities, at value      $ 163                   —         $ —   

The effect of warrants on the Statement of Operations for the year ended September 30, 2015, was as follows:

 

    

Location of Gain (Loss) on Warrants
Recognized in Income

    Realized Gain
(Loss) on Warrants
Recognized in Income		      Change in Unrealized Appreciation
(Depreciation) on Derivatives
Recognized in Income		  

Warrants

    Net realized gain (loss) on investments and net change in unrealized appreciation (depreciation) on investments    $ 34       $ (34 ) 

 

Note 4. Investment Advisory Fees and Related Party Transactions

($ reported in thousands except as noted)

 

  A. Adviser

Virtus Investment Advisers, Inc. (the “Adviser”), an indirect wholly owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the adviser to the Trust. The Adviser manages the Funds’ investment programs and general operations of the Funds, including oversight of the Funds’ subadvisers.

As compensation for its services to the Funds, 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:

 

       First $1 Billion      $1+ Billion  

Emerging Markets Debt Fund

        0.75 %       0.70 % 

Emerging Markets Equity Income Fund

        1.05         1.00   

Emerging Markets Small-Cap Fund

        1.20         1.15   

Greater European Opportunities Fund

        0.85         0.80   

International Small-Cap Fund

        1.00         0.95   

International Wealth Masters Fund

        0.90         0.85   

 

       First $1 Billion      $1+ Billion through $2 Billion      $2+ Billion  

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   

International Real Estate Securities Fund

        1.00         0.95         0.90   
       First $2 Billion      $2+ Billion through $4 Billion      $4+ Billion  

International Equity Fund

        0.85 %       0.80 %       0.75 % 

During the period covered by these financial statements, the Emerging Markets Debt Fund invested a portion of its assets in Virtus Credit Opportunities Fund, an affiliated mutual fund. In order to avoid any duplication of advisory fees, the Adviser has voluntarily waived its advisory fees in an amount equal to that which would otherwise be paid by the Fund on the assets invested in the Credit Opportunities Fund. For the period covered by these financial statements, the waiver amounted to $—*. This waiver is in addition to the expense limitation and/or fee waiver covered elsewhere in these financial statements and is included in the Statement of Operations in “expenses reimbursed and/or waived by the investment adviser”.

 

  * Amount is less than $500.

 

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  B. Subadvisers

The subadvisers manage the investments of each Fund for which they are paid a fee by the Adviser. The subadvisers and the Funds they serve are as follows:

 

Fund

  

Subadviser

   

Fund

  

Subadviser

Emerging Markets Debt Fund

  

NF(1)

   

Greater European Opportunities Fund

  

Vontobel(5)

Emerging Markets Equity Income fund

  

KBI(2)

   

International Equity Fund

  

Euclid(6)

Emerging Markets Small-Cap Fund   KAR(3)   

International Real Estate Securities Fund

  

DPIM(4)

Global Infrastructure Fund

  

DPIM(4)

   

International Small-Cap Fund

  

KAR(3)

Global Opportunities Fund

  

Vontobel(5)

   

International Wealth Masters Fund

  

Horizon(7)

Global Real Estate Securities Fund

  

DPIM(4)

     

 

  (1)  Newfleet Asset Management, LLC, an indirect wholly owned subsidiary of Virtus.
  (2) Kleinwort Benson Investors International, Ltd.
  (3)  Kayne Anderson Rudnick Investment Management, LLC, an indirect wholly owned subsidiary of Virtus.
  (4) Duff & Phelps Investment Management Co., an indirect, wholly owned subsidiary of Virtus.
  (5) Vontobel Asset Management, Inc.
  (6) Euclid Advisors LLC, an indirect wholly owned subsidiary of Virtus.
  (7)  Horizon Asset Management, LLC
 

 

  C. Expense Limits and Fee Waivers

Effective September 1, 2015, the Adviser has contractually agreed to limit the following Fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses, and acquired fund fees and expenses), so that such expenses do not exceed the following percentages of the Fund’s average daily net asset values as listed below.

 

     Class A     Class B     Class C     Class I     Class R6     Through
Date		  

Emerging Markets Debt Fund†

      1.35 %      — %      2.10 %      1.10 %      — %      1/31/17   

Emerging Markets Equity Income Fund†

      1.75        —        2.50        1.50        —        1/31/17   

Emerging Markets Small-Cap Fund†

      1.85        —        2.60        1.60        —        1/31/17   

Global Opportunities Fund†

      1.55        2.30        2.30        1.30        —        1/31/17   

Global Real Estate Securities Fund†

      1.40        —        2.15        1.15        —        1/31/17   

Greater European Opportunities Fund†

      1.45        —        2.20        1.20        —        1/31/17   

International Equity Fund†

      1.50        —        2.25        1.25        —        1/31/17   

International Real Estate Securities Fund†

      1.50        —        2.25        1.25        —        1/31/17   

International Small-Cap Fund†

      1.60        —        2.35        1.35        1.26        1/31/17   

International Wealth Masters Fund

      1.55        —        2.30        1.30        —        1/31/16   

 

  †  For the period of October 1, 2014, through August 31, 2015, the waiver was voluntary.

 

  D. Expense Recapture

For certain Funds, the Adviser may recapture operating expenses waived or reimbursed under these arrangements, within three fiscal years following the end of the fiscal year in which such waiver or reimbursement occurred. A 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 or, if none, the expense limitation in effect at the time of the waiver or reimbursement. All or a portion of the following Adviser reimbursed expenses may be recaptured as follows:

 

       Fiscal Year Ended  
       2016        2017        2018        Total  

Emerging Markets Debt Fund

      $ 64         $ 40         $ 39         $ 143   

Emerging Markets Equity Income Fund

        95           13           6           114   

Emerging Markets Small-Cap Fund

        —           80           79           159   

Global Real Estate Securities Fund

        90           79           79           248   

Greater European Opportunities Fund

        87           80           85           252   

International Equity Fund

        67           74           72           213   

International Real Estate Securities Fund

        95           100           114           309   

International Small-Cap Fund

        85           60           67           212   

International Wealth Masters Fund

        —           —           101           101   

 

  E. Distributor

VP Distributors, LLC (“VP Distributors”), an indirect wholly owned subsidiary of Virtus, serves as the distributor of each Fund’s shares. VP Distributors has advised the Funds that for the fiscal year (the “period”) ended September 30, 2015, it retained net commissions of $52 for Class A shares and deferred sales charges of $36, $—*, and $19 for Class A shares, Class B shares, and Class C shares, respectively.

* Amount is less than $500.

In addition, each Fund pays VP Distributors distribution and/or service fees under a 12b-1 Plan as a percentage of the average daily net assets of each respective class at the annual rates as follows: Class A shares 0.25%; Class B shares 1.00%; Class C shares 1.00%; Class I shares and Class R6 shares are not subject to a 12b-1 Plan.

 

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SEPTEMBER 30, 2015

 

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 NAV 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.

 

  F. Administrator and Transfer Agent

Virtus Fund Services, LLC, an indirect wholly owned subsidiary of Virtus, serves as the administrator and transfer agent to the Funds.

For the period ended September 30, 2015, the Funds incurred administration fees totaling $588 which are included in the Statements of Operations.

For the period ended September 30, 2015, the Funds incurred transfer agent fees totaling $653 which are included in the Statements of Operations. A portion of these fees was paid to outside entities that also provide services to the Trust.

 

  G. Affiliated Shareholders

At September 30, 2015, Virtus and its affiliates held shares of certain Funds, which may be redeemed at any time, that aggregated the following:

 

       Shares        Aggregate Net
Asset Value		  
Emerging Markets Debt Fund          

Class A

        11,524         $ 98   

Class C

        11,268           96   

Class I

        2,879,843           24,594   
Emerging Markets Equity Income Fund          

Class A

        10,707           89   

Class C

        10,511           87   

Class I

        247,977           2,061   
Emerging Markets Small-Cap Fund          

Class A

        10,384           82   

Class C

        10,323           81   

Class I

        291,131           2,294   
Global Infrastructure Fund          

Class I

        1,199,102           16,344   
Global Real Estate Securities Fund          

Class I

        286,002           7,542   
International Equity Fund          

Class A

        9,872           97   

Class C

        9,922           95   

Class I

        79,565           778   
International Real Estate Securities Fund          

Class A

        311,738           2,067   

Class I

        1,160,713           7,707   
International Small-Cap Fund          

Class R6

        8,227           90   
International Wealth Masters Fund          

Class A

        10,000           95   

Class C

        10,000           95   

Class I

        480,000           4,579   

 

  H. Investments in Affiliates

A summary of the Emerging Markets Debt Fund’s total long-term and short-term purchases and sales of affiliated underlying funds during the period ended September 30, 2015, is as follows:

 

     Value,
beginning of
period		      Purchases      Sales
Proceeds		      Value, end
of period		      Dividend
Income		      Distributions
of Realized
Gains		  

Virtus Credit Opportunities Fund

    $ —       $ 148       $ —       $ 144       $ 1       $ —   

The Emerging Markets Debt Fund does not invest in the underlying fund 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, 2015, the Fund was the owner of record of approximately 0.15% of Virtus Credit Opportunities Fund.

 

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SEPTEMBER 30, 2015

 

 

Note 5. Purchases and Sales of Securities

($ reported in thousands)

Purchases and sales of securities (excluding U.S. Government and agency securities, forward currency contracts, futures and short-term securities) during the period ended September 30, 2015, were as follows:

 

       Purchases        Sales  

Emerging Markets Debt Fund

      $ 13,240         $ 16,166   

Emerging Markets Equity Income Fund

        48,439           70,660   

Emerging Markets Small-Cap Fund

        3,250           1,517   

Global Infrastructure Fund

        77,818           46,140   

Global Opportunities Fund

        70,399           53,800   

Global Real Estate Securities Fund

        42,675           19,550   

Greater European Opportunities Fund

        9,883           6,626   

International Equity Fund

        8,133           10,021   

International Real Estate Securities Fund

        11,417           11,313   

International Small-Cap Fund

        34,099           29,568   

International Wealth Masters Fund

        6,613           1,507   

There were no purchases or sales of long-term U.S. Government and agency securities for the Funds during the period ended September 30, 2015.

 

Note 6. Capital Share Transactions

(reported in thousands)

Transactions in shares of capital stock, during the periods ended as indicated below, were as follows:

 

     Emerging Markets Debt Fund     Emerging Markets Equity Income Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      24      $ 221        103      $ 997        29      $ 291        64      $ 683   
Reinvestment of distributions      4        34        10        94        3        27        2        18   
Shares repurchased      (45 )      (414 )      (350 )      (3,390 )      (59 )      (589 )      (29 )      (311 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (17 )    $ (159 )      (237 )    $ (2,299 )      (27 )    $ (271 )      37      $ 390   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      44      $ 408        48      $ 471        26      $ 248        40      $ 408   
Reinvestment of distributions      3        26        2        19        1        15        1        6   
Shares repurchased      (62 )      (571 )      (8 )      (80 )      (26 )      (253 )      (4 )      (41 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (15 )    $ (137 )      42      $ 410        1      $ 10        37      $ 373   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      144      $ 1,329        505      $ 4,980        1,722      $ 16,430        9,101      $ 93,703   
Reinvestment of distributions      143        1,307        143        1,378        34        343        11        116   
Shares repurchased      (574 )      (5,295 )      (17 )      (168 )      (4,333 )      (41,211 )      (2,286 )      (23,047 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (287 )    $ (2,659 )      631      $ 6,190        (2,577 )    $ (24,438 )      6,826      $ 70,772   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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SEPTEMBER 30, 2015

 

     Emerging Markets Small-Cap Fund     Global Infrastructure Fund  
     Year Ended
September 30, 2015		     From Inception
December 17, 2013 to
September 30, 2014		     Year Ended
September 30, 2015 		    Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      25      $ 240        22      $ 226        2,224      $ 33,956        1,305      $ 19,911   
Reinvestment of distributions      1        8        — (1)      — (2)      153        2,277        150        2,293   
Shares repurchased      (5 )      (38 )      (1 )      (11 )      (1,863 )      (27,573 )      (1,338 )      (20,296 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      21      $ 210        21      $ 215        514      $ 8,660        117      $ 1,908   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      — (1)     $ 4        16      $ 155        2,414      $ 36,729        590      $ 9,117   
Reinvestment of distributions      1        4        — (1)      — (2)      62        917        40        620   
Shares repurchased      —        —        —        —        (1,168 )      (17,261 )      (206 )      (3,138 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      1      $ 8        16      $ 155        1,308      $ 20,385        424      $ 6,599   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      274      $ 2,666        336      $ 3,387        1,858      $ 28,316        1,142      $ 17,698   
Reinvestment of distributions      17        161        1        7        135        2,016        164        2,501   
Shares repurchased      (136 )      (1,257 )      —        —        (1,897 )      (28,258 )      (2,750 )      (41,980 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      155      $ 1,570        337      $ 3,394        96      $ 2,074        (1,444 )    $ (21,781 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

     Global Opportunities Fund     Global Real Estate Securities Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      2,304      $ 28,851        572      $ 6,675        1,115      $ 30,347        500      $ 12,687   
Reinvestment of distributions      34        423        40        467        25        689        15        333   
Shares repurchased      (1,625 )      (20,664 )      (1,282 )      (15,224 )      (608 )      (16,436 )      (323 )      (8,052 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      713      $ 8,610        (670 )    $ (8,082 )      532      $ 14,600        192      $ 4,968   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class B                 
Sale of shares      —      $ —        5      $ 52        —      $ —        —      $ —   
Reinvestment of distributions      — (1)       1        —        —        —        —        —        —   
Shares repurchased      (17 )      (192 )      (25 )      (265 )      —        —        —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (17 )    $ (191 )      (20 )    $ (213 )      —      $ —        —      $ —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      1,293      $ 14,518        87      $ 904        188      $ 5,085        115      $ 2,906   
Reinvestment of distributions      1        6        — (1)      2        5        134        2        52   
Shares repurchased      (280 )      (3,149 )      (67 )      (693 )      (102 )      (2,710 )      (37 )      (885 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      1,014      $ 11,375        20      $ 213        91      $ 2,509        80      $ 2,073   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      650      $ 8,210        171      $ 2,037        734      $ 20,228        467      $ 11,814   
Reinvestment of distributions      3        43        22        252        33        912        27        609   
Shares repurchased      (361 )      (4,581 )      (60 )      (695 )      (594 )      (16,107 )      (517 )      (12,655 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      292      $ 3,672        133      $ 1,594        173      $ 5,033        (23 )    $ (232 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)  Amount is less than 500.
(2)  Amount is less than $500.

 

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SEPTEMBER 30, 2015

 

     Greater European Opportunities Fund     International Equity Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      420      $ 6,463        701      $ 11,317        287      $ 3,013        416      $ 4,580   
Reinvestment of distributions      16        236        24        374        3        30        9        94   
Shares repurchased      (390 )      (5,967 )      (743 )      (11,774 )      (453 )      (4,695 )      (82 )      (904 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      46      $ 732        (18 )    $ (83 )      (163 )    $ (1,652 )      343      $ 3,770   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      64      $ 995        59      $ 935        122      $ 1,322        67      $ 724   
Reinvestment of distributions      1        13        2        25        — (1)      1        1        9   
Shares repurchased      (35 )      (536 )      (25 )      (384 )      (21 )      (227 )      (4 )      (47 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      30      $ 472        36      $ 576        101      $ 1,096        64      $ 686   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      415      $ 6,216        141      $ 2,287        178      $ 1,967        456      $ 5,025   
Reinvestment of distributions      3        46        2        36        5        53        8        83   
Shares repurchased      (220 )      (3,420 )      (85 )      (1,364 )      (333 )      (3,549 )      (81 )      (898 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      198      $ 2,842        58      $ 959        (150 )    $ (1,529 )      383      $ 4,210   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

     International Real Estate Securities Fund     International Small-Cap Fund  
     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		     Year Ended
September 30, 2015		     Year Ended
September 30, 2014		  
     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT  
Class A                 
Sale of shares      522      $ 3,606        601      $ 4,140        105      $ 1,306        307      $ 4,315   
Reinvestment of distributions      116        773        29        186        14        161        4        52   
Shares repurchased      (367 )      (2,507 )      (577 )      (3,899 )      (123 )      (1,574 )      (161 )      (2,308 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      271      $ 1,872        53      $ 427        (4 )    $ (107 )      150      $ 2,059   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class C                 
Sale of shares      140      $ 982        140      $ 986        71      $ 884        70      $ 958   
Reinvestment of distributions      17        114        4        25        9        100        2        23   
Shares repurchased      (185 )      (1,278 )      (69 )      (486 )      (31 )      (372 )      (13 )      (179 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (28 )    $ (182 )      75      $ 525        49      $ 612        59      $ 802   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class I                 
Sale of shares      1,960      $ 13,578        1,686      $ 11,674        2,141      $ 26,540        2,604      $ 35,793   
Reinvestment of distributions      270        1,808        107        677        317        3,641        71        976   
Shares repurchased      (2,548 )      (17,494 )      (2,245 )      (15,445 )      (2,129 )      (25,756 )      (653 )      (9,360 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      (318 )    $ (2,108 )      (452 )    $ (3,094 )      329      $ 4,425        2,022      $ 27,409   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Class R6(3)                 
Sale of shares      —      $ —        —      $ —        7      $ 100        —      $ —   
Reinvestment of distributions      —        —        —        —        1        9        —        —   
Shares repurchased      —        —        —        —        — (1)      — (2)      —        —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Net Increase / (Decrease)      —      $ —        —      $ —        8      $ 109        —      $ —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)  Amount is less than 500.
(2)  Amount is less than $500.
(3)  From Inception date November 12, 2014.

 

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SEPTEMBER 30, 2015

 

     International Wealth
Masters Fund		                               
     From Inception
November 17, 2014 to
September 30, 2015		                          
     SHARES     AMOUNT                               
Class A                      
Sale of shares      14      $ 142                    
Reinvestment of distributions      —        —                    
Shares repurchased      (1 )      (7 )                  
  

 

 

    

 

 

                   
Net Increase / (Decrease)      13      $ 135                    
  

 

 

    

 

 

                   
Class C                      
Sale of shares      15      $ 149                    
Reinvestment of distributions      —        —                    
Shares repurchased      (3 )      (25 )                  
  

 

 

    

 

 

                   
Net Increase / (Decrease)      12      $ 124                    
  

 

 

    

 

 

                   
Class I                      
Sale of shares      482      $ 4,826                    
Reinvestment of distributions      —        —                    
Shares repurchased      — (1)      (1 )                  
  

 

 

    

 

 

                   
Net Increase / (Decrease)      482      $ 4,825                    
  

 

 

    

 

 

                   

 

(1)  Amount is less than 500.

 

Note 7. 10% Shareholders

As of September 30, 2015, certain Funds had individual shareholder account(s) and/or omnibus shareholder account(s) (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of each such Fund as detailed below:

 

       % of Shares
Outstanding		        Number of
Accounts		  

Emerging Markets Debt Fund

        92 %         1   

Emerging Markets Equity Income Fund

        11           1   

Emerging Markets Small-Cap Fund

        84           2 * 

Global Infrastructure Fund#

        22           2 * 

Global Opportunities Fund

        20           1   

Global Real Estate Securities Fund#

        31           1   

Greater European Opportunities Fund

        53           3   

International Equity Fund

        27           1   

International Real Estate Securities Fund#

        50           3 * 
International Small-Cap Fund        78           1   

 

  * Includes affiliated shareholder accounts.
  #  The Fund is owned by Virtus Alternatives Diversifier Fund. Virtus Alternatives Diversifier Fund does not invest in the underlying Funds for the purpose of exercising management or control; however, investments made may represent a significant portion of an underlying Fund’s net assets. At September 30, 2015, Virtus Alternatives Diversifier Fund was the owner of record of approximately 19% of the International Real Estate Securities Fund, 10% of the Global Infrastructure Fund, and 10% of the Global Real Estate Securities Fund.

 

Note 8. Credit Risk and Asset Concentration

In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund’s ability to repatriate such amounts.

High-yield/high-risk securities typically entail greater price volatility and/or principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high-yield/high-risk securities may be complex, and as a result, it may be more difficult for the Adviser and/or subadviser to accurately predict risk.

Certain Funds may invest a high percentage of their assets in specific sectors of the market in the pursuit of their investment objectives. 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.

 

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SEPTEMBER 30, 2015

 

At September 30, 2015, the following Funds held securities issued by various companies in specific sectors as detailed below:

 

                    Fund

     

Sector

      Percentage of Total
Investments		  
Emerging Markets Debt Fund     

Financials

        28 % 
Emerging Markets Equity Income Fund     

Financials

        31 % 
Global Infrastructure Fund     

Utilities

        37 % 
Global Opportunities Fund     

Consumer Staples

        31 % 
Global Real Estate Fund      Financials        38 % 
Greater European Opportunities Fund     

Consumer Staples

        38 % 
International Real Estate Securities Fund     

Financials

        31 % 
International Real Estate Securities Fund     

Retail REITs

        30 % 
International Wealth Masters Fund      Consumer Discretionary        30 % 

 

Note 9. Indemnifications

Under the Trust’s organizational documents, its Trustees and officers are indemnified against certain liabilities arising out of the performance of their duties to the Funds. Each Trustee has entered into an indemnification agreement with the Trust. In addition, in the normal course of business, the Funds enter into contracts that provide a variety of indemnifications to other parties. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds and that have not occurred. However, the Funds have not had prior claims or losses pursuant to these arrangements and expect the risk of loss to be remote.

 

Note 10. Federal Income Tax Information

($ reported in thousands)

At September 30, 2015, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Funds were as follows:

 

      Federal
Tax Cost		      Unrealized
Appreciation		      Unrealized
(Depreciation)		     Net Unrealized
Appreciation
(Depreciation)		  

Emerging Markets Debt Fund

    $ 28,961       $ 305       $ (3,214 )    $ (2,909 ) 

Emerging Markets Equity Income Fund

      51,206         1,646         (9,223 )      (7,577 ) 

Emerging Markets Small-Cap Fund

      5,499         87         (1,333 )      (1,246 ) 

Global Infrastructure Fund

      155,036         11,984         (13,502 )      (1,518 ) 

Global Opportunities Fund

      115,772         29,721         (2,451 )      27,270   

Global Real Estate Securities Fund

      71,946         8,581         (3,124 )      5,457   

Greater European Opportunities Fund

      18,417         2,696         (456 )      2,240   

International Equity Fund

      8,657         502         (473 )      29   

International Real Estate Securities Fund

      35,818         4,952         (1,156 )      3,796   

International Small-Cap Fund

      52,645         1,545         (10,588 )      (9,043 ) 

International Wealth Masters Fund

      5,284         280         (663 )      (383 ) 

Certain Funds have capital loss carryovers available to offset future realized capital gains, through the indicated expiration dates shown below:

 

     2018      2019      No
Expiration
(Short-Term)		      No
Expiration
(Long-Term)		      Total  

Emerging Markets Debt Fund

    $ —       $ —       $ 88       $ 450       $ 538   

Emerging Markets Equity Income Fund

      —         —         230         13         243   

Global Opportunities Fund

      422         —         —         —         422   

Greater European Opportunities Fund

      —         —         5         —         5   

International Equity Fund

      —         —         223         —         223   

International Real Estate Securities Fund

      3,884         884         1,776         1,152         7,696   

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.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized for tax years beginning after December 22, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

For the period ended September 30, 2015, the following Funds utilized losses deferred in prior years against current year capital gains:

 

Global Opportunities Fund

    $ 1,705   

International Real Estate Securities Fund

      306   

 

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NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

Capital losses realized after October 31, and certain late year ordinary losses may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal period ended September 30, 2015, the Funds deferred and recognized losses as follows:

 

     Late Year
Ordinary
Losses
Deferred		      Capital
Loss
Deferred		      Capital
Loss
Recognized		  

Emerging Markets Debt Fund

    $ —       $ 1,395       $ 385   

Emerging Markets Equity Income Fund

      —         5,981         —   

Emerging Markets Small-Cap Fund

      —         52         —   

Global Opportunities Fund

      —         1,262         —   

Greater European Opportunities Fund

      —         129         —   

International Equity Fund

      8         676         120   

International Real Estate Securities Fund

      —         88         1,119   

The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which are disclosed above) consist of the following:

 

       Undistributed
Ordinary
Income		        Undistributed
Long-Term
Capital Gains		  

Emerging Markets Equity Income Fund

      $ 869         $ —   

Emerging Markets Small-Cap Fund

        77           —   

Global Infrastructure Fund

        152           7,490   

Global Opportunities Fund

        397           —   

Global Real Estate Securities Fund

        1,011           733   

Greater European Opportunities Fund

        171           —   

International Real Estate Securities Fund

        15           —   

International Small-Cap Fund

        906           477   

International Wealth Masters Fund

        142           —   

The tax character of dividends and distributions paid during the years ended September 30, 2015 and 2014 was as follows:

 

     2015      2014  
     Ordinary
Income		      Long-Term
Capital Gains		      Return
of Capital		      Total      Ordinary
Income		      Long-Term
Capital Gains		      Return
of Capital		      Total  

Virtus Emerging Markets Debt Fund

    $ 1,132       $ —       $ 239       $ 1,371       $ 1,461       $ —       $ 47       $ 1,508   

Virtus Emerging Markets Equity Income Fund

      2,175         —         —         2,175         612         —         —         612   

Virtus Emerging Markets Small-Cap Fund

      174         —         —         174         7         —         —         7   

Virtus Global Infrastructure Fund

      4,398         1,425         —         5,823         6,155         —         —         6,155   

Virtus Global Opportunities Fund

      698         —         —         698         828         —         —         828   

Virtus Global Real Estate Securities Fund

      1,605         164         —         1,769         759         249         —         1,008   

Virtus Greater European Opportunities Fund

      107         196         —         303         308         153         —         461   

Virtus International Equity Fund

      85         —         —         85         202         —         —         202   

Virtus International Real Estate Securities Fund

      2,732         —         —         2,732         911         —         —         911   

Virtus International Small-Cap Fund

      2,889         1,127         —         4,016         1,207         —         —         1,207   

Virtus International Wealth Masters Fund

      —         —         —         —         —         —         —         —   

The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

Certain funds have distributed more than its income and capital gains; therefore, a portion of the distribution is a taxable return of capital (“ROC”). The ROC amounts are reflected in the Statement of Changes and Financial Highlights.

 

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SEPTEMBER 30, 2015

 

 

Note 11. Reclassifications of Capital Accounts

($ reported in thousands)

For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Funds. As of September 30, 2015, the Funds recorded reclassifications to increase (decrease) the accounts as listed below:

 

       Capital Paid in on
Shares of
Beneficial Interest		        Undistributed
Net Investment
Income (Loss)		        Accumulated
Net Realized
Gain (Loss)		  

Emerging Markets Debt Fund

      $ —         $ (351 )       $ 351   

Emerging Markets Equity Income Fund

        — (1)         (83 )         83   

Emerging Markets Small-Cap Fund

        —           (2 )         2   

Global Infrastructure Fund

        —           (15 )         15   

Global Opportunities Fund

        —           (41 )         41   

Global Real Estate Securities Fund

        — (1)         (19 )         19   

Greater European Opportunities Fund

        — (1)         (22 )         22   

International Equity Fund

        — (1)         (15 )         15   

International Real Estate Securities Fund

        — (1)         (33 )         33   

International Small-Cap Fund

        — (1)         (10 )         10   

International Wealth Masters

        — (1)         13           (13 ) 

 

  (1)  Amount is less than $500.

 

Note 12. Borrowings

($ reported in thousands)

On July 2, 2015, the Funds and other affiliated Funds entered into a $50,000 secured Line of Credit Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Funds to borrow cash from the Bank to manage large unexpected redemptions and trade fails, up to a limit of one-third or one-fifth of each Fund’s total net assets in accordance with the Agreement. Interest is charged at the higher of the LIBOR (London Interbank Offered Rate) or the Federal Funds rate plus an additional percentage rate on the amount borrowed. Commitment fees are charged on the undrawn balance. The Funds are individually, and not jointly, liable for their particular advances, if any, under the line of credit. The Bank has the ability to require repayment of outstanding borrowings under the Agreement upon certain circumstances such as an event of default.

For the period July 2, 2015 through September 30, 2015, the Emerging Markets Equity Income Fund made borrowings. The average daily borrowings under the Agreement and the daily weighted average interest rate were $118 and 1.20%, respectively. No other Funds made borrowings during the period and no Fund had any outstanding borrowings as of September 30, 2015.

 

Note 13. Illiquid and Restricted Securities

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 a 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. However, a portion of such footnoted securities could be liquid where it is determined that some, though not all, of the position could 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 applicable Fund.

Restricted securities are illiquid securities, as defined above, not registered under the Securities Act of 1933, as amended (the “1933 Act”). Generally, 144A securities are excluded from this category, except where defined as illiquid.

Each Fund will bear any costs, including those involved in registration under the 1933 Act, in connection with the disposition of such securities.

At September 30, 2015, the Funds did not hold any securities that were both illiquid and restricted.

 

Note 14. Regulatory Matters and Litigation

From time to time, the Funds’ investment adviser and/or its affiliates and/or subadvisers may be involved in litigation and arbitration as well as examinations and investigations by various regulatory bodies, including the SEC, involving compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting their products and other activities. At this time, the Funds’ investment adviser believes that the outcomes of such matters are not likely, either individually or in the aggregate, to be material to these financial statements.

As part of an SEC non-public, confidential investigation of a matter entitled — In the Matter of F-Squared Investments Inc., the SEC staff informed the Funds’ investment adviser that it was inquiring into whether it had violated securities laws or regulations with respect to circumstances related to that matter. On November 16, 2015, without admitting or denying the SEC’s findings, the Funds’ investment adviser consented to the entry of an order providing that it cease and desist from committing or causing any violations and future violations of Sections 204, 206(2) and 206(4) of the Investment Advisers Act of 1940, as amended, and Rules 204-2, 206(4)-1, 206(4)-7 and 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940, as amended; agreed to a censure; and paid $16.5 million, which included a civil money penalty of $2 million, disgorgement of $13.4 million and prejudgment interest of $1.1 million.

 

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VIRTUS OPPORTUNITIES TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2015

 

On February 20, 2015, a putative class action complaint (In re Virtus Investment Partners, Inc. Securities Litigation; formerly styled as Tom Cummins v. Virtus Investment Partners Inc. et al) alleging violation of the federal securities laws was filed by an individual shareholder against Virtus and certain of its officers (the “defendants”) in the United States District Court for the Southern District of New York. On August 21, 2015, the lead plaintiff filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint and adding the Trust as a defendant. The Consolidated Complaint was purportedly filed on behalf of all purchasers of Virtus common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint alleges that during the Class Period, the defendants knowingly disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds previously subadvised by F-Squared Investments, Inc. and/or its affiliates (“F-Squared”). The plaintiff seeks to recover unspecified damages. Virtus and its affiliates, including the Funds’ adviser, believe that the suit is without merit and intend to defend it vigorously. A motion to dismiss the Consolidated Complaint was filed on behalf of the defendants on October 21, 2015. The Trust believes that the risk of loss to the Funds as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Funds.

On May 8, 2015, a putative class action complaint (Mark Youngers v. Virtus Investment Partners, Inc. et al) alleging violations of certain provisions of the federal securities laws was filed in the United States District Court for the Central District of California. The complaint, which was purportedly filed on behalf of purchasers of certain Virtus Funds previously subadvised by F-Squared between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”), alleges claims against Virtus, certain Virtus officers and affiliates (including the Funds’ investment adviser, Euclid Advisors LLC and VP Distributors, LLC), the trustees and certain officers of the Trust, and certain other parties (the “defendants”). The complaint alleges that during the Class Period the defendants knowingly disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On October 1, 2015, the plaintiff filed a First Amended Class Action Complaint which, among other things, added a derivative claim for breach of fiduciary duty on behalf of the Trust. On October 19, 2015, the Court entered an order transferring the action to the Southern District of New York. Virtus and its affiliates, including the Funds’ adviser, believe the plaintiff’s claims asserted in the complaint are frivolous and intend to defend them vigorously. The Trust believes that the risk of loss to the Funds as a result of this suit is remote. The adviser does not believe that the suit will have any impact on its ability to provide services to the Funds.

 

Note 15. Subsequent Events

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there are no subsequent events requiring recognition or disclosure in these financial statements.

 

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LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 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 Emerging Markets Debt Fund, Virtus Emerging Markets Equity Income Fund, Virtus Emerging Markets Small-Cap Fund, Virtus Global Infrastructure Fund, Virtus Global Opportunities Fund, Virtus Global Real Estate Securities Fund, Virtus Greater European Opportunities Fund, Virtus International Equity Fund, Virtus International Real Estate Securities Fund, Virtus International Small-Cap Fund and Virtus International Wealth Masters Fund, (constituting funds within Virtus Opportunities Trust, hereafter referred to as the “Funds”) at September 30, 2015, the results of each of their operations for the year or period then ended, 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, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

November 20, 2015

 

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VIRTUS OPPORTUNITIES TRUST

TAX INFORMATION NOTICE

SEPTEMBER 30, 2015

 

For the fiscal year ended September 30, 2015, the Funds make the following disclosures for federal income tax purposes. Below is listed the percentages, or the maximum amount allowable, of its ordinary income dividends (“QDI”) to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Funds which qualifies for the dividends received deduction (“DRD”) for corporate shareholders. The actual percentage of QDI and DRD for the calendar year will be designated in year-end tax statements. The Funds designate the amounts below as long-term capital gains dividends (“LTCG”) taxable at a 20% rate, or lower depending on the shareholder’s income ($ reported in thousands). LTCG amounts, if subsequently different, will be designated in the next annual report.

 

      QDI        DRD        LTCG  

Emerging Markets Debt Fund

      0 %         0 %       $ —   

Emerging Markets Equity Income Fund

      91           0           —   

Emerging Markets Small-Cap Fund

      86           0           —   

Global Infrastructure Fund

      100           78           8,354   

Global Opportunities Fund

      100           100           —   

Global Real Estate Securities Fund

      42           0           769   

Greater European Opportunities Fund

      100           23           —   

International Equity Fund

      100           0           —   

International Real Estate Securities Fund

      100           0           —   

International Small-Cap Fund

      61           0           532   

International Wealth Masters

      65           0           —   

For the period ended September 30, 2015, certain 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
Income
Recognized		        Foreign Taxes
Paid on
Foreign
Source
Income		  

Emerging Markets Equity Income Fund

    $ 2,866         $ 360   

Emerging Markets Small-Cap Fund

      173           21   

Greater European Opportunities Fund

      484           33   

International Equity Fund

      188           21   

International Real Estate Securities Fund

      2,504           141   

International Small-Cap Fund

      1,670           164   

International Wealth Masters Fund

      120           10   

 

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FUND MANAGEMENT TABLES

 

Information pertaining to the trustees and officers of the Trust as of September 30, 2015, 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) 243-1574. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for trustees of the Trust.

Independent Trustees

 

   
Name,
Year of Birth,
Year Elected and
Number of Funds Overseen		  

Principal Occupation(s) During Past 5 Years and

Other Directorships Held by Trustee

McClellan, Hassell H.

YOB: 1945

Elected: 2015

55 Portfolios

   Retired. Professor (1984 to 2013), Wallace E. Carroll School of Management, Boston College; Trustee, Virtus Variable Insurance Trust (9 portfolios) (since 2008); Trustee (since 2015), Virtus Mutual Fund Complex (46 portfolios); Trustee, John Hancock Fund Complex (since 2000), John Hancock Funds (collectively, 234 portfolios); and Director (since 2010), Barnes Group, Inc. (diversified global components manufacturer and logistical services company).

McLoughlin, Philip

YOB: 1946

Elected: 2006

69 Portfolios

   Director (since 1991) and Chairman (since 2010), World Trust Fund (closed-end investment firm in Luxembourg); Director (since 1995), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); Chairman (since 2002) and Trustee (since 1989), Virtus Mutual Fund Complex (46 portfolios); Chairman and Trustee (since 2003), Virtus Variable Insurance Trust (9 portfolios); Trustee/Director and Chairman (since 2011), Virtus Closed-End Funds (3 portfolios); Trustee and Chairman (since 2013), Virtus Alternative Solutions Trust (7 portfolios); Partner (2006 to 2010), Cross Pond Partners, LLC (investment management consultant); and Managing Director (2008 to 2010), SeaCap Partners, LLC (investment management).

McNamara, Geraldine M.

YOB: 1951

Elected: 2006

59 Funds

   Retired. Trustee (since 2001), Virtus Mutual Fund Complex (46 portfolios); and Director (since 2003), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); and Trustee (since 2015), Virtus Variable Insurance Trust (9 portfolios)

Oates, James M.

YOB: 1946

Elected: 2006

56 Funds

   Managing Director (since 1994), Wydown Group (consulting firm). Trustee (since 1987), Virtus Mutual Fund Complex (46 portfolios); Director (since 1996), Stifel Financial; Director (1998 to 2014), Connecticut River Bancorp; Chairman and Director (1999 to 2014), Connecticut River Bank; Chairman (since 2000), Emerson Investment Management, Inc.; Director (2002 to 2014), New Hampshire Trust Company; Chairman and Trustee (since 2005), John Hancock Fund Complex (228 portfolios); Non-Executive Chairman (2007 to 2011), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services); Trustee/Director (since 2013), Virtus Closed-End Funds (3 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

Segerson, Richard E.

YOB: 1948

Elected: 2006

46 Funds

   Trustee (since 1983), Virtus Mutual Fund Complex (46 portfolios); and Managing Director (1998 to 2013), Northway Management Company.

Verdonck, Ferdinand L.J.

YOB: 1942

Elected: 2006

46 Funds

   Trustee (since 2002), Virtus Mutual Fund Complex (46 portfolios).

Interested Trustees

 

   
Name,
Year of Birth,
Year Elected and
Number of Funds Overseen		  

Principal Occupation(s) During Past 5 Years and

Other Directorships Held by Trustee

Aylward, George R.*

Trustee and President

YOB: 1964

Elected: 2006

67 Funds

   Director, President and Chief Executive Officer (since 2008), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions with Virtus affiliates (since 2005); Trustee (since 2006), Virtus Mutual Funds (46 portfolios); Chairman, President and Chief Executive Officer (since 2006), The Zweig Closed-End Funds (2 portfolios); Trustee (since 2012) and President (since 2010), Virtus Variable Insurance Trust (9 portfolios); Trustee and President (since 2011), Virtus Closed-End Funds (3 portfolios); Director (since 2013), Virtus Global Funds, PLC (2 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios).

 

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FUND MANAGEMENT TABLES (Continued)

 

Officers of the Trust Who Are Not Trustees

 

     

Name, Address and

Year of Birth

   Position(s) Held with Trust and
Length of Time Served		   Principal Occupation(s)
During Past 5 Years

Waltman, Francis G.

YOB: 1962

   Executive Vice President (since 2013); Senior Vice President (2008-2013).   Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2006) with Virtus affiliates; Executive Vice President (since 2013), Senior Vice President (2008 to 2013), Virtus Mutual Fund Complex; Executive Vice President (since 2013), Senior Vice President (2010 to 2013), Virtus Variable Insurance Trust; Executive Vice President (since 2013), Senior Vice President (2011 to 2013), Virtus Closed-End Funds; Director (since 2013), Virtus Global Funds PLC; and Executive Vice President (since 2013), Virtus Alternative Solutions Trust.

Bradley, W. Patrick

YOB: 1972

   Senior Vice President (since 2013); Vice President (2011 to 2013); Chief Financial Officer and Treasurer (since 2006).   Senior Vice President, Fund Services (since 2010), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2006) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2004), Virtus Variable Insurance Trust; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2006), Virtus Mutual Fund Complex; Senior Vice President (since 2013), Vice President (2012 to 2013) and Treasurer (Chief Financial Officer) (since 2007), The Zweig Closed-End Funds; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2011), Virtus Closed-End Funds; Vice President and Assistant Treasurer (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Director (since 2013), Virtus Global Funds, PLC; and Senior Vice President, Chief Financial Officer and Treasurer (since 2013), Virtus Alternative Solutions Trust.

Carr, Kevin J.

YOB: 1954

   Senior Vice President, since 2013; Vice President (2005-2013); Chief Legal Officer, Counsel and Secretary (since 2005).   Senior Vice President (since 2009), Vice President, Counsel and Secretary (2008 to 2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2005) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2005 to 2013), Chief Legal Officer, Counsel and Secretary (since 2005), Virtus Mutual Fund Complex; Senior Vice President (2013 to 2014), Vice President (2012 to 2013) and Assistant Secretary (since 2012), Secretary and Chief Legal Officer (2005 to 2012), The Zweig Closed-End Funds; Assistant Secretary (since 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2010 to 2013), Virtus Variable Insurance Trust; Vice President and Assistant Secretary (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Senior Vice President and Assistant Secretary (2013 to 2014), Vice President and Assistant Secretary (2012 to 2013), Vice President, Chief Legal Officer, Counsel and Secretary (2011 to 2012), Virtus Closed-End Funds; and Assistant Secretary (since 2013), Virtus Alternative Solutions Trust.

Engberg, Nancy J.

YOB: 1956

  

Vice President and Chief Compliance

Officer since 2011.

   Vice President (since 2008) and Chief Compliance Officer (2008 to 2011), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2003) with Virtus affiliates; Vice President and Chief Compliance Officer (since 2011), Virtus Mutual Fund Complex; Vice President (since 2010), Chief Compliance Officer (since 2011), Virtus Variable Insurance Trust; Vice President and Chief Compliance Officer (since 2011), Virtus Closed-End Funds; Vice President and Chief Compliance Officer (since 2012), The Zweig Closed-End Funds; and Vice President and Chief Compliance Officer (since 2013), Virtus Alternative Solutions Trust.

 

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Virtus Emerging Markets Debt Fund, Virtus Emerging Markets Small-Cap Fund,

Virtus Emerging Markets Equity Income Fund, Virtus Global Opportunities Fund,

Virtus Global Real Estate Securities Fund, Virtus Greater European Opportunities Fund,

Virtus International Equity Fund, Virtus International Real Estate Securities Fund and

Virtus International Small-Cap Fund each a series of Virtus Opportunities Trust

Supplement dated September 1, 2015 to the Summary Prospectuses dated January 28, 2015,

as supplemented, and the Virtus Opportunities Trust Statutory Prospectus,

dated January 28, 2015, as supplemented.

IMPORTANT NOTICE TO INVESTORS

Virtus Emerging Markets Debt Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment)		      Class A        Class C        Class I  

Management Fees

        0.75 %         0.75 %         0.75 % 

Distribution and Shareholder Servicing (12b-1) Fees

        0.25 %         1.00 %         None   

Other Expenses

        0.52 %         0.52 %         0.52 % 

Total Annual Fund Operating Expenses

        1.52 %         2.27 %         1.27 % 

Less: Expense Reimbursement(b)

        (0.17 %)         (0.17 %)         (0.17 %) 

Total Annual Fund Operating Expenses After Expense
Reimbursement(b)

        1.35 %         2.10 %         1.10 % 

 

  (b)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.35% for Class A Shares, 2.10% for Class C Shares and 1.10% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 507         $ 804         $ 1,141         $ 2,091   

Class C

      Sold      $ 313         $ 676         $ 1,183         $ 2,578   
     Held      $ 213         $ 676         $ 1,183         $ 2,578   

Class I

      Sold or Held      $ 112         $ 368         $ 663         $ 1,503   

Virtus Emerging Markets Small-Cap Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment)		      Class A        Class C        Class I  

Management Fees

        1.20 %         1.20 %         1.20 % 

Distribution and Shareholder Servicing (12b-1) Fees

        0.25 %         1.00 %         None   

Other Expenses

        3.37 %         3.37 %         3.37 % 

Acquired Fund Fees and Expenses

        0.02 %         0.02 %         0.02 % 

Total Annual Fund Operating Expenses(b)

        4.84 %         5.59 %         4.59 % 

Less: Expense Reimbursement(c)

        (2.99 %)         (2.99 %)         (2.99 %) 

Total Annual Fund Operating Expenses After Expense
Reimbursement(b)(c)

        1.85 %         2.60 %         1.60 % 

 

  (b)  The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.
  (c)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.85% for Class A Shares, 2.60% for Class C Shares and 1.60% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Table of Contents

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 752         $ 1,421         $ 2,394         $ 4,843   

Class C

      Sold      $ 363         $ 1,117         $ 2,276         $ 5,113   
     Held      $ 263         $ 1,117         $ 2,276         $ 5,113   

Class I

      Sold or Held      $ 163         $ 823         $ 1,812         $ 4,322   

Virtus Global Real Estate Securities Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment)		      Class A        Class C        Class I  

Management Fees

        0.85 %         0.85 %         0.85 % 

Distribution and Shareholder Servicing (12b-1) Fees

        0.25 %         1.00 %         None   

Other Expenses

        0.47 %         0.47 %         0.47 % 

Total Annual Fund Operating Expenses

        1.57 %         2.32 %         1.32 % 

Less: Expense Reimbursement(b)

        (0.17 %)         (0.17 %)         (0.17 %) 

Total Annual Fund Operating Expenses After Expense
Reimbursement(b)

        1.40 %         2.15 %         1.15 % 

 

  (b)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.40% for Class A Shares, 2.15% for Class C Shares and 1.15% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 709         $ 1,010         $ 1,350         $ 2,307   

Class C

      Sold      $ 318         $ 691         $ 1,209         $ 2,629   
     Held      $ 218         $ 691         $ 1,209         $ 2,629   

Class I

      Sold or Held      $ 117         $ 384         $ 690         $ 1,560   

Virtus Greater European Opportunities Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment)		      Class A        Class C        Class I  

Management Fees

        0.85 %         0.85 %         0.85 % 

Distribution and Shareholder Servicing (12b-1) Fees

        0.25 %         1.00 %         None   

Other Expenses

        0.81 %         0.81 %         0.81 % 

Acquired Fund Fees and Expenses

        0.01 %         0.01 %         0.01 % 

Total Annual Fund Operating Expenses(b)

        1.92 %         2.67 %         1.67 % 

Less: Expense Reimbursement(c)

        (0.47 %)         (0.47 %)         (0.47 %) 

Total Annual Fund Operating Expenses After Expense
Reimbursement(b)(c)

        1.45 %         2.20 %         1.20 % 

 

  (b)  The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.
  (c)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.45% for Class A Shares, 2.20% for Class C Shares and 1.20% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 714         $ 1,055         $ 1,468         $ 2,615   

Class C

      Sold      $ 323         $ 738         $ 1,329         $ 2,931   
     Held      $ 223         $ 738         $ 1,329         $ 2,931   

Class I

      Sold or Held      $ 122         $ 432         $ 816         $ 1,895   

Table of Contents

Virtus International Equity Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment)		      Class A        Class C        Class I  

Management Fees

        0.85 %         0.85 %         0.85 % 

Distribution and Shareholder Servicing (12b-1) Fees

        0.25 %         1.00 %         None   

Other Expenses

        1.32 %         1.32 %         1.32 % 

Acquired Fund Fees and Expenses

        0.01 %         0.01 %         0.01 % 

Total Annual Fund Operating Expenses(b)

        2.43 %         3.18 %         2.18 % 

Less: Expense Reimbursement(c)

        (0.93 %)         (0.93 %)         (0.93 %) 

Total Annual Fund Operating Expenses After Expense
Reimbursement(b)(c)

        1.50 %         2.25 %         1.25 % 

 

  (b)  The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.
  (c)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.50% for Class A Shares, 2.25% for Class C Shares and 1.25% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 719         $ 1,116         $ 1,633         $ 3,044   

Class C

      Sold      $ 328         $ 801         $ 1,497         $ 3,352   
     Held      $ 228         $ 801         $ 1,497         $ 3,352   

Class I

      Sold or Held      $ 127         $ 497         $ 994         $ 2,362   

Virtus International Real Estate Securities Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment)		      Class A        Class C        Class I  

Management Fees

        1.00 %         1.00 %         1.00 % 

Distribution and Shareholder Servicing (12b-1) Fees

        0.25 %         1.00 %         None   

Other Expenses

        0.48 %         0.48 %         0.48 % 

Total Annual Fund Operating Expenses

        1.73 %         2.48 %         1.48 % 

Less: Expense Reimbursement(b)

        (0.23 %)         (0.23 %)         (0.23 %) 

Total Annual Fund Operating Expenses After Expense
Reimbursement(b)

        1.50 %         2.25 %         1.25 % 

 

  (b)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.50% for Class A Shares, 2.25% for Class C Shares and 1.25% for Class I Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 719         $ 1,045         $ 1,418         $ 2,462   

Class C

      Sold      $ 328         $ 728         $ 1,278         $ 2,780   
     Held      $ 228         $ 728         $ 1,278         $ 2,780   

Class I

      Sold or Held      $ 127         $ 422         $ 763         $ 1,728   

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Virtus International Small-Cap Fund

Under “Fees and Expenses” in the fund’s summary prospectus and the summary section of the statutory prospectus, the “Annual Fund Operating Expenses” table and associated footnotes are hereby replaced with the following:

 

Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment)		    Class A      Class C      Class I      Class R6  

Management Fees

      1.00 %       1.00 %       1.00 %       1.00 % 

Distribution and Shareholder Servicing (12b-1) Fees

      0.25 %       1.00 %       None         None   

Other Expenses

      0.48 %       0.48 %       0.48 %       0.39 %(b) 

Acquired Fund Fees and Expenses

      0.02 %       0.02 %       0.02 %       0.02 % 

Total Annual Fund Operating Expenses(c)

      1.75 %       2.50 %       1.50 %       1.41 % 

Less: Expense Reimbursement(d)

      (0.15 %)       (0.15 %)       (0.15 %)       (0.15 %) 

Total Annual Fund Operating Expenses After Expense
Reimbursement(c)(d)

      1.60 %       2.35 %       1.35 %       1.26 % 

 

  (b)  Estimated for current fiscal year, as annualized.
  (c)  The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.
  (d)  The fund’s investment adviser has contractually agreed to limit the fund’s total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) so that such expenses do not exceed 1.60% for Class A Shares, 2.35% for Class C Shares, 1.35% for Class I Shares and 1.26% for Class R6 Shares through January 31, 2017. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years following the fiscal year in which such reimbursement occurred.

Under “Fees and Expenses, the “Example” table is hereby replaced with the following:

 

        Share Status      1 Year        3 Years        5 Years        10 Years  

Class A

      Sold or Held      $ 728         $ 1,066         $ 1,442         $ 2,495   

Class C

      Sold      $ 338         $ 749         $ 1,303         $ 2,813   
     Held      $ 238         $ 749         $ 1,303         $ 2,813   

Class I

      Sold or Held      $ 137         $ 444         $ 789         $ 1,764   

Class R6

      Sold or Held      $ 128         $ 416         $ 742         $ 1,664   

Virtus Emerging Markets Debt Fund, Virtus Emerging Markets Small-Cap Fund, Virtus Emerging Markets Equity Income Fund, Virtus Global Opportunities Fund, Virtus Global Real Estate Securities Fund, Virtus Greater European Opportunities Fund, Virtus International Equity Fund, Virtus International Real Estate Securities Fund and Virtus International Small-Cap Fund.

The first paragraph and the information in the first table in the section “More Information About Fund Expenses” on page 139 of the statutory prospectus are hereby revised with the following information for the above referenced funds:

Virtus Investment Advisers, Inc. (“VIA”) has contractually agreed to limit the total operating expenses (excluding dividend and interest expenses, taxes, brokerage commissions, leverage expenses, extraordinary expenses and acquired fund fees and expenses, if any) of certain of the funds so that expenses do not exceed, on an annualized basis, the amounts indicated in the following table.

 

 

    Class A
Shares		      Class B
Shares		      Class C
Shares		      Class I
Shares		      Class R6
Shares		      Class T
Shares		      Through Date  

Virtus Emerging Markets Debt Fund

      1.35 %       N/A         2.10 %       1.10 %       N/A         N/A         January 31, 2017   

Virtus Emerging Markets Equity Income Fund(1)

      1.75 %       N/A         2.50 %       1.50 %       N/A         N/A         January 31, 2017   

Virtus Emerging Markets Small-Cap Fund

      1.85 %       N/A         2.60 %       1.60 %       N/A         N/A         January 31, 2017   

Virtus Global Opportunities Fund(1)

      1.55 %       2.30 %       2.30 %       1.30 %       N/A         N/A         January 31, 2017   

Virtus Global Real Estate Securities Fund

      1.40 %       N/A         2.15 %       1.15 %       N/A         N/A         January 31, 2017   

Virtus Greater European Opportunities Fund

      1.45 %       N/A         2.20 %       1.20 %       N/A         N/A         January 31, 2017   

Virtus International Equity Fund

      1.50 %       N/A         2.25 %       1.25 %       N/A         N/A         January 31, 2017   

Virtus International Real Estate Securities Fund

      1.50 %       N/A         2.25 %       1.25 %       N/A         N/A         January 31, 2017   

Virtus International Small-Cap Fund

      1.60 %       N/A         2.35 %       1.35 %       1.26 %       N/A         January 31, 2017   

 

  (1) Fund expenses currently below the capped level.

Investors should retain this supplement with the Prospectuses for future reference.

 

VOT 8020/9FundsNewExpCap&Waiver (09/15)

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VIRTUS OPPORTUNITIES TRUST

101 Munson Street

Greenfield, MA 01301-9668

 

Trustees

George R. Aylward

Hassell H. McClellan

Philip R. McLoughlin, Chairman

Geraldine M. McNamara

James M. Oates

Richard E. Segerson

Ferdinand L.J. Verdonck

Officers

George R. Aylward, President

Francis G. Waltman, Executive Vice President

W. Patrick Bradley, Senior Vice President, Chief Financial Officer and Treasurer

Kevin J. Carr, Senior Vice President, Chief Legal Officer, Counsel and Secretary

Nancy J. Engberg, Vice President and Chief Compliance Officer

Investment Adviser

Virtus Investment Advisers, Inc.

100 Pearl Street

Hartford, CT 06103-4506

Principal Underwriter

VP Distributors, LLC

100 Pearl Street

Hartford, CT 06103-4506

Administrator and Transfer Agent

Virtus Fund Services, LLC

100 Pearl Street

Hartford, CT 06103-4506

Custodian

JPMorgan Chase Bank, NA

1 Chase Manhattan Plaza

New York, NY 10005-1401

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

Web site

    Virtus.com
 

 

 

 

Important Notice to Shareholders

The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-243-1574.

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LOGO

 

   

P.O. Box 9874

Providence, RI 02940-8074

   

For more information about Virtus Mutual Funds,

please call your financial representative, or contact us

at 1-800-243-1574 or Virtus.com.

 

8032

    11-15

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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)

Other than certain non-substantive changes, 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)

The Registrant’s Board of Trustees has determined that James M. Oates and Richard E. Segerson each possess the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an “audit committee financial expert.” Each of Mr. Oates and Mr. Segerson 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

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that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $666,850 for 2014 and $673,744 for 2015.

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 $62,664 for 2014 and $90,281 for 2015. Such audit-related fees include out of pocket expenses and 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 $111,750 for 2014 and $129,550 for 2015.

“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 2014 and $0 for 2015.

 

(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. The Audit Committee must 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 Audit Committee 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 Committee 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 Audit Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting.

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(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%

(c) 0%

(d) N/A

 

  (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 $490,517 for 2014 and $528,041 for 2015.

 

  (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.

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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.

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  (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.

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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     12/4/15                                                                                                                         

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     12/4/15                                                                                                                         

 

By (Signature and Title)*  

      /s/ W. Patrick Bradley                                                           

  
 

      W. Patrick Bradley, Senior Vice President, Chief Financial Officer, and

      Treasurer

 

      (principal financial officer)

  

Date     12/4/15                                                                                                                     

* Print the name and title of each signing officer under his or her signature.