VIRTUS ZEVENBERGEN INNOVATIVE GROWTH STOCK FUND
June 30, 2021 IMPORTANT RISK CONSIDERATIONS
Equity Securities The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.
Foreign Investing Investing in foreign securities subjects the portfolio to additional risks such as increased volatility, currency fluctuations, less liquidity, and political, regulatory, economic, and market risk.
Sector Focused Events negatively affecting a particular market sector in which the portfolio focuses its Investing investments may cause the value of the portfolio to decrease.
Limited Number of Because the portfolio has a limited number of securities, it may be more susceptible to Investments factors adversely affecting its securities than a portfolio with a greater number of securities.
Market Volatility Local, regional, or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the portfolio and its investments, including hampering the ability of the portfolio manager(s) to invest the portfolio’s assets as intended.
Prospectus For additional information on risks, please see the fund’s prospectus.
2 VIRTUS INVESTMENT PARTNERS MULTI-BOUTIQUE, MULTI-STRATEGY MODEL
Key Facts:
Virtus affiliates4 Select external $178.6 subadvisers Billion in AUM1
AFFILIATE 9 SHARED SUPPORT Affiliates OPERATIONS AND IT HUMAN RESOURCES FUND SERVICES + 7 Select Subadvisers LEGAL AND COMPLIANCE FINANCE PRODUCT MANAGEMENT DISTRIBUTION AND MARKETING 34 Funds Rated 4 or 5 Stars2
3
Past performance is not indicative of future results. 1As of 6/30/21. 2The Overall Morningstar Rating is based on risk-adjusted returns, derived from a weighted average of the three-, five-, and 10-year (if applicable) Morningstar metrics. Analysis includes rated retail mutual funds only (funds with at least three years of history). Funds with A and I or Institutional shares use I or Institutional shares for Ratings otherwise, A share is used. Please see page 13 for additional Morningstar disclosure. Strong ratings are not indicative of positive performance. 3Virtus has an ownership interest in the firm. 3 ABOUT ZEVENBERGEN CAPITAL INVESTMENTS
Founded in 1987 – Growth Investment Philosophy Seattle, Washington – Revenue, cash flow, and earnings growth drive stock prices
Managing separately – Quality management and solid financials moderate downside risk managed portfolios and Early State, Growth Equity Specialists mutual funds – Proven process in discovering emerging trends AUM: $5.7 billion* Investing in the Disruptors Cohesive management – Founders challenging conventional wisdom – architecting the future team
High-Conviction Portfolio Management
– Concentrated positions
– Long-term holding periods
Source: Zevenbergen Capital Investments *As of 06/30/21. 4 ZCI INVESTMENT TEAM CLIENT INVESTMENT MANAGEMENT TEAM
PORTFOLIO RESEARCH & MANAGEMENT
Nancy Zevenbergen, CFA, CIC Brooke de Boutray, CFA, CIC President Co-Chief Investment Officer Co-Chief Investment Officer Portfolio Manager Portfolio Manager
Joseph Dennison, CFA Anthony Zackery, CFA Leslie Tubbs, CFA, CIC Portfolio Manager Portfolio Manager Chief Operating Officer Sustainable Investment Lead Portfolio Manager
PORTFOLIO ANALYSIS & CLIENT COMMUNICATIONS
Lisa Foley Herb Albin Chief Client Investment Advisor Chief Fixed Income Officer Business Development Officer Client Investment Advisor
Source: Zevenbergen Capital Investments 5 ZCI GROWTH EQUITY SEATTLE – ENTREPRENEURIAL/START-UP HUB
ZCI Views the West Coast as the Growth Coast • The Pacific Northwest has historically been home to early adopters and a testing ground for new concepts • Silicon Valley to the south is notable for the number of innovative and disruptive technology companies started and headquartered there
Source: Zevenbergen Capital Investments As of 03/31/21. Companies referenced herein do not represent a security recommendation. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. A complete list of ZCI’s holdings over the preceding 12 months is available upon request. Companies herein are selected based on geographic location. The trademarks shown are the property of their respective owners. 6 ZCI: BOUTIQUE GROWTH MANAGER KEY OBJECTIVES
Discover, research, and invest in companies with revenue and earning growth for a decade.
Invest in companies through stock ownership, not financially engineered products.
Assess management personally, as often as possible
Conviction to invest for the future
Produce a solid qualitative assessment regarding management and business model
Keep vision on the long term
Look for founders and management teams with the vision to drive innovation
Companies referenced herein do not represent a security recommendation. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. A complete list of ZCI’s holdings over the preceding 12 months is available upon request. Companies herein are selected as examples of founder-led businesses. Source: Zevenbergen Capital Investments, using individual company websites. The trademarks shown are the property of their respective owners. Percent of Virtus Zevenbergen Innovative Growth Stock Fund as of 06/30/21: Tesla: 7.3%; Shopify: 6.6%; Netflix: 2.3%. 7 INVESTING FOR THE NEXT DECADE OF GROWTH ZCI’S ANALYST DRIVEN CULTURE
Research is conducted by all members of the investment team, providing different perspectives that lead to unique insights.
Idea Generation – 360º View Portfolio Construction – High-Conviction Strategy
IPO research Security weights – high active share
Private investments Risks reviewed from business owner’s perspective
Industry conferences Holdings rise in weight through appreciation
Fundamental tools/screens Sector weights – reviewed relative to benchmark
Review aggregate portfolio level risks and growth drivers
Original Research – Forward Looking Growth The Decision to Sell
Revenue growth Change in fundamentals
– Price increases, volume growth, market share, new products Identify more attractive opportunities
Cash flow, earnings growth Meaningful overvaluation relative to business growth prospects
Fundamental review – financial strength
– Income statement – revenue trends, margin improvements
– Balance sheet – debt levels, cash
– Ownership – founder-led, ownership-incented
Valuation metrics
– P/E, Relative P/E, P/Sales, P/E/G, P/CF
Source: Zevenbergen Capital Investments Characteristics are defined on page 21. 8 INVESTMENT OVERVIEW AND KEY FEATURES A SHARES: SAGAX, I SHARES: SCATX, R6 SHARES: VZGRX
Objective Features The Fund seeks long-term High-Growth Focus capital appreciation by Searches for well-run, high-growth companies prompting investing in a concentrated 1 disruptive business landscape changes, often through portfolio of companies technological advances across capitalizations and in Rigorous Fundamental Research different phases of their life Bottom-up analysis strives to identify stocks poised to benefit cycle, which exhibit strong 2 from price catalysts from positive revenue, cash flow, and growth expectations. A earnings growth strongly independent High-Conviction Portfolio approach to research and Focused on the portfolio team’s strongest investment disciplined active 3 opportunities, with a long-term, low-turnover approach to management aims to realize full stock value potential preserve objectivity from Wall Street biases and to help capture meaningful potential return advantages.
9 TOP HOLDINGS AS OF JUNE 30, 2021
Security Percent Holdings Sector Held Since
Tesla Inc. 7.3% Consumer Discretionary Nov, 2010
Shopify Inc. 6.6% Technology Nov, 2016
The Trade Desk Inc. 5.6% Consumer Discretionary Aug, 2018
MercadoLibre Inc. 5.0% Consumer Discretionary Oct, 2009
Exact Sciences Corp. 4.8% Health Care Jan, 2015
NVIDIA Corp. 4.8% Technology Aug, 2017
Square Inc. 3.8% Industrials Mar, 2018
Zillow Group Inc. 3.8% Real Estate Jan, 2012
Snap Inc. 3.5% Technology Oct, 2020
Teladoc Health Inc. 3.5% Health Care Mar, 2017
48.7%
Past performance is no guarantee of future results. Source: Virtus Performance & Analytics 10 SECTOR WEIGHTS AS OF JUNE 30, 2021
Virtus Zevenbergen Innovative Growth Stock Fund Russell 3000® Growth Index
44.8%
35.9% 34.2%
21.5%
13.5% 13.8%
10.2%
7.4%
4.0% 3.8% 2.8% 2.3% 2.0% 1.2% 1.0% 0.8% 0.7% 0.0% 0.0% 0.0% 0.0%0.1%
Consumer Technology Health Industrials Financials Real Telecomm. Consumer Basic Energy Utilities Discretionary Care Estate Staples Materials
Sector weightings are subject to change. 11 PERFORMANCE HISTORY AS OF JUNE 30, 2021
Virtus Zevenbergen Innovative Growth Stock Fund (SCATX) Russell 3000® Growth Index 119.67% 59.73% 56.24% 38.26% 37.02% 37.01% 35.85% 34.29% 34.23% 29.59% 23.12% 21.71% 17.64% 15.29% 15.21% 12.44% 12.00% 11.38% 11.07% 9.46% 7.85% 7.39% 7.11% 7.02% 7.00% 5.17% 5.09% 5.32% 2.22% 2.18% 4.44% -2.12% -2.12% -10.41% -38.44% -43.53% 2/23/04 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Inception to to Date* 12/31/04
Past performance is no guarantee of future results. Returns for periods greater than one year are annualized. *Annualized 2/23/04 to 06/30/21 12 PERFORMANCE REVIEW AS OF JUNE 30, 2021 (%)
Virtus Zevenbergen Innovative Growth Stock Fund (SCATX) MORNINGSTAR RATINGSTM Russell 3000® Growth Index Large I Share Growth 47.30 42.99 Time Period # of Stars # of Funds 38.94 37.25 Overall ★★★★★ 1,138 3 Year ★★★★★ 1,138 5 Year ★★★★★ 1,024 24.47 23.31 21.37 10 Year ★★★★ 761 17.54 15.29 12.71 Morningstar ratings are based on risk-adjusted returns. Strong ratings 11.38 12.00 are not indicative of positive fund performance. 8.28 The Morningstar RatingTM for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, -0.18 and separate accounts) with at least a three-year history. Exchange- traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a QTD YTD 1 Year 3 Year 5 Year 10 Year Since Morningstar Risk-Adjusted Return measure that accounts for variation in Inception a managed product’s monthly excess performance, placing more 2/23/04 emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive Performance data quoted represents past performance. Past performance does not 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, guarantee future results. Investment return and principal value will fluctuate so that the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The shares, when redeemed, may be worth more or less than their original cost. Current Overall Morningstar Rating for a managed product is derived from a performance may be lower or higher than the performance data quoted. Please visit weighted average of the performance figures associated with its three-, virtus.com for performance data current to the most recent month end. This share five-, and 10-year (if applicable) Morningstar Rating metrics. The class has no sales charges and is not available to all investors. Other share classes weights are: 100% three-year rating for 36-59 months of total returns, have sales charges. See virtus.com for details. 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year The fund class gross expense ratio is 1.07%. The net expense ratio is 1.00%, which reflects a rating for 120 or more months of total returns. While the 10-year overall contractual expense reimbursement in effect through 4/30/2022. star rating formula seems to give the most weight to the 10-year period, Average annual total return is the annual compound return for the indicated period and reflects the the most recent three-year period actually has the greatest impact change in share price and the reinvestment of all dividends and capital gains. Returns for periods of one because it is included in all three rating periods. Ratings do not take into year or less are cumulative returns. account the effects of sales charges and loads. The Russell 3000® Growth Index is a market capitalization-weighted index of growth-oriented stocks of U.S. © 2021 Morningstar, Inc. All rights reserved. The information contained companies. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, herein: (1) is proprietary to Morningstar and/or its content providers; (2) its return do not reflect any fees, expenses, or sales charges, and is not available for direct investment. 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.
13 A LONG-TERM TRACK RECORD
ZCI looks to hold investments for long periods of time, and has offered strong growth potential to patient investors comfortable with volatility and occasional, significant market drawdowns.
INVESTMENT GROWTH AND INTRA-YEAR DRAWDOWNS as of 06/30/21 since inception* 1,400 Virtus Zevenbergen Innovative Growth Stock Fund (SCATX) 1,200 Virtus Zevenbergen Innovative Growth Stock Fund (SCATX) $1,182 RussellRussell 3000 3000 ®GrowthGrowth Index Index 1,000 USUS Fund Fund Large Large Growth Growth Category Category 800 $716 600 $561 400 200 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD
Total 7.11 5.32 23.12 -43.53 56.24 21.71 -10.41 7.85 59.73 2.22 7.02 -2.12 34.29 11.07 37.02 119.67 -0.18 Return (%)
Max -12.71 -17.65 -11.19 -55.71 -22.29 -16.00 -29.17 -17.87 -6.24 -18.59 -15.74 -24.22 -7.54 -30.45 -19.72 -35.91 -32.46 Drawdown (%)
A focus on investing in growth for the next 10 years is a powerful way to magnify a company’s return potential, offering visionary management teams the opportunity to produce superior long-term results.
MORNINGSTAR PERCENTILE RANKINGS—Large Growth Category, Based on Total Return as of 06/30/21 Since 1-Year 3-year 5-Year 10-year Inception*
Top Top Top Top Top 47.30% Fund 38.94% Fund 37.25% Fund 21.37% Fund 15.29% Fund 16%42.99% Index 2%24.47% Index 2%23.31% Index 2%17.54% Index 2% 12.00% Index
1,243 1,142 1,032 765 458 FUNDS IN CATEGORY 148 19 15 14 8 RANK *Inception: 2/23/04 Past performance is not indicative of future results. Source: Morningstar Direct. Standardized performance is presented on page 13. Russell 3000® Growth Index is defined on page 13. 14 PORTFOLIO CHARACTERISTICS AS OF JUNE 30, 2021
Virtus Zevenbergen Russell Innovative 3000® CHARACTERISTICS Growth Stock Fund Growth Index
Average Weighted Market Cap (bn) 197.1 741.3
Median Market Cap (bn) 33.8 2.8
Trailing P/E Ex-Negative Earnings 61.9 38.3
Price-to-Cash Flow 75.7 35.0
Price-to-Book Value 17.7 13.8
3-Year EPS Growth Rate 33.7 27.0
5-Year EPS Growth Rate 51.9 19.0
Active Share 86.7 n/a
RISK STATISTICS (3 YEAR)
Alpha 7.6 n/a
Beta 1.3 1.0
R2 0.7 1.0
Sharpe Ratio 1.3 1.2
Standard Deviation 29.6 19.7
Past performance is no guarantee of future results. Source: Virtus Performance and Analytics. Statistics are defined on page 21. 15 A COVID-19 WORLD FORCED DIGITIZATION ACROSS THE GLOBAL ECONOMY
Technology Enables Transformation Changing how we… Live E-Commerce (the “new” therapy): Amazon.com, Inc., MercadoLibre, Inc., Chewy, Inc., Shopify Inc. Social Media, Internet Advertsing, Social Commerce: Pinterest, Inc., The Trade Desk, Inc. Education: Chegg, Inc. E-Services: – Payments-Digitization Fueled by E-Commerce: PayPal Holdings, Inc., Square, Inc. – Re-thinking the “Home” and the Real Estate Experience: Zillow Group, Inc. – Insurance: Lemonade, Inc. – Healthcare: GoodRx Holdings, Inc.,Teladoc Health, Inc.
Work Accelerating Cloud Adoption: Amazon.com, Inc., ServiceNow, Inc., NVIDIA Corporation, Veeva Systems Inc. Digital Transformation of Front and Back Office: ServiceNow, Inc., Bill.com Holdings, Inc., Coupa Software Inc. Security – Securing the Mobile/Remote User: Okta, Inc. Data Analytics/Monitoring: Datadog, Inc., MongoDB, Inc., NVIDIA Corporation Collaboration Tools (Working Together When Apart): Zoom Video Communications, Twilio Inc., Unity Software
Play Video Gaming: NVIDIA Corporation, Unity Software Streaming Entertainment (Live Events Aversion): Netflix, Inc., The Trade Desk, Inc. Health and Wellness: Peloton Interactive, Inc.
Source: Zevenbergen Capital Investments Companies referenced herein do not represent a security recommendation. It should not be assumed that recommendations made in the furure will be profitable or will equal the performance of the securities in this list. A complete list of ZCI’s holdings over the preceding 12 months is available upon request, 16 MILLENNIAL & GEN Z LIFE
Apartment found on Zillow Stays in touch with friends via Instagram (Facebook) Dog treats from Chewy Buys direct from brands powered Rent paid on Venmo (PayPal) by Shopify
Streams favorite shows on Netflix Rides their Peloton Streams video games on Twitch (Amazon)
Dinner delivered by Uber Eats
Food purchased from the local Rides a bike to save up for a Tesla farmer’s market with Square
Gets homework help on Chegg
Source: Zevenbergen Capital Investments Companies referenced herein do not represent a security recommendation. It should not be assumed that commendations made in the future will be profitable or will equal the performance of the securities in this list. A complete list of ZCI’s holdings over the preceding 12 months is available upon request. Opinions represented are subject to change and should not be considered investment advice. 17 PACE OF PUBLIC CLOUD ADOPTION IN 2020
Among hardware domain experts surveyed, the pace of public cloud adoption accelerated meaningfully from February to March, possibly indicating acceleration in planned adoption.
89% Accelerate 54%
0% No Change 39%
11% Decelerate 7% 1Q20 - March Respondents
1Q20 - February Respondents
Source: AlphaWise CIO Survey (n=41 in February; n=19 in March), Morgan Stanley Research “Amazon and Alphabet Takeaways from 1Q:20 CIO Survey” April 2, 2020 18 ECOMMERCE STEPS FORWARD 5-10 YEARS
Lockdown has likely pulled forward a huge amount of future adoption.
E-commerce as a share of addressable retail*
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
• Excluding cars, car parts, fuel, bars & restaurants. Seasonally adjusted. • Source: ONS, U.S. Census; Benedict Evans “The Great Unbundling” January 2021 19 WHERE LOYALTIES LIE
Conventional wisdom would suggest that a return to normal doesn’t bode well for streaming entertainment. That may not be the case though.
U.S. consumers were asked about which subscriptions they’ll definitely keep or definitely cancel after the COVID-19 pandemic: Definitely keep 77% Disney+ Definitely drop 7%
73% Netflix 4%
71% Amazon Prime Video 9%
69% Hulu 15%
66% Discovery+ 14%
63% HBO Max 17%
Companies referenced herein do not represent a security recommendation. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. A complete list of ZCI’s holdings over the preceding 12 months is available upon request. Source: Hub Entertainment Research, survey conducted February 17 – March 2, 2021. Bloomberg LP, Bloomberg Opinion, “Netflix Wants You to Book That Trip. Really: Tara Lachapelle” March 25, 2021. 20 GLOSSARY
Avg. Weighted Market Cap (bn): The total dollar market value of all of a company’s outstanding shares. Trailing P/E Ex-Negative Earnings: Per share stock price divided by the latest 12-months earnings per share. Price-to-Cash Flow: Per-share stock price divided by the per-share operating cash flow. Price-to-Book Value: A ratio used to compare a stock’s market value to its book value. 3-Year EPS Growth Rate: Average of earnings per share growth for latest 3-year period. 5-Year EPS Growth Rate: Average of earnings per share growth for latest 5-year period. Active Share: A measure of the percentage of stock holdings in a manager’s portfolio that differ from the benchmark index. Alpha: A risk-adjusted measure of an investment’s excess return relative to a benchmark. Beta: A quantitative measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. R2: A measure that represents the percentage of a fund or security’s movements that can be explained by movements in a benchmark index. Price/Earnings-to-Growth Ratio: The price/earnings to growth ratio (PEG ratio) is a stock's price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a specified time period. Price-to-Sales Ratio: The price-to-sales (P/S) ratio is a valuation ratio that compares a company’s stock price to its revenues. It is an indicator of the value placed on each dollar of a company’s sales or revenues. Sharpe Ratio: A risk-adjusted measure calculated using standard deviation and excess return to determine reward per unit of risk. Standard Deviation: Measures variability of returns around the average return for an investment portfolio. Higher standard deviation suggests greater risk.
21 Virtus (NASDAQ: VRTS) is a distinctive partnership of boutique investment managers, singularly committed to the long-term success of individual and institutional investors.
We are not constrained by a single investment approach; rather, we provide access to independent, specialized investment philosophies through our multi-discipline, multi-strategy approach.
We have the flexibility, agility, and responsiveness of a boutique asset management firm with similar product breadth and investment talent of our larger peers.
We are committed to thoughtfully providing investment solutions, adhering to the highest standards of product quality, operational excellence, and fiduciary responsibility.
Please consider a Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other information about any Virtus Fund, contact your financial professional, call 800-243-4361, or visit virtus.com for a prospectus or summary prospectus. Read it carefully before investing. Not all products or marketing materials are available at all firms. Not insured by FDIC/NCUSIF or any federal government agency. No bank guarantee. Not a deposit. May lose value. Mutual Funds distributed by VP Distributors, LLC member FINRA and subsidiary of Virtus Investment Partners, Inc. 3420 08-21 © 2021 Virtus Mutual Funds