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 811-00945
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Virtus Equity Trust
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(Exact name of registrant as specified in charter)
101 Munson Street
Greenfield, MA 01301-9668
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(Address of principal executive offices) (Zip code)
Kevin J. Carr, Esq.
Vice President, Chief Legal Officer, Counsel
and Secretary for the Registrant
100 Pearl Street
Hartford, CT 06103-4506
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(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 243-1574
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Date of fiscal year end: March 31
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Date of reporting period: September 30, 2009
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
SEMIANNUAL REPORT
[GRAPHIC OMITTED]
VIRTUS
MUTUAL FUNDS
================================================================================
Virtus Growth & Income Fund
Virtus Mid-Cap Core Fund
Virtus Mid-Cap Growth Fund
Virtus Quality Large-Cap Value Fund
Virtus Quality Small-Cap Fund
Virtus Small-Cap Core Fund
Virtus Small-Cap Growth Fund
Virtus Small-Cap Sustainable Growth Fund
Virtus Strategic Growth Fund
Virtus Tactical Allocation Fund
================================================================================
TRUST NAME: September 30, 2009 [GRAPHIC OMITTED]
VIRTUS EQUITY TRUST Eligible shareholders can sign up
for eDelivery at Virtus.com
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
TABLE OF CONTENTS
Message to Shareholders .................................................. 1
Key Investment Terms and Footnote Legend ................................. 2
Disclosure of Fund Expenses .............................................. 4
Portfolio Holdings Summary Weightings .................................... 6
SCHEDULES OF INVESTMENTS
Virtus Growth & Income Fund ("Growth & Income Fund") ..................... 8
Virtus Mid-Cap Core Fund ("Mid-Cap Core Fund") ........................... 9
Virtus Mid-Cap Growth Fund ("Mid-Cap Growth Fund") ....................... 10
Virtus Quality Large-Cap Value Fund* ("Quality Large-Cap Value Fund,"
formerly "Virtus Value Opportunities Fund") ........................... 11
Virtus Quality Small-Cap Fund ("Quality Small-Cap Fund") ................. 12
Virtus Small-Cap Core Fund ("Small-Cap Core Fund") ....................... 13
Virtus Small-Cap Growth Fund ("Small-Cap Growth Fund") ................... 14
Virtus Small-Cap Sustainable Growth Fund ("Small-Cap Sustainable Growth
Fund") ................................................................ 15
Virtus Strategic Growth Fund ("Strategic Growth Fund") ................... 16
Virtus Tactical Allocation Fund ("Tactical Allocation Fund") ............. 17
Statements of Assets and Liabilities ..................................... 22
Statements of Operations ................................................. 24
Statements of Changes in Net Assets ...................................... 26
Financial Highlights ..................................................... 30
Notes to Financial Statements ............................................ 42
Consideration of Advisory and Subadvisory Agreements by the Board of
Trustees .............................................................. 53
Results of Shareholder Meetings .......................................... 55
* Name change effective September 15, 2009.
PROXY VOTING PROCEDURES AND VOTING RECORD (FORM N-PX)
The adviser and subadvisers vote proxies relating to portfolio securities
in accordance with procedures that have been approved by the Trust's Board
of Trustees. You may obtain a description of these procedures, along with
information regarding how the Funds voted proxies during the most recent
12-month period ended June 30, 2009, free of charge, by calling toll-free
1-800-243-1574. This information is also available through the Securities
and Exchange Commission's website at http://www.sec.gov.
FORM N-Q INFORMATION
The Trust files a complete schedule of portfolio holdings for each Fund
with the Securities and Exchange Commission (the "SEC") for the first and
third quarters of each fiscal year on Form N-Q. Form N-Q is available on
the SEC's website at http://www.sec.gov. Form N-Q may be reviewed and
copied at the SEC's Public Reference Room. Information on the operation of
the SEC's Public Reference Room can be obtained by calling toll-free
1-800-SEC-0330.
This report is not authorized for distribution to prospective investors in the
funds of Virtus Equity Trust unless preceded or accompanied by an effective
prospectus which includes information concerning the sales charge, each Fund's
record and other pertinent information.
MESSAGE TO SHAREHOLDERS
Dear Fellow Shareholders of Virtus Mutual Funds:
Investors who were calmed by the positive news from the financial markets in the
second quarter of 2009 may have had a reason to regain some of their enthusiasm
during the third quarter. There were numerous signs pointing to an end to the
recession: gross domestic product grew by an annualized 3.5 percent, matching
its average growth rate of the last 80 years; a measure of stability appeared in
the housing market; consumer confidence inched up; and better-than-expected
profits and rosier outlooks were reported by many corporations.
The capital markets continued their recovery during the quarter, with most major
stock market indices up by double digits for the quarter. The S&P 500(R) Index
was up 15.6 percent in the quarter and in late September was at its highest
level in nearly a year. The Dow Jones Industrial Average(SM) increased 15.8
percent in the third quarter, and as of September 30 had improved by 13.5
percent for the year. These figures are even more encouraging when compared with
market lows in early March and the double-digit losses both indices recorded
during the first quarter of the year. Bonds also participated in the
third-quarter rally, with the Barclays Capital U.S. Aggregate Bond Index ahead
by 3.74 percent and the Barclays Capital U.S. Municipal Bond Index up 7.12
percent.
Although the Federal Open Market Committee acknowledged that "economic activity
has picked up following its severe downturn," these recent gains should not
unleash any 1990s-style market "exuberance." The strength and timing of a full
recovery is yet to be realized. Unemployment rates that probably have not peaked
remain a drag on consumer spending, and with an expected slowdown of the
government's monetary and fiscal stimulus, some economists speculate that the
growth from the second and third quarter may not be sustainable into next year.
These factors suggest this is an important time to rely on the experience of
your personal financial adviser and the investment professionals who manage your
assets in the Virtus Mutual Funds. We encourage you to meet with your adviser to
review your portfolio and, when appropriate, adjust it to fit your current
investment objectives and your tolerance for risk.
Our wide range of equity, fixed income, and alternative investments allow you to
allocate your assets and design a portfolio tailored to your individual needs.
Information about your investments is always available on our website,
www.virtus.com, and from our customer service staff at 1-800-243-1574. While
there are no guarantees in the world of investing, I can assure you that we will
do our very best to meet your expectations.
On behalf of the entire team at Virtus Investment Partners, I thank you for
entrusting your financial assets to us.
Sincerely,
/s/ George R. Aylward
George R. Aylward
President, Virtus Mutual Funds
NOVEMBER 1, 2009
WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT OR REQUIRE ADDITIONAL
INFORMATION, PLEASE VISIT US AT www.virtus.com OR CALL OUR SHAREOWNER SERVICES
GROUP, TOLL FREE, AT 1-800-243-1574.
PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN
PERFORMANCE SHOWN ABOVE.
1
KEY INVESTMENT TERMS AND FOOTNOTE LEGEND
KEY INVESTMENT TERMS
ADR (AMERICAN DEPOSITARY RECEIPT)
Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges
that are held by a U.S. bank or trust. Foreign companies use ADRs in order to
make it easier for Americans to buy their shares.
ETF (EXCHANGE-TRADED FUNDS)
Portfolios of stocks or bonds that track a specific market index.
FHLMC
Federal Home Loan Mortgage Corporation ("Freddie Mac").
FNMA
Federal National Mortgage Association ("Fannie Mae").
GNMA
Government National Mortgage Association ("Ginnie Mae").
SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT)
An ADR which is issued with the cooperation of the company whose stock will
underlie the ADR. Sponsored ADRs generally carry the same rights normally given
to stockholders, such as voting rights. ADRs must be sponsored to be able to
trade on a major U.S. exchange such as the NYSE.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Securities purchased on a when-issued or forward commitment basis are also known
as delayed delivery transactions. Delayed delivery transactions involve a
commitment by a Fund to purchase or sell a security at a future date, ordinarily
up to 90 days later. When-issued or forward commitments enable a Fund to lock in
what is believed to be an attractive price or yield on a particular security for
a period of time, regardless of future changes in interest rates.
FOOTNOTE LEGEND
(1) Federal Income Tax Information: For tax information at September 30, 2009,
see the Federal Income Tax Information Note 9 in the Notes to Financial
Statements.
(2) Non-income producing.
(3) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(4) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2009 for the Tactical Allocation Fund, these securities amounted to a value
of $5,590 or 2.8% of net assets.
(5) Amount is less than $500.
2
THIS PAGE INTENTIONALLY BLANK.
VIRTUS EQUITY TRUST
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009
We believe it is important for you to understand the impact of costs on
your investment. All mutual funds have operating expenses. As a shareholder of a
Virtus Equity Trust Fund (the "Fund") you may incur two types of costs: (1)
transaction costs, including sales charges on purchases of Class A shares and
contingent deferred sales charges on Class B and Class C shares; and (2) ongoing
costs, including investment advisory fees; distribution and service fees; and
other expenses. Class I shares are sold without a sales charge and do not incur
distribution and service fees. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in 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 those transactional costs were included, your
costs would have been higher. The calculations assume no shares were bought or
sold during the period. Your actual costs may have been higher or lower,
depending on the amount of your investment and the timing of any purchases or
redemptions.
EXPENSE TABLE
Beginning Ending Annualized Expenses Paid
Account Value Account Value Expense During
April 1, 2009 September 30, 2009 Ratio Period*
------------- ------------------ ---------- -------------
GROWTH & INCOME FUND++
ACTUAL
Class A $1,000.00 $1,350.20 1.02% $ 6.01
Class B 1,000.00 1,344.40 1.78 10.46
Class C 1,000.00 1,345.30 1.77 10.41
Class I 1,000.00 1,352.30 0.83 4.89
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,019.89 1.02 5.18
Class B 1,000.00 1,016.03 1.78 9.04
Class C 1,000.00 1,016.08 1.77 8.99
Class I 1,000.00 1,020.86 0.83 4.21
MID-CAP CORE FUND
ACTUAL+
Class A $1,000.00 $1,130.00 1.35% $ 3.90
Class C 1,000.00 1,127.00 2.10 6.06
Class I 1,000.00 1,130.00 1.10 3.18
HYPOTHETICAL (5% RETURN BEFORE EXPENSES SINCE INCEPTION)+
Class A 1,000.00 1,009.87 1.35 3.69
Class C 1,000.00 1,007.83 2.10 5.73
Class I 1,000.00 1,010.56 1.10 3.00
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
MID-CAP GROWTH FUND
ACTUAL
Class A $1,000.00 $1,421.30 1.45% $ 8.80
Class B 1,000.00 1,416.80 2.20 13.33
Class C 1,000.00 1,416.80 2.20 13.33
Class I 1,000.00 1,422.80 1.20 7.29
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,017.71 1.45 7.36
Class B 1,000.00 1,013.90 2.20 11.17
Class C 1,000.00 1,013.90 2.20 11.17
Class I 1,000.00 1,018.98 1.20 6.09
QUALITY LARGE-CAP VALUE FUND
ACTUAL
Class A $1,000.00 $1,333.10 1.35% $ 7.90
Class C 1,000.00 1,327.70 2.10 12.25
Class I 1,000.00 1,334.70 1.10 6.44
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 1,019.49 1.10 5.58
QUALITY SMALL-CAP FUND
ACTUAL
Class A $1,000.00 $1,422.10 1.55% $ 9.41
Class C 1,000.00 1,417.60 2.30 13.94
Class I 1,000.00 1,423.80 1.30 7.90
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
4
VIRTUS EQUITY TRUST
DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED)
FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009
EXPENSE TABLE
Beginning Ending Annualized Expenses Paid
Account Value Account Value Expense During
April 1, 2009 September 30, 2009 Ratio Period*
------------- ------------------ ---------- -------------
SMALL-CAP CORE FUND
ACTUAL
Class A $1,000.00 $1,419.90 1.67% $10.13
Class B 1,000.00 1,415.10 2.42 14.65
Class C 1,000.00 1,415.70 2.42 14.66
Class I 1,000.00 1,422.60 1.41 8.62
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,016.59 1.67 8.48
Class B 1,000.00 1,012.78 2.42 12.29
Class C 1,000.00 1,012.78 2.42 12.29
Class I 1,000.00 1,017.86 1.41 7.21
SMALL-CAP GROWTH FUND
ACTUAL
Class A $1,000.00 $1,402.20 1.67% $10.06
Class B 1,000.00 1,397.30 2.42 14.54
Class C 1,000.00 1,396.90 2.42 14.54
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,016.59 1.67 8.48
Class B 1,000.00 1,012.78 2.42 12.29
Class C 1,000.00 1,012.78 2.42 12.29
SMALL-CAP SUSTAINABLE GROWTH FUND
ACTUAL
Class A $1,000.00 $1,404.80 1.65% $ 9.95
Class C 1,000.00 1,401.00 2.40 14.51
Class I 1,000.00 1,407.80 1.40 8.45
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,016.69 1.65 8.38
Class C 1,000.00 1,012.84 2.40 12.23
Class I 1,000.00 1,017.96 1.40 7.11
STRATEGIC GROWTH FUND
ACTUAL
Class A $1,000.00 $1,325.30 1.50% $ 8.74
Class B 1,000.00 1,320.30 2.25 13.09
Class C 1,000.00 1,322.30 2.24 13.04
Class I 1,000.00 1,326.50 1.26 7.35
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,017.46 1.50 7.61
Class B 1,000.00 1,013.65 2.25 11.42
Class C 1,000.00 1,013.70 2.24 11.37
Class I 1,000.00 1,018.67 1.26 6.40
TACTICAL ALLOCATION FUND#
ACTUAL
Class A $1,000.00 $1,239.10 1.38% $ 7.75
Class B 1,000.00 1,233.90 2.13 11.93
Class C 1,000.00 1,235.20 2.13 11.94
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,018.06 1.38 7.01
Class B 1,000.00 1,014.26 2.13 10.81
Class C 1,000.00 1,014.26 2.13 10.81
The Funds 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 expenses and fees had been included, the expenses would have
been higher.
+ Inception date is June 22, 2009. Expenses are equal to the relevant Fund's
annualized expense ratio, which includes waived fees and reimbursed
expenses, if applicable, multiplied by the average account value over the
period, multiplied by the number of days (99) expenses were accrued in the
most recent fiscal half-year, then divided by 365 days to reflect the
period since inception.
* Expenses are equal to the relevant Fund's annualized expense ratio, which
includes waived fees and reimbursed expenses, if applicable, multiplied by
the average account value over the period, multiplied by the number of days
(183) expenses were accrued in the most recent fiscal half-year, then
divided by 365 days to reflect the period since inception.
++ If net reimbursed extraordinary expenses from prior years and additional
current year extraordinary expenses were excluded, the actual expenses paid
and the hypothetical expenses would be as follows:
ACTUAL
EXPENSES HYPOTHETICAL
PAID EXPENSES
-------- ------------
Growth & Income Fund
Class A $ 7.36 $ 6.35
Class B 11.75 10.15
Class C 11.79 10.15
Class I 5.90 5.08
# If extraordinary expenses were excluded, actual expenses paid and the
hypothetical expenses would be as follows:
ACTUAL
EXPENSES HYPOTHETICAL
PAID EXPENSES
-------- ------------
Tactical Allocation Fund
Class A $ 7.58 $ 6.85
Class B 11.76 10.66
Class C 11.77 10.66
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.
5
VIRTUS EQUITY TRUST
PORTFOLIO HOLDINGS SUMMARY WEIGHTINGS
SEPTEMBER 30, 2009 (UNAUDITED)
For each Fund, the following tables present asset allocations within certain
sectors as a percentage of total investments as of September 30, 2009.
GROWTH & INCOME FUND
Information Technology 18%
Energy 13
Health Care 13
Industrials 12
Consumer Staples 11
Financials 9
Materials 8
Other (includes short-term investments) 16
---
100%
===
MID-CAP CORE FUND
Industrials 25%
Information Technology 17
Health Care 15
Consumer Staples 11
Financials 11
Consumer Discretionary 9
Utilities 5
Other (includes short-term investments) 7
---
100%
===
MID-CAP GROWTH FUND
Information Technology 25%
Industrials 19
Consumer Discretionary 16
Health Care 15
Energy 5
Materials 4
Utilities 4
Other (includes short-term investments) 12
---
100%
===
QUALITY LARGE-CAP VALUE FUND
Financials 22%
Consumer Staples 15
Energy 13
Information Technology 12
Industrials 11
Consumer Discretionary 10
Health Care 8
Other (includes short-term investments) 9
---
100%
===
QUALITY SMALL-CAP FUND
Industrials 27%
Financials 20
Energy 10
Health Care 10
Consumer Discretionary 9
Information Technology 9
Consumer Staples 7
Other (includes short-term investments) 8
---
100%
===
SMALL-CAP CORE FUND
Industrials 25%
Information Technology 23
Health Care 15
Financials 12
Consumer Discretionary 9
Energy 4
Materials 4
Other (includes short-term investments) 8
---
100%
===
SMALL-CAP GROWTH FUND
Information Technology 31%
Health Care 21
Industrials 15
Consumer Discretionary 12
Energy 7
Financials 5
Consumer Staples 3
Other (includes short-term investments) 6
---
100%
===
SMALL-CAP SUSTAINABLE GROWTH FUND
Information Technology 31%
Health Care 19
Industrials 14
Consumer Discretionary 12
Energy 7
Consumer Staples 4
Financials 3
Other (includes short-term investments) 10
---
100%
===
6
VIRTUS EQUITY TRUST
PORTFOLIO HOLDINGS SUMMARY WEIGHTINGS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
STRATEGIC GROWTH FUND
Information Technology 36%
Health Care 13
Consumer Staples 12
Consumer Discretionary 10
Industrials 9
Energy 7
Materials 6
Other (includes short-term investments) 7
---
100%
===
TACTICAL ALLOCATION FUND
Common Stocks 48%
Information Technology 9%
Energy 6
Health Care 6
Industrials 6
All other sectors in common stock 21
Mortgage-Backed Securities 20
Corporate Bonds 18
U.S. Government Securities 10
Other (includes short-term investments) 4
---
100%
===
7
VIRTUS GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
COMMON STOCKS--95.5%
CONSUMER DISCRETIONARY--6.8%
McDonald's Corp. 55,000 $ 3,139
NIKE, Inc. Class B 54,000 3,494
Under Armour, Inc.(2) 111,000 3,089
---------------
9,722
---------------
CONSUMER STAPLES--11.1%
Altria Group, Inc. 179,000 3,188
Bunge Ltd. 50,600 3,168
Costco Wholesale Corp. 56,000 3,162
PepsiCo, Inc. 54,000 3,167
Philip Morris International, Inc. 66,000 3,217
---------------
15,902
---------------
ENERGY--12.7%
ConocoPhillips 73,800 3,333
Halliburton Co. 116,000 3,146
Massey Energy Co. 74,000 2,064
Occidental Petroleum Corp. 40,000 3,136
Petroleo Brasileiro SA ADR 76,000 3,488
Valero Energy Corp. 158,000 3,064
---------------
18,231
---------------
FINANCIALS--7.0%
Allstate Corp. (The) 61,000 1,868
Goldman Sachs Group, Inc.
(The) 17,000 3,134
Hudson City Bancorp, Inc. 235,100 3,091
Reinsurance Group of America, Inc. 42,000 1,873
---------------
9,966
---------------
HEALTH CARE--13.2%
Biogen Idec, Inc.(2) 62,000 3,132
Gilead Sciences, Inc.(2) 72,000 3,354
Johnson & Johnson 55,800 3,398
Merck & Co., Inc. 74,000 2,340
Shire plc ADR 7,430 388
St. Jude Medical, Inc.(2) 80,000 3,121
UnitedHealth Group, Inc. 128,700 3,223
---------------
18,956
---------------
SHARES VALUE
--------------- ---------------
INDUSTRIALS--12.2%
Boeing Co. (The) 59,000 $ 3,195
Caterpillar, Inc. 36,000 1,848
Continental Airlines, Inc.(2) 188,000 3,091
Foster Wheeler AG(2) 98,000 3,127
L-3 Communications Holdings, Inc. 39,000 3,132
Union Pacific Corp. 52,000 3,034
---------------
17,427
---------------
INFORMATION TECHNOLOGY--17.9%
Cisco Systems, Inc.(2) 134,000 3,154
Corning, Inc. 226,100 3,462
Hewlett-Packard Co. 66,000 3,116
International Business Machines Corp. 27,000 3,229
Microsoft Corp. 122,000 3,159
Nokia Oyj Sponsored ADR 207,000 3,026
QUALCOMM, Inc. 74,400 3,347
Research In Motion Ltd.(2) 47,000 3,175
---------------
25,668
---------------
MATERIALS--7.9%
Alcoa, Inc. 141,000 1,850
Freeport-McMoRan Copper & Gold, Inc.(2) 46,000 3,156
Nucor Corp. 67,000 3,150
Potash Corp. of Saskatchewan, Inc. 35,000 3,162
---------------
11,318
---------------
TELECOMMUNICATION SERVICES--4.5%
AT&T, Inc. 115,000 3,106
Verizon Communications, Inc. 109,000 3,300
---------------
6,406
---------------
UTILITIES--2.2%
Exelon Corp. 63,000 3,126
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $104,260) 136,722
---------------
SHARES VALUE
--------------- ---------------
EXCHANGE-TRADED FUNDS--3.9%
PowerShares Deutsche
Bank Agriculture Fund(2) 126,000 $ 3,208
ProShares Ultrashort S&P 500(R) 58,000 2,345
---------------
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $5,761) 5,553
---------------
TOTAL LONG-TERM INVESTMENTS--99.4%
(IDENTIFIED COST $110,021) 142,275
---------------
SHORT-TERM INVESTMENTS--1.0%
MONEY MARKET MUTUAL FUNDS--1.0%
State Street Institutional Liquid
Reserves Fund - Institutional Shares
(seven-day effective yield 0.260%) 1,472,936 1,473
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $1,473) 1,473
---------------
TOTAL INVESTMENTS--100.4%
(IDENTIFIED COST $111,494) 143,748(1)
Other assets and liabilities, net--(0.4)% (554)
---------------
NET ASSETS--100.0% $ 143,194
===============
COUNTRY WEIGHTINGS as of September 30, 2009+
- --------------------------------------------
United States 84%
Canada 5
Bermuda 4
Brazil 3
Finland 2
Switzerland 2
---
Total 100%
---
+ % of total investments as of September 30, 2009
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at
September 30, Level 1 -
2009 Quoted Prices
--------------- ---------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $ 136,722 $ 136,722
Exchange-Traded Funds 5,553 5,553
Short-Term Investments 1,473 1,473
--------------- ---------------
Total Investments $ 143,748 $ 143,748
=============== ===============
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
8
VIRTUS MID-CAP CORE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
COMMON STOCKS--97.4%
CONSUMER DISCRETIONARY--9.4%
Choice Hotels International, Inc. 410 $ 13
ITT Educational Services, Inc.(2) 65 7
John Wiley & Sons, Inc.
Class A 410 14
---------------
34
---------------
CONSUMER STAPLES--10.7%
Brown-Forman Corp.
Class B 220 10
Church & Dwight Co., Inc. 170 10
McCormick & Co., Inc. 235 8
SYSCO Corp. 430 11
---------------
39
---------------
FINANCIALS--10.7%
Brown & Brown, Inc. 575 11
Federated Investors, Inc.
Class B 535 14
Realty Income Corp. 570 14
---------------
39
---------------
HEALTH CARE--15.6%
Bard (C.R.), Inc. 210 16
DENTSPLY International, Inc. 400 14
Teleflex, Inc. 160 8
Waters Corp.(2) 340 19
---------------
57
---------------
SHARES VALUE
--------------- ---------------
INDUSTRIALS--25.5%
Copart, Inc.(2) 295 $ 10
Equifax, Inc. 630 18
Expeditors International of Washington, Inc. 220 8
Graco, Inc. 550 15
Jacobs Engineering Group, Inc.(2) 325 15
Robinson (C.H.) Worldwide, Inc. 140 8
Rockwell Collins, Inc. 370 19
---------------
93
---------------
INFORMATION TECHNOLOGY--16.7%
Adobe Systems, Inc.(2) 485 16
Dolby Laboratories, Inc.
Class A(2) 270 10
Intuit, Inc.(2) 560 16
Lender Processing Services, Inc. 210 8
Microchip Technology, Inc. 400 11
---------------
61
---------------
MATERIALS--4.2%
Sigma-Aldrich Corp. 285 16
UTILITIES--4.6%
EQT Corp. 395 17
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $320) 356
---------------
TOTAL LONG-TERM INVESTMENTS--97.4%
(IDENTIFIED COST $320) 356
---------------
SHARES VALUE
--------------- ---------------
SHORT-TERM INVESTMENTS--2.7%
MONEY MARKET MUTUAL FUNDS--2.7%
State Street Institutional Liquid
Reserves Fund - Institutional Shares
(seven-day effective yield 0.260%) 9,814 $ 10
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $10) 10
---------------
TOTAL INVESTMENTS--100.1%
(IDENTIFIED COST $330) 366(1)
Other assets and liabilities, net--(0.1)% (0)(5)
---------------
NET ASSETS--100.0% $ 366
===============
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at
September 30, Level 1 -
2009 Quoted Prices
--------------- ---------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $ 356 $ 356
Short-Term Investments 10 10
--------------- ---------------
Total Investments $ 366 $ 366
=============== ===============
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
9
VIRTUS MID-CAP GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
COMMON STOCKS--99.3%
CONSUMER DISCRETIONARY--16.0%
Advance Auto Parts, Inc. 39,700 $ 1,560
Darden Restaurants, Inc. 18,500 631
DISH Network Corp.
Class A(2) 85,100 1,639
Gap, Inc. (The) 79,300 1,697
H&R Block, Inc. 50,500 928
Liberty Global, Inc.
Class A(2) 30,600 691
Limited Brands, Inc. 44,200 751
Penn National Gaming, Inc.(2) 40,000 1,106
Penske Auto Group, Inc. 89,900 1,724
Ross Stores, Inc. 30,100 1,438
TJX Cos., Inc. (The) 14,460 537
TRW Automotive Holdings Corp.(2) 37,600 630
---------------
13,332
---------------
CONSUMER STAPLES--3.7%
Coca-Cola Enterprises, Inc. 66,000 1,413
Dean Foods Co.(2) 96,300 1,713
---------------
3,126
---------------
ENERGY--5.0%
Dresser-Rand Group, Inc.(2) 30,600 951
Encore Acquisition Co.(2) 39,000 1,458
ENSCO International, Inc. 8,900 379
Oceaneering International, Inc.(2) 10,500 596
Walter Energy, Inc. 13,100 787
---------------
4,171
---------------
FINANCIALS--4.2%
AmeriCredit Corp.(2) 45,900 725
Aspen Insurance Holdings Ltd. 33,300 881
Jefferies Group, Inc.(2) 33,000 899
TD Ameritrade Holding Corp.(2) 52,400 1,028
---------------
3,533
---------------
HEALTH CARE--14.6%
Beckman Coulter, Inc. 5,500 379
Biogen Idec, Inc.(2) 12,500 632
CIGNA Corp. 25,000 702
Coventry Health Care, Inc.(2) 29,600 591
Forest Laboratories, Inc.(2) 15,400 453
Hologic, Inc.(2) 44,600 729
Humana, Inc.(2) 7,490 279
Kinetic Concepts, Inc.(2) 50,700 1,875
Millipore Corp.(2) 9,500 668
Quest Diagnostics, Inc. 26,900 1,404
Universal Health Services, Inc.
Class B 30,900 1,914
Valeant Pharmaceuticals International(2) 50,200 1,409
Watson Pharmaceuticals, Inc.(2) 31,400 1,150
---------------
12,185
---------------
SHARES VALUE
--------------- ---------------
INDUSTRIALS--19.2%
Brink's Co. (The) 22,700 $ 611
Carlisle Cos., Inc. 54,300 1,841
Con-way, Inc. 12,700 487
Crown Holdings, Inc.(2) 71,600 1,947
Dover Corp. 32,600 1,264
General Cable Corp.(2) 44,800 1,754
Goodrich Corp. 20,000 1,087
Harsco Corp. 32,220 1,141
Manpower, Inc. 37,900 2,149
Navistar International Corp.(2) 17,800 666
Northrop Grumman Corp. 14,300 740
Thomas & Betts Corp.(2) 37,500 1,128
WESCO International, Inc.(2) 43,900 1,264
---------------
16,079
---------------
INFORMATION TECHNOLOGY--24.8%
Affiliated Computer Services,Inc.
Class A(2) 33,900 1,836
Arrow Electronics, Inc.(2) 35,700 1,005
Avnet, Inc.(2) 73,400 1,906
CommScope, Inc.(2) 29,600 886
Compuware Corp.(2) 60,000 440
Cypress Semiconductor Corp.(2) 162,400 1,678
F5 Networks, Inc.(2) 15,400 610
Fidelity National Information Services, Inc. 27,600 704
Fiserv, Inc.(2) 37,600 1,812
LG Display Co. Ltd. ADR 58,800 843
Marvell Technology Group Ltd.(2) 34,500 559
ON Semiconductor Corp.(2) 68,000 561
QLogic Corp.(2) 47,800 822
Red Hat, Inc.(2) 36,300 1,003
Silicon Laboratories, Inc.(2) 12,000 556
Sybase, Inc.(2) 21,300 829
Symantec Corp.(2) 115,700 1,906
Teradata Corp.(2) 39,900 1,098
Western Digital Corp.(2) 45,100 1,647
---------------
20,701
---------------
MATERIALS--4.3%
Cliffs Natural Resources, Inc. 13,400 434
Nalco Holding Co. 99,600 2,041
Pactiv Corp.(2) 19,500 508
Terra Industries, Inc. 17,400 603
---------------
3,586
---------------
TELECOMMUNICATION SERVICES--3.2%
NII Holdings, Inc.(2) 23,900 717
Telephone & Data Systems, Inc. 37,800 1,172
tw telecom, Inc.(2) 54,800 737
---------------
2,626
---------------
SHARES VALUE
--------------- ---------------
UTILITIES--4.3%
AES Corp. (The)(2) 131,200 $ 1,944
Energen Corp. 17,500 754
UGI Corp. 36,900 925
3,623
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $75,047) 82,962
---------------
TOTAL LONG-TERM INVESTMENTS--99.3%
(IDENTIFIED COST $75,047) 82,962
---------------
SHORT-TERM INVESTMENTS--0.9%
MONEY MARKET MUTUAL FUNDS--0.9%
State Street Institutional Liquid
Reserves Fund - Institutional
Shares (seven-day effective
yield 0.260%) 782,790 783
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $783) 783
---------------
TOTAL INVESTMENTS--100.2%
(IDENTIFIED COST $75,830) 83,745(1)
Other assets and liabilities, net--(0.2)% (156)
---------------
NET ASSETS--100.0% $ 83,589
===============
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at
September 30, Level 1 -
2009 Quoted Prices
--------------- ---------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $ 82,962 $ 82,962
Short-Term Investments 783 783
--------------- ---------------
Total Investments $ 83,745 $ 83,745
=============== ===============
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
10
VIRTUS QUALITY LARGE-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
COMMON STOCKS--98.7%
CONSUMER DISCRETIONARY--10.0%
Genuine Parts Co. 40,900 $ 1,557
TJX Cos., Inc. (The) 47,000 1,746
VF Corp. 16,800 1,217
---------------
4,520
---------------
CONSUMER STAPLES--14.6%
Clorox Co. (The) 23,100 1,359
Coca-Cola Co. (The) 38,600 2,073
H.J. Heinz Co. 29,200 1,160
Kimberly-Clark Corp. 19,500 1,150
SYSCO Corp. 35,700 887
---------------
6,629
---------------
ENERGY--13.1%
Apache Corp. 16,300 1,497
BP plc Sponsored ADR 37,000 1,970
Exxon Mobil Corp. 15,000 1,029
Schlumberger Ltd. 23,900 1,424
---------------
5,920
---------------
FINANCIALS--21.9%
Bank of New York Mellon Corp. (The) 61,900 1,795
Franklin Resources, Inc. 13,900 1,398
JPMorgan Chase & Co. 50,800 2,226
PNC Financial Services Group, Inc. 53,900 2,619
Travelers Cos., Inc. (The) 38,500 1,895
---------------
9,933
---------------
SHARES VALUE
--------------- ---------------
HEALTH CARE--8.1%
Alcon, Inc. 16,700 $ 2,316
Johnson & Johnson 21,900 1,333
---------------
3,649
---------------
INDUSTRIALS--11.2%
3M Co. 29,500 2,177
Honeywell International, Inc. 45,900 1,705
Union Pacific Corp. 20,300 1,185
---------------
5,067
---------------
INFORMATION TECHNOLOGY--12.5%
Microchip Technology, Inc. 40,800 1,081
Microsoft Corp. 79,700 2,064
Paychex, Inc. 47,400 1,377
Western Union Co. (The) 60,000 1,135
---------------
5,657
---------------
MATERIALS--2.1%
Barrick Gold Corp. 24,900 944
---------------
TELECOMMUNICATION SERVICES--2.3%
AT&T, Inc. 38,200 1,032
---------------
UTILITIES--2.9%
AGL Resources, Inc. 37,400 1,319
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $42,806) 44,670
---------------
TOTAL LONG-TERM INVESTMENTS--98.7%
(IDENTIFIED COST $42,806) 44,670
---------------
SHARES VALUE
--------------- ---------------
SHORT-TERM INVESTMENTS--1.4%
MONEY MARKET MUTUAL FUNDS--1.4%
State Street Institutional Liquid Reserves
Fund - Institutional Shares (seven-day
effective yield 0.260%) 613,962 $ 614
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $614) 614
---------------
TOTAL INVESTMENTS--100.1%
(IDENTIFIED COST $43,420) 45,284(1)
Other assets and liabilities, net--(0.1)% (47)
---------------
NET ASSETS--100.0% $ 45,237
===============
COUNTRY WEIGHTINGS as of September 30, 2009+
United States 91%
United Kingdom 4
Netherlands 3
Canada 2
---
Total 100%
---
+ % of total investments as of September 30, 2009
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at Level 1 -
September 30, 2009 Quoted Prices
------------------ -------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $44,670 $44,670
Short-Term Investments 614 614
------- -------
Total Investments $45,284 $45,284
------- -------
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
11
VIRTUS QUALITY SMALL-CAP FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
COMMON STOCKS--94.3%
CONSUMER DISCRETIONARY--9.5%
Cherokee, Inc. 75,900 $ 1,819
Matthews International Corp. Class A 92,900 3,287
Tempur-Pedic International, Inc.(2) 158,000 2,993
---------------
8,099
---------------
CONSUMER STAPLES--7.4%
Chattem, Inc.(2) 50,900 3,380
WD-40 Co. 103,500 2,940
---------------
6,320
---------------
ENERGY--9.8%
CARBO Ceramics, Inc. 83,500 4,304
World Fuel Services Corp. 84,000 4,038
---------------
8,342
---------------
FINANCIALS--19.9%
Ares Capital Corp. 377,066 4,155
Entertainment Properties Trust 115,300 3,936
Federated Investors, Inc. Class B 131,600 3,470
Financial Federal Corp. 90,500 2,234
RLI Corp. 50,500 2,665
Suffolk Bancorp 14,490 429
---------------
16,889
---------------
SHARES VALUE
--------------- ---------------
HEALTH CARE--9.8%
Landauer, Inc. 55,900 $ 3,073
Owens & Minor, Inc. 82,100 3,715
Young Innovations, Inc. 56,900 1,497
---------------
8,285
---------------
INDUSTRIALS--27.1%
ABM Industries, Inc. 243,900 5,132
CLARCOR, Inc. 90,100 2,825
Graco, Inc. 68,500 1,909
Landstar System, Inc. 91,100 3,467
Lincoln Electric Holdings, Inc. 72,400 3,435
McGrath RentCorp 147,100 3,129
Roper Industries, Inc. 61,800 3,151
---------------
23,048
---------------
INFORMATION TECHNOLOGY--8.6%
Cass Information Systems, Inc. 40,800 1,218
Computer Services, Inc. 52,100 1,829
Syntel, Inc. 89,100 4,253
---------------
7,300
---------------
MATERIALS--2.2%
Balchem Corp. 70,100 1,844
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $73,964) 80,127
---------------
TOTAL LONG-TERM INVESTMENTS--94.3%
(IDENTIFIED COST $73,964) 80,127
---------------
SHARES VALUE
--------------- ---------------
SHORT-TERM INVESTMENTS--6.3%
MONEY MARKET MUTUAL FUNDS--6.3%
State Street Institutional Liquid Reserves
Fund - Institutional Shares (seven-day
effective yield 0.260%) 5,346,897 $ 5,347
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $5,347) 5,347
TOTAL INVESTMENTS--100.6%
(IDENTIFIED COST $79,311) 85,474(1)
Other assets and liabilities, net--(0.6)% (507)
---------------
NET ASSETS--100.0% $ 84,967
===============
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at Level 1 -
September 30, 2009 Quoted Prices
------------------ -------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $80,127 $80,127
Short-Term Investments 5,347 5,347
------- -------
Total Investments $85,474 $85,474
------- -------
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
12
VIRTUS SMALL-CAP CORE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
COMMON STOCKS--96.0%
CONSUMER DISCRETIONARY--8.8%
Pool Corp. 56,100 $ 1,246
Steiner Leisure Ltd.(2) 45,300 1,620
Tempur-Pedic International, Inc.(2) 63,230 1,198
---------------
4,064
---------------
CONSUMER STAPLES--3.2%
Chattem, Inc.(2) 22,300 1,481
---------------
ENERGY--4.4%
CARBO Ceramics, Inc. 39,000 2,011
---------------
FINANCIALS--12.0%
Brown & Brown, Inc. 68,500 1,312
Cohen & Steers, Inc. 65,700 1,577
Federated Investors, Inc. Class B 46,400 1,224
Financial Federal Corp. 57,550 1,420
---------------
5,533
---------------
HEALTH CARE--15.7%
Abaxis, Inc.(2) 68,000 1,819
Computer Programs & Systems, Inc. 36,500 1,512
Haemonetics Corp.(2) 31,400 1,762
Techne Corp. 33,900 2,120
---------------
7,213
---------------
SHARES VALUE
--------------- ---------------
INDUSTRIALS--25.0%
ABM Industries, Inc. 43,100 $ 907
Advisory Board Co. (The)(2) 35,025 880
Exponent, Inc.(2) 16,000 451
Forward Air Corp. 67,000 1,551
HEICO Corp. Class A 49,300 1,672
Lincoln Electric Holdings, Inc. 35,400 1,680
RBC Bearings, Inc.(2) 61,800 1,442
Rollins, Inc. 36,900 695
Roper Industries, Inc. 43,900 2,238
---------------
11,516
---------------
INFORMATION TECHNOLOGY--22.9%
ANSYS, Inc.(2) 59,250 2,220
Blackbaud, Inc. 115,372 2,677
FactSet Research Systems, Inc. 37,700 2,497
Jack Henry & Associates, Inc. 78,615 1,845
ScanSource, Inc.(2) 45,509 1,289
---------------
10,528
---------------
MATERIALS--4.0%
AptarGroup, Inc. 49,100 1,834
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $35,610) 44,180
---------------
TOTAL LONG-TERM INVESTMENTS--96.0%
(IDENTIFIED COST $35,610) 44,180
---------------
SHARES VALUE
--------------- ---------------
SHORT-TERM INVESTMENTS--5.3%
MONEY MARKET MUTUAL FUNDS--5.3%
State Street Institutional Liquid Reserves
Fund - Institutional Shares (seven-day
effective yield 0.260%) 2,451,304 $ 2,451
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $2,451) 2,451
TOTAL INVESTMENTS--101.3%
(IDENTIFIED COST $38,061) 46,631(1)
Other assets and liabilities, net--(1.3)% (585)
---------------
NET ASSETS--100.0% $ 46,046
===============
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at Level 1 -
September 30, 2009 Quoted Prices
------------------ -------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $44,180 $44,180
Short-Term Investments 2,451 2,451
------- -------
Total Investments $46,631 $46,631
------- -------
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
13
VIRTUS SMALL-CAP GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
COMMON STOCKS--100.3%
CONSUMER DISCRETIONARY--11.4%
Aeropostale, Inc.(2) 23,900 $ 1,039
Burger King Holdings, Inc. 31,300 550
Chico's FAS, Inc.(2) 86,700 1,127
Children's Place Retail
Stores, Inc. (The)(2) 27,600 827
Guess?, Inc. 25,800 956
Jack in the Box, Inc.(2) 43,600 893
LKQ Corp.(2) 33,883 628
Pep Boys - Manny Moe &
Jack (The) 92,700 906
---------------
6,926
---------------
CONSUMER STAPLES--3.3%
Darling International, Inc.(2) 157,500 1,158
Ralcorp Holdings, Inc.(2) 14,800 865
---------------
2,023
---------------
ENERGY--7.1%
Brigham Exploration Co.(2) 111,400 1,012
Dril-Quip, Inc.(2) 15,500 769
Global Industries Ltd.(2) 65,000 617
Massey Energy Co. 19,400 541
Pride International, Inc.(2) 23,000 700
Swift Energy Co.(2) 27,600 654
---------------
4,293
---------------
FINANCIALS--5.0%
Knight Capital Group, Inc.
Class A(2) 46,100 1,003
Lazard Ltd. Class A 27,900 1,152
MF Global Ltd.(2) 123,500 898
---------------
3,053
---------------
HEALTH CARE--21.4%
Alexion Pharmaceuticals,
Inc.(2) 19,700 878
BioMarin Pharmaceutical,
Inc.(2) 40,400 730
ev3, Inc.(2) 55,100 678
Haemonetics Corp.(2) 15,000 842
HMS Holdings Corp.(2) 25,000 956
Luminex Corp.(2) 71,800 1,221
SHARES VALUE
--------------- ---------------
HEALTH CARE--CONTINUED
Myriad Genetics, Inc.(2) 38,400 $ 1,052
Neogen Corp.(2) 34,048 1,099
NuVasive, Inc.(2) 29,823 1,245
Onyx Pharmaceuticals,
Inc.(2) 27,900 836
Perrigo Co. 37,000 1,258
Phase Forward, Inc.(2) 38,000 534
Thoratec Corp.(2) 31,200 944
United Therapeutics Corp.(2) 14,200 696
---------------
12,969
---------------
INDUSTRIALS--14.8%
American Superconductor
Corp.(2) 28,451 954
Atlas Air Worldwide Holdings,
Inc.(2) 30,700 981
Beacon Roofing Supply,
Inc.(2) 48,500 775
Bucyrus International, Inc. 28,100 1,001
Harsco Corp. 21,100 747
II-VI, Inc.(2) 26,284 669
Landstar System, Inc. 21,900 834
Navistar International
Corp.(2) 15,700 587
SPX Corp. 14,600 895
Timken Co. (The) 28,000 656
Yingli Green Energy Holding
Co. Ltd. ADR(2) 69,600 867
---------------
8,966
---------------
INFORMATION TECHNOLOGY--31.1%
Advanced Energy Industries,
Inc.(2) 73,100 1,041
AsiaInfo Holdings, Inc.(2) 66,800 1,334
Atheros Communications,
Inc.(2) 38,500 1,021
Cavium Networks, Inc.(2) 40,600 872
Ciena Corp.(2) 36,300 591
CommScope, Inc.(2) 40,200 1,203
Constant Contact, Inc.(2) 36,000 693
Cybersource Corp.(2) 61,700 1,029
FormFactor, Inc.(2) 42,000 1,005
GSI Commerce, Inc.(2) 48,000 926
Netezza Corp.(2) 91,500 1,028
Nuance Communications,
Inc.(2) 64,300 962
SHARES VALUE
--------------- ---------------
INFORMATION TECHNOLOGY--CONTINUED
ON Semiconductor Corp.(2) 106,000 $ 874
Plantronics, Inc. 35,000 938
PMC-Sierra, Inc.(2) 67,500 645
Riverbed Technology, Inc.(2) 46,900 1,030
Rovi Corp.(2) 31,600 1,062
Silicon Laboratories, Inc.(2) 20,800 964
Sourcefire, Inc.(2) 34,400 739
Volterra Semiconductor
Corp.(2) 50,654 931
---------------
18,888
---------------
MATERIALS--3.1%
FMC Corp. 15,900 894
Nalco Holding Co. 49,000 1,004
---------------
1,898
---------------
TELECOMMUNICATION SERVICES--1.9%
Neutral Tandem, Inc.(2) 51,300 1,168
---------------
UTILITIES--1.2%
Ormat Technologies, Inc. 17,000 694
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $50,733) 60,878
---------------
TOTAL LONG-TERM INVESTMENTS--100.3%
(IDENTIFIED COST $50,733) 60,878
---------------
SHORT-TERM INVESTMENTS--0.1%
MONEY MARKET MUTUAL FUNDS--0.1%
State Street Institutional Liquid
Reserves Fund - Institutional
Shares (seven-day effective
yield 0.260%) 44,335 44
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $44) 44
---------------
TOTAL INVESTMENTS--100.4%
(IDENTIFIED COST $50,777) 60,922(1)
Other assets and liabilities, net--(0.4)% (244)
---------------
NET ASSETS--100.0% $ 60,678
===============
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at Level 1 -
September 30, 2009 Quoted Prices
------------------ -------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $60,878 $60,878
Short-Term Investments 44 44
------- -------
Total Investments $60,922 $60,922
======= =======
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
14
VIRTUS SMALL-CAP SUSTAINABLE GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
COMMON STOCKS--94.3%
CONSUMER DISCRETIONARY--12.3%
Aaron Rents, Inc. 8,000 $ 211
Ambassadors Group, Inc. 2,056 32
Morningstar, Inc.(2) 4,800 233
Strayer Education, Inc. 950 207
---------------
683
---------------
CONSUMER STAPLES--4.2%
Hansen Natural Corp.(2) 6,400 235
---------------
ENERGY--7.4%
NATCO Group, Inc.
Class A(2) 5,700 252
Petroleum Development
Corp.(2) 3,300 62
Tesco Corp.(2) 12,000 96
---------------
410
---------------
FINANCIALS--2.9%
World Acceptance Corp.(2) 6,500 164
---------------
HEALTH CARE--19.8%
Abaxis, Inc.(2) 12,700 340
Meridian Bioscience, Inc. 10,600 266
National Research Corp. 9,400 227
Techne Corp. 4,300 269
---------------
1,102
---------------
SHARES VALUE
--------------- ---------------
INDUSTRIALS--14.9%
Copart, Inc.(2) 7,650 $ 254
Forward Air Corp. 9,150 212
HEICO Corp. Class A 7,400 251
Omega Flex, Inc. 6,532 109
---------------
826
---------------
INFORMATION TECHNOLOGY--32.8%
ANSYS, Inc.(2) 8,650 324
Blackbaud, Inc. 15,200 353
Cabot Microelectronics
Corp.(2) 4,650 162
FactSet Research Systems,
Inc. 3,550 235
Hittite Microwave Corp.(2) 7,150 263
Quality Systems, Inc. 3,350 206
ScanSource, Inc.(2) 9,850 279
---------------
1,822
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $4,400) 5,242
---------------
TOTAL LONG-TERM INVESTMENTS--94.3%
(IDENTIFIED COST $4,400) 5,242
---------------
SHARES VALUE
--------------- ---------------
SHORT-TERM INVESTMENTS--10.4%
MONEY MARKET MUTUAL FUNDS--10.4%
State Street Institutional Liquid
Reserves Fund - Institutional
Shares (seven-day effective
yield 0.260%) 575,445 $ 575
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $575) 575
---------------
TOTAL INVESTMENTS--104.7%
(IDENTIFIED COST $4,975) 5,817(1)
Other assets and liabilities, net--(4.7)% (262)
---------------
NET ASSETS--100.0% $ 5,555
===============
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at Level 1 -
September 30, 2009 Quoted Prices
------------------ --------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $5,242 $5,242
Short-Term Investments 575 575
------ ------
Total Investments $5,817 $5,817
====== ======
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
15
VIRTUS STRATEGIC GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
COMMON STOCKS--100.3%
CONSUMER DISCRETIONARY--10.0%
Amazon.com, Inc.(2) 16,890 $ 1,577
American Eagle Outfitters,
Inc. 142,010 2,394
DreamWorks Animation
SKG, Inc. Class A(2) 45,130 1,605
Jack in the Box, Inc.(2) 73,730 1,511
LKQ Corp.(2) 86,900 1,611
Lowe's Cos., Inc. 107,400 2,249
McDonald's Corp. 40,070 2,287
Yum! Brands, Inc. 65,710 2,218
---------------
15,452
---------------
CONSUMER STAPLES--11.8%
Colgate-Palmolive Co. 41,310 3,151
CVS Caremark Corp. 67,260 2,404
General Mills, Inc. 35,560 2,289
Kroger Co. (The) 108,250 2,234
PepsiCo, Inc. 37,750 2,215
Philip Morris International,
Inc. 33,330 1,625
Ralcorp Holdings, Inc.(2) 34,960 2,044
Safeway, Inc. 117,300 2,313
---------------
18,275
---------------
ENERGY--6.8%
Pride International, Inc.(2) 57,770 1,758
Range Resources Corp. 38,440 1,897
Schlumberger Ltd. 28,820 1,718
Transocean Ltd.(2) 33,413 2,858
Weatherford International
Ltd.(2) 113,110 2,345
---------------
10,576
---------------
FINANCIALS--5.3%
BlackRock, Inc. 10,950 2,374
Goldman Sachs Group, Inc.
(The) 18,790 3,464
Invesco Ltd. 105,800 2,408
---------------
8,246
---------------
HEALTH CARE--13.0%
Abbott Laboratories 36,870 1,824
Allergan, Inc. 33,080 1,878
Amgen, Inc.(2) 22,310 1,344
Biogen Idec, Inc.(2) 15,060 761
Bristol-Myers Squibb Co. 110,760 2,494
Celgene Corp.(2) 51,290 2,867
Genzyme Corp.(2) 28,140 1,596
Gilead Sciences, Inc.(2) 35,580 1,657
Mylan, Inc.(2) 89,500 1,433
Myriad Genetics, Inc.(2) 75,000 2,055
Perrigo Co. 65,710 2,234
---------------
20,143
---------------
SHARES VALUE
--------------- ---------------
INDUSTRIALS--9.5%
ABB Ltd. Sponsored ADR(2) 88,830 $ 1,780
Joy Global, Inc. 57,790 2,828
Norfolk Southern Corp. 50,910 2,195
SPX Corp. 24,590 1,507
Stericycle, Inc.(2) 45,160 2,188
Timken Co. (The) 95,000 2,226
United Technologies Corp. 31,180 1,900
---------------
14,624
---------------
INFORMATION TECHNOLOGY--36.5%
Adobe Systems, Inc.(2) 70,500 2,329
Apple, Inc.(2) 27,960 5,183
Applied Materials, Inc. 169,500 2,271
Broadcom Corp. Class A(2) 106,380 3,265
Cisco Systems, Inc.(2) 174,950 4,118
CommScope, Inc.(2) 35,000 1,048
eBay, Inc.(2) 103,420 2,442
Electronic Arts, Inc.(2) 103,000 1,962
EMC Corp.(2) 157,220 2,679
Google, Inc. Class A(2) 8,925 4,425
Hewlett-Packard Co. 93,680 4,423
International Business
Machines Corp. 30,520 3,651
Marvell Technology Group
Ltd.(2) 198,580 3,215
Microsoft Corp. 117,700 3,047
Nuance Communications,
Inc.(2) 149,470 2,236
Oracle Corp. 143,100 2,982
QUALCOMM, Inc. 59,570 2,678
Research In Motion Ltd.(2) 25,680 1,735
Silicon Laboratories, Inc.(2) 59,200 2,745
---------------
56,434
---------------
MATERIALS--5.5%
FMC Corp. Class A 28,310 1,592
Freeport-McMoRan Copper &
Gold, Inc.(2) 22,090 1,516
Monsanto Co. 24,140 1,868
Nalco Holding Co. 90,100 1,846
United States Steel Corp. 37,900 1,682
---------------
8,504
---------------
TELECOMMUNICATION SERVICES--1.9%
American Tower Corp.
Class A(2) 59,870 2,179
Neutral Tandem, Inc.(2) 34,320 781
---------------
2,960
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $134,044) 155,214
---------------
TOTAL LONG-TERM INVESTMENTS--100.3%
(IDENTIFIED COST $134,044) 155,214
---------------
SHARES VALUE
--------------- ---------------
SHORT-TERM INVESTMENTS--0.2%
MONEY MARKET MUTUAL FUNDS--0.2%
State Street Institutional Liquid
Reserves Fund - Institutional
Shares (seven-day effective
yield 0.260%) 280,639 $ 281
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $281) 281
---------------
TOTAL INVESTMENTS--100.5%
(IDENTIFIED COST $134,325) 155,495(1)
Other assets and liabilities, net--(0.5)% (819)
---------------
NET ASSETS--100.0% $ 154,676
===============
COUNTRY WEIGHTINGS as of September 30, 2009+
United States 89%
Switzerland 4
Bermuda 3
Cayman Islands 2
Canada 1
Netherlands 1
---
Total 100%
---
+ % of total investments as of September 30, 2009
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at
September 30, Level 1 -
2009 Quoted Prices
-------------- -------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $155,214 $155,214
Short-Term Investments 281 281
-------- --------
Total Investments $155,495 $155,495
======== ========
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
16
VIRTUS TACTICAL ALLOCATION FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
PAR
VALUE VALUE
--------------- ---------------
U.S. GOVERNMENT SECURITIES--10.0%
U.S. Treasury Bond
3.500%, 2/15/39 $ 2,235 $ 2,025
U.S. Treasury Note
0.875%, 4/30/11 2,735 2,743
2.625%, 6/30/14 6,365 6,478
4.750%, 8/15/17 3,495 3,894
3.125%, 5/15/19 4,795 4,718
---------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $19,404) 19,858
---------------
MORTGAGE-BACKED SECURITIES--19.5%
AGENCY--14.9%
FHLMC
R010-AB
5.500%, 12/15/19 216 225
5.000%, 1/1/35 5,028 5,221
FNMA
5.000%, 6/1/18 940 999
4.500%, 12/1/18 591 613
4.000%, 7/1/19 474 493
5.000%, 8/1/20 261 276
4.500%, 11/1/20 867 899
6.000%, 11/1/31 219 233
5.500%, 7/1/34 1,585 1,666
6.000%, 11/1/34 3,481 3,699
5.000%, 3/1/36 150 155
5.500%, 3/1/36 1,503 1,579
6.000%, 9/1/36 291 308
5.500%, 11/1/36 1,082 1,135
6.500%, 7/1/37 1,487 1,592
6.000%, 9/1/37 453 479
5.000%, 2/1/38 345 357
6.000%, 2/1/38 420 444
6.500%, 3/1/38 2,735 2,946
5.000%, 4/1/38 233 241
5.000%, 5/1/38 1,304 1,349
5.500%, 6/1/38 1,145 1,200
6.000%, 11/1/38 1,271 1,343
6.000%, 3/1/39 542 572
FNMA REMICs 03-42, HC
4.500%, 12/25/17 214 222
GNMA
6.500%, 11/15/23 91 97
6.500%, 11/15/23 9 10
6.500%, 11/15/23 110 117
6.500%, 11/15/23 55 59
6.500%, 12/15/23 116 124
6.500%, 12/15/23 84 89
6.500%, 12/15/23 103 110
6.500%, 3/15/24 76 81
6.500%, 4/15/24 42 45
6.500%, 7/15/24 434 462
---------------
29,440
---------------
NON-AGENCY--4.6%
Banc of America Commercial
Mortgage, Inc.
05-1, A4
5.141%, 11/10/42(3) 125 126
06-1, A4
5.372%, 9/10/45(3) 410 379
07-1, A4
5.451%, 1/15/49 825 730
PAR
VALUE VALUE
--------------- ---------------
NON-AGENCY--CONTINUED
Bear Stearns Commercial
Mortgage Securities
06-PW12, A4
5.903%, 9/11/38(3) $ 160 $ 155
Credit Suisse Mortgage Capital
Certificates 06-C1, A4
5.609%, 2/15/39(3) 2,050 1,936
First Horizon Asset Securities,
Inc. 05-AR1, 2A1
5.006%, 4/25/35(3) 636 573
GS Mortgage Securities Corp. II
05-GG4, A3
4.607%, 7/10/39 1,110 1,055
07-GG10, A4
5.999%, 8/10/45(3) 600 496
JPMorgan Chase Commercial
Mortgage Securities Corp.
06-CB17, A4
5.429%, 12/12/43 410 379
Lehman Brothers - UBS
Commercial Mortgage
Trust 04-C7, A6
4.786%, 10/15/29(3) 1,800 1,688
Morgan Stanley Capital I
06-T23, A4
5.984%, 8/12/41(3) 270 265
05-IQ9, A3
4.540%, 7/15/56 270 268
Wachovia Bank Commercial
Mortgage Trust 05-C19, A5
4.661%, 5/15/44 245 247
Wells Fargo Mortgage-Backed
Securities Trust 05-AR4, 2A1
4.514%, 4/25/35(3) 889 813
---------------
9,110
---------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $38,349) 38,550
---------------
ASSET-BACKED SECURITIES--0.4%
Associates Manufactured
Housing Pass-Through Certificate
97-2, A6
7.075%, 3/15/28(3) 194 192
Bosphorus Financial Services
Ltd. 144A
2.240%, 2/15/12(3)(4) 156 138
Capital One Auto Finance
Trust 07-B, A3A
5.030%, 4/15/12 398 403
GMAC Mortgage Corp. Loan
Trust 05-HE2, A3
4.622%, 11/25/35 (3) 34 33
Wachovia Auto Loan Owner
Trust 06-2A, A3 144A
5.230%, 8/22/11(4) 13 13
---------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $795) 779
---------------
CORPORATE BONDS--18.4%
CONSUMER DISCRETIONARY--2.3%
Affinion Group, Inc.
10.125%, 10/15/13 320 330
PAR
VALUE VALUE
--------------- ---------------
CONSUMER DISCRETIONARY--CONTINUED
Comcast Corp.
5.700%, 7/1/19 $ 895 $ 946
COX Communications, Inc.
144A
6.250%, 6/1/18 (4) 300 318
Hasbro, Inc. 6.300%, 9/15/17 275 288
Mediacom Broadband
LLC/Mediacom Broadband
Corp.
8.500%, 10/15/15 265 269
Nebraska Book Co., Inc. 144A
10.000%, 12/1/11 (4) 500 499
Royal Caribbean Cruises Ltd.
7.250%, 6/15/16 340 316
Time Warner Cable, Inc.
5.850%, 5/1/17 160 169
8.250%, 4/1/19 585 707
Videotron Ltee
6.375%, 12/15/15 225 216
WMG Holdings Corp.
0.000%, 12/15/14(3) 520 503
---------------
4,561
---------------
CONSUMER STAPLES--2.1%
Alliance One International, Inc.
144A
10.000%, 7/15/16 (4) 310 321
Altria Group, Inc.
9.250%, 8/6/19 805 984
ASG Consolidated LLC/ASG
Finance, Inc.
11.500%, 11/1/11(3) 325 317
CVS Caremark Corp.
6.125%, 9/15/39 180 183
Delhaize Group
6.500%, 6/15/17 465 506
Dole Food Co., Inc.
7.250%, 6/15/10 195 196
Kraft Foods, Inc.
5.625%, 11/1/11 465 495
Lorillard Tobacco Co.
8.125%, 6/23/19 440 499
Reynolds American, Inc.
7.300%, 7/15/15 550 574
---------------
4,075
---------------
ENERGY--1.2%
Buckeye Partners LP
6.050%, 1/15/18 75 78
Kinder Morgan Finance Co.
5.700%, 1/5/16 930 890
Petroleos Mexicanos 144A
4.875%, 3/15/15 (4) 245 242
Petropower I Funding Trust
144A
7.360%, 2/15/14 (4) 838 836
Plains All American Pipeline
LP/PAA Finance Corp.
4.250%, 9/1/12 90 93
Rowan Cos., Inc.
7.875%, 8/1/19 160 172
TEPPCO Partners LP
7.625%, 2/15/12 150 166
---------------
2,477
---------------
See Notes to Financial Statements
17
VIRTUS TACTICAL ALLOCATION FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
PAR
VALUE VALUE
--------------- ---------------
FINANCIALS--7.8%
American Express Co.
7.250%, 5/20/14 $ 435 $ 489
Bank of America Corp.
6.500%, 8/1/16 80 84
5.750%, 8/15/16 300 295
5.750%, 12/1/17 205 205
5.650%, 5/1/18 300 296
Bank of New York/Mellon
Corp. (The)
4.950%, 11/1/12 370 401
Barclays Bank plc
5.200%, 7/10/14 395 417
Series 1, 5.000%, 9/22/16 395 400
Bear Stearns Cos., Inc. LLC
(The)
7.250%, 2/1/18 330 377
Capital One Financial Corp.
7.375%, 5/23/14 455 508
Citigroup, Inc.
5.000%, 9/15/14 340 324
5.500%, 10/15/14 500 499
4.875%, 5/7/15 460 430
Credit Suisse New York
5.000%, 5/15/13 330 349
Ford Motor Credit Co. LLC
7.500%, 8/1/12 260 250
General Electric Capital Corp.
3.500%, 8/13/12 800 810
6.875%, 1/10/39 515 539
GMAC, Inc. 144A
6.750%, 12/1/14 (4) 73 63
Goldman Sachs Group, Inc. (The)
5.950%, 1/18/18 280 290
6.150%, 4/1/18 225 237
International Lease Finance
Corp.
4.750%, 1/13/12 375 318
JPMorgan Chase & Co.
5.250%, 5/1/15 350 356
Series 1
7.900%, 12/31/49(3) 214 205
Macquarie Group Ltd. 144A
7.300%, 8/1/14 (4) 910 972
Merrill Lynch & Co., Inc.
6.110%, 1/29/37 415 395
Metropolitan Life Global
Funding I 144A
2.875%, 9/17/12 (4) 540 538
Morgan Stanley
6.000%, 4/28/15 435 461
7.300%, 5/13/19 430 473
Northern Trust Co. (The)
6.500%, 8/15/18 250 285
Prudential Financial, Inc.
3.625%, 9/17/12 640 644
Rabobank Nederland NV 144A
11.000%, 12/31/49 (3)(4) 400 490
Royal Bank of Scotland Group plc
5.050%, 1/8/15 695 623
Series 1
9.118%, 3/31/49 430 398
Simon Property Group LP
6.750%, 5/15/14 470 504
PAR
VALUE VALUE
--------------- ---------------
FINANCIALS--CONTINUED
SunTrust Banks, Inc.
5.250%, 11/5/12 $ 370 $ 382
Wachovia Bank NA
5.000%, 8/15/15 250 241
Wachovia Corp.
4.875%, 2/15/14 435 443
Westfield Capital Corp.
Ltd./Westfield Finance
Authority 144A
5.125%, 11/15/14 (4) 420 409
---------------
15,400
---------------
HEALTH CARE--0.2%
Quest Diagnostics, Inc.
6.400%, 7/1/17 330 359
---------------
INDUSTRIALS--0.6%
Allied Waste North America,
Inc.
6.125%, 2/15/14 500 512
Hutchison Whampoa Ltd.
144A
5.750%, 9/11/19 (4) 185 186
Pitney Bowes, Inc.
4.750%, 5/15/18 450 458
---------------
1,156
---------------
INFORMATION TECHNOLOGY--0.5%
Fiserv, Inc.
6.125%, 11/20/12 455 493
Intuit, Inc.
5.750%, 3/15/17 80 84
L-3 Communications Corp.
144A
5.200%, 10/15/19 (4) 95 95
Xerox Corp.
6.750%, 2/1/17 385 408
---------------
1,080
---------------
MATERIALS--0.6%
Dow Chemical Co. (The)
6.000%, 10/1/12 465 495
5.900%, 2/15/15 405 416
Holcim U.S. Finance S.a.r.l. &
Cie S.C.S. 144A
6.000%, 12/30/19 (4) 195 197
---------------
1,108
---------------
TELECOMMUNICATION SERVICES--2.6%
AT&T, Inc.
5.625%, 6/15/16 550 592
5.800%, 2/15/19 460 492
Citizen Communications Co.
6.250%, 1/15/13 235 231
France Telecom SA
4.375%, 7/8/14 155 162
Global Crossing Ltd. 144A
12.000%, 9/15/15 (4) 45 47
Qwest Corp.
7.875%, 9/1/11 150 155
6.500%, 6/1/17 190 179
PAR
VALUE VALUE
--------------- ---------------
TELECOMMUNICATION SERVICES--CONTINUED
Sprint Capital Corp.
8.375%, 3/15/12 $ 730 $ 757
Telecom Italia Capital SA
6.999%, 6/4/18 250 276
7.175%, 6/18/19 440 491
Telefonica Emisiones SAU
5.877%, 7/15/19 320 348
Verizon Communications, Inc.
4.900%, 9/15/15 275 291
6.350%, 4/1/19 380 420
West Corp.
9.500%, 10/15/14 290 286
Windstream Corp.
7.000%, 3/15/19 530 498
---------------
5,225
---------------
UTILITIES--0.5%
AmeriGas Partners LP
7.250%, 5/20/15 500 490
FirstEnergy Solutions Corp.
144A
6.050%, 8/15/21(4) 180 186
Northeast Utilities
5.650%, 6/1/13 265 274
---------------
950
---------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $35,177) 36,391
---------------
SHARES
---------------
PREFERRED STOCK--0.0%
FINANCIALS--0.0%
Preferred Blocker, Inc. (GMAC)
Pfd. 144A
7.000%(4) 68 40
---------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $21) 40
---------------
COMMON STOCKS--47.5%
CONSUMER DISCRETIONARY--3.4%
McDonald's Corp. 35,000 1,997
NIKE, Inc. Class B 40,000 2,588
Under Armour, Inc.(2) 76,000 2,115
---------------
6,700
---------------
CONSUMER STAPLES--5.4%
Altria Group, Inc. 122,000 2,173
Bunge Ltd. 30,000 1,878
Costco Wholesale Corp. 38,000 2,146
PepsiCo, Inc. 37,000 2,170
Philip Morris International,
Inc. 47,900 2,335
---------------
10,702
---------------
ENERGY--6.5%
ConocoPhillips 47,900 2,163
Halliburton Co. 86,000 2,332
Massey Energy Co. 45,000 1,255
See Notes to Financial Statements
18
VIRTUS TACTICAL ALLOCATION FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
--------------- ---------------
ENERGY--CONTINUED
Occidental Petroleum Corp. 27,000 $ 2,117
Petroleo Brasileiro SA ADR 55,000 2,525
Valero Energy Corp. 125,000 2,424
---------------
12,816
---------------
FINANCIALS--3.5%
Allstate Corp. (The) 45,000 1,378
Goldman Sachs Group, Inc.
(The) 12,000 2,212
Hudson City Bancorp, Inc. 152,800 2,009
Reinsurance Group of
America, Inc. 30,000 1,338
---------------
6,937
---------------
HEALTH CARE--6.3%
Biogen Idec, Inc.(2) 44,000 2,223
Gilead Sciences, Inc.(2) 46,000 2,143
Johnson & Johnson 36,200 2,204
Merck & Co., Inc. 51,000 1,613
Shire plc ADR 4,950 259
St. Jude Medical, Inc.(2) 50,000 1,951
UnitedHealth Group, Inc. 83,600 2,093
---------------
12,486
---------------
INDUSTRIALS--6.3%
Boeing Co. (The) 42,000 2,274
Caterpillar, Inc. 27,000 1,386
Continental Airlines, Inc.(2) 129,000 2,121
Foster Wheeler AG(2) 73,000 2,330
L-3 Communications
Holdings, Inc. 28,900 2,321
Union Pacific Corp. 35,000 2,042
---------------
12,474
---------------
INFORMATION TECHNOLOGY--8.8%
Cisco Systems, Inc.(2) 97,000 2,283
Corning, Inc. 138,000 2,113
Hewlett-Packard Co. 47,000 2,219
SHARES VALUE
--------------- ---------------
INFORMATION TECHNOLOGY--CONTINUED
International Business
Machines Corp. 19,000 $ 2,272
Microsoft Corp. 84,000 2,175
Nokia Oyj Sponsored ADR 137,000 2,002
QUALCOMM, Inc. 48,400 2,177
Research In Motion Ltd.(2) 32,000 2,162
---------------
17,403
---------------
MATERIALS--4.0%
Alcoa, Inc. 115,000 1,509
Freeport-McMoRan Copper &
Gold, Inc.(2) 34,000 2,333
Nucor Corp. 46,000 2,162
Potash Corp. of Saskatchewan,
Inc. 21,000 1,897
---------------
7,901
---------------
TELECOMMUNICATION SERVICES--2.2%
AT&T, Inc. 82,000 2,215
Verizon Communications, Inc. 70,000 2,119
---------------
4,334
---------------
UTILITIES--1.1%
Exelon Corp. 42,000 2,084
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $72,243) 93,837
---------------
EXCHANGE-TRADED FUNDS--1.8%
PowerShares Deutsche Bank
Agriculture Fund(2) 84,000 2,139
ProShares Ultrashort
S&P 500(R) 35,000 1,415
---------------
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $3,676) 3,554
---------------
TOTAL LONG-TERM INVESTMENTS--97.6%
(IDENTIFIED COST $169,665) 193,009
---------------
SHARES VALUE
--------------- ---------------
SHORT-TERM INVESTMENTS--2.4%
MONEY MARKET MUTUAL FUNDS--2.4%
State Street Institutional Liquid
Reserves Fund - Institutional
Shares (seven-day effective
yield 0.260%) 4,651,098 $ 4,651
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $4,651) 4,651
---------------
TOTAL INVESTMENTS--100.0%
(IDENTIFIED COST $174,316) 197,660(1)
Other Assets and Liabilities--0.0% (41)
---------------
NET ASSETS--100.0% $ 197,619
===============
COUNTRY WEIGHTINGS as of September 30, 2009+
United States 89%
Bermuda 2
Brazil 2
Canada 2
Finland 1
Switzerland 1
United Kingdom 1
Other 2
---
Total 100%
---
+ % of total investments as of September 30, 2009
See Notes to Financial Statements
19
VIRTUS TACTICAL ALLOCATION FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Level 2 - Level 3 -
Total Value at Significant Significant
September 30, Level 1 - Observable Unobservable
2009 Quoted Prices Inputs Inputs
-------------- ------------- ----------- ------------
INVESTMENT IN SECURITIES:
Debt Securities:
U.S. Government Securities $ 19,858 $ -- $19,858 $ --
Mortgage-Backed Securities 38,550 -- 38,550 --
Asset-Backed Securities 779 -- 779
Corporate Debt 36,391 -- 35,555 836
Equity Securities:
Preferred Stocks 40 40 -- --
Common Stocks 93,837 93,837 -- --
Exchange-Traded Funds 3,554 3,554 -- --
Short-Term Investments 4,651 4,651 -- --
-------- -------- ------- ----
Total Investments $197,660 $102,082 $94,742 $836
======== ======== ======= ====
The following is a reconciliation of assets of the Fund for Level 3 investments
for which significant unobservable inputs were used to determine fair value:
Corporate
Debt
---------
INVESTMENTS IN SECURITIES:
BALANCE AS OF MARCH 31, 2009 ......................... $818
Accrued discounts/premiums ........................... --
Realized gain (loss)(1) .............................. --(3)
Change in unrealized appreciation (depreciation)(1) .. 99
Net purchases (sales) ................................ (81)
Transfers in and/or out of Level 3(2) ................ --
----
BALANCE AS OF SEPTEMBER 30, 2009 ..................... $836
====
(1) Disclosed in the Statement of Operations under Net realized and unrealized
gain (loss) on investments.
(2) "Transfers in and/or out" represent the ending value as of September 30,
2009, for any investment security where a change in the pricing level
occurred from the beginning to the end of the period.
(3) Amount is less than $500.
Certain level 3 security valuations have been determined based on availability
of only a single broker source, which may or may not be a principal market
maker. Other level 3 securities are without an active market or market
participants and therefore are internally fair valued. These internally fair
valued securities derive their valuation based on the review of inputs such as,
but not limited to, similar securities, liquidity factors, capital structure,
and credit analysis.
Security abbreviation definitions and footnote explanations are located under
the Key Investment Terms and Footnote Legend on page 2.
See Notes to Financial Statements
20
THIS PAGE INTENTIONALLY BLANK.
VIRTUS EQUITY TRUST
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands except shares and per share amounts)
GROWTH & MID-CAP MID-CAP QUALITY QUALITY
INCOME CORE GROWTH LARGE-CAP SMALL-CAP
FUND FUND FUND VALUE FUND FUND
----------- ------- ---------- ---------- ----------
ASSETS
Investment in securities at
value(1) .......................... $ 143,748 $ 366 $ 83,745 $ 45,284 $ 85,474
Receivables
Investment securities sold ........ 19,589 -- -- -- --
Fund shares sold .................. 13 -- --(2) 5 1,887
Receivable from adviser(3) ........ 186 11 -- -- --
Dividends and interest
receivable ..................... 275 --(2) 35 56 282
Prepaid expenses ..................... 37 -- 31 28 24
---------- ------- ---------- ---------- ----------
Total assets ................... 163,848 377 83,811 45,373 87,667
---------- ------- ---------- ---------- ----------
LIABILITIES
Payables
Fund shares repurchased ........... 17,673 -- 84 57 2,349
Investment securities purchased ... 2,820 -- -- -- 217
Investment advisory fee ........... -- -- 48 20 65
Distribution and service fees ..... 53 --(2) 22 11 9
Administration fee ................ 10 --(2) 5 4 5
Transfer agent fees and expenses .. 63 --(2) 35 18 28
Trustees' fee and expenses ........ 2 --(2) 1 1 1
Professional fee .................. 19 11 19 19 19
Other accrued expenses ............ 14 -- 8 6 7
---------- ------- ---------- ---------- ----------
Total liabilities .............. 20,654 11 222 136 2,700
---------- ------- ---------- ---------- ----------
NET ASSETS ........................... $ 143,194 $ 366 $ 83,589 $ 45,237 $ 84,967
========== ======= ========== ========== ==========
NET ASSETS CONSIST OF:
Capital paid in on shares of
beneficial interest ............ $ 184,500 $ 325 $ 145,641 $ 77,895 $ 97,587
Accumulated undistributed net
investment income (loss) ....... 439 --(2) (194) 136 353
Accumulated undistributed net
realized gain (loss) ........... (73,999) 5 (69,773) (34,658) (19,136)
Net unrealized appreciation
(depreciation) on investments .. 32,254 36 7,915 1,864 6,163
---------- ------- ---------- ---------- ----------
NET ASSETS ........................... $ 143,194 $ 366 $ 83,589 $ 45,237 $ 84,967
========== ======= ========== ========== ==========
CLASS A
Net asset value (net assets/shares
outstanding) per share ............ $ 13.55 $ 11.30 $ 12.55 $ 8.34 $ 8.87
Maximum offering price per share
NAV/(1-5.75%) ..................... $ 14.38 $ 11.99 $ 13.32 $ 8.85 $ 9.41
Shares of beneficial interest
outstanding, no par value,
unlimited authorization ........... 7,258,766 12,381 5,911,678 5,006,124 3,666,609
Net Assets ........................... $ 98,335 $ 140 $ 74,199 $ 41,741 $ 32,539
CLASS B
Net asset value (net assets/shares
outstanding) and offering price per
share ............................. $ 12.98 $ -- $ 10.98 $ -- $ --
Share of beneficial interest
outstanding, no par value,
unlimited authorization ........... 517,312 -- 355,378 -- --
Net Assets ........................... $ 6,717 $ -- $ 3,901 $ -- $ --
CLASS C
Net asset value (net assets/shares
outstanding) and offering price per
share ............................. $ 12.97 $ 11.27 $ 10.98 $ 8.23 $ 8.87
Shares of beneficial interest
outstanding, no par value,
unlimited authorization 2,263,595 10,000 401,606 415,062 302,668
Net Assets ........................... $ 29,364 $ 113 $ 4,409 $ 3,416 $ 2,684
CLASS I
Net asset value (net assets/shares
outstanding) and offering price per
share ............................. $ 13.54 $ 11.30 $ 12.62 $ 8.34 $ 8.88
Shares of beneficial interest
outstanding, no par value,
unlimited authorization ........... 648,519 10,000 85,543 9,614 5,601,485
Net Assets ........................... $ 8,778 $ 113 $ 1,080 $ 80 $ 49,744
(1) Investment in securities at
cost .............................. $ 111,494 $ 330 $ 75,830 $ 43,420 $ 79,311
(2) Amount is less than $500 (not reported in thousands).
(3) See Note 3 in the Notes to Financial Statements.
See Notes to Financial Statements
22
VIRTUS EQUITY TRUST
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands except shares and per share amounts)
SMALL-CAP
SMALL-CAP SMALL-CAP SUSTAINABLE STRATEGIC TACTICAL
CORE GROWTH GROWTH GROWTH ALLOCATION
FUND FUND FUND FUND FUND
---------- ---------- ----------- ----------- -----------
ASSETS
Investment in securities at
value(1) .......................... $ 46,631 $ 60,922 $ 5,817 $ 155,495 $ 197,660
Receivables
Investment securities sold ......... -- 2,220 2,017 5,630 4,660
Fund shares sold ................... 184 9 -- 1 15
Dividends and interest receivable .. 10 8 2 92 1,043
Tax reclaims ....................... -- -- -- 9 --
Prepaid expenses ..................... 39 25 20 41 36
---------- ---------- --------- ----------- -----------
Total assets ..................... 46,864 63,184 7,856 161,268 203,414
---------- ---------- --------- ----------- -----------
LIABILITIES
Payables
Fund shares repurchased ............ 112 2,372 2,242 324 350
Investment securities purchased .... 631 -- 32 6,023 5,177
Investment advisory fee ............ 31 46 3 94 113
Distribution and service fees ...... 7 19 1 37 43
Administration fee ................. 2 4 1 10 14
Transfer agent fees and expenses ... 14 42 3 62 45
Trustees' fee and expenses ......... 1 1 --(2) 2 3
Professional fee ................... 16 16 19 26 27
Other accrued expenses ............. 4 6 --(2) 14 23
---------- ---------- --------- ----------- -----------
Total liabilities ................ 818 2,506 2,301 6,592 5,795
---------- ---------- --------- ----------- -----------
NET ASSETS ........................... $ 46,046 $ 60,678 $ 5,555 $ 154,676 $ 197,619
========== ========== ========= =========== ===========
NET ASSETS CONSIST OF:
Capital paid in on shares of
beneficial interest .............. $ 46,265 $ 149,212 $ 9,866 $ 225,686 $ 208,405
Accumulated undistributed net
investment income (loss).......... (70) (428) (39) (290) (150)
Accumulated undistributed net
realized gain (loss) ............. (8,719) (98,251) (5,114) (91,890) (33,980)
Net unrealized appreciation
(depreciation) on investments .... 8,570 10,145 842 21,170 23,344
---------- ---------- --------- ----------- -----------
NET ASSETS ........................... $ 46,046 $ 60,678 $ 5,555 $ 154,676 $ 197,619
========== ========== ========= =========== ===========
CLASS A
Net asset value (net assets/shares
outstanding) per share ............. $ 13.29 $ 23.88 $ 8.71 $ 7.66 $ 7.73
Maximum offering price per share
NAV/(1-5.75%) ...................... $ 14.10 $ 25.34 $ 9.24 $ 8.13 $ 8.20
Shares of beneficial interest
outstanding, no par value, unlimited
authorization ...................... 1,022,175 2,100,489 126,365 18,393,131 25,105,712
Net Assets ........................... $ 13,587 $ 50,157 $ 1,100 $ 140,802 $ 194,049
CLASS B
Net asset value (net assets/shares
outstanding) and offering price per
share .............................. $ 12.41 $ 21.63 $ -- $ 6.76 $ 7.80
Share of beneficial interest
outstanding, no par value, unlimited
authorization ...................... 70,470 208,396 -- 629,506 301,784
Net Assets ........................... $ 875 $ 4,507 $ -- $ 4,255 $ 2,354
CLASS C
Net asset value (net assets/shares
outstanding) and offering price per
share .............................. $ 12.43 $ 21.61 $ 8.49 $ 6.77 $ 7.87
Shares of beneficial interest
outstanding, no par value, unlimited
authorization ...................... 382,984 278,301 39,853 827,308 154,471
Net Assets ........................... $ 4,759 $ 6,014 $ 338 $ 5,597 $ 1,216
CLASS I
Net asset value (net assets/shares
outstanding) and offering price per
share .............................. $ 13.60 $ -- $ 8.70 $ 7.72 $ --
Shares of beneficial interest
outstanding, no par value, unlimited
authorization ...................... 1,972,690 -- 473,335 521,134 --
Net Assets ........................... $ 26,825 $ -- $ 4,117 $ 4,022 $ --
(1) Investment in securities at
cost $ 38,061 $ 50,777 $ 4,975 $ 134,325 $ 174,316
(2) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements
23
VIRTUS EQUITY TRUST
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands)
GROWTH & MID-CAP MID-CAP QUALITY QUALITY
INCOME CORE GROWTH LARGE-CAP SMALL-CAP
FUND FUND(2) FUND VALUE FUND FUND
-------- ------- -------- ---------- ---------
INVESTMENT INCOME
Dividends ............................ $ 1,694 $ 2 $ 387 $ 623 $ 1,090
Foreign taxes withheld ............... (25) -- (8) -- --
-------- ---- ------- -------- -------
Total investment income ........... 1,669 2 379 623 1,090
-------- ---- ------- -------- -------
EXPENSES
Investment advisory fees ............. 558 1 301 193 324
Service fees, Class A ................ 130 --(1) 83 60 36
Distribution and service fees,
Class B ........................... 33 -- 20 -- --
Distribution and service fees,
Class C ........................... 137 --(1) 18 16 11
Administration fees .................. 62 --(1) 32 22 31
Transfer agent fee and expenses ...... 187 --(1) 117 59 161
Custodian fees ....................... 7 1 5 6 4
Printing fees and expenses ........... 27 5 10 7 9
Professional fees .................... 58 13 16 17 15
Registration fees .................... 24 12 27 17 24
Trustees' fee and expenses ........... 60 --(1) 4 3 3
Miscellaneous expenses ............... 14 2 7 5 6
-------- ---- ------- -------- -------
Total expenses .................... 1,297 34 640 405 624
Less expenses reimbursed by
investment adviser ................ (423)(3) (32) (67) (46) (109)
-------- ---- ------- -------- -------
Net expenses ...................... 874 2 573 359 515
-------- ---- ------- -------- -------
NET INVESTMENT INCOME (LOSS) ......... 795 --(1) (194) 264 575
-------- ---- ------- -------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments ....................... 11,336 5 (4,156) 6,251 (4,546)
Net change in unrealized
appreciation (depreciation) on
investments ....................... 31,165 36 29,777 7,846 28,666
-------- ---- ------- -------- -------
NET GAIN (LOSS) ON INVESTMENTS .......... 42,501 41 25,621 14,097 24,120
-------- ---- ------- -------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............ $ 43,296 $ 41 $25,427 $ 14,361 $24,695
======== ==== ======= ======== =======
(1) Amount is less than $500 (not reported in thousands).
(2) From inception, June 22, 2009.
(3) See Note 3 in the Notes to Financial Statements.
See Notes to Financial Statements
24
VIRTUS EQUITY TRUST
STATEMENTS OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands)
SMALL-CAP SMALL-CAP SMALL-CAP STRATEGIC TACTICAL
CORE GROWTH SUSTAINABLE GROWTH ALLOCATION
FUND FUND GROWTH FUND FUND FUND
--------- --------- ----------- --------- ----------
INVESTMENT INCOME
Dividends ............................ $ 241 $ 81 $ 32 $ 768 $ 1,094
Interest ............................. -- -- -- -- 2,306
Foreign taxes withheld ............... -- -- -- (1) (16)
------- ------- ------- ------- --------
Total investment income ........... 241 81 32 767 3,384
------- ------- ------- ------- --------
EXPENSES
Investment advisory fees ............. 164 280 42 479 653
Service fees, Class A ................ 15 58 4 155 229
Distribution and service fees,
Class B ........................... 4 22 -- 20 12
Distribution and service fees,
Class C ........................... 19 27 1 26 5
Administration fees .................. 16 24 4 58 79
Transfer agent fee and expenses ...... 35 140 7 213 155
Custodian fees ....................... 2 --(1) 1 7 13
Printing fees and expenses ........... 5 7 1 38 80
Professional fees .................... 12 14 15 22 31
Registration fees .................... 33 18 17 22 20
Trustees' fee and expenses ........... 2 3 --(1) 6 9
Miscellaneous expenses ............... 4 6 2 11 17
------- ------- ------- ------- --------
Total expenses .................... 311 599 94 1,057 1,303
Less expenses reimbursed by
investment adviser ................ -- (90) (23) -- --
------- ------- ------- ------- --------
Net expenses ...................... 311 509 71 1,057 1,303
------- ------- ------- ------- --------
NET INVESTMENT INCOME (LOSS) ......... (70) (428) (39) (290) 2,081
------- ------- ------- ------- --------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments ....................... (101) (447) 84 (5,361) (68)
Net realized gain (loss) on foreign
currency transactions ............. -- -- -- -- 1
Net change in unrealized appreciation
(depreciation) on investments ...... 13,370 19,522 3,081 40,716 37,180
Net change in unrealized appreciation
(depreciation) on foreign currency
translation ........................ -- -- -- -- --(1)
------- ------- ------- ------- --------
NET GAIN (LOSS) ON INVESTMENTS .......... 13,269 19,075 3,165 35,355 37,113
------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............ $13,199 $18,647 $ 3,126 $35,065 $ 39,194
======= ======= ======= ======= ========
(1) Amount is less than $500 (not reported in thousands)
See Notes to Financial Statements
25
VIRTUS EQUITY TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(Reported in thousands)
GROWTH & INCOME FUND MID-CAP CORE FUND
----------------------------------- ------------------
FROM INCEPTION,
SIX MONTHS ENDED JUNE 22, 2009 TO
SEPTEMBER 30, 2009 YEAR ENDED SEPTEMBER 30, 2009
(UNAUDITED) MARCH 31, 2009 (UNAUDITED)
------------------ -------------- ------------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income
(loss) .................................. $ 795 $ 1,973 $ --(1)
Net realized gain
(loss) .................................. 11,336 (47,791) 5
Net change in unrealized appreciation
(depreciation) .......................... 31,165 (38,963) 36
--------- --------- ----
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............... 43,296 (84,781) 41
--------- --------- ----
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A .......... (1,088) (1,487) --
Net investment income, Class B .......... (48) -- --
Net investment income, Class C .......... (210) (11) --
Net investment income, Class I .......... (136) (256) --
Net realized short-term gains, Class A .. -- -- --
Net realized short-term gains, Class B .. -- -- --
Net realized short-term gains, Class C .. -- -- --
Net realized short-term gains, Class I .. -- -- --
Net realized long-term gains, Class A ... -- -- --
Net realized long-term gains, Class B ... -- -- --
Net realized long-term gains, Class C ... -- -- --
Net realized long-term gains, Class I ... -- -- --
--------- --------- ----
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO
SHAREHOLDERS ............................ (1,482) (1,754) --
--------- --------- ----
FROM SHARE TRANSACTIONS (SEE NOTE 5)
Change in net assets from share
transactions, Class A ................ (18,109) (20,764) 125
Change in net assets from share
transactions, Class B ................ (1,341) (5,673) --
Change in net assets from share
transactions, Class C ................ (1,780) (6,538) 100
Change in net assets from share
transactions, Class I ................ (4,298) (5,827) 100
--------- --------- ----
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS .............. (25,528) (38,802) 325
--------- --------- ----
CAPITAL CONTRIBUTIONS
Fair Funds settlement(2) ................ -- -- --
--------- --------- ----
NET INCREASE (DECREASE) IN NET ASSETS ...... 16,286 (125,337) 366
NET ASSETS
Beginning of period ........................ 126,908 252,245 --
--------- --------- ----
END OF PERIOD .............................. $ 143,194 $ 126,908 $366
========= ========= ====
Accumulated undistributed net investment
income (loss) at end of
period .................................. $ 439 $ 1,126 $ --(1)
(1) Amount is less than $500 (not reported in thousands).
(2) The Fund was a recipient of a portion of a distribution from a Fair Fund
established by the United States Securities and Exchange Commission. The
proceeds received were part of the Millennium Partners, L.P. and Bear
Stearns & Co., Inc. settlements.
See Notes to Financial Statements
26
MID-CAP GROWTH FUND QUALITY LARGE-CAP VALUE FUND QUALITY SMALL-CAP FUND
- ----------------------------------- ----------------------------------- -----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, 2009 YEAR ENDED SEPTEMBER 30, 2009 YEAR ENDED SEPTEMBER 30, 2009 YEAR ENDED
(UNAUDITED) MARCH 31, 2009 (UNAUDITED) MARCH 31, 2009 (UNAUDITED) MARCH 31, 2009
- ------------------ -------------- ------------------ -------------- ------------------ --------------
$ (194) $ (436) $ 264 $ 789 $ 575 $ 1,261
(4,156) (31,213) 6,251 (33,560) (4,546) (14,590)
29,777 (11,982) 7,846 37 28,666 (13,410)
--------- -------- -------- --------- -------- --------
25,427 (43,631) 14,361 (32,734) 24,695 (26,739)
--------- -------- -------- --------- -------- --------
-- -- (474) (390) (197) (195)
-- -- -- -- -- --
-- -- (20) (4) (7) (16)
-- -- (1) (1) (325) (1,035)
-- -- -- -- -- --(1)
-- -- -- -- -- --
-- -- -- -- -- --(1)
-- -- -- -- -- (1)
-- -- -- -- -- --(1)
-- -- -- -- -- --
-- -- -- -- -- --(1)
-- -- -- -- -- (2)
--------- -------- -------- --------- -------- --------
-- -- (495) (395) (529) (1,249)
--------- -------- -------- --------- -------- --------
(2,585) (8,349) (15,498) (15,485) (439) 16,434
(1,289) (3,449) -- -- -- --
722 (1,274) (473) (3,575) 545 175
(13) (112) 4 101 2,408 8,419
--------- -------- -------- --------- -------- --------
(3,165) (13,184) (15,967) (18,959) 2,514 25,028
--------- -------- -------- --------- -------- --------
25 -- -- -- -- --
--------- -------- -------- --------- -------- --------
22,287 (56,815) (2,101) (52,088) 26,680 (2,960)
61,302 118,117 47,338 99,426 58,287 61,247
--------- -------- -------- --------- -------- --------
$ 83,589 $ 61,302 $ 45,237 $ 47,338 $ 84,967 $ 58,287
========= ======== ======== ========= ======== ========
$ (194) $ -- $ 136 $ 367 $ 353 $ 307
See Notes to Financial Statements
27
VIRTUS EQUITY TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
(Reported in thousands)
SMALL-CAP CORE FUND SMALL-CAP GROWTH FUND
---------------------------- ----------------------------
SIX SIX
MONTHS ENDED MONTHS ENDED
SEPTEMBER SEPTEMBER
30, 2009 YEAR ENDED 30, 2009 YEAR ENDED
(UNAUDITED) MARCH 31, 2009 (UNAUDITED) MARCH 31, 2009
------------ -------------- ------------ --------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) .................................... $ (70) $ 9 $ (428) $ (1,253)
Net realized gain (loss) ........................................ (101) (8,618) (447) (22,925)
Net change in unrealized appreciation (depreciation) ............ 13,370 (6,704) 19,522 (18,152)
-------- -------- ------- --------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..... 13,199 (15,313) 18,647 (42,330)
-------- -------- ------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A ............................... -- (3) -- --
Net investment income, Class B ............................... -- --(1) -- --
Net investment income, Class C ............................... -- (1) -- --
Net investment income, Class I ............................... -- (4) -- --
Net realized long-term gains, Class A ........................ -- (1,906) -- --
Net realized long-term gains, Class B ........................ -- (151) -- --
Net realized long-term gains, Class C ........................ -- (654) -- --
Net realized long-term gains, Class I ........................ -- (3,052) -- --
-------- -------- ------- --------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ....... -- (5,771) -- --
-------- -------- ------- --------
FROM SHARE TRANSACTIONS (SEE NOTE 5)
Change in net assets from share transactions, Class A ........ (987) (3,203) (4,735) (8,702)
Change in net assets from share transactions, Class B ........ (128) (416) (1,110) (5,033)
Change in net assets from share transactions, Class C ........ 449 (1,475) (314) (2,607)
Change in net assets from share transactions, Class I ........ 1,540 (2,905) -- --
-------- -------- ------- --------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ....... 874 (7,999) (6,159) (16,342)
-------- -------- ------- --------
CAPITAL CONTRIBUTIONS
Fair Funds settlement(2) ..................................... 5 -- 113 --
-------- -------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS ........................... 14,078 (29,083) 12,601 (58,672)
NET ASSETS
Beginning of period ............................................. 31,968 61,051 48,077 106,749
-------- -------- ------- --------
END OF PERIOD ................................................... $46,046 $ 31,968 $60,678 $ 48,077
======== ======== ======= ========
Accumulated undistributed net investment income (loss) at
end of period ................................................ $ (70) $ -- $ (428) $ --
(1) Amount is less than $500 (not reported in thousands).
(2) The Fund was a recipient of a portion of a distribution from a Fair Fund
established by the United States Securities and Exchange Commission. The
proceeds received were part of the Millennium Partners, L.P. and Bear
Stearns & Co., Inc. settlements.
See Notes to Financial Statements
28
SMALL-CAP
SUSTAINABLE GROWTH FUND STRATEGIC GROWTH FUND TACTICAL ALLOCATION FUND
- ---------------------------- ---------------------------- ----------------------------
SIX SIX SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER SEPTEMBER SEPTEMBER
30, 2009 YEAR ENDED 30, 2009 YEAR ENDED 30, 2009 YEAR ENDED
(UNAUDITED) MARCH 31, 2009 (UNAUDITED) MARCH 31, 2009 (UNAUDITED) MARCH 31, 2009
- ------------ -------------- ------------ -------------- ------------ --------------
$ (39) $ (100) $ (290) $ (536) $ 2,081 $ 6,738
84 (4,886) (5,361) (31,280) (67) (31,810)
3,081 (1,033) 40,716 (23,340) 37,180 (30,053)
------- ------- -------- -------- -------- --------
3,126 (6,019) 35,065 (55,156) 39,194 (55,125)
------- ------- -------- -------- -------- --------
-- -- -- -- (2,681) (6,951)
-- -- -- -- (25) (82)
-- -- -- -- (11) (25)
-- -- -- -- -- --
-- -- -- -- -- (1,597)
-- -- -- -- -- (28)
-- -- -- -- -- (7)
-- -- -- -- -- --
------- ------- -------- -------- -------- --------
-- -- -- -- (2,717) (8,690)
------- ------- -------- -------- -------- --------
(2,032) (4,089) 37,878 (12,402) (5,364) (24,315)
-- -- 879 (1,860) (324) (1,659)
96 79 2,697 (625) 224 (770)
(3,995) 3,756 (111) (364) -- --
------- ------- -------- -------- -------- --------
(5,931) (254) 41,343 (15,251) (5,464) (26,744)
------- ------- -------- -------- -------- --------
-- -- -- -- 3 --
------- ------- -------- -------- -------- --------
(2,805) (6,273) 76,408 (70,407) 31,016 (90,559)
8,360 14,633 78,268 148,675 166,603 257,162
------- ------- -------- -------- -------- --------
$ 5,555 $ 8,360 $154,676 $ 78,268 $197,619 $166,603
======= ======= ======== ======== ======== ========
$ (39) $ -- $ (290) $ -- $ (150) $ 486
See Notes to Financial Statements
29
VIRTUS EQUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET
ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
GROWTH & INCOME FUND
CLASS A
4/1/09 to 9/30/09(9) $10.15 0.07 3.46 3.53 (0.13) -- (0.13)
4/1/08 to 3/31/09 16.47 0.17 (6.33) (6.16) (0.16) -- (0.16)
9/1/07 to 3/31/08 18.08 0.08 (1.65) (1.57) (0.04) -- (0.04)
9/1/06 to 8/31/07 15.96 0.10 2.20 2.30 (0.18) -- (0.18)
9/1/05 to 8/31/06 14.74 0.13 1.19 1.32 (0.10) -- (0.10)
9/1/04 to 8/31/05 13.15 0.12 1.57 1.69 (0.10) -- (0.10)
9/1/03 to 8/31/04 11.86 0.09 1.30 1.39 (0.10) -- (0.10)
CLASS B
4/1/09 to 9/30/09(9) $ 9.73 0.03 3.31 3.34 (0.09) -- (0.09)
4/1/08 to 3/31/09 15.71 0.05 (6.03) (5.98) -- -- --
9/1/07 to 3/31/08 17.31 --(5) (1.58) (1.58) (0.02) -- (0.02)
9/1/06 to 8/31/07 15.26 (0.02) 2.10 2.08 (0.03) -- (0.03)
9/1/05 to 8/31/06 14.13 0.01 1.14 1.15 (0.02) -- (0.02)
9/1/04 to 8/31/05 12.61 0.01 1.51 1.52 -- -- --
9/1/03 to 8/31/04 11.38 (0.01) 1.25 1.24 (0.01) -- (0.01)
CLASS C
4/1/09 to 9/30/09(9) $ 9.72 0.03 3.31 3.34 (0.09) -- (0.09)
4/1/08 to 3/31/09 15.72 0.06 (6.06) (6.00) --(5) -- --
9/1/07 to 3/31/08 17.31 --(5) (1.57) (1.57) (0.02) -- (0.02)
9/1/06 to 8/31/07 15.26 (0.03) 2.11 2.08 (0.03) -- (0.03)
9/1/05 to 8/31/06 14.13 0.01 1.14 1.15 (0.02) -- (0.02)
9/1/04 to 8/31/05 12.62 0.01 1.50 1.51 -- -- --
9/1/03 to 8/31/04 11.38 (0.01) 1.26 1.25 (0.01) -- (0.01)
CLASS I
4/1/09 to 9/30/09(9) $10.14 0.09 3.46 3.55 (0.15) -- (0.15)
4/1/08 to 3/31/09 16.49 0.20 (6.33) (6.13) (0.22) -- (0.22)
11/13/07(7) to 3/31/08 18.33 0.06 (1.90) (1.84) -- -- --
MID-CAP CORE FUND
CLASS A
6/22/09(7) to 9/30/09(9) $10.00 0.01 1.29 1.30 -- -- --
CLASS C
6/22/09(7) to 9/30/09(9) $10.00 (0.01) 1.28 1.27 -- -- --
CLASS I
6/22/09(7) to 9/30/09(9) $10.00 0.02 1.28 1.30 -- -- --
MID-CAP GROWTH FUND
CLASS A
4/1/09 to 9/30/09(9) $ 8.83 (0.02) 3.74 3.72 -- -- --
4/1/08 to 3/31/09 14.78 (0.05) (5.90) (5.95) -- -- --
11/1/07 to 3/31/08 17.98 (0.05) (3.15) (3.20) -- -- --
11/1/06 to 10/31/07 16.33 (0.10) 1.75 1.65 -- -- --
11/1/05 to 10/31/06 15.42 (0.08) 0.99 0.91 -- -- --
11/1/04 to 10/31/05 13.40 (0.16) 2.18 2.02 -- -- --
11/1/03 to 10/31/04 13.97 (0.17) (0.40) (0.57) -- -- --
The footnote legend is at the end of the financial highlights.
See Notes to Financial Statements
30
RATIO OF GROSS
EXPENSES TO
NET NET AVERAGE RATIO OF NET
ASSET ASSETS, RATIO OF NET NET ASSETS INVESTMENT
CHANGE IN VALUE, END OF EXPENSES TO (BEFORE WAIVERS INCOME (LOSS) PORTFOLIO
NET ASSET END OF TOTAL PERIOD AVERAGE NET AND TO AVERAGE NET TURNOVER
VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS REIMBURSEMENTS) ASSETS RATE
- --------- ------ --------- -------------- ------------ --------------- -------------- ---------
3.40 $13.55 35.02%(4) $ 98,335 1.02%(3)(10) 1.59%(3) 1.22%(3) 18%(4)
(6.32) 10.15 (37.65) 87,198 1.42 1.60 1.19 112
(1.61) 16.47 (8.69)(4) 166,600 1.37(3) 1.51(3) 0.73(3) 53(4)
2.12 18.08 14.43 188,479 1.28 1.42 0.60 37
1.22 15.96 9.02 168,209 1.25 1.39 0.86 33
1.59 14.74 12.85 178,557 1.25 1.40 0.84 41
1.29 13.15 11.74 201,230 1.25 1.38 0.68 53
3.25 $12.98 34.44%(4) $ 6,717 1.78%(3)(10) 2.34%(3) 0.47%(3) 18%(4)
(5.98) 9.73 (38.06) 6,177 2.17 2.35 0.40 112
(1.60) 15.71 (9.14)(4) 16,658 2.11(3) 2.24(3) (0.03)(3) 53(4)
2.05 17.31 13.64 24,731 2.03 2.17 (0.14) 37
1.13 15.26 8.18 41,863 2.00 2.14 0.09 33
1.52 14.13 12.05 58,869 2.00 2.15 0.10 41
1.23 12.61 10.90 68,637 2.00 2.14 (0.07) 53
3.25 $12.97 34.53%(4) $ 29,364 1.77%(3)(10) 2.34%(3) 0.48%(3) 18%(4)
(6.00) 9.72 (38.15) 23,470 2.17 2.35 0.43 112
(1.59) 15.72 (9.08)(4) 46,292 2.12(3) 2.26(3) (0.02)(3) 53(4)
2.05 17.31 13.64 53,854 2.03 2.17 (0.15) 37
1.13 15.26 8.18 57,345 2.00 2.14 0.10 33
1.51 14.13 12.05 68,432 2.00 2.15 0.10 41
1.24 12.62 10.80 78,570 2.00 2.13 (0.07) 53
3.40 $13.54 35.23%(4) $ 8,778 0.83%(3)(10) 1.34%(3) 1.42%(3) 18%(4)
(6.35) 10.14 (37.51) 10,063 1.17 1.35 1.40 112
(1.84) 16.49 (10.04)(4) 22,695 1.19(3) 1.34(3) 0.88(3) 53(4)
1.30 $11.30 13.00%(4) $ 140 1.35%(3) 35.28%(3) 0.47%(3) 12%(4)
1.27 $11.27 12.70%(4) $ 113 2.10%(3) 35.88%(3) (0.28)%(3) 12%(4)
1.30 $11.30 13.00%(4) $ 113 1.10%(3) 34.89%(3) 0.72%(3) 12%(4)
3.72 $12.55 42.13%(4) $ 74,199 1.45%(3) 1.63%(3) (0.44)%(3) 56%(4)
(5.95) 8.83 (40.26) 54,233 1.45 1.60 (0.38) 93
(3.20) 14.78 (17.80)(4) 100,416 1.66(3) 1.76(3) (0.68)(3) 27(4)
1.65 17.98 10.10 130,028 1.55 1.55 (0.60) 77
0.91 16.33 5.90 127,160 1.52 1.52 (0.50) 124
2.02 15.42 15.07 142,651 1.53 1.53 (1.06) 46
(0.57) 13.40 (4.08) 166,244 1.50 1.50 (1.22) 181
See Notes to Financial Statements
31
VIRTUS EQUITY TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET
ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
MID-CAP GROWTH FUND (CONTINUED)
CLASS B
4/1/09 to 9/30/09(9) $ 7.75 (0.06) 3.29 3.23 -- -- --
4/1/08 to 3/31/09 13.09 (0.13) (5.21) (5.34) -- -- --
11/1/07 to 3/31/08 15.97 (0.08) (2.80) (2.88) -- -- --
11/1/06 to 10/31/07 14.61 (0.24) 1.60 1.36 -- -- --
11/1/05 to 10/31/06 13.91 (0.18) 0.88 0.70 -- -- --
11/1/04 to 10/31/05 12.18 (0.25) 1.98 1.73 -- -- --
11/1/03 to 10/31/04 12.78 (0.25) (0.35) (0.60) -- -- --
CLASS C
4/1/09 to 9/30/09(9) $ 7.75 (0.06) 3.29 3.23 -- -- --
4/1/08 to 3/31/09 13.07 (0.13) (5.19) (5.32) -- -- --
11/1/07 to 3/31/08 15.96 (0.08) (2.81) (2.89) -- -- --
11/1/06 to 10/31/07 14.60 (0.41) 1.77 1.36 -- -- --
11/1/05 to 10/31/06 13.89 (0.19) 0.90 0.71 -- -- --
11/1/04 to 10/31/05 12.16 (0.25) 1.98 1.73 -- -- --
11/1/03 to 10/31/04 12.77 (0.24) (0.37) (0.61) -- -- --
CLASS I
4/1/09 to 9/30/09(9) $ 8.87 (0.01) 3.76 3.75 -- -- --
4/1/08 to 3/31/09 14.80 (0.02) (5.91) (5.93) -- -- --
11/1/07 to 3/31/08 17.99 (0.03) (3.16) (3.19) -- -- --
9/13/07(7) to 10/31/07 17.25 (0.09) 0.83 0.74 -- -- --
QUALITY LARGE-CAP VALUE FUND
CLASS A
4/1/09 to 9/30/09(9) $ 6.32 0.04 2.05 2.09 (0.07) -- (0.07)
4/1/08 to 3/31/09 10.51 0.10 (4.24) (4.14) (0.05) -- (0.05)
7/1/07 to 3/31/08 13.67 0.04 (2.87) (2.83) (0.07) (0.26) (0.33)
7/1/06 to 6/30/07 11.20 0.06 2.86 2.92 (0.05) (0.40) (0.45)
7/29/05(7) to 6/30/06 10.00 0.07 1.17 1.24 (0.04) -- (0.04)
CLASS C
4/1/09 to 9/30/09(9) $ 6.24 0.01 2.03 2.04 (0.05) -- (0.05)
4/1/08 to 3/31/09 10.40 0.03 (4.18) (4.15) (0.01) -- (0.01)
7/1/07 to 3/31/08 13.60 (0.03) (2.85) (2.88) (0.06) (0.26) (0.32)
7/1/06 to 6/30/07 11.18 (0.03) 2.85 2.82 --(5) (0.40) (0.40)
7/29/05(7) to 6/30/06 10.00 --(5) 1.19 1.19 (0.01) -- (0.01)
CLASS I
4/1/09 to 9/30/09(9) $ 6.32 0.05 2.05 2.10 (0.08) -- (0.08)
6/6/08(7) to 3/31/09 11.04 0.11 (4.76) (4.65) (0.07) -- (0.07)
QUALITY SMALL-CAP FUND
CLASS A
4/1/09 to 9/30/09(9) $ 6.29 0.06 2.57 2.63 (0.05) -- (0.05)
4/1/08 to 3/31/09 9.66 0.14 (3.37) (3.23) (0.14) --(5) (0.14)
9/1/07 to 3/31/08 11.74 0.11 (2.08) (1.97) (0.08) (0.03) (0.11)
9/1/06 to 8/31/07 10.05 0.25 1.51 1.76 (0.05) (0.02) (0.07)
6/28/06(7) to 8/31/06 10.00 0.03 0.02 0.05 -- -- --
The footnote legend is at the end of the financial highlights.
See Notes to Financial Statements
32
RATIO OF GROSS
EXPENSES TO
NET NET AVERAGE RATIO OF NET
ASSET ASSETS, RATIO OF NET NET ASSETS INVESTMENT
CHANGE IN VALUE, END OF EXPENSES TO (BEFORE WAIVERS INCOME (LOSS) PORTFOLIO
NET ASSET END OF TOTAL PERIOD AVERAGE NET AND TO AVERAGE NET TURNOVER
VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS REIMBURSEMENTS) ASSETS RATE
- --------- ------- --------- -------------- ------------ ---------------- -------------- ---------
3.23 $10.98 41.68%(4) $ 3,901 2.20%(3) 2.38%(3) (1.16)%(3) 56%(4)
(5.34) 7.75 (40.79) 3,795 2.20 2.34 (1.17) 93
(2.88) 13.09 (18.03)(4) 10,600 2.40(3) 2.50(3) (1.42)(3) 27(4)
1.36 15.97 9.31 15,407 2.29 2.29 (1.53) 77
0.70 14.61 5.03 10,102 2.27 2.27 (1.24) 124
1.73 13.91 14.20 12,776 2.28 2.28 (1.81) 46
(0.60) 12.18 (4.69) 15,549 2.24 2.24 (1.97) 181
3.23 $10.98 41.68%(4) $ 4,409 2.20%(3) 2.38%(3) (1.24)%(3) 56%(4)
(5.32) 7.75 (40.70) 2,509 2.20 2.35 (1.16) 93
(2.89) 13.07 (18.11)(4) 5,629 2.41(3) 2.51(3) (1.43)(3) 27(4)
1.36 15.96 9.32 6,853 2.20 2.20 (2.60) 77
0.71 14.60 5.11 530 2.27 2.27 (1.29) 124
1.73 13.89 14.23 418 2.28 2.28 (1.81) 46
(0.61) 12.16 (4.78) 350 2.24 2.24 (1.97) 181
3.75 $12.62 42.28%(4) $ 1,080 1.20%(3) 1.38%(3) (0.21)%(3) 56%(4)
(5.93) 8.87 (40.07) 765 1.20 1.35 (0.13) 93
(3.19) 14.80 (17.73)(4) 1,472 1.40(3) 1.50(3) (0.41)(3) 27(4)
0.74 17.99 4.29(4) 2,086 1.09(3) 1.09(3) (3.85)(3) 77(4)
2.02 $ 8.34 33.31%(4) $41,741 1.35%(3) 1.53%(3) 1.08%(3) 148%(4)
(4.19) 6.32 (39.44) 44,283 1.35 1.46 1.16 140
(3.16) 10.51 (21.06)(4) 90,476 1.52(3) 1.55(3) 0.45(3) 103(4)
2.47 13.67 26.71 50,788 1.41 1.60 0.46 101
1.20 11.20 12.41(4) 3,292 1.40(3)(6) 7.45(3) 0.72(3) 136(4)
1.99 $ 8.23 32.77%(4) $ 3,416 2.10%(3) 2.28%(3) 0.33%(3) 148%(4)
(4.16) 6.24 (39.93) 2,997 2.10 2.20 0.33 140
(3.20) 10.40 (21.54)(4) 8,950 2.27(3) 2.31(3) (0.33)(3) 103(4)
2.42 13.60 25.77 1,128 2.16 2.58 (0.22) 101
1.18 11.18 11.85(4) 183 2.15(3)(6) 8.19(3) (0.05)(3) 136(4)
2.02 $ 8.34 33.47%(4) $ 80 1.10%(3) 1.28%(3) 1.31%(3) 148%(4)
(4.72) 6.32 (42.22)(4) 58 1.10(3) 1.25(3) 1.68(3) 140(4)
2.58 $ 8.87 42.21%(4) $32,539 1.55%(3) 1.85%(3) 1.47%(3) 8%(4)
(3.37) 6.29 (33.77) 23,355 1.45(9) 1.84 1.81 15
(2.08) 9.66 (16.92)(4) 12,422 1.47(3) 1.63(3) 1.68(3) 0(4)
1.69 11.74 17.51 8,506 1.40 2.19 2.14 17
0.05 10.05 0.50(4) 101 1.40(3) 26.39(3) 1.82(3) 7(4)
See Notes to Financial Statements
33
VIRTUS EQUITY TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET
ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
QUALITY SMALL-CAP FUND (CONTINUED)
CLASS C
4/1/09 to 9/30/09(9) $ 6.28 0.03 2.59 2.62 (0.03) -- (0.03)
4/1/08 to 3/31/09 9.65 0.07 (3.37) (3.30) (0.07) --(5) (0.07)
9/1/07 to 3/31/08 11.68 0.06 (2.06) (2.00) -- (0.03) (0.03)
9/1/06 to 8/31/07 10.04 0.10 1.57 1.67 (0.01) (0.02) (0.03)
6/28/06(7) to 8/31/06 10.00 0.02 0.02 0.04 -- -- --
CLASS I
4/1/09 to 9/30/09(9) $ 6.29 0.07 2.58 2.65 (0.06) -- (0.06)
4/1/08 to 3/31/09 9.67 0.16 (3.38) (3.22) (0.16) --(5) (0.16)
9/1/07 to 3/31/08 11.76 0.13 (2.08) (1.95) (0.11) (0.03) (0.14)
9/1/06 to 8/31/07 10.06 0.21 1.57 1.78 (0.06) (0.02) (0.08)
6/28/06(7) to 8/31/06 10.00 0.07 (0.01) 0.06 -- -- --
SMALL-CAP CORE FUND
CLASS A
4/1/09 to 9/30/09(9) $ 9.36 (0.02) 3.95 3.93 -- -- --
4/1/08 to 3/31/09 14.76 --(5) (3.89) (3.89) --(5) (1.51) (1.51)
1/01/08 to 3/31/08 17.31 (0.02) (2.53) (2.55) -- -- --
1/1/07 to 12/31/07 19.46 (0.12) 0.10 (0.02) -- (2.13) (2.13)
1/1/06 to 12/31/06 21.15 (0.12) 2.52 2.40 -- (4.09) (4.09)
1/1/05 to 12/31/05 20.59 (0.09) 0.65 0.56 -- -- --
1/1/04 to 12/31/04 18.12 (0.10) 2.57 2.47 -- -- --
CLASS B
4/1/09 to 9/30/09(9) $ 8.77 (0.06) 3.70 3.64 -- -- --
4/1/08 to 3/31/09 14.03 (0.09) (3.66) (3.75) --(5) (1.51) (1.51)
1/1/08 to 3/31/08 16.48 (0.05) (2.40) (2.45) -- -- --
1/1/07 to 12/31/07 18.76 (0.26) 0.11 (0.15) -- (2.13) (2.13)
1/1/06 to 12/31/06 20.67 (0.28) 2.46 2.18 -- (4.09) (4.09)
1/1/05 to 12/31/05 20.27 (0.23) 0.63 0.40 -- -- --
1/1/04 to 12/31/04 17.94 (0.24) 2.57 2.33 -- -- --
CLASS C
4/1/09 to 9/30/09(9) $ 8.78 (0.06) 3.71 3.65 -- -- --
4/1/08 to 3/31/09 14.05 (0.09) (3.67) (3.76) --(5) (1.51) (1.51)
1/1/08 to 3/31/08 16.50 (0.05) (2.40) (2.45) -- -- --
1/1/07 to 12/31/07 18.79 (0.26) 0.10 (0.16) -- (2.13) (2.13)
1/1/06 to 12/31/06 20.69 (0.28) 2.47 2.19 -- (4.09) (4.09)
1/1/05 to 12/31/05 20.30 (0.23) 0.62 0.39 -- -- --
1/1/04 to 12/31/04 17.96 (0.24) 2.58 2.34 -- -- --
CLASS I
4/1/09 to 9/30/09(9) $ 9.56 (0.01) 4.05 4.04 -- -- --
4/1/08 to 3/31/09 15.02 0.03 (3.98) (3.95) --(5) (1.51) (1.51)
1/1/08 to 3/31/08 17.60 (0.01) (2.57) (2.58) -- -- --
1/1/07 to 12/31/07 19.70 (0.08) 0.11 0.03 -- (2.13) (2.13)
1/1/06 to 12/31/06 21.31 (0.07) 2.55 2.48 -- (4.09) (4.09)
1/1/05 to 12/31/05 20.70 (0.04) 0.65 0.61 -- -- --
1/1/04 to 12/31/04 18.17 (0.06) 2.59 2.53 -- -- --
The footnote legend is at the end of the financial highlights.
See Notes to Financial Statements
34
RATIO OF GROSS
EXPENSES TO
NET NET AVERAGE RATIO OF NET
ASSET ASSETS, RATIO OF NET NET ASSETS INVESTMENT
CHANGE IN VALUE, END OF EXPENSES TO (BEFORE WAIVERS INCOME (LOSS) PORTFOLIO
NET ASSET END OF TOTAL PERIOD AVERAGE NET AND TO AVERAGE NET TURNOVER
VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS REIMBURSEMENTS) ASSETS RATE
- --------- ------- --------- -------------- ------------ ---------------- -------------- ---------
2.59 $ 8.87 41.76%(4) $ 2,684 2.30%(3) 2.59%(3) 0.72%(3) 8%(4)
(3.37) 6.28 (34.30) 1,436 2.19(9) 2.55 0.89 15
(2.03) 9.65 (17.25)(4) 2,108 2.22(3) 2.38(3) 0.92(3) 0(4)
1.64 11.68 16.61 1,354 2.16 3.45 0.89 17
0.04 10.04 0.40(4) 138 2.15(3) 25.96(3) 1.38(3) 7(4)
2.59 $ 8.88 42.38%(4) $49,744 1.30%(3) 1.60%(3) 1.73%(3) 8%(4)
(3.38) 6.29 (33.66) 33,496 1.19(8) 1.55 1.95 15
(2.09) 9.67 (16.75)(4) 46,717 1.25(3) 1.42(3) 2.07(3) 0(4)
1.70 11.76 17.74 10,691 1.15 2.54 1.82 17
0.06 10.06 0.60(4) 1,070 1.15(3) 21.32(3) 3.85(3) 7(4)
3.93 $13.29 41.99%(4) $13,587 1.67%(3) 1.67%(3) (0.41)%(3) 14%(4)
(5.40) 9.36 (29.71) 10,339 1.59 1.59 (0.01) 95
(2.55) 14.76 (14.73)(4) 20,204 1.66(3) 1.66(3) (0.60)(3) 8(4)
(2.15) 17.31 (0.32) 25,534 1.45 1.45 (0.63) 18
(1.69) 19.46 11.70 33,383 1.47 1.47 (0.55) 26
0.56 21.15 2.72 38,170 1.42 1.42 (0.45) 22
2.47 20.59 13.63 73,825 1.41 1.41 (0.55) 16
3.64 $12.41 41.51%(4) $ 875 2.42%(3) 2.42%(3) (1.16)%(3) 14%(4)
(5.26) 8.77 (30.30) 720 2.34 2.34 (0.78) 95
(2.45) 14.03 (14.87)(4) 1,623 2.41(3) 2.41(3) (1.35)(3) 8(4)
(2.28) 16.48 (1.04) 2,136 2.20 2.20 (1.39) 18
(1.91) 18.76 10.88 3,024 2.22 2.22 (1.30) 26
0.40 20.67 1.97 3,960 2.19 2.19 (1.19) 22
2.33 20.27 12.99 4,404 2.16 2.16 (1.31) 16
3.65 $12.43 41.57%(4) $ 4,759 2.42%(3) 2.42%(3) (1.17)%(3) 14%(4)
(5.27) 8.78 (30.33) 3,028 2.34 2.34 (0.79) 95
(2.45) 14.05 (14.85)(4) 6,569 2.41(3) 2.41(3) (1.35)(3) 8(4)
(2.29) 16.50 (1.09) 8,590 2.20 2.20 (1.38) 18
(1.90) 18.79 10.93 11,646 2.22 2.22 (1.30) 26
0.39 20.69 1.92 14,102 2.19 2.19 (1.19) 22
2.34 20.30 13.03 17,845 2.16 2.16 (1.31) 16
4.04 $13.60 42.26%(4) $26,825 1.41%(3) 1.41%(3) (0.17)%(3) 14%(4)
(5.46) 9.56 (29.59) 17,881 1.34 1.34 0.22 95
(2.58) 15.02 (14.66)(4) 32,655 1.41(3) 1.41(3) (0.36)(3) 8(4)
(2.10) 17.60 (0.11) 42,525 1.20 1.20 (0.38) 18
(1.61) 19.70 12.05 64,361 1.22 1.22 (0.30) 26
0.61 21.31 2.95 78,290 1.17 1.17 (0.18) 22
2.53 20.70 13.92 92,838 1.15 1.15 (0.32) 16
See Notes to Financial Statements
35
VIRTUS EQUITY TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET
ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
SMALL-CAP GROWTH FUND
CLASS A
4/1/09 to 9/30/09(9) $17.03 (0.14) 6.99 6.85 -- -- --
4/1/08 to 3/31/09 30.28 (0.35) (12.90) (13.25) -- -- --
1/1/08 to 3/31/08 37.26 (0.12) (6.86) (6.98) -- -- --
1/1/07 to 12/31/07 34.30 (0.41) 3.37 2.96 -- -- --
1/1/06 to 12/31/06 32.53 (0.39) 2.16 1.77 -- -- --
1/1/05 to 12/31/05 29.65 (0.35) 3.23 2.88 -- -- --
1/1/04 to 12/31/04 27.39 (0.31) 2.57 2.26 -- -- --
CLASS B
4/1/09 to 9/30/09(9) $15.48 (0.20) 6.35 6.15 -- -- --
4/1/08 to 3/31/09 27.73 (0.51) (11.74) (12.25) -- -- --
1/1/08 to 3/31/08 34.19 (0.16) (6.30) (6.46) -- -- --
1/1/07 to 12/31/07 31.71 (0.64) 3.12 2.48 -- -- --
1/1/06 to 12/31/06 30.30 (0.59) 2.00 1.41 -- -- --
1/1/05 to 12/31/05 27.82 (0.54) 3.02 2.48 -- -- --
1/1/04 to 12/31/04 25.90 (0.50) 2.42 1.92 -- -- --
CLASS C
4/1/09 to 9/30/09(9) $15.47 (0.20) 6.34 6.14 -- -- --
4/1/08 to 3/31/09 27.72 (0.50) (11.75) (12.25) -- -- --
1/1/08 to 3/31/08 34.18 (0.16) (6.30) (6.46) -- -- --
1/1/07 to 12/31/07 31.70 (0.64) 3.12 2.48 -- -- --
1/1/06 to 12/31/06 30.29 (0.59) 2.00 1.41 -- -- --
1/1/05 to 12/31/05 27.81 (0.54) 3.02 2.48 -- -- --
1/1/04 to 12/31/04 25.88 (0.49) 2.42 1.93 -- -- --
SMALL-CAP SUSTAINABLE GROWTH FUND
CLASS A
4/1/09 to 9/30/09(9) $ 6.20 (0.04) 2.55 2.51 -- -- --
4/1/08 to 3/31/09 9.15 (0.08) (2.87) (2.95) -- -- --
9/1/07 to 3/31/08 10.34 (0.07) (1.12) (1.19) -- -- --
9/1/06 to 8/31/07 9.79 (0.10) 0.65 0.55 -- -- --
6/28/06(7) to 8/31/06 10.00 (0.01) (0.20) (0.21) -- -- --
CLASS C
4/1/09 to 9/30/09(9) $ 6.06 (0.06) 2.49 2.43 -- -- --
4/1/08 to 3/31/09 9.03 (0.12) (2.85) (2.97) -- -- --
9/1/07 to 3/31/08 10.25 (0.11) (1.11) (1.22) -- -- --
9/1/06 to 8/31/07 9.77 (0.18) 0.66 0.48 -- -- --
6/28/06(7) to 8/31/06 10.00 (0.03) (0.20) (0.23) -- -- --
CLASS I
4/1/09 to 9/30/09(9) $ 6.18 (0.03) 2.55 2.52 -- -- --
4/1/08 to 3/31/09 9.19 (0.04) (2.97) (3.01) -- -- --
9/1/07 to 3/31/08 10.37 (0.05) (1.13) (1.18) -- -- --
9/1/06 to 8/31/07 9.79 (0.08) 0.66 0.58 -- -- --
6/28/06(7) to 8/31/06 10.00 (0.01) (0.20) (0.21) -- -- --
The footnote legend is at the end of the financial highlights.
See Notes to Financial Statements
36
RATIO OF GROSS
EXPENSES TO
NET NET AVERAGE RATIO OF NET
ASSET ASSETS, RATIO OF NET NET ASSETS INVESTMENT
CHANGE IN VALUE, END OF EXPENSES TO (BEFORE WAIVERS INCOME (LOSS) PORTFOLIO
NET ASSET END OF TOTAL PERIOD AVERAGE NET AND TO AVERAGE NET TURNOVER
VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS REIMBURSEMENTS) ASSETS RATE
- --------- ------- --------- -------------- ------------ ---------------- -------------- ---------
6.85 $23.88 40.22%(4) $ 50,157 1.67%(3) 1.99%(3) (1.38)%(3) 59%(4)
(13.25) 17.03 (43.76) 39,353 1.84(8) 1.93 (1.42) 158
(6.98) 30.28 (18.73)(4) 81,622 1.86(3) 1.86(3) (1.44)(3) 14(4)
2.96 37.26 8.63 104,135 1.67 1.72 (1.12) 35
1.77 34.30 5.41 120,953 1.60 1.68 (1.16) 22
2.88 32.53 9.75 168,527 1.58 1.69 (1.18) 38
2.26 29.65 8.25 255,698 1.58 1.68 (1.15) 35
6.15 $21.63 39.73%(4) $ 4,507 2.42%(3) 2.74%(3) (2.13)%(3) 59%(4)
(12.25) 15.48 (44.18) 4,162 2.59(8) 2.66 (2.17) 158
(6.46) 27.73 (18.89)(4) 13,662 2.61(3) 2.61(3) (2.20)(3) 14(4)
2.48 34.19 7.82 19,320 2.42 2.47 (1.87) 35
1.41 31.71 4.62 27,138 2.35 2.44 (1.91) 22
2.48 30.30 8.95 41,105 2.34 2.44 (1.93) 38
1.92 27.82 7.41 58,574 2.33 2.42 (1.93) 35
6.14 $21.61 39.69%(4) $ 6,014 2.42%(3) 2.74%(3) (2.13)%(3) 59%(4)
(12.25) 15.47 (44.19) 4,562 2.59(8) 2.67 (2.17) 158
(6.46) 27.72 (18.90)(4) 11,465 2.61(3) 2.61(3) (2.19)(3) 14(4)
2.48 34.18 7.82 15,352 2.42 2.47 (1.87) 35
1.41 31.70 4.66 18,426 2.36 2.43 (1.91) 22
2.48 30.29 8.92 23,653 2.34 2.44 (1.93) 38
1.93 27.81 7.46 30,280 2.33 2.42 (1.92) 35
2.51 $ 8.71 40.48%(4) $ 1,100 1.65%(3) 2.12%(3) (0.95)%(3) 11%(4)
(2.95) 6.20 (32.24) 2,185 1.44(8) 1.97 (0.87) 64
(1.19) 9.15 (11.51)(4) 8,481 1.54(3) 1.84(3) (1.12)(3) 12(4)
0.55 10.34 5.62 10,222 1.40 2.16 (0.96) 26
(0.21) 9.79 (2.10)(4) 100 1.40(3) 28.32(3) (0.87)(3) 4(4)
2.43 $ 8.49 40.10%(4) $ 338 2.40%(3) 2.88%(3) (1.70)%(3) 11%(4)
(2.97) 6.06 (32.89) 165 2.22(8) 2.72 (1.57) 64
(1.22) 9.03 (11.90)(4) 181 2.29(3) 2.60(3) (1.86)(3) 12(4)
0.48 10.25 4.81 174 2.15 4.31 (1.78) 26
(0.23) 9.77 (2.20)(4) 98 2.15(3) 29.09(3) (1.61)(3) 4(4)
2.52 $ 8.70 40.78%(4) $ 4,117 1.40%(3) 1.91%(3) (0.74)%(3) 11%(4)
(3.01) 6.18 (32.75) 6,010 1.23(8) 1.72 (0.55) 64
(1.18) 9.19 (11.38)(4) 5,971 1.30(3) 1.60(3) (0.88)(3) 12(4)
0.58 10.37 5.92 6,231 1.16 2.94 (0.77) 26
(0.21) 9.79 (2.10)(4) 898 1.15(3) 23.99(3) (0.61)(3) 4(4)
See Notes to Financial Statements
37
VIRTUS EQUITY TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET
ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
STRATEGIC GROWTH FUND
CLASS A
4/1/09 to 9/30/09(9) $ 5.78 (0.01) 1.89 1.88 -- -- --
4/1/08 to 3/31/09 9.50 (0.03) (3.69) (3.72) -- -- --
5/1/07 to 3/31/08 9.99 (0.05) (0.44) (0.49) -- -- --
5/1/06 to 4/30/07 9.78 (0.06) 0.27 0.21 -- -- --
5/1/05 to 4/30/06 8.59 (0.06) 1.25 1.19 -- -- --
5/1/04 to 4/30/05 8.64 (0.06) 0.01 (0.05) -- -- --
5/1/03 to 4/30/04 7.17 (0.06) 1.53 1.47 -- -- --
CLASS B
4/1/09 to 9/30/09(9) $ 5.12 (0.03) 1.67 1.64 -- -- --
4/1/08 to 3/31/09 8.48 (0.08) (3.28) (3.36) -- -- --
5/1/07 to 3/31/08 8.98 (0.11) (0.39) (0.50) -- -- --
5/1/06 to 4/30/07 8.86 (0.12) 0.24 0.12 -- -- --
5/1/05 to 4/30/06 7.84 (0.12) 1.14 1.02 -- -- --
5/1/04 to 4/30/05 7.94 (0.11) 0.01 (0.10) -- -- --
5/1/03 to 4/30/04 6.64 (0.11) 1.41 1.30 -- -- --
CLASS C
4/1/09 to 9/30/09(9) $ 5.12 (0.04) 1.69 1.65 -- -- --
4/1/08 to 3/31/09 8.49 (0.08) (3.29) (3.37) -- -- --
5/1/07 to 3/31/08 8.99 (0.11) (0.39) (0.50) -- -- --
5/1/06 to 4/30/07 8.87 (0.11) 0.23 0.12 -- -- --
5/1/05 to 4/30/06 7.85 (0.12) 1.14 1.02 -- -- --
5/1/04 to 4/30/05 7.95 (0.11) 0.01 (0.10) -- -- --
5/1/03 to 4/30/04 6.65 (0.12) 1.42 1.30 -- -- --
CLASS I
4/1/09 to 9/30/09(9) $ 5.82 --(5) 1.90 1.90 -- -- --
4/1/08 to 3/31/09 9.54 (0.01) (3.71) (3.72) -- -- --
5/1/07 to 3/31/08 10.01 (0.03) (0.44) (0.47) -- -- --
9/29/06(7) to 4/30/07 9.26 (0.01) 0.76 0.75 -- -- --
TACTICAL ALLOCATION FUND
CLASS A
4/1/09 to 9/30/09(9) $ 6.33 0.08 1.43 1.51 (0.11) -- (0.11)
4/1/08 to 3/31/09 8.59 0.24 (2.18) (1.94) (0.26) (0.06) (0.32)
5/1/07 to 3/31/08 9.71 0.22 (0.48) (0.26) (0.23) (0.63) (0.86)
5/1/06 to 4/30/07 9.18 0.23 0.75 0.98 (0.24) (0.21) (0.45)
5/1/05 to 4/30/06 8.90 0.22 0.44 0.66 (0.24) (0.14) (0.38)
5/1/04 to 4/30/05 8.66 0.22 0.26 0.48 (0.24) -- (0.24)
5/1/03 to 4/30/04 7.92 0.22 0.76 0.98 (0.24) -- (0.24)
CLASS B
4/1/09 to 9/30/09(9) $ 6.39 0.05 1.44 1.49 (0.08) -- (0.08)
4/1/08 to 3/31/09 8.65 0.18 (2.18) (2.00) (0.20) (0.06) (0.26)
5/1/07 to 3/31/08 9.77 0.15 (0.48) (0.33) (0.16) (0.63) (0.79)
5/1/06 to 4/30/07 9.23 0.16 0.76 0.92 (0.17) (0.21) (0.38)
5/1/05 to 4/30/06 8.95 0.15 0.44 0.59 (0.17) (0.14) (0.31)
5/1/04 to 4/30/05 8.71 0.15 0.26 0.41 (0.17) -- (0.17)
5/1/03 to 4/30/04 7.96 0.16 0.76 0.92 (0.17) -- (0.17)
The footnote legend is at the end of the financial highlights.
See Notes to Financial Statements
38
RATIO OF GROSS
EXPENSES TO
NET NET AVERAGE RATIO OF NET
ASSET ASSETS, RATIO OF NET NET ASSETS INVESTMENT
CHANGE IN VALUE, END OF EXPENSES TO (BEFORE WAIVERS INCOME (LOSS) PORTFOLIO
NET ASSET END OF TOTAL PERIOD AVERAGE NET AND TO AVERAGE NET TURNOVER
VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS REIMBURSEMENTS) ASSETS RATE
- --------- ------- --------- -------------- ------------ ---------------- -------------- ---------
1.88 $ 7.66 32.53%(4) $140,802 1.50%(3) 1.50%(3) (0.38)%(3) 21%(4)
(3.72) 5.78 (39.16) 71,082 1.53 1.53 (0.43) 91
(0.49) 9.50 (4.90)(4) 133,119 1.44(3) 1.44(3) (0.53)(3) 75(4)
0.21 9.99 2.15 161,396 1.61 1.61 (0.61) 81
1.19 9.78 13.85 106,693 1.62 1.62 (0.66) 63
(0.05) 8.59 (0.58) 128,426 1.56 1.56 (0.67) 107
1.47 8.64 20.50 162,974 1.52 1.52 (0.73) 167
1.64 $ 6.76 32.03%(4) $ 4,255 2.25%(3) 2.25%(3) (1.13)%(3) 21%(4)
(3.36) 5.12 (39.62) 2,374 2.27 2.27 (1.18) 91
(0.50) 8.48 (5.57)(4) 6,242 2.19(3) 2.19(3) (1.27)(3) 75(4)
0.12 8.98 1.35 9,932 2.36 2.36 (1.36) 81
1.02 8.86 13.01 7,885 2.37 2.37 (1.41) 63
(0.10) 7.84 (1.26) 11,006 2.32 2.32 (1.40) 107
1.30 7.94 19.58 24,989 2.27 2.27 (1.48) 167
1.65 $ 6.77 32.23%(4) $ 5,597 2.24%(3) 2.24%(3) (1.15)%(3) 21%(4)
(3.37) 5.12 (39.69) 1,685 2.28 2.28 (1.18) 91
(0.50) 8.49 (5.56)(4) 3,625 2.19(3) 2.19(3) (1.27)(3) 75(4)
0.12 8.99 1.35 4,843 2.32 2.32 (1.30) 81
1.02 8.87 12.99 1,490 2.37 2.37 (1.42) 63
(0.10) 7.85 (1.26) 2,371 2.31 2.31 (1.42) 107
1.30 7.95 19.55 3,713 2.27 2.27 (1.48) 167
1.90 $ 7.72 32.65%(4) $ 4,022 1.26%(3) 1.26%(3) (0.11)%(3) 21%(4)
(3.72) 5.82 (38.99) 3,127 1.28 1.28 (0.18) 91
(0.47) 9.54 (4.70)(4) 5,689 1.19(3) 1.19(3) (0.27)(3) 75(4)
0.75 10.01 8.10(4) 7,208 1.27(3) 1.27(3) (0.24)(3) 81(4)
1.40 $ 7.73 23.91%(4) $194,049 1.38%(3) 1.38%(3) 2.24%(3) 91%(4)
(2.26) 6.33 (23.17) 163,586 1.33 1.33 3.19 86
(1.12) 8.59 (3.08)(4) 250,502 1.32(3) 1.32(3) 2.52(3) 44(4)
0.53 9.71 10.93 296,354 1.34 1.34 2.47 46
0.28 9.18 7.33 318,318 1.28 1.28 2.38 72
0.24 8.90 5.53 350,609 1.28 1.28 2.46 59
0.74 8.66 12.40 381,423 1.29 1.29 2.54 83
1.41 $ 7.80 23.39%(4) $ 2,354 2.13%(3) 2.13%(3) 1.50%(3) 91%(4)
(2.26) 6.39 (23.59) 2,217 2.08 2.08 2.38 86
(1.12) 8.65 (3.79)(4) 4,820 2.06(3) 2.06(3) 1.76(3) 44(4)
0.54 9.77 10.04 7,059 2.08 2.08 1.73 46
0.28 9.23 6.58 10,997 2.03 2.03 1.62 72
0.24 8.95 4.69 16,145 2.03 2.03 1.71 59
0.75 8.71 11.61 24,228 2.04 2.04 1.82 83
See Notes to Financial Statements
39
VIRTUS EQUITY TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET
ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
TACTICAL ALLOCATION FUND (CONTINUED)
CLASS C
4/1/09 to 9/30/09(9) $6.44 0.05 1.46 1.51 (0.08) -- (0.08)
4/1/08 to 3/31/09 8.73 0.18 (2.21) (2.03) (0.20) (0.06) (0.26)
5/1/07 to 3/31/08 9.86 0.16 (0.50) (0.34) (0.16) (0.63) (0.79)
5/1/06 to 4/30/07 9.31 0.16 0.77 0.93 (0.17) (0.21) (0.38)
5/1/05 to 4/30/06 9.02 0.15 0.45 0.60 (0.17) (0.14) (0.31)
5/1/04 to 4/30/05 8.78 0.15 0.26 0.41 (0.17) -- (0.17)
5/1/03 to 4/30/04 8.02 0.15 0.78 0.93 (0.17) -- (0.17)
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) For the Quality Large-Cap Value Fund, the ratio of net expenses to average
net assets excludes the effect of expense offsets for custodian fees; if
expense offsets were included, the ratio would have been 0.05% lower than
the ratio shown in the table.
(7) Inception date.
(8) Represents a blended Ratio, for more information regarding this see Note 3
in the Notes to Financial Statements.
(9) Unaudited.
(10) Includes extraordinary expenses. See Note 3 in the Notes to Financial
Statements.
See Notes to Financial Statements
40
RATIO OF GROSS
EXPENSES TO
NET NET AVERAGE RATIO OF NET
ASSET ASSETS, RATIO OF NET NET ASSETS INVESTMENT
CHANGE IN VALUE, END OF EXPENSES TO (BEFORE WAIVERS INCOME (LOSS) PORTFOLIO
NET ASSET END OF TOTAL PERIOD AVERAGE NET AND TO AVERAGE NET TURNOVER
VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS REIMBURSEMENTS) ASSETS RATE
- --------- ------- --------- -------------- ------------ ---------------- -------------- ---------
1.43 $7.87 23.52%(4) $1,216 2.13%(3) 2.13%(3) 1.48%(3) 91%(4)
(2.29) 6.44 (23.72) 800 2.08 2.08 2.38 86
(1.13) 8.73 (3.85)(4) 1,840 2.07(3) 2.07(3) 1.78(3) 44(4)
0.55 9.86 10.06 1,652 2.09 2.09 1.72 46
0.29 9.31 6.64 1,888 2.03 2.03 1.63 72
0.24 9.02 4.65 1,988 2.03 2.03 1.71 59
0.76 8.78 11.64 1,980 2.04 2.04 1.77 83
See Notes to Financial Statements
41
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
1. ORGANIZATION
Virtus Equity 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, 13 funds are offered for sale (each a
"Fund"), of which ten are reported in this semiannual report, each a
diversified Fund, and each having a distinct investment objective.
The Funds offer the following classes of shares for sale and have the
following investment objectives:
CLASS A CLASS B CLASS C CLASS I
INVESTMENT OBJECTIVE SHARES SHARES SHARES SHARES
-------------------- ------- ------- ------- -------
Each Fund seeks to provide
Growth & Income Fund capital appreciation and current income
Mid-Cap Core Fund long-term capital appreciation X X X X
Mid-Cap Growth Fund capital appreciation X -- X X
Quality Large-Cap Value Fund long-term capital appreciation X X X X
Quality Small-Cap Fund long-term capital appreciation X -- X X
long-term capital appreciation with dividend X -- X X
Small-Cap Core Fund income a secondary consideration
Small-Cap Growth Fund long-term growth of capital X X X X
Small-Cap Sustainable Growth Fund long-term capital appreciation X X X --
Strategic Growth Fund long-term capital growth X -- X X
Tactical Allocation Fund capital appreciation and income X X X X
X X X --
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 1% contingent deferred sales charge
("CDSC") may be imposed on certain redemptions made within one year
following purchases on which a finder's fee has been paid. The one-year
period begins on the last day of the month preceding the month in which the
purchase was made. Class B shares are sold with a contingent deferred sales
charge, which declines from 5% to zero depending on the period of time the
shares are held (see Note 12). Class C shares are sold with a 1% contingent
deferred sales charge if redeemed within one year of purchase. Class I
shares are sold without a sales charge.
Each class of shares has identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that each class bears
different distribution and/or service expenses and has exclusive voting
rights with respect to its distribution plan. Class I shares bear no
distribution and/or service expenses. Income and other expenses and
realized and unrealized gains and losses of each Fund are borne pro rata by
the holders of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount
of increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates and
those differences could be significant.
A. SECURITIES VALUATION:
Equity securities are valued at the official closing price (typically last
sale) on the exchange on which the securities are primarily traded, or if
no closing price is available, at the last bid price.
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service, which utilizes information with respect to
recent sales, market transactions in comparable securities, quotations from
dealers, and various relationships between securities in determining value.
Due to continued volatility in the current market, valuations developed
through pricing techniques may materially vary from the actual amounts
realized upon sale of the securities.
As required, some securities and assets may be valued at fair value as
determined in good faith by or under the direction of the Trustees.
Certain foreign common stocks may be fair valued in cases where closing
prices are not readily available or are deemed not reflective of readily
available market prices. For example, significant events (such as movement
in the U.S. securities market, or other regional and local developments)
may occur between the time that foreign markets close (where the security
is principally traded) and the time that the Fund calculates its net asset
value (generally, the close of the NYSE) that may impact the value of
securities traded in these foreign markets. In these cases, information
from an external vendor may be utilized to adjust closing market prices of
certain foreign common stocks to reflect their fair value. Because the
frequency of significant events is not predictable, fair valuation of
certain foreign common stocks may occur on a frequent basis.
Investments in underlying money market mutual funds are valued at each
fund's closing net asset value.
Short-term investments having a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market.
The Funds utilize a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels.
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - prices determined using other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, etc.)
- Level 3 - prices determined using significant unobservable inputs
(including the Fund's own assumptions in determining the fair value of
investments)
42
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
A summary of the inputs used to value each Fund's net assets by each major
security type is located at the end of each Fund's Schedule of Investments.
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date, or in the case of certain foreign
securities, as soon as the Fund is notified. Interest income is recorded on
the accrual basis. Each Fund amortizes premiums and accretes discounts
using the effective interest method. Realized gains and losses are
determined on the identified cost basis.
Dividend income is recorded using management's estimate of the income
included in distributions received from REIT investments. Distributions
received in excess of this estimated amount are recorded as a reduction of
the cost of investments or reclassified to capital gains. The actual
amounts of income, return of capital, and capital gains are only determined
by each REIT after its fiscal year-end, and may differ from the estimated
amounts.
C. INCOME TAXES:
Each Fund is treated as a separate taxable entity. It is the policy of each
Fund in the Trust to comply with the requirements of Subchapter M of the
Internal Revenue Code and to distribute substantially all of its taxable
income to its shareholders. Therefore, no provision for federal income
taxes or excise taxes has been made.
The Trust may be subject to foreign taxes on income, gains on investments
or currency repatriation, a portion of which may be recoverable. Each Fund
will accrue such taxes and recoveries as applicable based upon current
interpretations of the tax rules and regulations that exist in the markets
in which they invest.
Accounting for Uncertainty in Income Taxes sets forth a minimum threshold
for financial statement recognition of the benefit of a tax position taken
or expected to be taken in a tax return. Management has analyzed each
Fund's tax positions and has concluded that no provision for income tax is
required in any Fund's financial statements. The Funds are not aware of any
tax positions for which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next twelve
months. Each of the Funds' federal tax returns for the prior three fiscal
years remains subject to examination by the Internal Revenue Service.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by each Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted
in the United States of America. These differences may include the
treatment of non-taxable dividends, market premium and discount,
non-deductible expenses, expiring capital loss carryovers, foreign currency
gain or loss, gain or loss on futures contracts, partnerships, operating
losses and losses deferred due to wash sales. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to capital paid in on shares of beneficial interest.
E. EXPENSES:
Expenses incurred by the Trust with respect to more than one Fund are
allocated in proportion to the net assets of each Fund, except where
allocation of direct expenses to each Fund or an alternative allocation
method can be more appropriately made.
F. FOREIGN CURRENCY TRANSLATION:
Foreign securities and other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting
period. Cost of investments is translated at the currency exchange rate
effective at the trade date. The gain or loss resulting from a change in
currency exchange rates between the trade and settlement date of a
portfolio transaction is treated as a gain or loss on foreign currency.
Likewise, the gain or loss resulting from a change in currency exchange
rates between the date income is accrued and the date it is paid is treated
as a gain or loss on foreign currency. The Trust does not isolate that
portion of the results of operations arising from changes in exchange rates
or from fluctuations which arise due to changes in the market prices of
securities.
G. 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. 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. A loan is often administered by a bank or other financial
institution (the lender) that acts as agent for all holders. The agent
administers the terms of the loan, as specified in the loan agreement. When
investing in a loan participation, the Fund has the right to receive
payments of principal, interest and any fees to which it is entitled only
from the lender selling the loan agreement and only upon receipt by the
lender of payments from the borrower.
The Fund generally has no right to enforce compliance with the terms of the
loan agreement with the borrower. As a result, the Fund may be subject to
the credit risk of both the borrower and the lender that is selling the
loan agreement. When the Fund purchases assignments from lenders it
acquires direct rights against the borrower on the loan. Direct
indebtedness of emerging countries involves a risk that the government
entities responsible for the repayment of the debt may be unable, or
unwilling, to pay the principal and interest when due.
At September 30, 2009 the Funds did not have any open loan agreements.
H. SECURITIES LENDING:
Certain Funds may loan securities to qualified brokers through an agreement
with State Street Bank and Trust Company ("State Street"). Under the terms
of the agreement, the Funds are required to maintain collateral with a
market value not less than 100% of the market value of loaned securities.
Collateral is adjusted daily in connection with changes in the market value
of securities on loan. Collateral may consist of cash and securities issued
by the U.S. Government. Cash collateral is invested in a short-term money
market fund. Dividends earned on the collateral and premiums paid by the
borrower are recorded as income by the Fund net of fees charged by State
Street for its services in connection with this securities lending program.
Lending portfolio securities involves a risk of delay in the recovery of
the loaned securities or in the foreclosure on collateral.
At September 30, 2009, the Funds had no securities on loan.
3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
($ REPORTED IN THOUSANDS EXCEPT AS NOTED)
Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), is an indirect,
wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"). As
compensation for its services to the Trust, the Adviser is entitled
43
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
to a fee based upon the following annual rates as a percentage of the average
daily net assets of each Fund:
FIRST NEXT OVER
$50 $450 $500
MILLION MILLION MILLION
------- ------- -------
Small-Cap Growth Fund ......... 1.00% 0.90% 0.80%
$400+
FIRST MILLION
$400 THROUGH $1+
MILLION $1 BILLION BILLION
------- ---------- -------
Quality Small-Cap Fund ........ 0.90% 0.85% 0.80%
Small-Cap Sustainable Growth .. 0.90% 0.85% 0.80%
FIRST OVER
$500 $500
MILLION MILLION
------- -------
Mid-Cap Growth Fund ........... 0.80% 0.70%
$1+
FIRST BILLION
$1 THROUGH $2+
BILLION $2 BILLION BILLION
------- ---------- -------
Growth & Income Fund .......... 0.75% 0.70% 0.65%
Mid-Cap Core Fund ............. 0.80% 0.75% 0.70%
Quality Large-Cap Value Fund .. 0.75% 0.70% 0.65%
Small-Cap Core Fund ........... 0.85% 0.85% 0.85%
Strategic Growth Fund ......... 0.70% 0.65% 0.60%
Tactical Allocation Fund ...... 0.70% 0.65% 0.60%
The Adviser has voluntarily agreed to limit total Fund operating expenses
(excluding interest, taxes and extraordinary expenses) so that such expenses do
not exceed the following percentages of the average annual net asset values for
the following Funds. The voluntary agreement may be discontinued with respect to
any and all Funds at any time.
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
Growth & Income Fund .......... 1.25% 2.00% 2.00% 1.00%
Mid-Cap Growth Fund ........... 1.45% 2.20% 2.20% 1.20%
Quality Large-Cap Value Fund .. 1.35% N/A 2.10% 1.10%
Quality Small-Cap Fund ........ 1.55% N/A 2.30% 1.30%
Small-Cap Growth Fund ......... 1.67% 2.42% 2.42% N/A
Small-Cap Sustainable Growth
Fund ....................... 1.65% N/A 2.40% 1.40%
For the Mid-Cap Core Fund, the Adviser has contractually agreed to limit the
total operating expenses (excluding interest, taxes and extraordinary expenses)
until June 30, 2010, so that such expenses do not exceed, on an annual basis,
the following amounts:
CLASS A CLASS B CLASS C CLASS I
- ------- ------- ------- -------
1.35% N/A 2.10% 1.10%
For the Growth & Income Fund for the period ended September 30, 2009, the ratio
of net expenses to average net assets reported in the financial highlights
includes the effect of a $265 reimbursement of extraordinary legal expenses
incurred during the fiscal years ended March 31, 2008 and August 31, 2007, along
with an additional $96 of extraordinary expenses incurred in the current fiscal
period. If excluded, the net expense ratios for the period ended September 30,
2009 would have been as follows: Class A 1.25%, Class B 2.00%, Class C 2.00%,
Class I 1.00%.
The Adviser may recapture operating expenses waived or reimbursed under this
arrangement, within three fiscal years following the end of the fiscal year in
which such waiver or reimbursement occurred. Each Fund must pay its ordinary
operating expenses before the Adviser is entitled to any reimbursement and must
remain in compliance with applicable expense limitations. All or a portion of
the following Adviser reimbursed expenses may be recaptured by the fiscal years
ending:
EXPIRATION DATE
--------------------------
2010 2011 2012 TOTAL
---- ---- ---- -----
Growth & Income Fund ..... $ 7 $229 $347 $583
Mid-Cap Growth Fund ...... -- 57 136 193
Quality Large-Cap Value
Fund .................. -- -- 79 79
Quality Small-Cap Fund ... 9 40 244 293
Small-Cap Growth Fund .... -- -- 68 68
Small-Cap Sustainable
Growth Fund ........... 8 28 73 109
The Adviser manages the Funds' investment program and general operations of the
Funds, including oversight of the Funds' subadvisers. The subadvisers manage the
investments of the Funds for which they are paid a fee by the Adviser. The
subadvisers with respect to the Funds are indicated as follows:
FUND SUBADVISER
- ---- ----------
Mid-Cap Core Fund ................................... KAR*(3)
Mid-Cap Growth Fund ................................. HIM(2)
Quality Large-Cap Value Fund++ ...................... KAR*(3)
Quality Small-Cap Fund .............................. KAR*(3)
Small-Cap Core Fund ................................. KAR*(3)
Small-Cap Growth Fund ............................... EAM*(1)
Small-Cap Sustainable Growth Fund ................... KAR*(3)
Strategic Growth Fund ............................... SCM*(4)
Tactical Allocation Fund (Fixed Income Portfolio)+ .. SCM*(4)
(1) Engemann Asset Management
(2) Harris Investment Management, Inc. (a subsidiary of Harris Bankcorp, Inc.,
a minority investor in Virtus)
(3) Kayne Anderson Rudnick Investment Management, LLC
(4) SCM Advisors LLC
* an affiliate of Virtus
+ Effective June 4, 2009, SCM Advisors LLC became the Fund's Subadviser. For
the period April 1, 2009 through June 3, 2009, Goodwin Capital Advisers,
Inc. was the Subadviser.
++ Effective September 1, 2009, Kayne Anderson Rudnick Investment Management
became the Fund's Subadviser. For the period of April 1, 2009 through
August 31, 2009, Acadian Asset Management LLC was the Subadviser.
44
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
As distributor of each Fund's shares, VP Distributors, Inc. ("VP Distributors"),
an indirect wholly-owned subsidiary of Virtus, has advised the Fund that it
retained net selling commissions and deferred sales charges for the six-month
period ended (the "period") September 30, 2009, as follows:
CLASS A - CLASS B - CLASS C -
NET SELLING COMMISSIONS DEFERRED SALES CHARGES DEFERRED SALES CHARGES
----------------------- ---------------------- ----------------------
Growth & Income Fund ............... $ 2 $ 4 $--*
Mid-Cap Growth Fund ................ 4 2 --*
Quality Large-Cap Value Fund ....... 2 -- --*
Quality Small-Cap Fund ............. 1 -- 1
Small-Cap Core Fund ................ 1 --* 2
Small-Cap Growth Fund .............. 2 2 --*
Small-Cap Sustainable Growth Fund .. --* -- --*
Strategic Growth Fund .............. 2 2 --*
Tactical Allocation Fund ........... 2 1 --*
* AMOUNT IS LESS THAN $500 (NOT REPORTED IN THOUSANDS).
In addition, each Fund pays VP Distributors distribution and/or service fees at
an annual rate of 0.25% for Class A shares, 1.00% for Class B shares and 1.00%
for Class C shares applied to the average daily net assets of each respective
Class.
Under certain circumstances, shares of certain Virtus Mutual Funds may be
exchanged for shares of the same class of certain other Virtus Mutual Funds on
the basis of the relative net asset values per share at the time of the
exchange. On exchanges of share classes with CDSC, the CDSC schedule of the
original shares purchased continues to apply.
VP Distributors serves as the Administrator to the Trust. For the period ended
September 30, 2009, the Trust incurred administration fees totaling $328. VP
Distributors also serves as the Trust's transfer agent. For the period ended
September 30, 2009, transfer agent fees were $1,074 as reported in the
Statements of Operations.
At September 30, 2009, Virtus and its affiliates, Harris Bankcorp, Inc. (a
minority investor in Virtus), and the retirement plans of Virtus and its
affiliates, held shares of the Funds which may be redeemed at any time that
aggregated the following:
AGGREGATE
SHARES NET ASSETS
------- ----------
Mid-Cap Core Fund
Class A ...................... 10,000 $ 113
Class C ...................... 10,000 113
Class I ...................... 10,000 113
Quality Large-Cap Value Fund
Class I ...................... 9,247 77
Quality Small-Cap Fund
Class I ...................... 210,164 1,866
Small-Cap Sustainable Growth Fund
Class C ...................... 10,000 85
4. PURCHASES AND SALES OF SECURITIES
($ REPORTED IN THOUSANDS)
Purchases and sales of investment securities (excluding U.S. Government and
agency securities, short-term securities and forward currency contracts) during
the period ended September 30, 2009, were as follows:
PURCHASES SALES
--------- -------
Growth & Income Fund .......... $25,443 $50,275
Mid-Cap Core Fund ............. 353 38
Mid-Cap Growth Fund ........... 41,246 44,434
Quality Large-Cap Value Fund .. 75,042 91,323
Quality Small-Cap Fund ........ 5,337 6,771
Small-Cap Core Fund ........... 5,139 6,128
Small-Cap Growth Fund ......... 33,022 38,192
Small-Cap Sustainable
Growth Fund ................ 964 7,086
Strategic Growth Fund ......... 28,413 36,288
Tactical Allocation Fund ...... 55,396 90,347
The Tactical Allocation Fund had purchases of $108,546 and sales of $78,791 of
long-term U.S. Government and agency securities during the period ended
September 30, 2009.
45
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009
5. CAPITAL SHARE TRANSACTIONS
(REPORTED IN THOUSANDS)
Transactions in shares of capital stock, during the periods ended as indicated
below, were as follows:
SHARES AMOUNT SHARES AMOUNT
------ --------- ------ --------
Six Months Ended
September 30, 2009 Year Ended
(Unaudited) March 31, 2009
------------------ -----------------
GROWTH & INCOME FUND
CLASS A
Sale of shares 748 $ 8,951 984 $ 12,176
Reinvestment of distributions 81 928 95 1,284
Shares repurchased (2,164) (27,988) (2,598) (34,224)
------ -------- ------ --------
Net Increase / (Decrease) (1,335) $(18,109) (1,519) $(20,764)
====== ======== ====== ========
CLASS B
Sale of shares 13 $ 145 50 $ 625
Reinvestment of distributions 4 44 -- --
Shares repurchased (134) (1,530) (475) (6,298)
------ -------- ------ --------
Net Increase / (Decrease) (117) $ (1,341) (425) $ (5,673)
====== ======== ====== ========
CLASS C
Sale of shares 20 $ 235 75 $ 931
Reinvestment of distributions 15 169 1 9
Shares repurchased (186) (2,184) (606) (7,478)
------ -------- ------ --------
Net Increase / (Decrease) (151) $ (1,780) (530) $ (6,538)
====== ======== ====== ========
CLASS I
Sale of shares 6 $ 75 80 $ 922
Reinvestment of distributions 6 70 12 169
Shares repurchased (356) (4,443) (476) (6,918)
------ -------- ------ --------
Net Increase / (Decrease) (344) $ (4,298) (384) $ (5,827)
====== ======== ====== ========
From Inception,
June 22, 2009 to
September 30, 2009
(Unaudited)
------------------
MID-CAP CORE FUND
CLASS A
Sale of shares 12 $125
--- ----
Net Increase / (Decrease) 12 $125
=== ====
CLASS C
Sale of shares 10 $100
--- ----
Net Increase / (Decrease) 10 $100
=== ====
Sale of shares 10 $100
--- ----
Net Increase / (Decrease) 10 $100
=== ====
46
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009
SHARES AMOUNT SHARES AMOUNT
------ -------- ------ --------
Six Months Ended
September 30, 2009 Year Ended
(Unaudited) March 31, 2009
------------------- -------------------
MID-CAP GROWTH FUND
CLASS A
Sale of shares 281 $ 3,062 406 $ 4,721
Shares repurchased (512) (5,647) (1,058) (13,070)
------ -------- ------ --------
Net Increase / (Decrease) (231) $ (2,585) (652) $ (8,349)
====== ======== ====== ========
CLASS B
Sale of shares 13 $ 120 44 $ 465
Shares repurchased (147) (1,409) (365) (3,914)
------ -------- ------ --------
Net Increase / (Decrease) (134) $ (1,289) (321) $ (3,449)
====== ======== ====== ========
CLASS C
Sale of shares 127 $ 1,178 20 $ 168
Shares repurchased (49) (456) (127) (1,442)
------ -------- ------ --------
Net Increase / (Decrease) 78 $ 722 (107) $ (1,274)
====== ======== ====== ========
CLASS I
Sale of shares 9 $ 100 17 $ 161
Shares repurchased (10) (113) (30) (273)
------ -------- ------ --------
Net Increase / (Decrease) (1) $ (13) (13) $ (112)
====== ======== ====== ========
QUALITY LARGE-CAP VALUE FUND
CLASS A
Sale of shares 369 $ 2,545 1,003 $ 8,140
Reinvestment of distributions 58 399 44 338
Shares repurchased (2,431) (18,442) (2,643) (23,963)
------ -------- ------ --------
Net Increase / (Decrease) (2,004) $(15,498) (1,596) $(15,485)
====== ======== ====== ========
CLASS C
Sale of shares 24 $ 173 104 $ 641
Reinvestment of distributions 2 15 --(1) 3
Shares repurchased (92) (661) (484) (4,219)
------ -------- ------ --------
Net Increase / (Decrease) (66) $ (473) (380) $ (3,575)
====== ======== ====== ========
CLASS I
Sale of shares --(1) $ 3 9 $ 100
Reinvestment of distributions --(1) 1 --(1) 1
Shares repurchased -- -- -- --
------ -------- ------ --------
Net Increase / (Decrease) --(1) $ 4 9 $ 101
====== ======== ====== ========
QUALITY SMALL-CAP FUND
CLASS A
Sale of shares 691 $ 5,540 3,361 $ 23,505
Reinvestment of distributions 26 187 22 180
Shares repurchased (765) (6,166) (953) (7,251)
------ -------- ------ --------
Net Increase / (Decrease) (48) $ (439) 2,430 $ 16,434
====== ======== ====== ========
(1) Shares fewer than 500.
47
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009
SHARES AMOUNT SHARES AMOUNT
------ -------- ------ --------
Six Months Ended
September 30, 2009 Year Ended
(Unaudited) March 31, 2009
------------------- -------------------
QUALITY SMALL-CAP FUND (CONTINUED)
CLASS C
Sale of shares 99 $ 747 81 $ 692
Reinvestment of distributions 1 6 2 16
Shares repurchased (26) (208) (73) (533)
------ -------- ------ --------
Net Increase / (Decrease) 74 $ 545 10 $ 175
====== ======== ====== ========
CLASS I
Sale of shares 1,315 $ 10,574 3,836 $ 34,591
Reinvestment of distributions 44 319 121 996
Shares repurchased (1,085) (8,485) (3,461) (27,168)
------ -------- ------ --------
Net Increase / (Decrease) 274 $ 2,408 496 $ 8,419
====== ======== ====== ========
SMALL-CAP CORE FUND
CLASS A
Sale of shares 86 $ 997 160 $ 1,828
Reinvestment of distributions -- -- 125 1,740
Shares repurchased (169) (1,984) (548) (6,771)
------ -------- ------ --------
Net Increase / (Decrease) (83) $ (987) (263) $ (3,203)
====== ======== ====== ========
CLASS B
Sale of shares 1 $ 14 6 $ 66
Reinvestment of distributions -- -- 10 127
Shares repurchased (13) (142) (49) (609)
------ -------- ------ --------
Net Increase / (Decrease) (12) $ (128) (33) $ (416)
====== ======== ====== ========
CLASS C
Sale of shares 73 $ 828 65 $ 686
Reinvestment of distributions -- -- 33 434
Shares repurchased (35) (379) (221) (2,595)
------ -------- ------ --------
Net Increase / (Decrease) 38 $ 449 (123) $ (1,475)
====== ======== ====== ========
CLASS I
Sale of shares 288 $ 3,641 755 $ 8,235
Reinvestment of distributions -- -- 189 2,695
Shares repurchased (186) (2,101) (1,246) (13,835)
------ -------- ------ --------
Net Increase / (Decrease) 102 $ 1,540 (302) $ (2,905)
====== ======== ====== ========
SMALL-CAP GROWTH FUND
CLASS A
Sale of shares 77 $ 1,547 223 $ 5,428
Shares repurchased (287) (6,282) (607) (14,130)
------ -------- ------ --------
Net Increase / (Decrease) (210) $ (4,735) (384) $ (8,702)
====== ======== ====== ========
CLASS B
Sale of shares 6 $ 108 17 $ 363
Shares repurchased (66) (1,218) (241) (5,396)
------ -------- ------ --------
Net Increase / (Decrease) (60) $ (1,110) (224) $ (5,033)
====== ======== ====== ========
48
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009
SHARES AMOUNT SHARES AMOUNT
------ ------- ------ --------
Six Months Ended
September 30, 2009 Year Ended
(Unaudited) March 31, 2009
------------------- -------------------
SMALL-CAP GROWTH FUND (CONTINUED)
CLASS C
Sale of shares 5 $ 98 6 $ 140
Shares repurchased (22) (412) (125) (2,747)
------ ------- ------ --------
Net Increase / (Decrease) (17) $ (314) (119) $ (2,607)
====== ======= ====== ========
SMALL-CAP SUSTAINABLE GROWTH FUND
CLASS A
Sale of shares 98 $ 732 455 $ 4,243
Shares repurchased (324) (2,764) (1,029) (8,332)
------ ------- ------ --------
Net Increase / (Decrease) (226) $(2,032) (574) $ (4,089)
====== ======= ====== ========
CLASS C
Sale of shares 15 $ 115 20 $ 167
Shares repurchased (3) (19) (13) (88)
------ ------- ------ --------
Net Increase / (Decrease) 12 $ 96 7 $ 79
====== ======= ====== ========
CLASS I
Sale of shares 76 $ 575 1,221 $ 9,609
Shares repurchased (575) (4,570) (899) (5,853)
------ ------- ------ --------
Net Increase / (Decrease) (499) $(3,995) 322 $ 3,756
====== ======= ====== ========
STRATEGIC GROWTH FUND
CLASS A
Sale of shares 325 $ 2,197 306 $ 2,357
Plan of Reorganization (Note 11) 7,016 44,358 -- --
Shares repurchased (1,254) (8,677) (2,012) (14,759)
------ ------- ------ --------
Net Increase / (Decrease) 6,087 $37,878 (1,706) $(12,402)
====== ======= ====== ========
CLASS B
Sale of shares 21 $ 128 41 $ 280
Plan of Reorganization (Note 11) 292 1,633 -- --
Shares repurchased (147) (882) (313) (2,140)
------ ------- ------ --------
Net Increase / (Decrease) 166 $ 879 (272) $ (1,860)
====== ======= ====== ========
CLASS C
Sale of shares 21 $ 128 19 $ 119
Plan of Reorganization (Note 11) 749 4,197 -- --
Shares repurchased (272) (1,628) (117) (744)
------ ------- ------ --------
Net Increase / (Decrease) 498 $ 2,697 (98) $ (625)
====== ======= ====== ========
CLASS I
Sale of shares 12 $ 80 16 $ 109
Plan of Reorganization (Note 11) -- -- -- --
Shares repurchased (29) (191) (75) (473)
------ ------- ------ --------
Net Increase / (Decrease) (17) $ (111) (59) $ (364)
====== ======= ====== ========
49
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009
SHARES AMOUNT SHARES AMOUNT
------ -------- ------ --------
Six Months Ended
September 30, 2009 Year Ended
(Unaudited) March 31, 2009
------------------- -------------------
TACTICAL ALLOCATION FUND
CLASS A
Sale of shares 163 $ 1,175 325 $ 2,428
Reinvestment of distributions 298 2,161 937 7,015
Shares repurchased (1,204) (8,700) (4,576) (33,758)
------ ------- ------ --------
Net Increase / (Decrease) (743) $(5,364) (3,314) $(24,315)
====== ======= ====== ========
CLASS B
Sale of shares 21 $ 151 30 $ 225
Reinvestment of distributions 3 23 14 104
Shares repurchased (69) (498) (254) (1,988)
------ ------- ------ --------
Net Increase / (Decrease) (45) $ (324) (210) $ (1,659)
====== ======= ====== ========
CLASS C
Sale of shares 34 $ 249 21 $ 145
Reinvestment of distributions 1 9 3 26
Shares repurchased (5) (34) (111) (941)
------ ------- ------ --------
Net Increase / (Decrease) 30 $ 224 (87) $ (770)
====== ======= ====== ========
50
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
6. 10% SHAREHOLDERS
At September 30, 2009, the Funds had individual shareholder accounts and/or
omnibus shareholder accounts (comprised of a group of individual
shareholders), which amounted to more than 10% of the total shares
outstanding of the Funds as detailed below.
% OF NUMBER OF
SHARES ACCOUNTS
------ ---------
Mid-Cap Core Fund
Class A ...................... 31 1*
Class C ...................... 31 1*
Class I ...................... 31 1*
Small-Cap Sustainable Growth Fund
Class A ...................... 40 2*
Class I ...................... 34 1
* INCLUDES SHAREHOLDER ACCOUNT AFFILIATED WITH VIRTUS.
7. INDEMNIFICATIONS
Under the Funds' organizational documents, their Trustees and Officers are
indemnified against certain liabilities arising out of the performance of
their duties to the Funds. In addition, the Funds enter into contracts that
contain a variety of indemnifications. The Funds' maximum exposure under
these arrangements is unknown. However, the Funds have not had prior claims
or losses pursuant to these arrangements.
8. REGULATORY EXAMS
Federal and state regulatory authorities from time to time make inquiries
and conduct examinations regarding compliance by Virtus and its
subsidiaries (collectively "the Company") with securities and other laws
and regulations affecting their registered products.
There are currently no such matters which the Company believes will be
material to these financial statements.
9. FEDERAL INCOME TAX INFORMATION
($ REPORTED IN THOUSANDS)
At September 30, 2009, federal tax cost and aggregate gross unrealized
appreciation (depreciation) of securities held by the Funds were as
follows:
NET UNREALIZED
FEDERAL UNREALIZED UNREALIZED APPRECIATION
FUND TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
- ---- -------- ------------ -------------- --------------
Growth & Income Fund ............... $112,340 $33,299 $(1,891) $31,408
Mid-Cap Core Fund .................. 330 38 (2) 36
Mid-Cap Growth Fund ................ 75,872 12,867 (4,994) 7,873
Quality Large-Cap Value Fund ....... 43,431 2,188 (335) 1,853
Quality Small-Cap Fund ............. 79,341 11,035 (4,901) 6,134
Small-Cap Core Fund ................ 38,081 8,613 (63) 8,550
Small-Cap Growth Fund .............. 50,895 12,031 (2,004) 10,027
Small-Cap Sustainable Growth Fund .. 4,975 1,178 (336) 842
Strategic Growth Fund .............. 134,759 26,426 (5,690) 20,736
Tactical Allocation Fund ........... 175,431 25,157 (2,928) 22,229
The Funds have capital loss carryovers which may be used to offset future
capital gains, as follows:
EXPIRATION YEAR
--------------------------------------------------------------
2010 2011 2012 2014 2016 2017 TOTAL
------- ------- ------ ---- ------ ------- -------
Growth & Income Fund .......... $ 9,552 $18,605 $2,953 $ -- $ -- $ 6,192 $37,302
Mid-Cap Growth Fund ........... 30,519 -- -- -- 3,884 9,046 43,449
Quality Large-Cap Value Fund .. -- 407 -- -- -- 25,023 25,430
Quality Small-Cap Fund ........ -- -- -- -- -- 2,331 2,331
Small-Cap Core Fund ........... -- -- -- -- -- 4,753 4,753
Small-Cap Growth Fund ......... 66,001 8,840 -- -- -- 3,054 77,895
Small-Cap Sustainable
Growth Fund ................ -- -- -- 2 310 1,243 1,555
Strategic Growth Fund ......... 39,493 13,554 329 686 -- 15,188 69,250
Tactical Allocation Fund ...... -- -- -- -- -- 2,539 2,539
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.
51
VIRTUS EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
10. CREDIT RISK AND ASSET CONCENTRATIONS
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such
investments may be volatile. The consequences of political, social or
economic changes in these markets may have disruptive effects on the market
prices of these investments and the income they generate, as well as a
Fund's ability to repatriate such amounts.
High-yield/high-risk securities typically entail greater price volatility
and/or principal and interest rate risk. There is a greater chance that an
issuer will not be able to make principal and interest payments on time.
Analysis of the creditworthiness of issuers of high-yield securities may be
complex, and as a result, it may be more difficult for the Adviser and/or
Subadviser to accurately predict risk.
Lack of liquidity in an ETF could result in its value being more volatile
than the underlying portfolio of securities. Sector ETFs are subject to
sector risks and non-diversification risks, which may result in greater
price fluctuations than the overall market. When a Fund invests in ETFs, it
indirectly bears its proportionate share of the operating expenses of the
underlying funds. Indirectly, the Fund is subject to all risks associated
with the underlying ETFs.
Certain Funds may invest a high percentage of their assets in specific
sectors of the market in their pursuit of a greater investment return.
Fluctuations in these sectors of concentration may have a greater impact on
a Fund, positive or negative, than if a Fund did not concentrate its
investments in such sectors.
At September 30, 2009, the Funds listed held securities issued by various
companies in specific sectors as detailed below:
PERCENTAGE
OF TOTAL
FUND SECTOR INVESTMENTS
- ---- ---------------------- -----------
Mid-Cap Core Fund ....... Industrials 25%
Mid-Cap Growth Fund ..... Information Technology 25
Quality Small-Cap Fund .. Industrials 27
Small-Cap Core Fund ..... Industrials 25
Small-Cap Growth Fund ... Information Technology 31
Small-Cap Sustainable
Growth Fund .......... Information Technology 31
Strategic Growth Fund ... Information Technology 36
11. PLAN OF REORGANIZATION
(ALL AMOUNTS EXCEPT FOR THE PER SHARE AMOUNTS ARE REPORTED IN THOUSANDS)
On April 24, 2009, the Virtus Strategic Growth Fund (the "Strategic Growth
Fund") acquired all of the net assets of the Virtus All-Cap Growth Fund
("All-Cap Growth Fund") pursuant to an Agreement and Plan of Reorganization
approved by the shareholders of the Virtus All-Cap Growth Fund, a former
series of Virtus Equity Trust, at a reconvened special meeting of
shareholders of All-Cap Growth Fund, held on April 21, 2009. The
acquisition was accomplished by a tax-free exchange of 7,016 Class A
shares, 292 Class B shares, and 749 Class C shares of the All-Cap Growth
Fund outstanding on April 24, 2009 (valued at $44,358, $1,633, and $4,197,
respectively) for Class A shares, Class B shares, and Class C shares of the
Strategic Growth Fund outstanding on April 24, 2009. The All-Cap Growth
Fund had net assets on that date of $50,189 including $5,314 of net
unrealized depreciation which were combined with those of the Strategic
Growth Fund. The aggregate net assets of the Strategic Growth Fund
immediately after the merger were $135,437. The shareholders of the All-Cap
Growth Fund received for each share owned 1.33, 1.20, and 1.20 shares of
Class A, B and C shares, respectively, of the Strategic Growth Fund.
12. SUBSEQUENT EVENT EVALUATIONS
Management has evaluated the impact of all subsequent events on the Funds
through November 19, 2009, the date the financial statements were available
for issuance, and has determined that the following subsequent events
require recognition or disclosure in the financial statements.
Effective December 1, 2009 (the "Closing Date"), Class B Shares of the
Virtus Mutual Funds will no longer be available for purchase by new or
existing shareholders, except by existing shareholders through Qualifying
Transactions (for information regarding Qualifying Transactions refer to
each Fund's prospectus).
52
CONSIDERATION OF ADVISORY AND SUBADVISORY AGREEMENTS
FOR VIRTUS MID-CAP CORE FUND (THE "FUND")
BY THE BOARD OF TRUSTEES
(UNAUDITED)
The Board of Trustees of Virtus Equity Trust (the "Trust"), along with the
Boards of Trustees of the other trusts in the Virtus family of funds
(collectively, the "Board"), is responsible for determining whether to approve
the entering into and continuation of the investment advisory and subadvisory
agreement (each, an "Agreement") for the Virtus Mutual Funds including the Fund.
At a meeting held on February 24-25, 2009, the Board, including a majority of
the Trustees who are not interested persons as defined in Section 2(a)(19) of
the Investment Company Act of 1940, considered and approved the Agreements for
the Fund, as further discussed below. In approving the Agreements, the Board
determined that the retention of the adviser and subadviser was in the best
interests of the Fund and its shareholders.
In reaching their decisions, the Board considered information for other Virtus
Mutual Funds furnished throughout the year at regular Board meetings as well as
information prepared specifically in connection with the approval review
process. During the approval review process, the Board received assistance and
advice from and met separately with independent legal counsel. The Board's
determination contemplated a number of factors that the Trustees believed to be
relevant. Some of the factors that the Board considered are described below,
although the Trustees did not identify any particular information or factor as
controlling, but, instead, the Board considered the Agreements in the totality
of the circumstances. Each individual Trustee may have evaluated the information
presented differently, giving different weights to different factors.
NATURE, EXTENT AND QUALITY OF SERVICES. The Fund is managed using a "manager of
managers" structure that generally involves the use of one or more subadvisers
to manage some or all of the Fund's portfolio. Under this structure, Virtus
Investment Advisers, Inc. ("VIA") is responsible for evaluating and selecting
subadvisers on an ongoing basis and for making any recommendations to the Board
regarding hiring, retaining or replacing subadvisers. Therefore, in considering
the Agreement with VIA as adviser the Trustees considered VIA's existing process
for supervising and managing the other Virtus Mutual Fund subadvisers, including
(a) VIA's ability to select and monitor the subadvisers; (b) VIA's ability to
provide the services necessary to monitor the subadvisers' compliance with the
Fund's investment objective, policies and restrictions as well as provide other
oversight activities; and (c) VIA's ability and willingness to identify
instances in which a subadviser should be replaced and to carry out the required
changes. The Trustees also considered: (d) the experience, capability and
integrity of VIA's management and other personnel; (e) the financial position of
VIA; (f) the quality of VIA's own regulatory and legal compliance policies,
procedures and systems; (g) the nature, extent and quality of administrative and
other services provided by VIA to the Virtus Mutual Funds; and (h) VIA's
supervision of the Virtus Mutual Funds' other service providers. Finally, the
Board also noted the extent of benefits that are provided to Virtus Mutual Fund
shareholders as a result of being part of the Virtus family of funds, including
the right to exchange investments between the same class of Virtus Mutual Funds
without a sales charge, the ability to reinvest Virtus Mutual Fund dividends
into other Virtus Mutual Funds and the right to combine holdings in other Virtus
Mutual Funds to obtain a reduced sales charge.
With respect to the subadvisory Agreement, the Board noted that Kayne Anderson
Rudnick Investment Management, LLC (the "Subadviser") provided information with
respect to portfolio management, compliance with the Fund's investment policies
and procedures, and compliance with applicable securities laws and assurances
thereof. In considering the approval of the subadvisory Agreement, the Board
considered the Subadviser's investment management process, including (a) the
experience, capability and integrity of the Subadviser's management and other
personnel committed by the Subadviser to manage the Fund; (b) the financial
position of the Subadviser; (c) the quality and commitment of the Subadviser's
regulatory and legal compliance policies, procedures and systems and (d) the
Subadviser's brokerage and trading practices.
After considering all of the information provided to them, the Trustees
concluded that the nature, extent and quality of the services provided by VIA
and the Subadviser were reasonable and beneficial to the Fund and its
shareholders.
INVESTMENT PERFORMANCE. Because the Fund had not commenced operations, the Board
could not evaluate prior investment performance for the Fund. The Board noted
that the Subadviser would attempt to build a diversified portfolio for the Fund
of stocks of high-quality companies, purchased at discount values. The Board
then reviewed the performance of the Subadviser's composite of accounts with
substantially similar investment objectives, strategies and policies to the
Fund.
PROFITABILITY. The Board also considered the level of profits to be realized by
VIA and its affiliates in connection with the operation of the Fund, noting
VIA's intention to cap the Fund's total expenses during the startup phase. The
Board noted that the profitability appeared reasonable and concluded that the
profitability to VIA from the Fund was reasonable in light of the quality of all
services rendered to the Fund by VIA and its affiliates and the expense caps to
be implemented.
The Board did not separately review profitability information for the
Subadviser, noting that the subadvisory fees are paid by VIA rather than by the
Fund.
MANAGEMENT FEES AND TOTAL EXPENSES. In evaluating the management
fees and total expenses of the Fund, the Board reviewed information provided by
VIA and comparisons to other funds in the Fund's peer group. As noted above, the
Board also noted the reimbursements that would be provided to the Fund in order
to limit the total expenses incurred by the Fund and its shareholders. Based
upon the information presented by VIA, the Trustees determined that the
management fees charged by VIA and the total expenses of the Fund were
reasonable.
The Board acknowledged that the subadvisory fees to be paid would be paid by VIA
and not by the Fund. The Board noted that the subadvisory fees appeared to be
reasonable in light of the quality of services to be rendered by the Subadviser.
ECONOMIES OF SCALE. The Board noted that the management fees for the Fund
included breakpoints based on assets under management, and contractual
reimbursements which would also be in place for the Fund. The Board determined
that VIA and the Fund likely would achieve certain economies of scale,
particularly in relationship to certain fixed costs, and shareholders of the
Fund would have an opportunity to benefit from these economies of scale.
In considering the subadvisory Agreement, the Board also considered the
existence of any economies of scale and whether they would be passed along to
the Fund's shareholders, but noted that any such economies would likely be
generated at the Fund level rather than at the Subadviser level.
After considering the information presented, the Board approved the Agreements.
53
CONSIDERATION OF ADVISORY AND SUBADVISORY AGREEMENTS
FOR VIRTUS QUALITY LARGE-CAP VALUE FUND
(F/K/A VIRTUS VALUE OPPORTUNITIES FUND) (THE "FUND")
BY THE BOARD OF TRUSTEES
(UNAUDITED)
The Board of Trustees (the "Board") of Virtus Equity Trust (the "Trust"),
including a majority of the Trustees who are not interested persons as defined
in Section 2(a)(19) of the Investment Company Act of 1940, last renewed the
investment advisory agreement between Virtus Investment Advisers, Inc. ("VIA" or
the "Adviser") and the Fund (the "Advisory Agreement") and the investment
subadvisory agreement between the Adviser and Acadian Asset Management, Inc.
("Acadian") at a meeting held on November 18-20, 2008. At a Board meeting held
on June 3-4, 2009, Fund Management proposed that Kayne Anderson Rudnick
Investment Management, LLC ("Kayne" or the "Subadviser") be appointed as the new
subadviser in place of Acadian, and that the Adviser enter into a new
subadvisory agreement with Kayne (the "Subadvisory Agreement"). The Board
considered and approved the Subadvisory Agreement for the Fund with Kayne, as
further discussed below. In approving the Subadvisory Agreement, the Board
determined that the retention of the Subadviser was in the best interests of the
Fund and its shareholders. After approval by the Board and subsequent approval
by shareholders, the Subadvisory Agreement became effective on September 1,
2009.
In evaluating the proposal to appoint Kayne, the Board requested and evaluated
information provided by the Adviser and Kayne which, in the Board's view,
constituted information necessary for the Board to form a judgment as to whether
the subadviser change would be in the best interests of the Fund and its
shareholders. Prior to making its final decision, the Board met privately with
their independent counsel to discuss the information provided.
BASIS FOR THE BOARD'S RECOMMENDATION. In their deliberations, the Trustees did
not identify any particular information that was all-important or controlling,
and each Trustee attributed different weights to the various factors. In
determining to approve this proposal, the Trustees considered various factors,
including:
- - the nature, extent and quality of the services to be provided by the
Subadviser, pursuant to its proprietary model incorporating fundamental
investment analysis strategy. The Trustees reviewed biographical
information for the portfolio manager who would be providing services under
the Subadvisory Agreement and noted the breadth and depth of experience of
the team leader;
- - the rate of the investment subadvisory fee that would be paid by VIA (and
not the Fund) under the Subadvisory Agreement, and the advisory fee paid by
the Fund, both of which would remain unchanged from the fees paid under the
Advisory Agreement and previous subadvisory agreement;
- - the prior performance of a composite of all discretionary private accounts
managed by the Subadviser with substantially similar investment objectives,
strategies and policies as the Fund, which outperformed the Fund and the
Russell 1000 Value Index over the one-, two- and three-year periods and the
year-to-date period, all through April 30, 2009; and
- - the fact that while the Subadviser is an affiliate of VIA, there are no
other tangible benefits to the Subadviser or VIA in the Subadviser
providing investment advisory services to the Fund, other than the fee to
be earned under the Subadvisory Agreement (although there may be certain
intangible benefits gained to the extent that serving the Fund could
enhance the Subadviser's reputation in the marketplace and therefore enable
the Subadviser to attract additional client relationships).
In considering the profitability to the Subadviser of its relationship with the
Fund, the Board noted that the fees under the Subadvisory Agreement were paid by
VIA out of the advisory fees that it receives under the advisory agreement, and
that the subadvisory fees would be paid at the same level as under the previous
subadvisory agreement. For these reasons, the profitability to the Subadviser of
its relationship with the Fund was not a material factor in the Board's
deliberations at this time. For similar reasons, the Board did not consider the
potential economies of scale in the Subadviser's management of the Fund to be a
material factor in its consideration at this time. Based on all the foregoing
considerations, the Board concluded that the proposed Subadvisory Agreement was
favorable for shareholders because shareholders could benefit from management of
the Fund's assets by the large-cap value investment team at the Subadviser.
54
RESULTS OF SHAREHOLDER MEETING
VIRTUS EQUITY TRUST
APRIL 21, 2009
(UNAUDITED)
At a reconvened special meeting of shareholders of Virtus All-Cap Growth Fund, a
former series of Virtus Equity Trust, held on April 21, 2009, shareholders voted
on the following proposal:
NUMBER OF ELIGIBLE SHARES VOTED:
FOR AGAINST ABSTAIN
-------------- ----------- -----------
To approve an Agreement and Plan of
Reorganization to merge Virtus All-Cap
Growth Fund, a former series of Virtus
Equity Trust, into Virtus Strategic Growth
Fund, a series of Virtus Equity Trust ...... 2,793,349.802 104,024.651 356,474.587
Shareholders of the Fund voted to approve the above proposal.
RESULTS OF SHAREHOLDER MEETING
VIRTUS EQUITY TRUST
JUNE 4, 2009
(UNAUDITED)
At a special meeting of shareholders of Virtus Tactical Allocation Fund
(formerly known as Virtus Income & Growth Fund), a series of Virtus Equity
Trust, held on June 4, 2009, shareholders voted on the following proposal:
NUMBER OF ELIGIBLE SHARES VOTED:
FOR AGAINST ABSTAIN
-------------- ----------- -----------
To approve a Subadvisory Agreement between
Virtus Investment Advisers, Inc. and SCM
Advisors, LLC with regard to Virtus Tactical
Allocation Fund ............................ 12,684,751.785 577,752.214 805,385.125
Shareholders of the Fund voted to approve the above proposal.
RESULTS OF SHAREHOLDER MEETING
VIRTUS EQUITY TRUST
AUGUST 31, 2009
(UNAUDITED)
At a special meeting of shareholders of Virtus Quality Large-Cap Value Fund
(formerly known as Virtus Value Opportunities Fund) (the "Fund"), a series of
Virtus Equity Trust, held on August 31, 2009, shareholders voted on the
following proposal:
NUMBER OF ELIGIBLE SHARES VOTED:
FOR AGAINST ABSTAIN
-------------- ----------- -----------
To approve a Subadvisory Agreement between
Virtus Investment Advisers, Inc. and Kayne
Anderson Rudnick Investment Management, LLC
on behalf of the Fund ..................... 3,369,868.291 86,436.526 249,831.273
Shareholders of the Fund voted to approve the above proposal.
55
VIRTUS EQUITY TRUST
101 Munson Street
Greenfield, MA 01301-9668
TRUSTEES
George R. Aylward
Leroy Keith, Jr.
Philip R. McLoughlin, Chairman
Geraldine M. McNamara
James M. Oates
Richard E. Segerson
Ferdinand L.J. Verdonck
OFFICERS
George R. Aylward, President
Nancy G. Curtiss, Senior Vice President
Francis G. Waltman, Senior Vice President
Marc Baltuch, Vice President and Chief
Compliance Officer
W. Patrick Bradley, Chief Financial Officer and Treasurer
Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary
INVESTMENT ADVISER
Virtus Investment Adviser, Inc.
100 Pearl Street
Hartford, CT 06103-4506
PRINCIPAL UNDERWRITER
VP Distributors, Inc.
100 Pearl Street
Hartford, CT 06103-4506
TRANSFER AGENT
VP Distributors, Inc.
100 Pearl Street
Hartford, CT 06103-4506
CUSTODIAN
PFPC Trust Company
8800 Tinicum Boulevard
Philadelphia, PA 19155-3111
State Street Bank and Trust Company
P.O. Box 5501
Boston, MA 02206-5501
HOW TO CONTACT US
Mutual Fund Services 1-800-243-1574
Adviser Consulting Group 1-800-243-4361
Telephone Orders 1-800-367-5877
Text Telephone 1-800-243-1926
Web site Virtus.com
IMPORTANT NOTICE TO SHAREHOLDERS
The Securities and Exchange Commission has modified mailing regulations for
semiannual and annual shareholder fund reports to allow mutual fund companies to
send a single copy of these reports to shareholders who share the same mailing
address. If you would like additional copies, please call Mutual Fund Services
at 1-800-243-1574.
[GRAPHIC OMITTED] PRSRT STD
VIRTUS U.S. POSTAGE
MUTUAL FUNDS PAID
LANCASTER,
PA
PERMIT 1793
c/o State Street Bank and Trust Company
P.O. Box 8301
Boston, MA 02266-8301
For more information about Virtus mutual funds, please call your financial
representative, contact us at 1-800-243-1574 or Virtus.com.
8029 11-09
SEMIANNUAL
REPORT
[GRAPHIC OMITTED]
VIRTUS
MUTUAL FUNDS
================================================================================
Virtus Balanced Fund
================================================================================
TRUST NAME: September 30, 2009 [Graphic Omitted]
VIRTUS Eligible shareholders
EQUITY can sign up for
TRUST eDelivery at Virtus.com
NO BANK GUARANTEE NOT FDIC INSURED MAY LOSE VALUE
TABLE OF CONTENTS
VIRTUS BALANCED FUND ("Balanced Fund")
Message to Shareholders ............................................. 1
Disclosure of Fund Expenses ......................................... 3
Schedule of Investments ............................................. 5
Statement of Assets and Liabilities ................................. 13
Statement of Operations ............................................. 14
Statement of Changes in Net Assets .................................. 15
Financial Highlights ................................................ 16
Notes to Financial Statements ....................................... 18
Consideration of Subadvisory Agreement by
the Board of Trustees ............................................ 25
Results of Shareholder Meeting ...................................... 27
- --------------------------------------------------------------------------------
PROXY VOTING PROCEDURES (FORM N-PX)
The adviser and subadviser vote proxies relating to portfolio securities in
accordance with procedures that have been approved by the Trust's Board of
Trustees. You may obtain a description of these procedures, along with
information regarding how the Fund voted proxies during the most recent 12-month
period ended June 30, 2009, free of charge, by calling toll-free 1-800-243-1574.
This information is also available through the Securities and Exchange
Commission's website at http://www.sec.gov.
FORM N-Q INFORMATION
The Trust files a complete schedule of portfolio holdings for the Fund with the
Securities and Exchange Commission (the "SEC") for the first and third quarters
of each fiscal year on Form N-Q. Form N-Q is available on the SEC's website at
http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public
Reference Room. Information on the operation of the SEC's Public Reference Room
can be obtained by calling toll-free 1-800-SEC-0330.
- --------------------------------------------------------------------------------
This report is not authorized for distribution to prospective investors in the
Virtus Balanced Fund unless preceded or accompanied by an effective prospectus
which includes information concerning the sales charge, the Fund's record and
other pertinent information.
MESSAGE TO SHAREHOLDERS
Dear Fellow Shareholders of Virtus Mutual Funds:
Investors who were calmed by the positive news from the financial markets in the
second quarter of 2009 may have had a reason to regain some of their enthusiasm
during the third quarter. There were numerous signs pointing to an end to the
recession: gross domestic product grew by an annualized 3.5 percent, matching
its average growth rate of the last 80 years; a measure of stability appeared in
the housing market; consumer confidence inched up; and better-than-expected
profits and rosier outlooks were reported by many corporations.
The capital markets continued their recovery during the quarter, with most major
stock market indices up by double digits for the quarter. The S&P 500(R) Index
was up 15.6 percent in the quarter and in late September was at its highest
level in nearly a year. The Dow Jones Industrial Average(SM) increased 15.8
percent in the third quarter, and as of September 30 had improved by 13.5
percent for the year. These figures are even more encouraging when compared with
market lows in early March and the double-digit losses both indices recorded
during the first quarter of the year. Bonds also participated in the
third-quarter rally, with the Barclays Capital U.S. Aggregate Bond Index ahead
by 3.74 percent and the Barclays Capital U.S. Municipal Bond Index up 7.12
percent.
Although the Federal Open Market Committee acknowledged that "economic activity
has picked up following its severe downturn," these recent gains should not
unleash any 1990s-style market "exuberance." The strength and timing of a full
recovery is yet to be realized. Unemployment rates that probably have not peaked
remain a drag on consumer spending, and with an expected slowdown of the
government's monetary and fiscal stimulus, some economists speculate that the
growth from the second and third quarter may not be sustainable into next year.
These factors suggest this is an important time to rely on the experience of
your personal financial adviser and the investment professionals who manage your
assets in the Virtus Mutual Funds. We encourage you to meet with your adviser to
review your portfolio and, when appropriate, adjust it to fit your current
investment objectives and your tolerance for risk.
Our wide range of equity, fixed income, and alternative investments allow you to
allocate your assets and design a portfolio tailored to your individual needs.
Information about your investments is always available on our website,
WWW.VIRTUS.COM, and from our customer service staff at 1-800-243-1574. While
there are no guarantees in the world of investing, I can assure you that we will
do our very best to meet your expectations.
1
On behalf of the entire team at Virtus Investment Partners, I thank you for
entrusting your financial assets to us.
Sincerely,
/s/ George R. Aylward
George R. Aylward
President, Virtus Mutual Funds
NOVEMBER 1, 2009
WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT OR REQUIRE ADDITIONAL
INFORMATION, PLEASE VISIT US AT WWW.VIRTUS.COM OR CALL OUR SHAREOWNER SERVICES
GROUP, TOLL FREE, AT 1-800-243-1574.
PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN
PERFORMANCE SHOWN ABOVE.
2
VIRTUS BALANCED FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009
We believe it is important for you to understand the impact of costs on your
investments. All mutual funds have operating expenses. As a shareholder of the
Virtus Balanced Fund (the "Fund"), you 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. 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 the 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 line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the accompanying table provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not your Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your Fund and other funds. To do so, compare these
5% hypothetical examples with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the accompanying table are meant to
highlight your ongoing costs only and do not reflect any transactional costs,
such as sales charges or contingent deferred sales charges. Therefore, the
second section of the accompanying table is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if those transactional costs were included, your
costs would have been higher. The calculations assume no shares were bought or
sold during the period. Your actual costs may have been higher or lower
depending on the amount of your investment and timing of any purchases or
redemptions.
3
VIRTUS BALANCED FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED)
FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009
EXPENSE TABLE
- --------------------------------------------------------------------------------
Beginning Ending Expenses
Account Account Annualized Paid
Value Value Expense During
April 1, 2009 September 30, 2009 Ratio Period*
- --------------------------------------------------------------------------------
ACTUAL
Class A $1,000.00 $1,264.80 1.17% $ 6.64
Class B 1,000.00 1,259.00 1.92 10.87
Class C 1,000.00 1,259.30 1.92 10.87
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,019.13 1.17 5.94
Class B 1,000.00 1,015.32 1.92 9.75
Class C 1,000.00 1,015.32 1.92 9.75
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days (183)
expenses were accrued in the most recent fiscal half-year, then divided by
365 days to reflect the one-half year period.
If extraordinary expenses were excluded, actual expenses paid and the
hypothetical expenses would be as follows:
Actual Hypothetical
Expenses Paid Expenses
------------- ------------
Class A $ 6.47 $5.79
Class B 10.70 9.59
Class C 10.70 9.59
The Fund may invest in other funds, and the annualized expense ratios noted
above do not reflect fees and expenses associated with the underlying funds.
If such fees and expenses were included, the expenses would have been higher.
You can find more information about the Fund's expenses in the Financial
Statements section that follows. For additional information on operating
expenses and other shareholder costs, refer to the prospectus.
4
VIRTUS BALANCED FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSET ALLOCATIONS
-----------------
This table presents asset allocations within certain sectors as a percentage
of total investments as of September 30, 2009.
Common Stocks 57%
Financials 11%
Information Technology 11
Energy 9
All Other Sectors in Common Stocks 26
Mortgage-Backed Securities 15
Corporate Bonds 15
Other (includes short-term investments) 13
-----
Total 100%
=====
- --------------------------------------------------------------------------------
($ reported in thousands)
PAR VALUE VALUE
--------- -------
U.S. GOVERNMENT SECURITIES--7.3%
U.S. Treasury Bond
3.500%, 2/15/39 $ 6,345 $ 5,748
U.S. Treasury Note
0.875%, 4/30/11 1,605 1,609
2.625%, 6/30/14 16,055 16,341
4.750%, 8/15/17 4,130 4,602
3.125%, 5/15/19 19,125 18,819
- ----------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $45,595) 47,119
- ----------------------------------------
MUNICIPAL BONDS--0.0%
NEW JERSEY--0.0%
New Jersey Turnpike
Authority Taxable
Series B Prerefunded
1/1/15 @ 100
(AMBAC Insured)
4.252%, 1/1/16 5 5
- ----------------------------------------
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $5) 5
- ----------------------------------------
MORTGAGE-BACKED SECURITIES--15.5%
AGENCY--12.2%
FHLMC
R010-AB
5.500%, 12/15/19 1,199 1,250
5.000%, 1/1/35 8,961 9,306
5.000%, 7/1/35 197 204
5.000%, 12/1/35 1,385 1,436
PAR VALUE VALUE
--------- -------
AGENCY--CONTINUED
FNMA
6.000%, 5/1/17 $ 160 $ 172
4.500%, 12/1/18 1,585 1,644
4.500%, 4/1/19 333 351
4.000%, 7/1/19 58 60
4.000%, 6/1/20 994 1,014
5.000%, 8/1/20 78 83
4.500%, 11/1/20 2,319 2,405
6.000%, 12/1/32 344 366
6.000%, 10/1/34 254 270
6.000%, 11/1/34 9,974 10,598
6.000%, 5/1/35 487 517
5.500%, 3/1/36 4,517 4,744
6.000%, 9/1/36 831 880
5.500%, 11/1/36 3,238 3,396
6.500%, 7/1/37 2,629 2,814
6.000%, 10/1/37 1,554 1,643
5.000%, 2/1/38 846 875
6.000%, 2/1/38 471 498
5.000%, 3/1/38 1,012 1,047
5.000%, 3/1/38 856 886
6.500%, 3/1/38 7,361 7,930
5.000%, 4/1/38 1,783 1,845
5.000%, 5/1/38 6,169 6,382
5.000%, 6/1/38 937 969
5.500%, 6/1/38 5,638 5,906
6.500%, 10/1/38 396 424
6.000%, 11/1/38 1,788 1,888
6.000%, 3/1/39 1,387 1,465
FNMA REMICs
03-42, HC
4.500%, 12/25/17 573 595
See Notes to Financial Statements
5
VIRTUS BALANCED FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
PAR VALUE VALUE
--------- -------
AGENCY--CONTINUED
GNMA
6.500%, 8/15/23 $ 58 $ 62
6.500%, 11/15/23 226 241
6.500%, 11/15/23 84 89
6.500%, 11/15/23 502 534
6.500%, 12/15/23 77 82
6.500%, 12/15/23 47 50
6.500%, 12/15/23 59 63
6.500%, 1/15/24 227 243
6.500%, 1/15/24 22 23
6.500%, 1/15/24 7 8
6.500%, 1/15/24 187 200
6.500%, 1/15/24 51 54
6.500%, 1/15/24 56 60
6.500%, 2/15/24 308 329
6.500%, 2/15/24 127 136
6.500%, 2/15/24 35 38
6.500%, 2/15/24 21 23
6.500%, 3/15/24 78 83
6.500%, 3/15/24 185 199
6.500%, 4/15/24 396 424
6.500%, 4/15/24 21 23
6.500%, 4/15/24 55 59
6.500%, 4/15/24 13 14
6.500%, 5/15/24 8 8
6.500%, 1/15/26 167 179
6.500%, 1/15/26 20 21
6.500%, 1/15/26 59 63
6.500%, 2/15/26 55 59
6.500%, 3/15/26 83 89
6.500%, 3/15/26 94 101
6.500%, 4/15/26 12 13
6.500%, 4/15/26 25 27
6.500%, 4/15/26 132 142
6.500%, 6/15/28 15 17
6.500%, 6/15/28 21 23
6.500%, 7/15/31 174 188
6.500%, 11/15/31 29 32
6.500%, 2/15/32 27 30
6.500%, 3/15/32 30 32
6.500%, 4/15/32 55 59
6.000%, 8/15/32 534 569
-------
78,552
-------
PAR VALUE VALUE
--------- -------
NON-AGENCY--3.3%
Banc of America Commercial
Mortgage, Inc. 05-1, A4
4.986%, 11/10/42(3) $ 320 $ 321
06-1, A4
5.372%, 9/10/45(3) 1,090 1,007
07-1, A4
5.451%, 1/15/49 2,190 1,937
08-1, A4
6.166%, 2/10/51(3) 85 77
Bear Stearns Commercial
Mortgage Securities
06-PW12, A4
5.719%, 9/11/38(3) 430 417
Credit Suisse Mortgage
Capital Certificates
06-C1, A4
5.609%, 2/15/39(3) 5,490 5,184
06-C1, A3
5.711%, 2/15/39(3) 575 566
First Horizon Asset Securities,
Inc. 05-AR1, 2A1
5.006%, 4/25/35(3) 1,610 1,453
GS Mortgage Securities Corp. II
05-GG4, A3
4.607%, 7/10/39 2,975 2,828
07-GG10, A4
5.805%, 8/10/45(3) 1,700 1,405
JPMorgan Chase Commercial
Mortgage Securities Corp.
06-CB17, A4
5.429%, 12/12/43 1,090 1,008
Lehman Brothers - UBS
Commercial Mortgage Trust
04-C7, A6
4.786%, 10/15/29(3) 305 286
Morgan Stanley Capital I
06-T23, A4
5.810%, 8/12/41(3) 725 711
05-IQ9, A3
4.540%, 7/15/56 715 710
Wachovia Bank Commercial
Mortgage Trust
05-C19, A5
4.661%, 5/15/44 645 651
See Notes to Financial Statements
6
VIRTUS BALANCED FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
PAR VALUE VALUE
--------- -------
NON-AGENCY--CONTINUED
Wells Fargo Mortgage Backed
Securities Trust
05-AR4, 2A1
4.514%, 4/25/35(3) $ 2,667 $ 2,440
--------
21,001
- ----------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $99,073) 99,553
- ----------------------------------------
ASSET-BACKED SECURITIES--0.2%
AmeriCredit Automobile
Receivables Trust 06-BG, A3
5.210%, 10/6/11 29 29
Associates Manufactured Housing
Pass-Through Certificate
97-2, A6
7.075%, 3/15/28(3) 388 384
Bosphorus Financial Services Ltd.
144A
2.240%, 2/15/12(3)(4) 781 689
Capital One Auto Finance
Trust 07-B, A3A
5.030%, 4/15/12 449 455
GMAC Mortgage Corp.
Loan Trust 05-HE2, A3
4.622%, 11/25/35(3) 81 79
Wachovia Auto Loan Owner
Trust 06-2A, A3 144A
5.230%, 8/22/11(4) 43 43
- ----------------------------------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $1,772) 1,679
- ----------------------------------------
CORPORATE BONDS--15.2%
CONSUMER DISCRETIONARY--1.9%
Affinion Group, Inc.
10.125%, 10/15/13 860 888
Comcast Corp.
5.700%, 7/1/19 2,385 2,520
COX Communications, Inc. 144A
6.250%, 6/1/18(4) 800 849
Hasbro, Inc.
6.300%, 9/15/17 775 811
Mediacom Broadband LLC/
Mediacom Broadband Corp.
8.500%, 10/15/15 710 721
PAR VALUE VALUE
--------- -------
CONSUMER DISCRETIONARY--CONTINUED
Nebraska Book Co., Inc. 144A
10.000%, 12/1/11(4) $ 1,330 $ 1,327
Royal Caribbean Cruises Ltd.
7.250%, 6/15/16 875 814
Time Warner Cable, Inc.
5.850%, 5/1/17 435 459
8.250%, 4/1/19 1,555 1,879
Videotron Ltee
6.375%, 12/15/15 650 624
WMG Holdings Corp.
0.000%, 12/15/14(3) 1,380 1,335
-------
12,227
-------
CONSUMER STAPLES--1.6%
Alliance One International,
Inc. 144A
10.000%, 7/15/16(4) 835 866
Altria Group, Inc.
9.250%, 8/6/19 2,160 2,640
ASG Consolidated LLC/ASG
Finance, Inc.
11.500%, 11/1/11(3) 870 848
CVS Caremark Corp.
6.125%, 9/15/39 460 468
Delhaize Group
6.500%, 6/15/17 1,250 1,360
Dole Food Co., Inc.
7.250%, 6/15/10 530 533
Kraft Foods, Inc.
5.625%, 11/1/11 1,240 1,319
Lorillard Tobacco Co.
8.125%, 6/23/19 1,160 1,317
Reynolds American, Inc.
7.300%, 7/15/15 950 991
-------
10,342
-------
ENERGY--0.8%
Buckeye Partners LP
6.050%, 1/15/18 250 261
Kinder Morgan Finance Co.
5.700%, 1/5/16 2,420 2,317
Petroleos Mexicanos 144A
4.875%, 3/15/15(4) 655 647
Petropower I Funding Trust 144A
7.360%, 2/15/14(4) 1,082 1,080
See Notes to Financial Statements
7
VIRTUS BALANCED FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
PAR VALUE VALUE
--------- -------
ENERGY--CONTINUED
Plains All American Pipeline
LP/PAA Finance Corp.
4.250%, 9/1/12 $ 235 $ 242
Rowan Cos., Inc.
7.875%, 8/1/19 430 462
TEPPCO Partners LP
7.625%, 2/15/12 420 465
-------
5,474
-------
FINANCIALS--6.4%
American Express Co.
7.250%, 5/20/14 1,150 1,292
Bank of America Corp.
6.500%, 8/1/16 215 226
5.750%, 8/15/16 800 788
5.750%, 12/1/17 545 544
5.650%, 5/1/18 800 790
Bank of New York/
Mellon Corp. (The)
4.950%, 11/1/12 950 1,029
Barclays Bank plc
5.200%, 7/10/14 1,000 1,056
Series 1,
5.000%, 9/22/16 1,060 1,074
Bear Stearns Cos., Inc. LLC (The)
7.250%, 2/1/18 900 1,028
Capital One Financial Corp.
7.375%, 5/23/14 1,225 1,367
Citigroup, Inc.
5.000%, 9/15/14 910 866
5.500%, 10/15/14 1,225 1,223
4.875%, 5/7/15 1,235 1,153
Credit Suisse New York
5.000%, 5/15/13 900 953
Ford Motor Credit Co. LLC
7.500%, 8/1/12 685 658
General Electric Capital Corp.
3.500%, 8/13/12 2,120 2,146
6.875%, 1/10/39 1,380 1,445
GMAC, Inc. 144A
6.750%, 12/1/14(4) 245 211
Goldman Sachs Group, Inc. (The)
5.950%, 1/18/18 705 731
6.150%, 4/1/18 1,100 1,157
International Lease Finance Corp.
4.750%, 1/13/12 875 742
PAR VALUE VALUE
--------- -------
FINANCIALS--CONTINUED
JPMorgan Chase & Co.
5.250%, 5/1/15 $ 800 $ 814
Series 1,
7.900%, 12/31/49(3) 536 515
Macquarie Group Ltd. 144A
7.300%, 8/1/14(4) 2,410 2,574
Merrill Lynch & Co., Inc.
6.110%, 1/29/37 905 861
Metropolitan Life Global
Funding I 144A
2.875%, 9/17/12(4) 1,445 1,439
Morgan Stanley
6.000%, 4/28/15 1,150 1,218
7.300%, 5/13/19 1,140 1,254
Northern Trust Co. (The)
6.500%, 8/15/18 800 914
Prudential Financial, Inc.
3.625%, 9/17/12 1,705 1,716
Rabobank Nederland NV 144A
11.000%,
12/31/49(3)(4) 1,040 1,274
Royal Bank of Scotland Group plc
5.050%, 1/8/15 1,840 1,651
Series 1,
9.118%, 3/31/49 1,145 1,059
Simon Property Group LP
6.750%, 5/15/14 1,260 1,351
SunTrust Banks, Inc.
5.250%, 11/5/12 980 1,011
Wachovia Bank NA
5.000%, 8/15/15 600 578
Wachovia Corp.
4.875%, 2/15/14 1,145 1,166
Westfield Capital Corp. Ltd./
Westfield Finance Authority
144A
4.375%, 11/15/10(4) 175 178
144A
5.125%, 11/15/14(4) 1,175 1,144
-------
41,196
-------
HEALTH CARE--0.2%
Quest Diagnostics, Inc.
6.400%, 7/1/17 930 1,011
-------
INDUSTRIALS--1.1%
Hutchison Whampoa Ltd. 144A
5.750%, 9/11/19(4) 525 528
See Notes to Financial Statements
8
VIRTUS BALANCED FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
PAR VALUE VALUE
--------- -------
INDUSTRIALS--CONTINUED
ITW Cupids Financing
Trust I 144A
6.550%, 12/31/11(4) $5,000 $ 5,008
Pitney Bowes, Inc.
4.750%, 5/15/18 1,250 1,271
Waste Management, Inc.
5.000%, 3/15/14 175 182
-------
6,989
-------
INFORMATION TECHNOLOGY--0.4%
Fiserv, Inc.
6.125%, 11/20/12 1,220 1,322
Intuit, Inc.
5.750%, 3/15/17 221 231
L-3 Communications Corp. 144A
5.200%, 10/15/19(4) 250 251
Xerox Corp.
6.750%, 2/1/17 1,040 1,101
-------
2,905
-------
MATERIALS--0.5%
Dow Chemical Co. (The)
6.000%, 10/1/12 1,240 1,321
5.900%, 2/15/15 1,080 1,108
Holcim U.S. Finance S.a.r.l. &
Cie S.C.S. 144A
6.000%, 12/30/19(4) 515 521
-------
2,950
-------
TELECOMMUNICATION SERVICES--2.0%
AT&T, Inc.
5.800%, 2/15/19 1,240 1,327
Citizen Communications Co.
6.250%, 1/15/13 640 630
France Telecom SA
4.375%, 7/8/14 410 430
Global Crossing Ltd. 144A
12.000%, 9/15/15(4) 125 132
Qwest Corp.
7.875%, 9/1/11 410 423
6.500%, 6/1/17 570 536
Sprint Capital Corp.
8.375%, 3/15/12 1,955 2,028
Telecom Italia Capital SA
6.999%, 6/4/18 1,000 1,105
7.175%, 6/18/19 1,170 1,306
PAR VALUE VALUE
--------- -------
TELECOMMUNICATION SERVICES--CONTINUED
Telefonica Emisiones SAU
5.877%, 7/15/19 $ 860 $ 934
Verizon Communications, Inc.
4.900%, 9/15/15 720 761
6.350%, 4/1/19 1,015 1,121
West Corp.
9.500%, 10/15/14 775 763
Windstream Corp.
7.000%, 3/15/19 1,420 1,335
-------
12,831
-------
UTILITIES--0.3%
AmeriGas Partners LP
7.250%, 5/20/15 1,000 980
FirstEnergy Solutions Corp. 144A
6.050%, 8/15/21(4) 480 496
Northeast Utilities
5.650%, 6/1/13 715 738
-------
2,214
- ----------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $94,896) 98,139
- ----------------------------------------
SHARES
--------
PREFERRED STOCK--0.0%
FINANCIALS--0.0%
Preferred Blocker, Inc.
(GMAC) Pfd. 144A
7.000%(4) 181 105
- ----------------------------------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $57) 105
- ----------------------------------------
COMMON STOCKS--57.9%
CONSUMER DISCRETIONARY--4.0%
McDonald's Corp. 140,000 7,990
NIKE, Inc. Class B 146,000 9,446
Under Armour, Inc.(2) 301,000 8,377
-------
25,813
-------
CONSUMER STAPLES--6.7%
Altria Group, Inc. 486,000 8,656
Bunge Ltd. 120,000 7,513
Costco Wholesale
Corp. 150,000 8,469
PepsiCo, Inc. 153,000 8,975
See Notes to Financial Statements
9
VIRTUS BALANCED FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
-------- -------
CONSUMER STAPLES--CONTINUED
Philip Morris International,
Inc. 193,900 $ 9,451
--------
43,064
--------
ENERGY--7.9%
ConocoPhillips 193,900 8,757
Halliburton Co. 341,000 9,248
Massey Energy Co. 182,000 5,076
Occidental Petroleum
Corp. 114,000 8,938
Petroleo Brasileiro
SA ADR 197,000 9,042
Valero Energy Corp. 501,000 9,714
--------
50,775
--------
FINANCIALS--4.3%
Allstate Corp. (The) 184,000 5,634
Goldman Sachs Group, Inc.
(The) 47,000 8,664
Hudson City Bancorp,
Inc. 617,700 8,123
Reinsurance Group of
America, Inc. 120,000 5,352
--------
27,773
--------
HEALTH CARE--7.6%
Biogen Idec, Inc.(2) 173,000 8,740
Gilead Sciences,
Inc.(2) 187,000 8,711
Johnson & Johnson 146,500 8,920
Merck & Co., Inc. 200,000 6,326
Shire plc ADR 19,812 1,036
St. Jude Medical,
Inc.(2) 201,000 7,841
UnitedHealth Group,
Inc. 296,000 7,412
--------
48,986
--------
INDUSTRIALS--7.7%
Boeing Co. (The) 165,000 8,935
Caterpillar, Inc. 109,000 5,595
Continental Airlines,
Inc.(2) 513,000 8,434
Foster Wheeler AG(2) 266,000 8,488
L-3 Communications
Holdings, Inc. 117,000 9,397
Union Pacific Corp. 141,000 8,227
--------
49,076
--------
INFORMATION TECHNOLOGY--10.8%
Cisco Systems,
Inc.(2) 389,000 9,157
Corning, Inc. 552,000 8,451
Hewlett-Packard Co. 186,000 8,781
International Business
Machines Corp. 77,000 9,210
SHARES VALUE
-------- -------
INFORMATION TECHNOLOGY--CONTINUED
Microsoft Corp. 333,000 $ 8,621
Nokia Oyj Sponsored
ADR 551,000 8,056
QUALCOMM, Inc. 195,600 8,798
Research In Motion
Ltd.(2) 127,000 8,579
--------
69,653
--------
MATERIALS--4.8%
Alcoa, Inc. 400,000 5,248
Freeport-McMoRan Copper
& Gold, Inc.(2) 136,000 9,331
Nucor Corp. 185,000 8,697
Potash Corp. of
Saskatchewan, Inc. 86,000 7,769
--------
31,045
--------
TELECOMMUNICATION SERVICES--2.8%
AT&T, Inc. 333,000 8,994
Verizon Communications,
Inc. 294,000 8,900
--------
17,894
--------
UTILITIES--1.3%
Exelon Corp. 170,000 8,435
- ----------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $294,119) 372,514
- ----------------------------------------
EXCHANGE-TRADED FUNDS--2.2%
PowerShares Deutsche Bank
Agriculture Fund(2) 336,000 8,554
ProShares Ultrashort
S&P 500(R) 140,000 5,662
- ----------------------------------------
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $14,705) 14,216
- ----------------------------------------
TOTAL LONG-TERM INVESTMENTS--98.3%
(IDENTIFIED COST $550,222) 633,330
- ----------------------------------------
SHORT-TERM INVESTMENTS--3.6%
MONEY MARKET MUTUAL FUNDS--3.6%
State Street Institutional
Liquid Reserves Fund -
Institutional Shares
(seven-day effective
yield 0.260%) 22,935,096 22,935
- ----------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $22,935) 22,935
- ----------------------------------------
See Notes to Financial Statements
10
VIRTUS BALANCED FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
VALUE
--------
TOTAL INVESTMENTS--101.9%
(IDENTIFIED COST $573,157) $656,265(1)
Other Assets and
Liabilities--(1.9)% (12,543)
--------
NET ASSETS--100.0% $643,722
========
ABBREVIATIONS:
ADR American Depositary Receipt
AMBAC American Municipal Bond Assurance Corporation
FHLMC Federal Home Loan Mortgage Corporation ("Freddie Mac")
FNMA Federal National Mortgage Association ("Fannie Mae")
GNMA Government National Mortgage Association ("Ginnie Mae")
REMIC Real Estate Mortgage Investment Conduits
KEY INVESTMENT TERMS
ADR (AMERICAN DEPOSITARY RECEIPT)
Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges
that are held by a U.S. bank or trust. Foreign companies use ADRs in order to
make it easier for Americans to buy their shares.
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.
REMIC (REAL ESTATE MORTGAGE INVESTMENT CONDUITS)
A fixed pool of mortgage securities broken apart and marketed to investors as
individual securities.
SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT)
An ADR which is issued with the cooperation of the company whose stock will
underlie the ADR. Sponsored ADRs generally carry the same rights normally given
to stockholders, such as voting rights. ADRs must be sponsored to be able to
trade on a major U.S. exchange such as the NYSE.
FOOTNOTE LEGEND
(1) Federal Income Tax Information: For tax information at September 30, 2009,
see the Federal Income Tax Information Note 8 in the Notes to Financial
Statements.
(2) Non-income producing.
(3) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(4) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2009, these securities amounted to a value of $19,362 or 3.0% of net assets.
See Notes to Financial Statements
11
VIRTUS BALANCED FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Level 2 - Level 3 -
Significant Significant
Total Value at Level 1 - Observable Unobservable
September 30, 2009 Quoted Prices Inputs Inputs
------------------ ------------- ----------- ------------
INVESTMENT IN SECURITIES:
Debt Securities:
U.S. Government Securities $ 47,119 $ -- $ 47,119 $ --
Asset-Backed Securities 1,679 -- 1,679 --
Mortgage-Backed Securities 99,553 -- 99,553 --
Municipal Securities 5 -- 5 --
Corporate Debt 98,139 -- 97,060 1,079
Equity Securities:
Preferred Stock 105 105 -- --
Common Stock 372,514 372,514 -- --
Exchange Traded Funds 14,216 14,216 -- --
Short-Term Investments 22,935 22,935 -- --
--------- -------- -------- ------
Total Investments $656,265 $409,770 $245,416 $1,079
======== ======== ======== ======
The following is a reconciliation of assets of the Fund for Level 3 investments
for which significant unobservable inputs were used to determine fair value:
Corporate
Debt
---------
INVESTMENTS IN SECURITIES:
BALANCE AS OF MARCH 31, 2009 ......................... $1,056
Accrued discounts/premiums ........................... 1
Realized gain (loss) ................................. --
Change in unrealized appreciation (depreciation)(1)... 227
Net purchases (sales) ................................ (205)
Transfers in and/or out of Level 3(2) ................ --
------
BALANCE AS OF SEPTEMBER 30, 2009 ..................... $1,079
======
(1) Disclosed in the Statement of Operations under Net realized and unrealized
gain (loss) on investments.
(2) Transfers in and/or out" represent the ending value as of September 30,
2009, for any investment security where a change in the pricing level
occurred from the beginning to the end of the period.
Certain level 3 security valuations have been determined based on availability
of only a single broker source, which may or may not be a principal market
maker. Other level 3 securities are without an active market or market
participants and therefore are internally fair valued. These internally fair
valued securities derive their valuation based on the review of inputs such as,
but not limited to, similar securities, liquidity factors, capital structure,
and credit analysis.
See Notes to Financial Statements
12
VIRTUS BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands except shares and per share amounts)
ASSETS
Investment in securities at value(1)............................................ $ 656,265
Receivables
Investment securities sold................................................... 14,352
Fund shares sold ............................................................ 6
Dividends and interest receivable............................................ 3,060
Prepaid expenses................................................................ 58
----------
Total assets............................................................... 673,741
----------
LIABILITIES
Payables
Fund shares repurchased...................................................... 12,731
Investment securities purchased ............................................. 16,497
Investment advisory fee...................................................... 314
Distribution and service fees................................................ 175
Administration fee........................................................... 45
Transfer agent fees and expenses............................................. 150
Trustees' fee and expenses................................................... 9
Professional fee............................................................. 43
Other accrued expenses ...................................................... 55
----------
Total liabilities.......................................................... 30,019
----------
NET ASSETS...................................................................... $ 643,722
==========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest............................. $ 703,353
Accumulated undistributed net investment income (loss)....................... (27)
Accumulated undistributed net realized gain (loss) .......................... (142,712)
Net unrealized appreciation (depreciation) on investments.................... 83,108
----------
NET ASSETS...................................................................... $ 643,722
==========
CLASS A
Net asset value (net assets/shares outstanding) per share....................... $11.78
Maximum offering price per share $11.78/(1-5.75%)............................... $12.50
Shares of beneficial interest outstanding, no par value, unlimited authorization 50,359,589
Net Assets...................................................................... $ 593,155
CLASS B
Net asset value (net assets/shares outstanding) and offering price per share ... $11.73
Shares of beneficial interest outstanding, no par value, unlimited authorization 503,563
Net Assets...................................................................... $ 5,906
CLASS C
Net asset value (net assets/shares outstanding) and offering price per share ... $11.72
Shares of beneficial interest outstanding, no par value, unlimited authorization 3,811,435
Net Assets...................................................................... $ 44,661
(1) Investment in securities at cost............................................ $ 573,157
See Notes to Financial Statements
13
VIRTUS BALANCED FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands)
INVESTMENT INCOME
Dividends........................................................... $ 4,398
Interest............................................................ 6,039
Foreign taxes withheld.............................................. (66)
--------
Total investment income............................................. 10,371
--------
EXPENSES
Investment advisory fees............................................ 1,710
Service fees, Class A............................................... 717
Distribution and service fees, Class B.............................. 30
Distribution and service fees, Class C.............................. 210
Administration fees................................................. 264
Transfer agent fee and expenses..................................... 477
Custodian fees...................................................... 32
Printing fees and expenses.......................................... 215
Professional fees................................................... 61
Registration fees................................................... 24
Trustees' fee and expenses.......................................... 29
Miscellaneous expenses.............................................. 55
--------
Total expenses................................................. 3,824
--------
NET INVESTMENT INCOME (LOSS)........................................ 6,547
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments............................. 6,956
Net realized gain (loss) on foreign currency transactions........... 1
Net change in unrealized appreciation (depreciation) on investments 128,915
Net change in unrealized appreciation (depreciation) on foreign
currency translation ............................................. --(1)
--------
NET GAIN (LOSS) ON INVESTMENTS...................................... 135,872
--------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .... $142,419
========
<FN>
(1) Amount is less than $500 (not reported in thousands).
</FN>
See Notes to Financial Statements
14
VIRTUS BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
(Reported in thousands)
Six Months Ended
September 30, 2009 Year Ended
(Unaudited) March 31, 2009
------------------ --------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss)................................ $ 6,547 $ 21,305
Net realized gain (loss).................................... 6,957 (146,122)
Net change in unrealized appreciation (depreciation) ....... 128,915 (85,888)
-------- --------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 142,419 (210,705)
-------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A.............................. (6,581) (20,336)
Net investment income, Class B.............................. (46) (202)
Net investment income, Class C.............................. (332) (1,155)
Net realized long-term gains, Class A....................... -- (2,742)
Net realized long-term gains, Class B....................... -- (39)
Net realized long-term gains, Class C....................... -- (206)
-------- --------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS .. (6,959) (24,680)
-------- --------
FROM SHARE TRANSACTIONS:
SALE OF SHARES
Class A (484 and 978 shares, respectively).................. 5,241 11,036
Class B (9 and 64 shares, respectively)..................... 100 711
Class C (25 and 52 shares, respectively).................... 259 551
REINVESTMENT OF DISTRIBUTIONS
Class A (533 and 1,850 shares, respectively)................ 5,877 20,839
Class B (4 and 19 shares, respectively)..................... 42 219
Class C (25 and 101 shares, respectively)................... 268 1,132
SHARES REPURCHASED
Class A (4,588 and 9,700 shares, respectively).............. (51,130) (108,927)
Class B (135 and 371 shares, respectively).................. (1,448) (4,233)
Class C (221 and 777 shares, respectively).................. (2,372) (8,695)
-------- --------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS .. (43,163) (87,367)
-------- --------
CAPITAL CONTRIBUTIONS
Fair Funds settlement(1).................................... 2 --
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS....................... 92,299 (322,752)
-------- --------
NET ASSETS
Beginning of period......................................... 551,423 874,175
-------- --------
END OF PERIOD............................................... $643,722 $551,423
======== ========
Accumulated undistributed net investment income (loss)
at end of period.......................................... $ (27) $ 385
<FN>
(1) The Fund was a recipient of a portion of a distribution from a Fair Fund
established by the United States Securities and Exchange Commission. The
proceeds received were part of the Millennium Partners, L.P. and Bear
Stearns & Co., Inc. settlements.
</FN>
See Notes to Financial Statements
15
VIRTUS BALANCED FUND
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET NET
ASSET NET REALIZED TOTAL DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT AND FROM FROM NET FROM NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED
OF PERIOD (LOSS)(1) GAIN (LOSS) OPERATIONS INCOME GAINS
=====================================================================================================
CLASS A
4/1/09 to 9/30/09(6) $ 9.42 0.12 2.37 2.49 (0.13) --
4/1/08 to 3/31/09 13.19 0.35 (3.71) (3.36) (0.36) (0.05)
11/1/07 to 3/31/08 15.48 0.16 (1.28) (1.12) (0.19) (0.98)
11/1/06 to 10/31/07 15.74 0.35 1.16 1.51 (0.35) (1.42)
11/1/05 to 10/31/06 14.55 0.34 1.53 1.87 (0.34) (0.34)
11/1/04 to 10/31/05 14.98 0.32 0.18 0.50 (0.32) (0.61)
11/1/03 to 10/31/04 14.31 0.29 0.69 0.98 (0.31) --
CLASS B
4/1/09 to 9/30/09(6) $ 9.39 0.08 2.35 2.43 (0.09) --
4/1/08 to 3/31/09 13.13 0.26 (3.67) (3.41) (0.28) (0.05)
11/1/07 to 3/31/08 15.41 0.11 (1.27) (1.16) (0.14) (0.98)
11/1/06 to 10/31/07 15.69 0.24 1.13 1.37 (0.23) (1.42)
11/1/05 to 10/31/06 14.50 0.23 1.53 1.76 (0.23) (0.34)
11/1/04 to 10/31/05 14.93 0.21 0.18 0.39 (0.21) (0.61)
11/1/03 to 10/31/04 14.26 0.18 0.69 0.87 (0.20) --
CLASS C
4/1/09 to 9/30/09(6) $ 9.38 0.08 2.35 2.43 (0.09) --
4/1/08 to 3/31/09 13.12 0.26 (3.67) (3.41) (0.28) (0.05)
11/1/07 to 3/31/08 15.40 0.11 (1.27) (1.16) (0.14) (0.98)
11/1/06 to 10/31/07 15.68 0.23 1.14 1.37 (0.23) (1.42)
11/1/05 to 10/31/06 14.49 0.23 1.53 1.76 (0.23) (0.34)
4/19/05(5) to 10/31/05 14.47 0.10 0.01 0.11 (0.09) --
RATIO OF NET
NET NET INVESTMENT
CHANGE ASSET ASSETS, RATIO OF INCOME (LOSS)
IN NET VALUE, END OF EXPENSES TO TO AVERAGE PORTFOLIO
TOTAL ASSET END OF TOTAL PERIOD AVERAGE NET TURNOVER
DISTRIBUTIONS VALUE PERIOD RETURN(2) (IN THOUSANDS) NET ASSETS ASSETS RATE
==========================================================================================================================
CLASS A
4/1/09 to 9/30/09(6) (0.13) 2.36 $11.78 26.48%(4) $ 593,155 1.17%(3) 2.16%(3) 69%(4)
4/1/08 to 3/31/09 (0.41) (3.77) 9.42 (25.95) 508,204 1.10 3.02 91
11/1/07 to 3/31/08 (1.17) (2.29) 13.19 (7.62)(4) 801,724 1.12(3) 2.65(3) 21(4)
11/1/06 to 10/31/07 (1.77) (0.26) 15.48 10.26 919,363 1.12 2.31 54
11/1/05 to 10/31/06 (0.68) 1.19 15.74 13.29 973,751 1.08 2.29 78
11/1/04 to 10/31/05 (0.93) (0.43) 14.55 3.21 1,000,790 1.05 2.16 58
11/1/03 to 10/31/04 (0.31) 0.67 14.98 6.91 926,383 1.06 1.98 68
CLASS B
4/1/09 to 9/30/09(6) (0.09) 2.34 $11.73 25.90%(4) $ 5,906 1.92%(3) 1.43%(3) 69%(4)
4/1/08 to 3/31/09 (0.33) (3.74) 9.39 (26.40) 5,869 1.85 2.24 91
11/1/07 to 3/31/08 (1.12) (2.28) 13.13 (7.94)(4) 11,992 1.87(3) 1.91(3) 21(4)
11/1/06 to 10/31/07 (1.65) (0.28) 15.41 9.41 15,013 1.87 1.58 54
11/1/05 to 10/31/06 (0.57) 1.19 15.69 12.43 20,676 1.83 1.54 78
11/1/04 to 10/31/05 (0.82) (0.43) 14.50 2.47 19,970 1.80 1.39 58
11/1/03 to 10/31/04 (0.20) 0.67 14.93 6.12 16,814 1.80 1.23 68
CLASS C
4/1/09 to 9/30/09(6) (0.09) 2.34 $11.72 25.93%(4) $ 44,661 1.92%(3) 1.41%(3) 69%(4)
4/1/08 to 3/31/09 (0.33) (3.74) 9.38 (26.42) 37,350 1.85 2.26 91
11/1/07 to 3/31/08 (1.12) (2.28) 13.12 (7.94)(4) 60,459 1.87(3) 1.91(3) 21(4)
11/1/06 to 10/31/07 (1.65) (0.28) 15.40 9.42 71,326 1.87 1.56 54
11/1/05 to 10/31/06 (0.57) 1.19 15.68 12.44 76,874 1.83 1.54 78
4/19/05(5) to 10/31/05 (0.09) 0.02 14.49 0.75(4) 81,111 1.80(3) 1.22(3) 58(4)
<FN>
(1) Computed using average shares outstanding.
(2) Sales charges are not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Inception date.
(6) Unaudited.
</FN>
See Notes to Financial Statements
16 & 17
VIRTUS BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
1. ORGANIZATION
Virtus Equity 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, 13 funds of the Trust are offered for sale, of
which the Virtus Balanced Fund (the "Fund") is reported in this semiannual
report. The Fund is diversified and has investment objectives to seek to
provide reasonable income, long-term capital growth and conservation of
capital. There is no guarantee that the Fund will achieve its objectives.
The Fund offers Class A shares, Class B shares and Class C shares.
Class A shares are sold with a front-end sales charge of up to 5.75% with
some exceptions. Generally, Class A shares are not subject to any charges by
the Fund when redeemed; however, a 1% contingent deferred sales charge
("CDSC") may be imposed on certain redemptions made within one year following
purchases on which a finder's fee has been paid. The one-year period begins
on the last day of the month preceding the month in which the purchase was
made. Class B shares are sold with a contingent deferred sales charge, which
declines from 5% to zero depending on the period of time the shares are held
(see Note 9). Class C shares are sold with a 1% contingent deferred sales
charge, if applicable, if redeemed within one year of purchase.
Each class of shares has identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that each class bears
different distribution and/or service expenses and has exclusive voting
rights with respect to its distribution plan. Income and other expenses and
realized and unrealized gains and losses of the Fund are borne pro rata by
the holders of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates, and those differences could be
significant.
A. SECURITY VALUATION:
Equity securities are valued at the official closing price (typically last
sale) on the exchange on which the securities are primarily traded, or if no
closing price is available, at the last bid price.
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service, which utilizes information with respect to
recent sales, market transactions in comparable securities, quotations from
dealers, and various relationships between securities in determining value.
Due to continued volatility in the current market, valuations developed
through pricing techniques may materially vary from the actual amounts
realized upon sale of the securities.
18
VIRTUS BALANCED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
As required, some securities and assets may be valued at fair value as
determined in good faith by or under the direction of the Trustees.
Certain foreign common stocks may be fair valued in cases where closing
prices are not readily available or are deemed not reflective of readily
available market prices. For example, significant events (such as movement in
the U.S. securities market, or other regional and local developments) may
occur between the time that foreign markets close (where the security is
principally traded) and the time that the Fund calculates its net asset value
(generally, the close of the NYSE) that may impact the value of securities
traded in these foreign markets. In these cases, information from an external
vendor may be utilized to adjust closing market prices of certain foreign
common stocks to reflect their fair value. Because the frequency of
significant events is not predictable, fair valuation of certain foreign
common stocks may occur on a frequent basis.
Investments in underlying funds are valued at each fund's closing net asset
value determined as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. Eastern time).
Short-term investments having a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market.
The Fund utilizes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels:
o Level 1 - quoted prices in active markets for identical securities
o Level 2 - prices determined using other significant observable inputs
(including quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, etc.)
o Level 3 - prices determined using significant unobservable inputs
(including the Fund's own assumptions in determining the fair value of
investments)
A summary of the inputs used to value the Fund's net assets by each major
security type is disclosed at the end of the Schedule of Investments.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date, or in the case of certain foreign
securities, as soon as the Fund is notified. Interest income is recorded on
the accrual basis. The Fund amortizes premiums and accretes discounts using
the effective interest method. Realized gains and losses are determined on
the identified cost basis.
Dividend income is recorded using management's estimate of the income
included in distributions received from REIT investments. Distributions
received in excess of this estimated amount are recorded as a reduction of
the cost of investments or reclassified to capital gains. The actual amounts
of income, return of capital, and capital gains are only determined by each
REIT after its fiscal year-end, and may differ from the estimated amounts.
C. INCOME TAXES:
The Fund is treated as a separate taxable entity. It is the policy of the
Fund to comply with the requirements of Subchapter M of the Internal Revenue
Code and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes or excise
taxes has been made.
19
VIRTUS BALANCED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
The Trust may be subject to foreign taxes on income, gains on investments or
currency repatriation, a portion of which may be recoverable. Each Fund will
accrue such taxes and recoveries as applicable based upon current
interpretations of the tax rules and regulations that exist in the markets in
which they invest.
Accounting for Uncertainty in Income Taxes sets forth a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return. Management has analyzed each Fund's tax
positions and has concluded that no provision for income tax is required in
any Fund's financial statements. The Fund is not aware of any tax positions
for which it is reasonably possible that the total amounts of unrecognized
tax benefits will significantly change in the next twelve months. Each of the
Fund's federal tax returns for the prior three fiscal years remains subject
to examination by the Internal Revenue Service.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by the Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States of America. These differences may include the treatment of
non-taxable dividends, market premium and discount, non-deductible expenses,
expiring capital loss carryovers, foreign currency gain or loss, gain or loss
on futures contracts, partnerships, operating losses and losses deferred due
to wash sales. Permanent book and tax basis differences relating to
shareholder distributions will result in reclassifications to capital paid in
on shares of beneficial interest.
E. EXPENSES:
Expenses incurred by the Trust with respect to more than one fund are
allocated in proportion to the net assets of each fund, except where
allocation of direct expenses to each fund or an alternative allocation
method can be more appropriately made.
F. FOREIGN CURRENCY TRANSLATION:
Foreign securities and other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at
the trade date. The gain or loss resulting from a change in currency exchange
rates between the trade and settlement date of a portfolio transaction is
treated as a gain or loss on foreign currency. Likewise, the gain or loss
resulting from a change in currency exchange rates between the date income is
accrued and the date it is paid is treated as a gain or loss on foreign
currency. The Trust does not isolate that portion of the results of
operations arising from changes in exchange rates or from fluctuations which
arise due to changes in the market prices of securities.
G. LOAN AGREEMENTS:
The Fund may invest in direct debt instruments which are interests in amounts
owed by a corporate, governmental, or other borrower to lenders or lending
syndicates. The Fund's investments in loans may be in the form of
participations in loans or assignments of all or a portion of loans from
third parties. A loan is often administered by a bank or other financial
institution (the lender) that acts as agent for all holders. The agent
administers the terms of the loan, as specified in the loan agreement. When
investing in a loan
20
VIRTUS BALANCED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
participation, the Fund has the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling
the loan agreement and only upon receipt by the lender of payments from the
borrower. The Fund generally has no right to enforce compliance with the
terms of the loan agreement with the borrower. As a result, the Fund may be
subject to the credit risk of both the borrower and the lender that is
selling the loan agreement. When the Fund purchases assignments from lenders
it acquires direct rights against the borrower on the loan. Direct
indebtedness of emerging countries involves a risk that the government
entities responsible for the repayment of the debt may be unable, or
unwilling, to pay the principal and interest when due.
At September 30, 2009, the Fund did not hold any loan agreements.
H. SECURITIES LENDING:
The Fund may loan securities to qualified brokers through an agreement with
State Street Bank and Trust Company ("State Street"). Under the terms of the
agreement, the Fund is required to maintain collateral with a market value
not less than 100% of the market value of loaned securities. Collateral is
adjusted daily in connection with changes in the market value of securities
on loan. Collateral may consist of cash and securities issued by the U.S.
Government. Cash collateral is invested in a short-term money market fund.
Dividends earned on the collateral and premiums paid by the borrower are
recorded as income by the Fund net of fees charged by State Street for its
services in connection with this securities lending program. Lending
portfolio securities involves a risk of delay in the recovery of the loaned
securities or in the foreclosure on collateral.
At September 30, 2009, the Fund did not have any securities on loan.
I. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS:
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued and delayed delivery securities on the trade date. The
Fund maintains collateral for the securities purchased. Securities purchased
on a when-issued or delayed delivery basis begin earning interest on the
settlement date.
3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
($ REPORTED IN THOUSANDS EXCEPT AS NOTED)
Virtus Investment Advisers, Inc. ("VIA," the "Adviser") is an indirect,
wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"). As
compensation for its services to the Trust, the Adviser is entitled to a fee
based upon the following annual rates as a percentage of the average daily
net assets of the Fund:
1ST $1 $1+ BILLION - $2+
BILLION $2 BILLION BILLION
------- ------------- -------
0.55% 0.50% 0.45%
The Adviser manages the Fund's investment program and general operations of
the Fund, including oversight of the Fund's subadviser, SCM Advisors LLC
("SCM"), an affiliate of Virtus. Effective June 8, 2009, SCM is the
subadviser of the Fund's Fixed Income Portfolio. For the period April 1, 2009
through June 7, 2009, Goodwin Capital Advisers, Inc. served as the subadviser
for the Fund's Fixed Income Portfolio. The Adviser manages the Fund's Equity
Portfolio.
21
VIRTUS BALANCED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
As distributor of the Fund's shares, VP Distributors, Inc. ("VP
Distributors"), an indirect, wholly-owned subsidiary of Virtus, has advised
the Fund that it retained net selling commissions and deferred sales charges
for the six-months ended (the "period") September 30, 2009, as follows:
CLASS A CLASS B CLASS C
NET SELLING DEFERRED DEFERRED
COMMISSIONS SALES CHARGES SALES CHARGES
----------- ------------- -------------
$11 $3 $ --*
* Amount is less than $500 (not reported in thousands).
In addition, the Fund pays VP Distributors distribution and/or service fees
at the annual rate of 0.25% for Class A shares, 1.00% for Class B shares, and
1.00% for Class C shares applied to the average daily net assets of each
respective class.
Under certain circumstances, shares of certain Virtus Mutual Funds may be
exchanged for shares of the same class of certain other Virtus Mutual Funds
on the basis of the relative net asset values per share at the time of the
exchange. On exchanges with share classes that carry a contingent deferred
sales charge, the CDSC schedule of the original shares purchased continues to
apply.
VP Distributors serves as the Administrator to the Trust. For the period
ended September 30, 2009, the Fund incurred administration fees totaling
$264. VP Distributors also serves as the Trust's transfer agent. For the
period ended September 30, 2009, transfer agent fees were $477 as reported in
the Statement of Operations.
4. PURCHASES AND SALES OF SECURITIES
($ REPORTED IN THOUSANDS)
Purchases and sales of investment securities (excluding U.S. Government and
agency securities and short-term securities) during the period ended
September 30, 2009, were as follows:
PURCHASES SALES
--------- ---------
$161,899 $290,273
Purchases or sales of long-term U.S. Government and agency securities during
the period ended September 30, 2009 were as follows:
PURCHASES SALES
--------- ---------
$252,956 $170,429
5. CREDIT RISK AND ASSET CONCENTRATIONS
In countries with limited or developing markets, investments may present
greater risks than in more developed markets, and the prices of such
investments may be volatile. The consequences of political, social or
economic changes in these markets may have disruptive effects on the market
prices of these investments and the income they generate, as well as 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
22
VIRTUS BALANCED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
high-yield securities may be complex, and as a result, it may be more
difficult for the Adviser and/or subadviser to accurately predict risk.
Lack of liquidity in an ETF could result in its value being more volatile
than the underlying portfolio of securities. Sector ETFs are subject to
sector risks and non-diversification risks, which may result in greater price
fluctuations than the overall market. Because the Fund invests in ETFs, it
indirectly bears its proportionate share of the operating expenses of the
underlying funds. Indirectly, the Fund is subject to all risks associated
with the underlying ETFs.
The Fund may invest a high percentage of its assets in specific sectors of
the market in its pursuit of a greater investment return. Fluctuations in
these sectors of concentration may have a greater impact on the Fund,
positive or negative, than if the Fund did not concentrate its investments in
such sectors.
6. INDEMNIFICATIONS
Under the Fund's organizational documents, its Trustees and Officers are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, the Fund enters into contracts that
contain a variety of indemnifications. The Fund's maximum exposure under
these arrangements is unknown. However, the Fund has not had prior claims or
losses pursuant to these arrangements.
7. REGULATORY EXAMS
Federal and state regulatory authorities from time to time make inquiries and
conduct examinations regarding compliance by Virtus and its subsidiaries
(collectively "the Company") with securities and other laws and regulations
affecting their registered products.
There are currently no such matters which the Company believes will be
material to these financial statements.
8. FEDERAL INCOME TAX INFORMATION
($ REPORTED IN THOUSANDS)
At September 30, 2009, federal tax cost and aggregate gross unrealized
appreciation (depreciation) of securities held by the Fund were as follows:
NET UNREALIZED
FEDERAL UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
-------- ------------ ------------- --------------
$575,483 $89,549 $(8,767) $80,782
The Fund has capital loss carryovers which may be used to offset future
capital gains, as follows:
EXPIRATION YEAR
---------------------------------------------------------
2010 2017 TOTAL
------ ------ -------
$739 $9,922 $10,661
23
VIRTUS BALANCED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
The Fund may not realize the benefit of these losses to the extent the Fund
does not realize gains on investments prior to the expiration of the capital
loss carryovers. The Fund's amounts include losses acquired in connection
with prior and/or current year mergers. Utilization of these capital loss
carryovers are subject to annual limitations.
9. SUBSEQUENT EVENT EVALUATIONS
Management has evaluated the impact of all subsequent events on the Funds
through November 19, 2009, the date the financial statements were available
for issuance, and has determined that the following subsequent events require
recognition or disclosure in the financial statements.
Effective on December 1, 2009 (the "Closing Date"), Class B Shares of the
Virtus Mutual Funds will no longer be available for purchase by new or
existing shareholders, except by existing shareholders through Qualifying
Transactions (for information regarding Qualifying Transactions refer to each
Fund's prospectus).
24
CONSIDERATION OF SUBADVISORY AGREEMENT FOR
VIRTUS BALANCED FUND (THE "FUND") BY
THE BOARD OF TRUSTEES
(UNAUDITED)
The Board of Trustees (the "Board") of Virtus Equity Trust (the "Trust"),
including a majority of the Trustees who are not interested persons as defined
in Section 2(a)(19) of the Investment Company Act of 1940, last renewed the
investment advisory agreement between Virtus Investment Advisers, Inc. (the
"Adviser" or "VIA") and the Fund (the "Advisory Agreement"), and the investment
subadvisory agreement with Goodwin Capital Advisers, Inc. ("Goodwin") with
respect to the fixed income portion of the Fund's portfolio, at a meeting held
on November 18-20, 2008. At a Board meeting held on February 24-25, 2009, Fund
Management proposed that SCM Advisors, LLC ("SCM Advisors" or the "Subadviser")
be appointed as the new subadviser with respect to the fixed income portion of
the Fund's portfolio in place of Goodwin, and that the Adviser enter into a new
subadvisory agreement with SCM Advisors (the "Subadvisory Agreement"). The Board
considered and approved the Subadvisory Agreement for the Fund with SCM
Advisors, as further discussed below. In approving the Subadvisory Agreement,
the Board determined that the retention of the Subadviser was in the best
interests of the Fund and its shareholders. After approval by the Board and
subsequent approval by shareholders, the Subadvisory Agreement became effective
on June 8, 2009.
In evaluating the proposal to appoint SCM Advisors, the Board requested and
evaluated information provided by the Adviser and SCM Advisors which, in the
Board's view, constituted information necessary for the Board to form a judgment
as to whether the subadviser change would be in the best interests of the Fund
and its shareholders. Prior to making its final decision, the Board met
privately with their independent counsel to discuss the information provided.
BASIS FOR THE BOARD'S RECOMMENDATION
In their deliberations, the Trustees did not identify any particular information
that was all-important or controlling, and each Trustee attributed different
weights to the various factors. In determining to approve the proposal, the
Trustees considered various factors, including:
o the nature, extent and quality of the services to be provided by SCM
Advisors, with respect to the fixed income investments. The Trustees
reviewed biographical information for each portfolio manager of the
Subadviser who would be providing services under the Subadvisory Agreement
and noted the breadth and depth of experience presented, with the team
leaders having over 70 years of cumulative experience. The Board also noted
that the Subadviser's fixed income investment management is team managed,
and additional team members with significant experience had been added;
o the rate of the investment subadvisory fee that would be paid by the Adviser
(and not the Fund) under the Subadvisory Agreement, and the advisory fee
paid by the Fund, both of which would remain unchanged, at this time, from
the fees paid under the previous subadvisory agreement and Advisory
Agreement;
o the prior performance of a composite of all discretionary accounts and funds
managed by the Subadviser with substantially similar investment objectives,
strategies and policies as the fixed income portion of the Fund, which
composite outperformed the Fund (as well as the Adviser's calculation of the
performance of the fixed income portion of the Fund's investments) over the
one-, three- and five-year periods ended January 30, 2009. While the
performance of the composite underperformed the Barclays Capital U.S.
Aggregate Bond Index for the one- and three-year periods, it had comparable
performance for the five-year period; and
25
CONSIDERATION OF SUBADVISORY AGREEMENT FOR
VIRTUS BALANCED FUND (THE "FUND") BY
THE BOARD OF TRUSTEES (CONTINUED)
(UNAUDITED)
o the fact that while the Subadviser is an affiliate of VIA, there are no
other tangible benefits to VIA or the Subadviser in the Subadviser providing
investment advisory services to the Fund, other than the fees to be earned
under the Subadvisory Agreement (although there may be certain intangible
benefits gained to the extent that serving the Fund could enhance the
Subadviser's reputation in the marketplace and therefore enable the
Subadviser to attract additional client relationships).
In considering the profitability to SCM Advisors of its relationship with the
Fund, the Board noted that the fees under the Subadvisory Agreement were paid by
the Adviser out of the advisory fees that it receives under the Advisory
Agreement, and that the subadvisory fees would be paid at the same level as
under the previous subadvisory agreement. For these reasons, the profitability
to SCM Advisors of its relationship with the Fund was not a material factor in
the Board's deliberations. For similar reasons, the Board did not consider the
potential economies of scale in SCM Advisors' management of the Fund to be a
material factor in its consideration. Based on all the foregoing considerations,
the Board concluded that the proposed Subadvisory Agreement was favorable for
shareholders because shareholders could benefit from management of the Fund's
assets by the fixed income investment team at SCM Advisors.
26
RESULTS OF SHAREHOLDER MEETING
VIRTUS EQUITY TRUST
JUNE 4, 2009
(UNAUDITED)
At a special meeting of shareholders of Virtus Balanced Fund, a series of Virtus
Equity Trust, held on June 4, 2009, shareholders voted on the following
proposal:
NUMBER OF ELIGIBLE SHARES VOTED:
FOR AGAINST ABSTAIN
-------------- ------------- -------------
To approve a Subadvisory Agreement
between Virtus Investment Advisers, Inc.
and SCM Advisors, LLC with regard to
Virtus Balanced Fund................ 26,434,182.016 1,141,201.906 2,290,879.143
Shareholders of the Fund voted to approve the above proposal.
27
VIRTUS EQUITY TRUST
101 Munson Street
Greenfield, MA 01301-9668
TRUSTEES
George R. Aylward
Leroy Keith, Jr.
Philip R. McLoughlin, Chairman
Geraldine M. McNamara
James M. Oates
Richard E. Segerson
Ferdinand L.J. Verdonck
OFFICERS
George R. Aylward, President
Nancy G. Curtiss, Senior Vice President
Francis G. Waltman, Senior Vice President
Marc Baltuch, Vice President and
Chief Compliance Officer
W. Patrick Bradley, Chief Financial Officer
and Treasurer
Kevin J. Carr, Vice President, Chief Legal
Officer, Counsel and Secretary
INVESTMENT ADVISER
Virtus Investment Advisers, Inc.
100 Pearl Street
Hartford, CT 06103-4506
PRINCIPAL UNDERWRITER
VP Distributors, Inc.
100 Pearl Street
Hartford, CT 06103-4506
TRANSFER AGENT
VP Distributors, Inc.
100 Pearl Street
Hartford, CT 06103-4506
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 5501
Boston, MA 02206-5501
HOW TO CONTACT US
Mutual Fund Services 1-800-243-1574
Adviser Consulting Group 1-800-243-4361
Telephone Orders 1-800-367-5877
Text Telephone 1-800-243-1926
Web site VIRTUS.COM
- --------------------------------------------------------------------------------
IMPORTANT NOTICE TO SHAREHOLDERS
The Securities and Exchange Commission has modified mailing regulations for
semiannual and annual shareholder fund reports to allow mutual fund companies to
send a single copy of these reports to shareholders who share the same mailing
address. If you would like additional copies, please call Mutual Fund Services
at 1-800-243-1574.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] -------------
VIRTUS PRSRT STD
MUTUAL FUNDS U.S. POSTAGE
PAID
c/o State Street Bank and Trust Company LANCASTER, PA
P.O. Box 8301 PERMIT 1793
Boston, MA 02266-8301 -------------
For more information about
Virtus mutual funds, please call
your financial representative,
contact us at 1-800-243-1574
or VIRTUS.COM
8027 11-09
SEMIANNUAL
REPORT
[GRAPHIC OMITTED]
VIRTUS
MUTUAL FUNDS
================================================================================
Virtus Capital Growth Fund
================================================================================
TRUST NAME: September 30, 2009 [GRAPHIC OMITTED]
VIRTUS Eligible shareholders can sign up for
EQUITY eDelivery at Virtus.com
TRUST
NO BANK GUARANTEE NOT FDIC INSURED MAY LOSE VALUE
TABLE OF CONTENTS
VIRTUS CAPITAL GROWTH FUND ("Capital Growth Fund")
Message to Shareholders............................................. 1
Disclosure of Fund Expenses......................................... 3
Schedule of Investments............................................. 5
Statement of Assets and Liabilities................................. 8
Statement of Operations............................................. 9
Statement of Changes in Net Assets.................................. 10
Financial Highlights................................................ 12
Notes to Financial Statements....................................... 14
- -------------------------------------------------------------------------------
PROXY VOTING PROCEDURES (FORM N-PX)
The adviser and subadviser vote proxies relating to portfolio securities in
accordance with procedures that have been approved by the Trust's Board of
Trustees. You may obtain a description of these procedures, along with
information regarding how the Fund voted proxies during the most recent 12-month
period ended June 30, 2009, free of charge, by calling toll-free 1-800-243-1574.
This information is also available through the Securities and Exchange
Commission's website at http://www.sec.gov.
FORM N-Q INFORMATION
The Trust files a complete schedule of portfolio holdings for the Fund with the
Securities and Exchange Commission (the "SEC") for the first and third quarters
of each fiscal year on Form N-Q. Form N-Q is available on the SEC's website at
http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public
Reference Room. Information on the operation of the SEC's Public Reference Room
can be obtained by calling toll-free 1-800-SEC-0330.
- -------------------------------------------------------------------------------
This report is not authorized for distribution to prospective investors in the
Virtus Capital Growth Fund unless preceded or accompanied by an effective
prospectus which includes information concerning the sales charge, the Fund's
record and other pertinent information.
MESSAGE TO SHAREHOLDERS
Dear Fellow Shareholders of Virtus Mutual Funds:
Investors who were calmed by the positive news from the financial markets in the
second quarter of 2009 may have had a reason to regain some of their enthusiasm
during the third quarter. There were numerous signs pointing to an end to the
recession: gross domestic product grew by an annualized 3.5 percent, matching
its average growth rate of the last 80 years; a measure of stability appeared in
the housing market; consumer confidence inched up; and better-than-expected
profits and rosier outlooks were reported by many corporations.
The capital markets continued their recovery during the quarter, with most major
stock market indices up by double digits for the quarter. The S&P 500(R) Index
was up 15.6 percent in the quarter and in late September was at its highest
level in nearly a year. The Dow Jones Industrial Average(SM) increased 15.8
percent in the third quarter, and as of September 30 had improved by 13.5
percent for the year. These figures are even more encouraging when compared with
market lows in early March and the double-digit losses both indices recorded
during the first quarter of the year. Bonds also participated in the
third-quarter rally, with the Barclays Capital U.S. Aggregate Bond Index ahead
by 3.74 percent and the Barclays Capital U.S. Municipal Bond Index up 7.12
percent.
Although the Federal Open Market Committee acknowledged that "economic activity
has picked up following its severe downturn," these recent gains should not
unleash any 1990s-style market "exuberance." The strength and timing of a full
recovery is yet to be realized. Unemployment rates that probably have not peaked
remain a drag on consumer spending, and with an expected slowdown of the
government's monetary and fiscal stimulus, some economists speculate that the
growth from the second and third quarter may not be sustainable into next year.
These factors suggest this is an important time to rely on the experience of
your personal financial adviser and the investment professionals who manage your
assets in the Virtus Mutual Funds. We encourage you to meet with your adviser to
review your portfolio and, when appropriate, adjust it to fit your current
investment objectives and your tolerance for risk.
Our wide range of equity, fixed income, and alternative investments allow you to
allocate your assets and design a portfolio tailored to your individual needs.
Information about your investments is always available on our website,
WWW.VIRTUS.COM, and from our customer service staff at 1-800-243-1574. While
there are no guarantees in the world of investing, I can assure you that we will
do our very best to meet your expectations.
1
On behalf of the entire team at Virtus Investment Partners, I thank you for
entrusting your financial assets to us.
Sincerely,
/s/ George R. Aylward
George R. Aylward
President, Virtus Mutual Funds
NOVEMBER 1, 2009
WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT OR REQUIRE ADDITIONAL
INFORMATION, PLEASE VISIT US AT WWW.VIRTUS.COM OR CALL OUR SHAREOWNER SERVICES
GROUP, TOLL FREE, AT 1-800-243-1574.
PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN
PERFORMANCE SHOWN ABOVE.
2
VIRTUS CAPITAL GROWTH FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009
We believe it is important for you to understand the impact of costs on your
investments. All mutual funds have operating expenses. As a shareholder of the
Virtus Capital Growth 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. 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 the 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 line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR
COMPARISON PURPOSES
The second section of the accompanying table provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not your Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your Fund and other funds. To do so, compare these
5% hypothetical examples with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the accompanying table are meant to
highlight your ongoing costs only and do not reflect any transactional costs,
such as sales charges or contingent deferred sales charges. Therefore, the
second section of the accompanying table is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if those transactional costs were included, your
costs would have been higher. The calculations assume no shares were bought or
sold during the period. Your actual costs may have been higher or lower
depending on the amount of your investment and timing of any purchases or
redemptions.
3
VIRTUS CAPITAL GROWTH FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED)
FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009
EXPENSE TABLE
- --------------------------------------------------------------------------------
Beginning Ending Expenses
Account Account Annualized Paid
Value Value Expense During
April 1, 2009 September 30, 2009 Ratio Period*
- --------------------------------------------------------------------------------
ACTUAL
Class A $1,000.00 $1,274.90 1.45% $ 8.27
Class B 1,000.00 1,270.40 2.20 12.52
Class C 1,000.00 1,270.50 2.20 12.52
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,017.71 1.45 7.36
Class B 1,000.00 1,013.90 2.20 11.17
Class C 1,000.00 1,013.90 2.20 11.17
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days (183)
expenses were accrued in the most recent fiscal half-year, then divided by 365
to reflect the 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.
4
VIRTUS CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
- -------------------------------------------------------------------------------
Asset Allocations
-----------------
The table presents asset allocations within certain sectors as a percentage of
total investments as of September 30, 2009.
Information Technology 36%
Health Care 18
Consumer Staples 10
Consumer Discretionary 9
Financials 8
Energy 5
Industrials 4
Other (includes short-term investments) 10
---
Total 100%
===
- -------------------------------------------------------------------------------
($ reported in thousands)
SHARES VALUE
------- --------
COMMON STOCKS--99.0%
CONSUMER DISCRETIONARY--9.3%
Aeropostale, Inc.(2) 36,950 $ 1,606
Amazon.com, Inc.(2) 39,400 3,678
Apollo Group, Inc. Class A(2) 24,200 1,783
Chipotle Mexican Grill, Inc. Class A(2) 15,600 1,514
Expedia, Inc.(2) 70,300 1,684
ITT Educational Services, Inc.(2) 14,925 1,648
Panera Bread Co. Class A(2) 43,600 2,398
priceline.com, Inc.(2) 28,300 4,693
Ross Stores, Inc. 48,025 2,294
Yum! Brands, Inc. 82,000 2,768
--------
24,066
--------
CONSUMER STAPLES--10.2%
Archer-Daniels-Midland Co. 161,850 4,729
Colgate-Palmolive Co. 104,075 7,939
Hansen Natural Corp.(2) 73,650 2,706
Wal-Mart Stores, Inc. 126,425 6,206
Walgreen Co. 127,650 4,783
--------
26,363
--------
SHARES VALUE
------- --------
ENERGY--4.9%
Exxon Mobil Corp. 70,775 $ 4,856
National Oilwell Varco, Inc.(2) 44,900 1,937
Occidental Petroleum Corp. 43,600 3,418
Southwestern Energy Co.(2) 60,250 2,571
--------
12,782
--------
FINANCIALS--8.0%
AFLAC, Inc. 49,000 2,094
BlackRock, Inc. 7,850 1,702
Digital Realty Trust, Inc. 93,050 4,253
Goldman Sachs Group, Inc. (The) 29,500 5,439
HCC Insurance Holdings, Inc. 58,950 1,612
Hudson City Bancorp, Inc. 141,650 1,863
IntercontinentalExchange, Inc.(2) 15,850 1,541
Morgan Stanley 71,700 2,214
--------
20,718
--------
HEALTH CARE--18.1%
Amgen, Inc.(2) 108,400 6,529
Biogen Idec, Inc.(2) 32,500 1,642
See Notes to Financial Statements
5
VIRTUS CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
($ reported in thousands)
SHARES VALUE
------- --------
HEALTH CARE--CONTINUED
Endo Pharmaceuticals
Holdings, Inc.(2) 135,100 $ 3,057
Forest Laboratories, Inc.(2) 191,350 5,633
Gilead Sciences, Inc.(2) 120,675 5,621
Hospira, Inc.(2) 39,650 1,768
Illumina, Inc.(2) 112,500 4,781
Kinetic Concepts, Inc.(2) 43,800 1,620
Life Technologies Corp.(2) 83,175 3,872
Millipore Corp.(2) 18,250 1,284
Schering-Plough Corp. 146,700 4,144
Watson Pharmaceuticals, Inc.(2) 191,400 7,013
--------
46,964
--------
INDUSTRIALS--4.8%
Iron Mountain, Inc.(2) 79,250 2,113
Lockheed Martin Corp. 38,425 3,000
Shaw Group, Inc. (The)(2) 88,300 2,834
URS Corp.(2) 100,650 4,393
--------
12,340
--------
INFORMATION TECHNOLOGY--36.7%
Apple, Inc.(2) 55,250 10,242
BMC Software, Inc.(2) 38,900 1,460
Broadcom Corp. Class A(2) 106,580 3,271
Cisco Systems, Inc.(2) 428,798 10,094
Cognizant Technology Solutions Corp. Class A(2) 44,700 1,728
Cree, Inc.(2) 67,550 2,482
EMC Corp.(2) 95,400 1,626
F5 Networks, Inc.(2) 190,900 7,565
Google, Inc. Class A(2) 18,050 8,950
Hewlett-Packard Co. 91,400 4,315
Marvell Technology Group Ltd.(2) 107,350 1,738
McAfee, Inc.(2) 33,750 1,478
Microsoft Corp. 200,375 5,188
NetApp, Inc.(2) 69,100 1,844
NeuStar, Inc. Class A(2) 68,200 1,541
Oracle Corp. 432,300 9,009
QUALCOMM, Inc. 28,750 1,293
Red Hat, Inc.(2) 212,200 5,865
SHARES VALUE
------- --------
INFORMATION TECHNOLOGY--CONTINUED
Silicon Laboratories, Inc.(2) 34,650 $ 1,606
Sybase, Inc.(2) 63,900 2,486
Teradata Corp.(2) 55,350 1,523
WebMD Health Corp. Class A(2) 58,950 1,952
Western Digital Corp.(2) 220,200 8,044
--------
95,300
--------
MATERIALS--4.1%
Crown Holdings, Inc.(2) 112,300 3,055
Freeport-McMoRan
Copper & Gold, Inc.(2) 61,500 4,220
Lubrizol Corp. (The) 47,300 3,380
--------
10,655
--------
TELECOMMUNICATION SERVICES--2.2%
American Tower Corp. Class A(2) 158,950 5,786
UTILITIES--0.7%
NRG Energy, Inc.(2) 69,100 1,948
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $203,621) 256,922
- -------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--99.0%
(IDENTIFIED COST $203,621) 256,922
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--2.9%
MONEY MARKET MUTUAL FUNDS--2.9%
State Street Institutional Liquid
Reserves Fund - Institutional
Shares (seven-day effective
yield 0.260%) 7,480,001 7,480
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $7,480) 7,480
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS--101.9%
(IDENTIFIED COST $211,101) 264,402(1)
Other assets and liabilities, net--(1.9)% (5,015)
--------
NET ASSETS--100.0% $259,387
========
See Notes to Financial Statements
6
VIRTUS CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
KEY INVESTMENT TERM
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.
FOOTNOTE LEGEND
(1) Federal Income Tax Information: For tax information at September 30, 2009,
see the Federal Income Tax Information Note 8 in the Notes to Financial
Statements.
(2) Non-income producing.
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at Level 1 -
September 30, 2009 Quoted Prices
------------------ -------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $256,922 $256,922
Short-Term Investments 7,480 7,480
-------- --------
Total Investments $264,402 $264,402
======== ========
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
See Notes to Financial Statements
7
VIRTUS CAPITAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands except shares and per share amounts)
ASSETS
Investment securities at value(1) .......................... $ 264,402
Receivables
Investment securities sold .............................. 1,629
Fund shares sold ........................................ 2
Dividends and interest receivable ....................... 31
Prepaid expenses ........................................... 33
-----------
Total assets ......................................... 266,097
-----------
LIABILITIES
Payables
Fund shares repurchased ................................. 6,323
Investment advisory fees ................................ 149
Distribution and service fees ........................... 57
Administration fees ..................................... 18
Transfer agent fees and expenses ........................ 115
Trustees' fee and expenses .............................. 4
Professional fees ....................................... 19
Other accrued expenses .................................. 25
-----------
Total liabilities ..................................... 6,710
-----------
NET ASSETS ................................................. $ 259,387
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest ........... $ 417,621
Accumulated undistributed net investment income (loss) ..... (851)
Accumulated undistributed net realized gain (loss) ......... (210,684)
Net unrealized appreciation (depreciation) on investments... 53,301
-----------
NET ASSETS ................................................. $ 259,387
===========
CLASS A
Net asset value (net assets/shares outstanding) per share... $ 12.52
Maximum offering price per share $12.52/(1-5.75%) .......... $ 13.28
Shares of beneficial interest outstanding, no par value,
unlimited authorization .................................. 20,223,946
Net Assets ................................................. $ 253,268
CLASS B
Net asset value (net assets/shares outstanding)
and offering price per share ............................. $ 11.23
Shares of beneficial interest outstanding,
no par value, unlimited authorization .................... 384,224
Net Assets ................................................. $ 4,316
CLASS C
Net asset value (net assets/shares outstanding)
and offering price per share ............................. $ 12.26
Shares of beneficial interest outstanding,
no par value, unlimited authorization .................... 147,080
Net Assets ................................................. $ 1,803
(1)Investments in securities at cost ....................... $ 211,101
See Notes to Financial Statements
8
VIRTUS CAPITAL GROWTH FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands)
INVESTMENT INCOME
Dividends ............................................................. $ 966
--------
Total investment income .......................................... 966
--------
EXPENSES
Investment advisory fees .............................................. 865
Service fees, Class A ................................................. 302
Distribution and service fees, Class B ................................ 20
Distribution and service fees, Class C ................................ 8
Administration fees ................................................... 105
Transfer agent fee and expenses ....................................... 390
Custodian fees ........................................................ 12
Printing fees and expenses ............................................ 44
Professional fees ..................................................... 17
Registration fees ..................................................... 20
Trustees' fee and expenses ............................................ 12
Miscellaneous expenses ................................................ 22
--------
Total expenses ................................................... 1,817
NET INVESTMENT INCOME (LOSS) .......................................... (851)
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments ............................... (13,626)
Net change in unrealized appreciation (depreciation) on investments ... 74,200
--------
NET GAIN (LOSS) ON INVESTMENTS ........................................ 60,574
--------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........ $ 59,723
========
See Notes to Financial Statements
9
VIRTUS CAPITAL GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
(Reported in thousands)
Six Months Ended
September 30, 2009 Year Ended
(Unaudited) March 31, 2009
------------------ --------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) .......................................... $ (851) $ (1,101)
Net realized gain (loss) .............................................. (13,626) (76,683)
Net change in unrealized appreciation (depreciation).. ................ 74,200 (48,521)
-------- ---------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........... 59,723 (126,305)
-------- ---------
FROM SHARE TRANSACTIONS:
SALE OF SHARES
Class A (189 and 675 shares, respectively) ............................ 2,070 8,170
Class B (20 and 56 shares, respectively) .............................. 205 627
Class C (1 and 5 shares, respectively) ................................ 14 52
SHARES REPURCHASED
Class A (2,262 and 3,839 shares, respectively) ........................ (26,087) (48,364)
Class B (72 and 198 shares, respectively) ............................. (718) (2,326)
Class C (22 and 55 shares, respectively) .............................. (230) (609)
-------- ---------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ............. (24,746) (42,450)
CAPITAL CONTRIBUTIONS
Fair Funds settlement(1) .............................................. 21 --
-------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ................................. 34,998 (168,755)
NET ASSETS
Beginning of period ................................................... 224,389 393,144
-------- ---------
END OF PERIOD ......................................................... $259,387 $ 224,389
======== =========
Accumulated undistributed net investment income (loss) at end of period $ (851) $ --
(1) The Fund was a recipient of a portion of a distribution from a Fair Fund
established by the United States Securities and Exchange Commission. The
proceeds received were part of the Millennium Partners, L.P. and Bear
Stearns & Co., Inc. settlements.
See Notes to Financial Statements
10
THIS PAGE INTENTIONALLY BLANK.
VIRTUS CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET NET
ASSET NET REALIZED TOTAL DIVIDENDS DISTRIBUTIONS CHANGE
VALUE, INVESTMENT AND FROM FROM NET FROM NET IN NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL ASSET
OF PERIOD (LOSS)(1) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A
4/1/09 to 9/30/09(6) $ 9.82 (0.04) 2.74 2.70 -- -- -- 2.70
4/1/08 to 3/31/09 15.00 (0.04) (5.14) (5.18) -- -- -- (5.18)
11/1/07 to 3/31/08 18.18 (0.03) (3.15) (3.18) -- -- -- (3.18)
11/1/06 to 10/31/07 15.78 (0.03) 2.43 2.40 -- -- -- 2.40
11/1/05 to 10/31/06 14.89 (0.05) 1.02 0.97 (0.08) -- (0.08) 0.89
11/1/04 to 10/31/05 14.21 0.07 0.61 0.68 -- -- -- 0.68
11/1/03 to 10/31/04 13.90 (0.06) 0.37 0.31 -- -- -- 0.31
CLASS B
4/1/09 to 9/30/09(6) $ 8.84 (0.07) 2.46 2.39 -- -- -- 2.39
4/1/08 to 3/31/09 13.61 (0.13) (4.64) (4.77) -- -- -- (4.77)
11/1/07 to 3/31/08 16.55 (0.07) (2.87) (2.94) -- -- -- (2.94)
11/1/06 to 10/31/07 14.47 (0.14) 2.22 2.08 -- -- -- 2.08
11/1/05 to 10/31/06 13.69 (0.15) 0.93 0.78 -- -- -- 0.78
11/1/04 to 10/31/05 13.16 (0.05) 0.58 0.53 -- -- -- 0.53
11/1/03 to 10/31/04 12.96 (0.15) 0.35 0.20 -- -- -- 0.20
CLASS C
4/1/09 to 9/30/09(6) $ 9.65 (0.08) 2.69 2.61 -- -- -- 2.61
4/1/08 to 3/31/09 14.85 (0.14) (5.06) (5.20) -- -- -- (5.20)
11/1/07 to 3/31/08 18.06 (0.08) (3.13) (3.21) -- -- -- (3.21)
11/21/06(5) to 10/31/07 15.95 (0.16) 2.27 2.11 -- -- -- 2.11
NET NET RATIO OF NET
ASSET ASSETS, RATIO OF INVESTMENT
VALUE, END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO
END OF TOTAL PERIOD AVERAGE TO AVERAGE TURNOVER
PERIOD RETURN(2) (000'S) NET ASSETS NET ASSETS RATE
- ----------------------------------------------------------------------------------------------------------------
CLASS A
4/1/09 to 9/30/09(6) $12.52 27.49%(4) $253,268 1.45%(3) (0.67)%(3) 46%(4)
4/1/08 to 3/31/09 9.82 (34.53) 218,922 1.42 (0.33) 92
11/1/07 to 3/31/08 15.00 (17.49)(4) 382,033 1.43(3) (0.46)(3) 33(4)
11/1/06 to 10/31/07 18.18 15.21 493,633 1.41 (0.16) 90
11/1/05 to 10/31/06 15.78 6.54 486,845 1.37 (0.31) 167
11/1/04 to 10/31/05 14.89 4.79 580,058 1.36 0.45 67
11/1/03 to 10/31/04 14.21 2.23 844,523 1.34 (0.39) 57
CLASS B
4/1/09 to 9/30/09(6) $11.23 27.04%(4) $ 4,316 2.20%(3) (1.42)%(3) 46%(4)
4/1/08 to 3/31/09 8.84 (35.05) 3,852 2.17 (1.09) 92
11/1/07 to 3/31/08 13.61 (17.76)(4) 7,874 2.17(3) (1.20)(3) 33(4)
11/1/06 to 10/31/07 16.55 14.37 10,937 2.16 (0.93) 90
11/1/05 to 10/31/06 14.47 5.70 9,038 2.12 (1.06) 167
11/1/04 to 10/31/05 13.69 4.03 11,918 2.11 (0.34) 67
11/1/03 to 10/31/04 13.16 1.54 16,314 2.09 (1.13) 57
CLASS C
4/1/09 to 9/30/09(6) $12.26 27.05%(4) $ 1,803 2.20%(3) (1.42)%(3) 46%(4)
4/1/08 to 3/31/09 9.65 (35.02) 1,615 2.17 (1.09) 92
11/1/07 to 3/31/08 14.85 (17.77)(4) 3,237 2.17(3) (1.20)(3) 33(4)
11/21/06(5) to 10/31/07 18.06 13.23(4) 4,546 2.15(3) (1.03)(3) 90(4)
(1) Computed using average shares outstanding.
(2) Sales charges are not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Inception date.
(6) Unaudited.
See Notes to Financial Statements
12 and 13
VIRTUS CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
1. ORGANIZATION
Virtus Equity 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, thirteen funds of the Trust are offered for
sale, of which the Virtus Capital Growth Fund (the "Fund") is reported in
this semiannual report. The Fund is diversified and has an investment
objective to seek to provide long-term capital appreciation. There is no
guarantee that the Fund will achieve its objective.
The Fund offers Class A shares, Class B shares and Class C shares.
Class A shares are sold with a front-end sales charge of up to 5.75% with
some exceptions. Generally, Class A shares are not subject to any charges by
the Fund when redeemed; however, a 1% contingent deferred sales charge
("CDSC") may be imposed on certain redemptions made within one year following
purchases on which a finder's fee has been paid. The one-year period begins
on the last day of the month preceding the month in which the purchase was
made. Class B shares are sold with a contingent deferred sales charge which
declines from 5% to zero depending on the period of time the shares are held
(see Note 9). Class C shares are sold with a 1% contingent deferred sales
charge, if applicable, if redeemed within one year of purchase.
Each class of shares has identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that each class bears
different distribution and/or service expenses and has exclusive voting
rights with respect to its distribution plan. Income and other expenses and
realized and unrealized gains and losses of the Fund are borne pro rata by
the holders of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of increases and decreases
in net assets from operations during the reporting period. Actual results
could differ from those estimates, and those differences could be
significant.
A. SECURITY VALUATION:
Equity securities are valued at the official closing price (typically last
sale) on the exchange on which the securities are primarily traded, or if no
closing price is available, at the last bid price.
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service, which utilizes information with respect to
recent sales, market transactions in comparable securities, quotations from
dealers, and various relationships between securities in determining value.
Due to continued volatility in the current market, valuations developed
through pricing techniques may materially vary from the actual amounts
realized upon sale of the securities.
As required, some securities and assets may be valued at fair value as
determined in good faith by or under the direction of the Trustees.
14
VIRTUS CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
Certain foreign common stocks may be fair valued in cases where closing
prices are not readily available or are deemed not reflective of readily
available market prices. For example, significant events (such as movement in
the U.S. securities market, or other regional and local developments) may
occur between the time that foreign markets close (where the security is
principally traded) and the time that the Fund calculates its net asset value
(generally, the close of the NYSE) that may impact the value of securities
traded in these foreign markets. In these cases, information from an external
vendor may be utilized to adjust closing market prices of certain foreign
common stocks to reflect their fair value. Because the frequency of
significant events is not predictable, fair valuation of certain foreign
common stocks may occur on a frequent basis.
Investments in underlying funds are valued at each fund's closing net asset
value determined as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. Eastern time).
Short-term investments having a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market.
The Fund utilizes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels:
o Level 1 - quoted prices in active markets for identical securities
o Level 2 - prices determined using other significant observable inputs
(including quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, etc.)
o Level 3 - prices determined using significant unobservable inputs
(including the Fund's own assumptions in determining the fair value of
investments)
A summary of the inputs used to value the Fund's net assets by each major
security type is disclosed at the end of the Schedule of Investments.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date, or in the case of certain foreign
securities, as soon as the Fund is notified. Interest income is recorded on
the accrual basis. The Fund amortizes premiums and accretes discounts using
the effective interest method. Realized gains and losses are determined on
the identified cost basis.
Dividend income is recorded using management's estimate of the income
included in distributions received from the REIT investments. Distributions
received in excess of this estimated amount are recorded as a reduction of
the cost of investments or reclassified to capital gains. The actual amounts
of income, return of capital, and capital gains are only determined by each
REIT after its fiscal year-end, and may differ from the estimated amounts.
C. INCOME TAXES:
The Fund is treated as a separate taxable entity. It is the policy of the
Fund to comply with the requirements of Subchapter M of the Internal Revenue
Code and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes or excise
taxes has been made.
15
VIRTUS CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
The Trust may be subject to foreign taxes on income, gains on investments or
currency repatriation, a portion of which may be recoverable. Each Fund will
accrue such taxes and recoveries as applicable based upon current
interpretations of the tax rules and regulations that exist in the markets in
which they invest.
Accounting for Uncertainty in Income Taxes sets forth a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return. Management has analyzed each Fund's tax
positions and has concluded that no provision for income tax is required in
any Fund's financial statements. The Fund is not aware of any tax positions
for which it is reasonably possible that the total amounts of unrecognized
tax benefits will significantly change in the next twelve months. Each of the
Fund's federal tax returns for the prior three fiscal years remains subject
to examination by the Internal Revenue Service.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by the Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States of America. These differences may include the treatment of
non-taxable dividends, market premium and discount, non-deductible expenses,
expiring capital loss carryovers, foreign currency gain or loss, gain or loss
on futures contracts, partnerships, operating losses and losses deferred due
to wash sales. Permanent book and tax basis differences relating to
shareholder distributions will result in reclassifications to capital paid in
on shares of beneficial interest.
E. EXPENSES:
Expenses incurred by the Trust with respect to more than one fund are
allocated in proportion to the net assets of each fund, except where
allocation of direct expenses to each fund or an alternative allocation
method can be more appropriately made.
F. FOREIGN CURRENCY TRANSLATION:
Foreign securities and other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at
the trade date. The gain or loss resulting from a change in currency exchange
rates between the trade and settlement date of a portfolio transaction is
treated as a gain or loss on foreign currency. Likewise, the gain or loss
resulting from a change in currency exchange rates between the date income is
accrued and the date it is paid is treated as a gain or loss on foreign
currency. The Trust does not isolate that portion of the results of
operations arising from changes in exchange rates or from fluctuations which
arise due to changes in the market prices of securities.
G. SECURITIES LENDING:
The Fund may loan securities to qualified brokers through an agreement with
State Street Bank and Trust Company ("State Street"). Under the terms of the
agreement, the Fund is required to maintain collateral with a market value
not less than 100% of the market value of loaned securities. Collateral is
adjusted daily in connection with changes in the market value of securities
on loan. Collateral may consist of cash and securities issued by the U.S.
Government. Cash collateral is invested in a short-term money market fund.
16
VIRTUS CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
Dividends earned on the collateral and premiums paid by the borrower are
recorded as income by the Fund net of fees charged by State Street for its
services in connection with this securities lending program. Lending
portfolio securities involves a risk of delay in the recovery of the loaned
securities or in the foreclosure on collateral.
At September 30, 2009, the Fund did not have any securities on loan.
3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
($ REPORTED IN THOUSANDS EXCEPT AS NOTED)
Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), is an indirect,
wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"). As
compensation for its services to the Trust, the Adviser is entitled to a fee
based upon the following annual rates as a percentage of the average daily
net assets of the Fund:
1ST $1 $1+ BILLION - $2+
BILLION $2 BILLION BILLION
------- ---------- -------
0.70% 0.65% 0.60%
The Adviser manages the Fund's investment program and general operations of
the Fund, including oversight of the Fund's subadviser, Harris Investment
Management, Inc.
As distributor of the Fund's shares, VP Distributors, Inc. ("VP
Distributors"), an indirect, wholly-owned subsidiary of Virtus, has advised
the Fund that it retained net selling commissions and deferred sales charges
for the six months ended (the "period") September 30, 2009, as follows:
CLASS A CLASS B CLASS C
NET SELLING DEFERRED DEFERRED
COMMISSIONS SALES CHARGES SALES CHARGES
----------- ------------- -------------
$12 $5 $ --*
* Amount is less than $500 (not reported in thousands).
In addition, the Fund pays VP Distributors distribution and/or service fees
at the annual rate of 0.25% for Class A shares, 1.00% for Class B shares, and
1.00% for Class C shares applied to the average daily net assets of each
respective class.
Under certain circumstances, shares of certain Virtus Mutual Funds may be
exchanged for shares of the same class of certain other Virtus Mutual Funds
on the basis of the relative net asset values per share at the time of the
exchange. On exchanges with share classes that carry a contingent deferred
sales charge, the CDSC schedule of the original shares purchased continues to
apply.
VP Distributors serves as the Administrator to the Trust. For the period
ended September 30, 2009, the Fund incurred administration fees totaling
$105. VP Distributors also serves as the Trust's transfer agent. For the
period ended September 30, 2009, transfer agent fees were $390 as reported in
the Statement of Operations.
17
VIRTUS CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
4. PURCHASES AND SALES OF SECURITIES
($ REPORTED IN THOUSANDS)
Purchases and sales of investment securities (excluding U.S. Government and
agency securities and short-term securities) during the period ended
September 30, 2009, were as follows:
PURCHASES SALES
--------- --------
$109,978 $131,885
There were no purchases or sales of long-term U.S. Government and agency
securities during the period ended September 30, 2009.
5. CREDIT RISK AND ASSET CONCENTRATIONS
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such
investments may be volatile. The consequences of political, social or
economic changes in these markets may have disruptive effects on the market
prices of these investments and the income they generate, as well as 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 its pursuit of a greater investment return. Fluctuations in
these sectors of concentration may have a greater impact on the Fund,
positive or negative, than if the Fund did not concentrate its investments in
such sectors.
At September 30, 2009, the Fund held securities issued by various companies
in the Information Technology sector, representing 36% of the total
investments of the Fund.
6. INDEMNIFICATIONS
Under the Fund's organizational documents, its Trustees and Officers are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, the Fund enters into contracts that
contain a variety of indemnifications. The Fund's maximum exposure under
these arrangements is unknown. However, the Fund has not had prior claims or
losses pursuant to these arrangements.
7. REGULATORY EXAMS
Federal and state regulatory authorities from time to time make inquiries and
conduct examinations regarding compliance by Virtus and its subsidiaries
(collectively "the Company") with securities and other laws and regulations
affecting their registered products.
There are currently no such matters which the Company believes will be
material to these financial statements.
18
VIRTUS CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
8. FEDERAL INCOME TAX INFORMATION
($ REPORTED IN THOUSANDS)
At September 30, 2009, federal tax cost and aggregate gross appreciation
(depreciation) of securities held by the Fund were as follows:
NET UNREALIZED
FEDERAL UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------- ------------ -------------- --------------
$212,562 $55,184 $(3,344) $751,840
The Fund has capital loss carryovers which may be used to offset future
capital gains, as follows:
Expiration Year
--------------------------------------------------------------
2010 2011 2016 2017 Total
------- ------- ------ ------- --------
$97,731 $15,274 $4,365 $25,431 $142,801
The Fund may not realize the benefit of these losses to the extent the Fund
does not realize gains on investments prior to the expiration of the capital
loss carryovers. The Fund's amounts include losses acquired in connection
with prior year's mergers. Utilization of these capital loss carryovers is
subject to annual limitations.
9. SUBSEQUENT EVENT EVALUATIONS
Management has evaluated the impact of all subsequent events on the Funds
through November 19, 2009, the date the financial statements were available
for issuance, and has determined that the following subsequent events require
recognition or disclosure in the financial statements.
Effective on December 1, 2009 (the "Closing Date"), Class B Shares of the
Virtus Mutual Funds will no longer be available for purchase by new or
existing shareholders, except by existing shareholders through Qualifying
Transactions (for information regarding Qualifying Transactions refer to each
Fund's prospectus).
19
VIRTUS EQUITY TRUST
101 Munson Street
Greenfield, MA 01301-9668
TRUSTEES
George R. Aylward
Leroy Keith, Jr.
Philip R. McLoughlin, Chairman
Geraldine M. McNamara
James M. Oates
Richard E. Segerson
Ferdinand L.J. Verdonck
OFFICERS
George R. Aylward, President
Nancy G. Curtiss, Senior Vice President
Francis G. Waltman, Senior Vice President
Marc Baltuch, Vice President and Chief Compliance Officer
W. Patrick Bradley, Chief Financial Officer and Treasurer
Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary
INVESTMENT ADVISER
Virtus Investment Advisers, Inc.
100 Pearl Street
Hartford, CT 06103-4506
PRINCIPAL UNDERWRITER
VP Distributors, Inc.
100 Pearl Street
Hartford, CT 06103-4506
TRANSFER AGENT
VP Distributors, Inc.
100 Pearl Street
Hartford, CT 06103-4506
CUSTODIAN
PFPC Trust Company
8800 Tinicum Boulevard
Philadelphia, PA 19155-3111
HOW TO CONTACT US
Mutual Fund Services 1-800-243-1574
Adviser Consulting Group 1-800-243-4361
Telephone Orders 1-800-367-5877
Text Telephone 1-800-243-1926
Web site VIRTUS.COM
- --------------------------------------------------------------------------------
IMPORTANT NOTICE TO SHAREHOLDERS
The Securities and Exchange Commission has modified mailing regulations for
semiannual and annual shareholder fund reports to allow mutual fund companies to
send a single copy of these reports to shareholders who share the same mailing
address. If you would like additional copies, please call Mutual Fund Services
at 1-800-243-1574.
- --------------------------------------------------------------------------------
-------------
PRSRT STD
U.S. POSTAGE
PAID
LANCASTER, PA
PERMIT 1793
-------------
[GRAPHIC OMITTED]
VIRTUS
MUTUAL FUNDS
c/o State Street Bank and Trust Company
P.O. Box 8301
Boston, MA 02266-8301
For more information about Virtus mutual funds, please call your financial
representative, contact us at 1-800-243-1574 or VIRTUS.COM
8026 11-09
SEMIANNUAL
REPORT
[GRAPHIC OMITTED]
VIRTUS
MUTUAL FUNDS
================================================================================
Virtus Mid-Cap Value Fund
================================================================================
TRUST NAME: September 30, 2009 [GRAPHIC OMITTED]
VIRTUS Eligible shareholders can sign up for
EQUITY eDelivery at Virtus.com
TRUST
NO BANK GUARANTEE NOT FDIC INSURED MAY LOSE VALUE
TABLE OF CONTENTS
VIRTUS MID-CAP VALUE FUND ("Mid-Cap Value Fund")
Message to Shareholders................................................. 1
Disclosure of Fund Expenses............................................. 4
Schedule of Investments................................................. 6
Statement of Assets and Liabilities..................................... 8
Statement of Operations................................................. 9
Statement of Changes in Net Assets...................................... 10
Financial Highlights.................................................... 12
Notes to Financial Statements........................................... 14
- --------------------------------------------------------------------------------
PROXY VOTING PROCEDURES (FORM N-PX)
The adviser and subadviser vote proxies relating to portfolio securities in
accordance with procedures that have been approved by the Trust's Board of
Trustees. You may obtain a description of these procedures, along with
information regarding how the Fund voted proxies during the most recent 12-month
period ended June 30, 2009, free of charge, by calling toll-free 1-800-243-1574.
This information is also available through the Securities and Exchange
Commission's website at http://www.sec.gov.
FORM N-Q INFORMATION
The Trust files a complete schedule of portfolio holdings for the Fund with the
Securities and Exchange Commission (the "SEC") for the first and third quarters
of each fiscal year on Form N-Q. Form N-Q is available on the SEC's website at
http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public
Reference Room. Information on the operation of the SEC's Public Reference Room
can be obtained by calling toll-free 1-800-SEC-0330.
- --------------------------------------------------------------------------------
This report is not authorized for distribution to prospective investors in the
Virtus Mid-Cap Value Fund unless preceded or accompanied by an effective
prospectus which includes information concerning the sales charge, the Fund's
record and other pertinent information.
MESSAGE TO SHAREHOLDERS
Dear Fellow Shareholders of Virtus Mutual Funds:
Investors who were calmed by the positive news from the financial markets in the
second quarter of 2009 may have had a reason to regain some of their enthusiasm
during the third quarter. There were numerous signs pointing to an end to the
recession: gross domestic product grew by an annualized 3.5 percent, matching
its average growth rate of the last 80 years; a measure of stability appeared in
the housing market; consumer confidence inched up; and better-than-expected
profits and rosier outlooks were reported by many corporations.
The capital markets continued their recovery during the quarter, with most major
stock market indices up by double digits for the quarter. The S&P 500(R) Index
was up 15.6 percent in the quarter and in late September was at its highest
level in nearly a year. The Dow Jones Industrial Average(SM) increased 15.8
percent in the third quarter, and as of September 30 had improved by 13.5
percent for the year. These figures are even more encouraging when compared with
market lows in early March and the double-digit losses both indices recorded
during the first quarter of the year. Bonds also participated in the
third-quarter rally, with the Barclays Capital U.S. Aggregate Bond Index ahead
by 3.74 percent and the Barclays Capital U.S. Municipal Bond Index up 7.12
percent.
Although the Federal Open Market Committee acknowledged that "economic activity
has picked up following its severe downturn," these recent gains should not
unleash any 1990s-style market "exuberance." The strength and timing of a full
recovery is yet to be realized. Unemployment rates that probably have not peaked
remain a drag on consumer spending, and with an expected slowdown of the
government's monetary and fiscal stimulus, some economists speculate that the
growth from the second and third quarter may not be sustainable into next year.
These factors suggest this is an important time to rely on the experience of
your personal financial adviser and the investment professionals who manage your
assets in the Virtus Mutual Funds. We encourage you to meet with your adviser to
review your portfolio and, when appropriate, adjust it to fit your current
investment objectives and your tolerance for risk.
Our wide range of equity, fixed income, and alternative investments allow you to
allocate your assets and design a portfolio tailored to your individual needs.
Information about your investments is always available on our website,
WWW.VIRTUS.COM, and from our customer service staff at 1-800-243-1574. While
there are no guarantees in the world of investing, I can assure you that we will
do our very best to meet your expectations.
1
On behalf of the entire team at Virtus Investment Partners, I thank you for
entrusting your financial assets to us.
Sincerely,
/s/ George R. Aylward
George R. Aylward
President, Virtus Mutual Funds
NOVEMBER 1, 2009
WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT OR REQUIRE ADDITIONAL
INFORMATION, PLEASE VISIT US AT WWW.VIRTUS.COM OR CALL OUR SHAREOWNER SERVICES
GROUP, TOLL FREE, AT 1-800-243-1574.
PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN
PERFORMANCE SHOWN ABOVE.
2
THIS PAGE INTENTIONALLY BLANK.
VIRTUS MID-CAP VALUE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009
We believe it is important for you to understand the impact of costs on your
investment. All mutual funds have operating expenses. As a shareholder of the
Virtus Mid-Cap Value Fund (the "Fund"), you may incur two types of costs: (1)
transaction costs, including sales charges on purchases of Class A shares and
contingent deferred sales charges on Class C shares; and (2) ongoing costs,
including investment advisory fees; distribution and service fees; and other
expenses. Class I shares are sold without a sales charge and do not incur
distribution and service fees. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of
the period and held for the entire period. The following Expense Table
illustrates the Fund's costs in two ways.
ACTUAL EXPENSES
The first section of the accompanying table provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the accompanying table provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not your Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your Fund and other funds. To do so, compare these
5% hypothetical examples with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the accompanying table are meant to
highlight your ongoing costs only and do not reflect any transactional costs,
such as sales charges or contingent deferred sales charges. Therefore, the
second line of the accompanying table is useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if those transactional costs were included, your costs would
have been higher. The calculations assume no shares were bought or sold during
the period. Your actual costs may have been higher or lower, depending on the
amount of your investment and the timing of any purchases or redemptions.
4
VIRTUS MID-CAP VALUE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED)
FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009
EXPENSE TABLE
- --------------------------------------------------------------------------------
Beginning Ending Expenses
Account Account Annualized Paid
Value Value Expense During
April 1, 2009 September 30, 2009 Ratio Period*
- --------------------------------------------------------------------------------
ACTUAL
Class A $1,000.00 $1,462.50 1.48% $ 9.14
Class C 1,000.00 1,456.20 2.23 13.73
Class I 1,000.00 1,464.20 1.22 7.54
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
Class A 1,000.00 1,017.56 1.48 7.51
Class C 1,000.00 1,013.75 2.23 11.32
Class I 1,000.00 1,018.88 1.22 6.19
* Expenses are equal to the Fund's annualized expense ratio, which includes
waived fees and reimbursed expenses, if applicable, multiplied by the average
account value over the period, multiplied by the number of days (183)
expenses were accrued in the most recent fiscal half-year, then divided by
365 to reflect the period.
The Fund may invest in other funds, and the annualized expense ratios noted
above do not reflect fees and expenses associated with the underlying funds.
If such fees and expenses were included, the expenses would have been higher.
You can find more information about the Fund's expenses in the Financial
Statements section that follows. For additional information on operating
expenses and other shareholder costs, refer to the prospectus.
5
VIRTUS MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
- --------------------------------------------------------------------------------
Asset Allocations
-----------------
The table presents asset allocations within certain sectors as a percentage of
total investments as of September 30, 2009.
Industrials 26%
Consumer Discretionary 19
Consumer Staples 13
Materials 13
Utilities 13
Energy 10
Other (includes short-term investments) 6
---
Total 100%
===
- --------------------------------------------------------------------------------
($ reported in thousands)
SHARES VALUE
--------- --------
COMMON STOCKS--95.0%
CONSUMER DISCRETIONARY--19.1%
Big Lots, Inc.(2) 494,400 $ 12,370
Fortune Brands, Inc. 248,300 10,672
Home Depot, Inc. (The) 429,300 11,436
Limited Brands, Inc. 950,300 16,146
Penney (J.C.) Co., Inc. 391,000 13,196
TJX Cos., Inc. (The) 328,800 12,215
--------
76,035
--------
CONSUMER STAPLES--12.7%
Del Monte Foods Co. 1,040,450 12,048
Koninklijke Ahold NV Sponsored ADR 1,208,400 14,561
Safeway, Inc. 606,900 11,968
Sara Lee Corp. 1,079,500 12,026
--------
50,603
--------
ENERGY--10.2%
El Paso Corp. 1,213,450 12,523
Spectra Energy Corp. 842,042 15,948
Williams Cos., Inc. (The) 674,000 12,044
--------
40,515
--------
SHARES VALUE
--------- --------
FINANCIALS--0.4%
Alleghany Corp.(2) 5,878 $ 1,523
--------
INDUSTRIALS--26.5%
Con-way, Inc. 181,900 6,970
Crown Holdings, Inc.(2) 623,000 16,946
Masco Corp. 843,600 10,899
Owens Corning, Inc.(2) 524,350 11,772
Raytheon Co. 187,300 8,985
Republic Services, Inc. 603,402 16,032
Thomas & Betts Corp.(2) 432,800 13,019
USG Corp.(2) 500,400 8,597
Waste Management, Inc. 409,600 12,214
--------
105,434
--------
MATERIALS--12.7%
Ball Corp. 246,900 12,148
Dow Chemical Co. (The) 169,100 4,408
Owens-Illinois, Inc.(2) 486,150 17,939
Packaging Corp. of America 367,150 7,490
Weyerhaeuser Co. 229,200 8,400
--------
50,385
--------
See Notes to Financial Statements
6
VIRTUS MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
($ reported in thousands)
SHARES VALUE
--------- --------
UTILITIES--13.4%
Dominion Resources, Inc. 324,700 $ 11,202
Duke Energy Corp. 837,884 13,188
Dynegy, Inc. Class A(2) 2,420,900 6,174
Mirant Corp.(2) 502,900 8,263
ONEOK, Inc. 402,000 14,721
--------
53,548
--------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $430,951) 378,043
- --------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--95.0%
(IDENTIFIED COST $430,951) 378,043
- --------------------------------------------------------------------------------
SHARES VALUE
--------- --------
SHORT-TERM INVESTMENTS--6.4%
MONEY MARKET MUTUAL FUNDS--6.4%
State Street Institutional
Liquid Reserves Fund -
Institutional Shares
(seven-day effective
yield 0.260%) 25,456,804 $ 25,457
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $25,457) 25,457
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS--101.4%
(IDENTIFIED COST $456,408) 403,500(1)
Other assets and liabilities, net--(1.4)% (5,512)
--------
NET ASSETS--100.0% $397,988
========
ABBREVIATIONS
ADR - American Depositary Receipt
KEY INVESTMENT TERMS
ADR (AMERICAN DEPOSITARY RECEIPT)
Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges
that are held by a U.S. bank or trust. Foreign companies use ADRs in order to
make it easier for Americans to buy their shares.
SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT)
An ADR which is issued with the cooperation of the company whose stock will
underlie the ADR. Sponsored ADRs generally carry the same rights normally given
to stockholders such as voting rights. ADRs must be sponsored to be able to
trade on a major U.S. exchange such as the NYSE.
FOOTNOTE LEGEND
(1) Federal Income Tax Information: For tax information at September 30, 2009,
see the Federal Income Tax Information Note 9 in the Notes to Financial
Statements.
(2) Non-income producing.
The following table provides a summary of inputs used to value the Fund's net
assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at Level 1 -
September 30, 2009 Quoted Prices
------------------ -------------
INVESTMENT IN SECURITIES:
Equity Securities:
Common Stocks $378,043 $378,043
Short-Term Investments 25,457 25,457
-------- --------
Total Investments $403,500 $403,500
======== ========
There are no Level 2 (significant observable inputs) or Level 3 (significant
unobservable inputs) priced securities.
See Notes to Financial Statements
7
VIRTUS MID-CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands except shares and per share amounts)
ASSETS
Investment in securities at value(1) .......................... $ 403,500
Receivables
Fund shares sold ........................................... 746
Dividends and interest receivable .......................... 440
Prepaid expenses .............................................. 43
-----------
Total assets ............................................. 404,729
-----------
LIABILITIES
Payables
Fund shares repurchased .................................... 6,101
Investment advisory fee .................................... 245
Distribution and service fees .............................. 122
Administration fee ......................................... 26
Transfer agent fees and expenses ........................... 192
Trustees' fee and expenses ................................. 5
Professional fee ........................................... 19
Other accrued expenses ..................................... 31
-----------
Total liabilities ........................................ 6,741
-----------
NET ASSETS .................................................... $ 397,988
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest .............. $ 580,392
Accumulated undistributed net investment income (loss) ........ 1,070
Accumulated undistributed net realized gain (loss) ............ (130,566)
Net unrealized appreciation (depreciation) on investments ..... (52,908)
-----------
NET ASSETS .................................................... $ 397,988
===========
CLASS A
Net asset value per share (net assets/shares outstanding)
per share .................................................. $ 18.03
Maximum offering price per share $18.03/(1-5.75%) ............. $ 19.13
Shares of beneficial interest outstanding, no par value,
unlimited authorization .................................... 16,770,883
Net Assets .................................................... $ 302,395
CLASS C
Net asset value (net assets/shares outstanding)
and offering price per share ............................... $ 17.62
Shares of beneficial interest outstanding,
no par value, unlimited authorization ...................... 4,137,652
Net Assets .................................................... $ 72,921
CLASS I
Net asset value (net assets/shares outstanding)
and offering price per share ............................... $ 18.03
Shares of beneficial interest outstanding,
no par value, unlimited authorization ...................... 1,257,693
Net Assets .................................................... $ 22,672
(1)Investment in securities at cost ........................... $ 456,408
See Notes to Financial Statements
8
VIRTUS MID-CAP VALUE FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED)
(Reported in thousands)
INVESTMENT INCOME
Dividends .............................................................. $ 4,611
Foreign taxes withheld ................................................. (74)
--------
Total investment income ........................................... 4,537
--------
EXPENSES
Investment advisory fee ................................................ 1,359
Service fees, Class A .................................................. 346
Distribution and service fees, Class C ................................. 341
Administration fees .................................................... 150
Transfer agent fee and expenses ........................................ 570
Custodian fees ......................................................... 15
Printing fees and expenses ............................................. 36
Professional fees ...................................................... 19
Registration fees ...................................................... 28
Trustees' fees and expenses ............................................ 17
Miscellaneous expenses ................................................. 33
--------
Total expenses .................................................... 2,914
--------
NET INVESTMENT INCOME (LOSS) ........................................... 1,623
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments ................................ (51,891)
Net change in unrealized appreciation (depreciation) on investments .... 182,187
--------
NET GAIN (LOSS) ON INVESTMENTS ......................................... 130,296
--------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS. ....... $131,919
========
See Notes to Financial Statements
9
VIRTUS MID-CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
(Reported in thousands)
Six Months Ended
September 30, 2009 Year Ended
(Unaudited) March 31, 2009
------------------ --------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ................................................... $ 1,623 $ 3,397
Net realized gain (loss) ....................................................... (51,891) (78,498)
Net change in unrealized appreciation (depreciation) ........................... 182,187 (180,367)
-------- --------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................... 131,919 (255,468)
-------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A ................................................. (2,279) (1,303)
Net investment income, Class C ................................................. (364) --
Net investment income, Class I ................................................. (155) (64)
Net realized short-term gains, Class A ......................................... -- (3,277)
Net realized short-term gains, Class C ......................................... -- (922)
Net realized short-term gains, Class I ......................................... -- (78)
Net realized long-term gains, Class A .......................................... -- (8,573)
Net realized long-term gains, Class C .......................................... -- (2,412)
Net realized long-term gains, Class I .......................................... -- (203)
-------- --------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ...................... (2,798) (16,832)
-------- --------
FROM SHARE TRANSACTIONS:
SALE OF SHARES
Class A (1,662 and 5,327 shares, respectively) ................................. 26,350 93,863
Class C (119 and 330 shares, respectively) ..................................... 1,812 5,974
Class I (432 and 1,034 shares, respectively) ................................... 6,881 19,274
REINVESTMENT OF DISTRIBUTIONS
Class A (125 and 484 shares, respectively) ..................................... 1,818 10,413
Class C (19 and 107 shares, respectively) ...................................... 264 2,357
Class I (9 and 16 shares, respectively) ........................................ 133 343
SHARES REPURCHASED
Class A (3,246 and 11,002 shares, respectively) ................................ (51,404) (189,457)
Class C (715 and 2,498 shares, respectively) ................................... (10,961) (42,735)
Class I (137 and 102 shares, respectively) ..................................... (2,061) (1,510)
-------- --------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ...................... (27,168) (101,478)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS .......................................... 101,953 (373,778)
NET ASSETS
Beginning of period ............................................................ 296,035 669,813
-------- --------
END OF PERIOD .................................................................. $397,988 $296,035
======== ========
Accumulated undistributed net investment income (loss) at end of period ........ $ 1,070 $ 2,245
See Notes to Financial Statements
10
THIS PAGE INTENTIONALLY BLANK.
VIRTUS MID-CAP VALUE FUND
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET NET
ASSET NET REALIZED TOTAL DIVIDENDS DISTRIBUTIONS CHANGE
VALUE, INVESTMENT AND FROM FROM NET FROM NET IN NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL ASSET
OF PERIOD (LOSS)(1) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A
4/1/09 to 9/30/09 (9) $12.44 0.08 5.64 5.72 (0.13) -- (0.13) 5.59
4/1/08 to 3/31/09 22.27 0.15 (9.39) (9.24) (0.06) (0.53) (0.59) (9.83)
7/1/07 to 3/31/08 27.40 0.05 (4.08) (4.03) (0.03) (1.07) (1.10) (5.13)
7/1/06 to 6/30/07 21.72 0.18 5.66 5.84 (0.10) (0.06) (0.16) 5.68
7/1/05 to 6/30/06 19.63 0.10 2.05 2.15 (0.05) (0.01) (0.06) 2.09
7/1/04 to 6/30/05(4) 17.04 0.08 2.55 2.63 (0.04) -- (0.04) 2.59
7/1/03 to 6/30/04(4) 12.18 (0.01) 4.88 4.87 (0.01) -- (0.01) 4.86
CLASS C
4/1/09 to 9/30/09 (9) $12.17 0.02 5.51 5.53 (0.08) -- (0.08) 5.45
4/1/08 to 3/31/09 21.87 0.01 (9.18) (9.17) -- (0.53) (0.53) (9.70)
7/1/07 to 3/31/08 27.04 (0.09) (4.01) (4.10) -- (1.07) (1.07) (5.17)
7/1/06 to 6/30/07 21.53 (0.03) 5.60 5.57 -- (0.06) (0.06) 5.51
7/1/05 to 6/30/06 19.54 (0.05) 2.05 2.00 -- (0.01) (0.01) 1.99
10/22/04(8) to 6/30/05 17.77 (0.04) 1.84 1.80 (0.03) -- (0.03) 1.77
CLASS I
4/1/09 to 9/30/09 (9) $12.44 0.10 5.64 5.74 (0.15) -- (0.15) 5.59
4/1/08 to 3/31/09 22.27 0.20 (9.39) (9.19) (0.11) (0.53) (0.64) (9.83)
3/10/08(8) to 3/31/08 21.20 --(3) 1.07 1.07 -- -- -- 1.07
RATIO OF
GROSS EXPENSES RATIO OF NET
NET NET TO AVERAGE INVESTMENT
ASSET ASSETS, RATIO OF NET ASSETS INCOME
VALUE, END OF EXPENSES TO (BEFORE WAIVERS (LOSS) TO PORTFOLIO
END OF TOTAL PERIOD AVERAGE AND AVERAGE TURNOVER
PERIOD RETURN(2) (IN THOUSANDS) NET ASSETS REIMBURSEMENTS) NET ASSETS RATE
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
4/1/09 to 9/30/09 (9) $18.03 46.25%(7) $302,395 1.48%(6) 1.48%(6) 1.03%(6) 7%(7)
4/1/08 to 3/31/09 12.44 (42.59) 226,815 1.45 1.45 0.83 11
7/1/07 to 3/31/08 22.27 (14.90)(7) 521,552 1.35(5)(6) 1.42(6) 0.24(6) 14(7)
7/1/06 to 6/30/07 27.40 26.91 842,524 1.27 1.31 0.68 7
7/1/05 to 6/30/06 21.72 11.07 187,701 1.25 1.42 0.50 16
7/1/04 to 6/30/05(4) 19.63 15.39 97,771 1.25 1.65 0.49 9
7/1/03 to 6/30/04(4) 17.04 40.03 6,404 1.30 2.76 (0.06) 53
CLASS C
4/1/09 to 9/30/09 (9) $17.62 45.62%(7) $ 72,921 2.23%(6) 2.23%(6) 0.28%(6) 7%(7)
4/1/08 to 3/31/09 12.17 (43.01) 57,366 2.19 2.19 0.08 11
7/1/07 to 3/31/08 21.87 (15.36)(7) 148,156 2.10(5)(6) 2.17(6) (0.50)(6) 14(7)
7/1/06 to 6/30/07 27.04 25.89 229,293 2.01 2.06 (0.11) 7
7/1/05 to 6/30/06 21.53 10.26 99,987 2.00 2.17 (0.25) 16
10/22/04(8) to 6/30/05 19.54 10.13(7) 37,934 2.00(6) 2.29(6) (0.28)(6) 9(7)
CLASS I
4/1/09 to 9/30/09 (9) $18.03 46.42%(7) $ 22,672 1.22%(6) 1.22%(6) 1.23%(6) 7%(7)
4/1/08 to 3/31/09 12.44 (42.42) 11,854 1.24 1.24 1.21 11
3/10/08(8) to 3/31/08 22.27 5.05(7) 105 1.54(6) 1.54(6) (0.05)(6) 14(7)
(1) Computed using average shares outstanding.
(2) Sales charges, where applicable, are not reflected in the total return
calculation.
(3) Amount is less than $0.005.
(4) Due to a reorganization on October 22, 2004, the Mid-Cap Value Fund is the
successor of the FMI Sasco Contrarian Value Fund. The Mid-Cap Value Fund
Class A treats the past performance of the FMI Sasco Contrarian Value Fund
as its own.
(5) Represents a blended net operating ratio.
(6) Annualized.
(7) Not annualized.
(8) Inception date.
(9) Unaudited.
See Notes to Financial Statements
12 and 13
VIRTUS MID-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
1. ORGANIZATION
Virtus Equity 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, 13 funds of the Trust are offered for sale,
of which the Virtus Mid-Cap Value Fund (the "Fund") is reported in this
semiannual report. The Fund is diversified and has an investment objective
to seek to provide long-term capital growth. There is no guarantee that the
Fund will achieve its objective.
The Fund offers Class A shares, Class C shares and Class I shares.
Class A shares are sold with a front-end sales charge of up to 5.75% with
some exceptions. Generally, Class A shares are not subject to any charges by
the Fund when redeemed; however, a 1% contingent deferred sales charge
("CDSC") may be imposed on certain redemptions made within one year
following purchases on which a finder's fee has been paid. The one-year
period begins on the last day of the month preceding the month in which the
purchase was made. Class C shares are sold with a 1% contingent deferred
sales charge, if applicable, if redeemed within one year of purchase. Class
I shares are sold without a sales charge.
Each class of shares has identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that each class bears
different distribution and/or service expenses and has exclusive voting
rights with respect to its distribution plan. Class I shares bear no
distribution and/or service expenses. Income and other expenses and realized
and unrealized gains and losses of the Fund are borne pro rata by the
holders of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amount of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates, and those differences could be
significant.
A. SECURITY VALUATION:
Equity securities are valued at the official closing price (typically last
sale) on the exchange on which the securities are primarily traded, or if no
closing price is available, at the last bid price.
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service, which utilizes information with respect to
recent sales, market transactions in comparable securities, quotations from
dealers, and various relationships between securities in determining value.
Due to continued volatility in the current market, valuations developed
through pricing techniques may materially vary from the actual amounts
realized upon sale of the securities.
As required, some securities and assets may be valued at fair value as
determined in good faith by or under the direction of the Trustees.
14
VIRTUS MID-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
Certain foreign common stocks may be fair valued in cases where closing
prices are not readily available or are deemed not reflective of readily
available market prices. For example, significant events (such as movement
in the U.S. securities market, or other regional and local developments) may
occur between the time that foreign markets close (where the security is
principally traded) and the time that the Fund calculates its net asset
value (generally, the close of the NYSE) that may impact the value of
securities traded in these foreign markets. In these cases, information from
an external vendor may be utilized to adjust closing market prices of
certain foreign common stocks to reflect their fair value. Because the
frequency of significant events is not predictable, fair valuation of
certain foreign common stocks may occur on a frequent basis.
Investments in underlying funds are valued at each fund's closing net asset
value determined as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. Eastern time).
Short-term investments having a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market.
The Fund utilizes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels:
o Level 1 - quoted prices in active markets for identical securities
o Level 2 - prices determined using other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, etc.)
o Level 3 - prices determined using significant unobservable inputs
(including the Fund's own assumptions in determining the fair value of
investments)
A summary of the inputs used to value the Fund's net assets by each major
security type is disclosed at the end of the Schedule of Investments.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date, or in the case of certain foreign
securities, as soon as the Fund is notified. Interest income is recorded on
the accrual basis. The Fund amortizes premiums and accretes discounts using
the effective interest method. Realized gains and losses are determined on
the identified cost basis.
C. INCOME TAXES:
The Fund is treated as a separate taxable entity. It is the policy of the
Fund to comply with the requirements of Subchapter M of the Internal Revenue
Code and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes or excise
taxes has been made.
The Trust may be subject to foreign taxes on income, gains on investments or
currency repatriation, a portion of which may be recoverable. Each Fund will
accrue such taxes and recoveries as applicable based upon current
interpretations of the tax rules and regulations that exist in the markets
in which they invest.
Accounting for Uncertainty in Income Taxes sets forth a minimum threshold
for financial statement recognition of the benefit of a tax position taken
or expected to be taken in a tax return. Management has analyzed each Fund's
tax positions and has concluded that no provision for income tax is required
in any Fund's financial statements. The Fund is
15
VIRTUS MID-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
not aware of any tax positions for which it is reasonably possible that the
total amounts of unrecognized tax benefits will significantly change in the
next twelve months. Each of the Fund's federal tax returns for the prior
three fiscal years remains subject to examination by the Internal Revenue
Service.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by the Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted
in the United States of America. These differences may include the treatment
of non-taxable dividends, market premium and discount, non-deductible
expenses, expiring capital loss carryovers, foreign currency gain or loss,
gain or loss on futures contracts, partnerships, operating losses and losses
deferred due to wash sales. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassifications to
capital paid in on shares of beneficial interest.
E. EXPENSES:
Expenses incurred by the Trust with respect to more than one fund are
allocated in proportion to the net assets of each fund, except where
allocation of direct expenses to each fund or an alternative allocation
method can be more appropriately made.
F. FOREIGN CURRENCY TRANSLATION:
Foreign securities and other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at
the trade date. The gain or loss resulting from a change in currency
exchange rates between the trade and settlement date of a portfolio
transaction is treated as a gain or loss on foreign currency. Likewise, the
gain or loss resulting from a change in currency exchange rates between the
date income is accrued and the date it is paid is treated as a gain or loss
on foreign currency. The Trust does not isolate that portion of the results
of operations arising from changes in exchange rates or from fluctuations
which arise due to changes in the market prices of securities.
3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
($ REPORTED IN THOUSANDS EXCEPT AS NOTED)
Virtus Investment Advisers, Inc. ("VIA," the "Adviser") is an indirect,
wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"). As
compensation for its services to the Trust, the Adviser is entitled to a fee
based upon the following annual rate of 0.75% as a percentage of the average
daily net assets of the Fund.
The Adviser may recapture expenses waived or reimbursed under arrangements
previously in effect within three years following the end of the fiscal year
in which such waiver or reimbursement occurred. The Fund must pay its
ordinary operating expenses before the Adviser is entitled to any
reimbursement and must remain in compliance with any applicable expense
limitations. All or a portion of the following Adviser reimbursed expenses
may be recaptured by the end of the fiscal year ended as follows:
2011 TOTAL
---- -----
$385 $385
16
VIRTUS MID-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
The Adviser manages the Fund's investment program and general operations of
the Fund, including oversight of the Fund's subadviser, Sasco Capital, Inc.
As distributor of the Fund's shares, VP Distributors, Inc. ("VP
Distributors"), an indirect, wholly-owned subsidiary of Virtus, has advised
the Fund that it retained net selling commissions and deferred sales charges
for the six-months ended (the "period") September 30, 2009, as follows:
CLASS A CLASS C
NET SELLING DEFERRED
COMMISSIONS SALES CHARGES
----------- -------------
$6 $2
In addition, the Fund pays VP Distributors distribution and/or service fees
at the annual rate of 0.25% for Class A shares and 1.00% for Class C shares
applied to the average daily net assets of each respective Class.
Under certain circumstances, shares of certain Virtus Mutual Funds may be
exchanged for shares of the same class of certain other Virtus Mutual Funds
on the basis of the relative net asset values per share at the time of the
exchange. On exchanges with share classes that carry a contingent deferred
sales charge, the CDSC schedule of the original shares purchased continues
to apply.
VP Distributors serves as the Administrator to the Trust. For the period
ended September 30, 2009, the Fund incurred administration fees totaling
$150. VP Distributors also serves as the Trust's transfer agent. For the
period ended September 30, 2009, transfer agent fees were $570 as reported
in the Statement of Operations.
4. PURCHASES AND SALES OF SECURITIES
($ REPORTED IN THOUSANDS)
Purchases and sales of investment securities (excluding U.S. Government and
agency securities and short-term securities) during the period ended
September 30, 2009, were as follows:
PURCHASES SALES
--------- -------
$25,337 $71,909
There were no purchases or sales of long-term U.S. Government and agency
securities during the period ended September 30, 2009.
5. 10% SHAREHOLDERS
At September 30, 2009, the Fund had one omnibus shareholder account which
amounted to 12% of the shares outstanding of the Fund.
6. CREDIT RISK AND ASSET CONCENTRATIONS
In countries with limited or developing markets, investments may present
greater risks than in more developed markets, and the prices of such
investments may be volatile. The consequences of political, social or
economic changes in these markets may have disruptive effects on the market
prices of these investments and the income they generate, as well as 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 its pursuit of a greater investment return. Fluctuations in
these sectors of concentration
17
VIRTUS MID-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)
may have a greater impact on the Fund, positive or negative, than if the
Fund did not concentrate its investments in such sectors.
At September 30, 2009, the Fund held securities issued by various companies
in the Industrial sector representing 26% of the total investments of the
Fund.
7. INDEMNIFICATIONS
Under the Fund's organizational documents, its Trustees and Officers are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, the Fund enters into contracts that
contain a variety of indemnifications. The Fund's maximum exposure under
these arrangements is unknown. However, the Fund has not had prior claims or
losses pursuant to these arrangements.
8. REGULATORY EXAMS
Federal and state regulatory authorities from time to time make inquiries
and conduct examinations regarding compliance by Virtus and its subsidiaries
(collectively "the Company") with securities and other laws and regulations
affecting their registered products.
There are currently no such matters which the Company believes will be
material to these financial statements.
9. FEDERAL INCOME TAX INFORMATION
($ REPORTED IN THOUSANDS)
At September 30, 2009, federal tax cost and aggregate gross unrealized
appreciation (depreciation) of securities held by the Fund were as follows.
NET UNREALIZED
FEDERAL UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------- ------------ -------------- --------------
$456,700 $43,662 $(96,862) $53,200
The Fund has capital loss carryovers which may be used to offset future
capital gains as follows.
EXPIRATION YEAR
-----------------
2017 TOTAL
------ ------
$4,364 $4,364
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 these
capital loss carryovers.
10. SUBSEQUENT EVENT EVALUATIONS
Management has evaluated the impact of all subsequent events on the Funds
through November 19, 2009, the date the financial statements were available
for issuance, and has determined that there were no subsequent events
requiring recognition or disclosure in the financial statements.
18
VIRTUS EQUITY TRUST
101 Munson Street
Greenfield, MA 01301-9668
TRUSTEES
George R. Aylward
Leroy Keith, Jr.
Philip R. McLoughlin, Chairman
Geraldine M. McNamara
James M. Oates
Richard E. Segerson
Ferdinand L.J. Verdonck
OFFICERS
George R. Aylward, President
Nancy G. Curtiss, Senior Vice President
Francis G. Waltman, Senior Vice President
Marc Baltuch, Vice President and Chief Compliance Officer
W. Patrick Bradley, Chief Financial Officer and Treasurer
Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary
INVESTMENT ADVISER
Virtus Investment Advisers, Inc.
100 Pearl Street
Hartford, CT 06103-4506
PRINCIPAL UNDERWRITER
VP Distributors, Inc.
100 Pearl Street
Hartford, CT 06103-4506
TRANSFER AGENT
VP Distributors, Inc.
100 Pearl Street
Hartford, CT 06103-4506
CUSTODIAN
PFPC Trust Company
8800 Tinicum Boulevard
Philadelphia, PA 19155-3111
HOW TO CONTACT US
Mutual Fund Services 1-800-243-1574
Advisor Consulting Group 1-800-243-4361
Telephone Orders 1-800-367-5877
Text Telephone 1-800-243-1926
Web site VIRTUS.COM
- --------------------------------------------------------------------------------
IMPORTANT NOTICE TO SHAREHOLDERS
The Securities and Exchange Commission has modified mailing regulations for
semiannual and annual shareholder fund reports to allow mutual fund companies to
send a single copy of these reports to shareholders who share the same mailing
address. If you would like additional copies, please call Mutual Fund Services
at 1-800-243-1574.
- --------------------------------------------------------------------------------
THIS PAGE INTENTIONALLY BLANK.
-------------
PRSRT STD
U.S. POSTAGE
PAID
LANCASTER, PA
PERMIT 1793
-------------
[GRAPHIC OMITTED]
VIRTUS
MUTUAL FUNDS
c/o State Street Bank and Trust Company
P.O. Box 8301
Boston, MA 02266-8301
For more information about Virtus mutual funds, please call your financial
representative, contact us at 1-800-243-1574
or VIRTUS.COM
8028 11-09
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Virtus Equity Trust
-------------------------------------------------------------------
By (Signature and Title)* /s/ George R. Aylward
-------------------------------------------------------
George R. Aylward, President
(principal executive officer)
Date December 4, 2009
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ George R. Aylward
-------------------------------------------------------
George R. Aylward, President
(principal executive officer)
Date December 4, 2009
----------------------------------------------------------------------------
By (Signature and Title)* /s/ W. Patrick Bradley
-------------------------------------------------------
W. Patrick Bradley, Chief Financial Officer
and Treasurer (principal financial officer)
Date December 4, 2009
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.