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Investment Opportunity

The fund seeks to purchase closed-end funds that are exhibiting excessive or unusual discount patterns which the managers believe have an attractive probability of narrowing. By consistently buying closed-end funds trading at a discount to net asset value (NAV), and selling near or above their NAV, the subadviser seeks to deliver both capital appreciation and current income over time.

Fund Risks

Closed-end Funds: Closed-end funds may trade at a discount from their net asset values, which may affect whether the fund will realize gains or losses. They may also employ leverage, which may increase volatility.

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

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

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

Fund of Funds: Because the fund can invest in other funds, it indirectly bears its proportionate share of the operating expenses and management fees of the underlying fund(s).

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

Key Stats (as of 5/4/2016)

Inception: 9/5/2012
Ticker: VHFAX
CUSIP: 92828W874
Fund No: 1962
Net Assets by Fund: $46,040,867
Net Assets by Class: $7,671,172

Management Team

Thomas J. Herzfeld
Thomas J. Herzfeld Thomas J. Herzfeld Advisors

Industry start date: 1968

Start date with Fund: 2012

Erik M. Herzfeld
Erik M. Herzfeld Thomas J. Herzfeld Advisors

Industry start date: 1998

Start date with Fund: 2012

Thomas J. Herzfeld Advisors

Thomas J. Herzfeld Advisors' investment philosophy is predicated on recognizing the recurring valuation patterns found in the closed-end fund industry and exploiting them in a systematic manner.

Morningstar Ratings

Overall Rating Non Load-Waived

As of 3/31/2016 the Fund was rated 2 stars out of 734 funds within the Conservative Allocation category for the 3-year period.

Overall Rating Load-Waived

As of 3/31/2016 the Fund was rated 2 stars out of 734 funds within the Conservative Allocation category for the 3-year period.

Strong ratings are not indicative of positive fund performance.

Average Annual Total Returns

Monthly Performance (%) (as of 4/29/2016)
  3 Mon. YTD 1YR 3YR 5YR 10YR Since Inception
NAV 10.35 2.51 -5.33 2.91 NA NA 5.27
POP 4.00 -3.38 -10.77 0.90 NA NA 3.58
Quarterly Performance (%) (as of 3/31/2016)
  3 Mon. YTD 1YR 3YR 5YR 10YR Since Inception
NAV -0.59 -0.59 -6.96 2.34 NA NA 4.49
POP -6.30 -6.30 -12.31 0.34 NA NA 2.77
Index 1.47 1.47 -1.59 4.49 4.89 4.78 NA

Index: Composite: 60% MSCI AC World Index (net) / 40% Barclays U.S. Aggregate
The composite index consists of 60% MSCI AC World Index (net) and 40% Barclays U.S. Aggregate Bond Index. The MSCI AC World Index (net) is a free float-adjusted market capitalization-weighted index that measures equity performance of developed and emerging markets. The index is calculated on a total return basis with net dividends reinvested. The Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

Sales Charge and Expense

POP (Public Offering Price) performance reflects the deduction of the maximum sales charge of 5.75%. A contingent deferred sales charge of 1% may be imposed on certain redemptions within 18 months on purchases on which a finder’s fee has been paid.

Fund class operating expenses are 1.60% and gross operating expenses are 2.91%.

Operating expenses reflect a contractual expense reimbursement in effect through 01/31/2017.

Operating expenses do not include indirect expenses incurred by the underlying funds in which the Fund invests.

Risk Statistics3 (as of 3/31/2016)

  Fund Index
R2 0.87 1.00
Beta 1.21 1.00
Alpha -2.86 0.00
Std Dev 9.52 7.32
Index: Composite: 60% MSCI AC World Index (net) / 40% Barclays U.S. Aggregate

Daily Price (as of 5/4/2016)

NAV Change ($)
10.15 -0.03
POP Change ($)
10.77 -0.03

Distribution History2 (March 2016)

Ex-Date 03/30/2016
Income $0.130000
STCG $0.000000
LTCG $0.000000
Reinvest NAV $9.90

Top Holdings (% Fund)
(as of 3/31/2016)

Oxford Lane Capital Corp 7 1/2 % Term Cum Pfd Shs Series -2023- 10.10
Oxford Lane Capital Corp 8.125% Liquidation Pfd Shs Series 2024 8.54
Tekla Healthcare Opportunities Fund 5.15
Boulder Growth & Income Fund Inc 4.61
BlackRock Science & Technology Trust 4.41
MVC Capital Inc (Doing Business As MVC Capital) 7 1/4 % Notes 2013-15.1.23 Sr 4.31
Tekla World Healthcare Fund 3.37
Nexpoint Credit Strategies Fund 3.04
Tortoise Pipeline & Energy Fund Inc 2.80
Gabelli Dividend & Income Trust 2.24

Asset Allocation (% Fund)
(as of 3/31/2016)

Closed End Funds (Domestic Equity) 48.23
Closed End Funds (Domestic Bonds) 28.19
Closed End Funds (Foreign Equity) 13.79
Cash and Equivalents 6.82
Closed End Funds (Foreign Bonds) 2.97

Morningstar Ratings

Overall Rating Non Load-Waived

As of 3/31/2016 the Fund was rated 2 stars out of 734 funds within the Conservative Allocation category for the 3-year period.

Overall Rating Load-Waived

As of 3/31/2016 the Fund was rated 2 stars out of 734 funds within the Conservative Allocation category for the 3-year period.

Strong ratings are not indicative of positive fund performance.

Investors should carefully consider the investment objectives, risks, charges and expenses of any Virtus Mutual Fund before investing. The prospectus and summary prospectus contains this and other information about the fund. Please contact your financial representative, call 1-800- 243-4361 or visit to obtain a current prospectus and/or summary prospectus. You should read the prospectus and/or summary prospectus carefully before you invest or send money.

Performance data quoted represents past results. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, so your shares, when redeemed, may be worth more or less than their original cost.

Average annual total return is the annual compound return for the indicated period. It reflects the change in share price and the reinvestment of all dividends and capital gains. NAV returns do not include the effect of any applicable sales charges. POP and w/CDSC returns include the effect of maximum applicable sales charges.

Returns for periods of less than one year are cumulative total returns.

1 Yields/Distributions: Distribution Yield (at NAV) is calculated by (a) annualizing the latest distribution for fixed income funds or funds less than 1 year old (b) summing all distributions over the preceding 12 months for all other funds, and dividing the NAV on the last business date of the period. SEC Yield represents the net investment income earned by a fund over a 30-day period, expressed as an annual percentage rate based on the fund's public offering share price at the end of the 30-day period.  Gross SEC Yield represents the yield if there were no expense reimbursements.

2 Distribution History: Distributions are represented on a cash basis and may be reclassified at year end for tax purposes. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. STCG: Short Term Capital Gain, LTCG: Long Term Capital Gain

3 Risk Statistics:  R2 is a statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index. Beta is a quantitative measure of the volatility of a given portfolio to the overall market. Alpha is a risk adjusted measure of an investment's excess return relative to a benchmark. A positive Alpha indicates that the investment produced a return greater than expected for the risk (as measured by Beta) taken. Standard Deviation measures variability of returns around the average return for an investment fund. Higher standard deviation suggests greater risk. Risk Statistics are calculated using 36 monthly returns.

4 Characteristics: For Equity Funds:Trailing P/E: Per-share stock price divided by the latest12-months Earnings per Share; Price/Cash Flow: Per-share stock price divided by the per-share operating cash flow; Price/Book: Per-share stock price divided by the latest 12-month per-share Book Value; 3-Year EPS Growth Rate: Average of earnings per share growth for latest 3-year period. The 3-Year EPS Growth Rate is not a forecast of the fund's performance.

4 Characteristics: For Fixed Income Funds:  Duration represents the interest rate sensitivity of a fixed income fund. For example, if a fund's duration is five years, a 1% increase in interest rates would result in a 5% decline in the fund's price. Similarly, a 1% decline in interest rates would result in a 5% gain in the fund's price.

Morningstar Disclosures: 
For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for a variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in an investment category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its 3-, 5-, and 10-year (if applicable) Morningstar Rating metrics. Ratings are for the A Shares as shown only; other share classes bear different fees and expenses, which affect performance.

Load-waived A share star ratings do not include any front-end sales load and are intended for those investors who have access to such purchase terms (e.g., plan participants of a defined contribution plan). Not all A share mutual funds for which Morningstar calculates a load-waived A share star rating may actually waive their front-end sales load. Therefore, Morningstar strongly encourages investors to contact their investment professional to determine whether they are eligible to purchase the A share without paying the front load.

© 2016 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.