| Item 7. |
Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. |
The Fund has adopted a Policy Regarding Proxy Voting (the “Policy”) stating the
Fund’s intention to exercise stock ownership rights with respect to portfolio securities in a manner that is reasonably anticipated to further the best economic interests of shareholders of the Fund. The Fund or its voting delegates will
endeavor to analyze and vote all proxies that are likely to have financial implications, and where appropriate, to participate in corporate governance, shareholder proposals, management communications and legal proceedings. The Fund or its voting
delegates must also identify potential or actual conflicts of interest in voting proxies and must address any such conflict of interest in accordance with the Policy.
In the absence of a specific direction to the contrary from the Board, the Adviser or the subadviser that is managing the Fund is responsible for voting
proxies for such fund, or for delegating such responsibility to a qualified, independent organization engaged by the Adviser or respective subadviser to vote proxies on its behalf. The applicable voting party will vote proxies in accordance with the
Policy or its own policies and procedures, which must be reasonably designed to further the best economic interests of the affected fund shareholders. Because the Policy and the applicable voting party’s policies and procedures used to vote
proxies for the funds both are designed to further the best economic interests of the affected fund shareholders, they are not expected to conflict with one another although the types of factors considered by the applicable voting party under its
own policies and procedures may be in addition to or different from the ones listed below for the Policy.
The Policy specifies the types of factors to be
considered when analyzing and voting proxies on certain issues when voting in accordance with the Policy, including, but not limited to:
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Anti-takeover measures – the overall long-term financial performance of the target company relative to its
industry competition. |
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Corporate Governance Matters – tax and economic benefits of changes in the state of incorporation; dilution
or improved accountability associated with changes in capital structure. |
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Contested elections – the qualifications of all nominees; independence and attendance record of board and
key committee members; entrenchment devices in place that may reduce accountability. |
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Stock Option and Other Management Compensation Issues—executive pay and spending on perquisites,
particularly in conjunction with sub-par performance and employee layoffs. |
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Shareholder proposals – whether the proposal is likely to enhance or protect shareholder value; whether
identified issues are more appropriately or effectively addressed by legal or regulatory changes; whether the issuer has already appropriately addressed the identified issues; whether the proposal is unduly burdensome or prescriptive; whether the
issuer’s existing approach to the identified issues is comparable to industry best practice. |
The Fund and its voting delegates
seek to avoid actual or perceived conflicts of interest of Fund shareholders, on the one hand, and those of the Adviser, subadviser, other voting delegate, Distributor, or any affiliated person of the Fund, on the other hand.
Depending on the type and materiality, the Board or its delegates may take the following actions, among others, in addressing any material conflicts of
interest that arise with respect to voting (or directing voting delegates to vote): (i) rely on the recommendations of an established, independent third party proxy voting vendor; (ii) vote pursuant to the recommendation of the proposing
delegate; (iii) abstain; (iv) where two or more delegates provide conflicting requests, vote shares in proportion to the assets under management of each proposing delegate; (v) vote shares in the same proportion as the vote of all other
shareholders of such issuer; or (vi) the Adviser may vote proxies where the subadviser has a direct conflict of interest. The Policy requires each Adviser/subadviser that is a voting delegate to notify the Chief Compliance Officer of the Fund
(or, in the case of a subadviser, the Chief Compliance Officer of the Adviser) of any actual or potential conflict of interest that is identified, and provide a recommended course of action for protecting the best interests of the affected
fund’s shareholders. No Adviser/subadviser or other voting delegate may waive any conflict of interest or vote any conflicted proxies without the prior written approval of the Board (or the Executive Committee thereof) or the Chief Compliance
Officer of the Fund.
The Policy further imposes certain record-keeping and reporting requirements on each Adviser/subadviser or other voting delegate.
Information regarding how the funds voted proxies relating to portfolio securities during the most recent
12-month period ended September 30 will be available, no later than August 31 of each year, free of charge by calling, toll-free, 866.270.7788, or on the SEC’s Web site at www.sec.gov.
During the period of the report, any proxies for the Fund were handled by the Fund’s subadviser, Newfleet Asset Management, a division of Virtus Fixed
Income Advisers, LLC (“Newfleet”). Following is a summary of Newfleet’s proxy voting policies.
Newfleet
Although the nature of Newfleet’s portfolios is such that ballots are rarely required, Newfleet has adopted
pre-determined proxy voting guidelines (the “Guidelines”) to make every effort to ensure the manner in which shares are voted is in the best interest of its clients and the value of the investment.
Under the Guidelines, Newfleet sometimes delegates to a non-affiliated third party vendor the responsibility to review proxy proposals and make voting recommendations on behalf of Newfleet. Newfleet may also
vote a proxy contrary to the Guidelines if it determines that such action in the best interest of its clients including the Fund.
A complete copy of Newfleet’s current Proxy Voting Policies & Procedures is available by sending a
written request to Newfleet Asset Management, LLC, Attn: Compliance Department, One Financial Plaza, Hartford, CT 06103. Email requests may be sent to: james.sena@virtus.com.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
The names, titles, and length of service of the person or persons employed by or associated with the registrant or an investment adviser of the registrant who
are primarily responsible for the day-to-day management of the registrant’s portfolio (“Portfolio Manager”) and each Portfolio Manager’s business
experience during the past 5 years as of the date of filing of this report:
| (a)(1) |
Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio
Manager(s) or Management Team Members |
Newfleet Asset Management, a division of Virtus Fixed Income Advisers, LLC
David L. Albrycht, CFA. David Albrycht is president and chief investment officer of Newfleet, an affiliated manager of Virtus
Investment Partners (“Virtus”). Prior to joining Newfleet in 2011, Mr. Albrycht was executive managing director and senior portfolio manager with Goodwin Capital Advisers, a former affiliate of Virtus. He joined the Goodwin
multi-sector fixed income team in 1985 as a credit analyst and has managed fixed income portfolios since 1991.
Mr. Albrycht has been
a portfolio manager of the Fund since its inception, Virtus Newfleet Multi-Sector Short Term Bond Fund since 1993, Virtus Newfleet Multi-Sector Intermediate Bond Fund since 1994, Virtus Newfleet Senior Floating Rate Fund since 2008, Virtus Tactical
Allocation Fund and Virtus Newfleet High Yield Fund since 2011, Virtus Newfleet Core Plus Bond Fund and Virtus Newfleet Low Duration Income Fund since 2012. He also co-manages two variable investment options
and is co-manager of another closed-end fund, Virtus Total Return Fund (NYSE: ZTR). He also is a manager of four exchange-traded funds, AdvisorShares Newfleet
Multi-Sector Income ETF (NYSE: MINC), Virtus Newfleet Multi-Sector Bond ETF (NFLT), Virtus Newfleet High Yield Bond ETF (BLHY), and Virtus Newfleet ABS/MBS ETF (VABS), and two offshore funds, the Virtus GF Multi-Sector Short Duration Bond Fund and
Virtus GF Multi-Sector Income Fund. He is also responsible for the structuring and management of Newfleet’s CLO platform.
Mr. Albrycht earned a B.A., cum laude, from Central Connecticut State University and an M.B.A., with honors, from the University of
Connecticut. He is a Chartered Financial Analyst® (CFA®) charterholder and has been working in the investment industry since 1985.
Benjamin Caron, CFA. Ben Caron is a senior managing director and portfolio manager at Newfleet. In addition to the Fund, Mr. Caron
is co-portfolio manager of the Virtus Newfleet Low Duration Core Plus Bond Fund, and two actively managed ETFs: AdvisorShares Newfleet Multi-Sector Income ETF (NYSE: MINC), and Virtus Newfleet Multi-Sector
Bond ETF (NYSE: NFLT). He also assists in the management of Virtus Newfleet Multi-Sector Short Term Bond Fund, Virtus Newfleet Multi-Sector Intermediate Bond Fund, Virtus Tactical Allocation Fund, two variable insurance investment options and the closed-end Virtus Total Return Fund Inc. (NYSE: ZTR).
Prior to joining Newfleet in 2011, Mr. Caron was on the fixed income team at Goodwin Capital
Advisers, a former Virtus investment management subsidiary. He joined Goodwin Capital in 2002 as a client service associate for the institutional markets group focusing on institutional fixed income clients. Earlier in his career, he was with
Fidelity Investments, where he was responsible for client management and sales in the managed account group.
Mr. Caron earned a B.A.
from Syracuse University and an M.B.A. from Suffolk University. He is a Chartered Financial Analyst® (CFA®) charterholder and has been
working in the investment industry since 1997.
Kyle A. Jennings, CFA. Kyle Jennings is a senior managing director and the head of
credit research at Newfleet. Mr. Jennings is also co-portfolio manager of Virtus Newfleet Senior Floating Rate Fund and Virtus Newfleet High Yield Fund.
Mr. Jennings has been a member of Newfleet’s corporate credit research team since 1998 and currently covers the gaming, healthcare,
and pharmaceutical industries. He is also a member of the team that formulates the leveraged finance strategy for the multi-sector fixed income strategies. In addition, Mr. Jennings is responsible for the structuring and management of
Newfleet’s CLO platform.
Prior to joining Newfleet in 2011, Mr. Jennings was on the fixed income team at Goodwin Capital
Advisers, a former Virtus investment management subsidiary. Before that, he was a credit research analyst in the banking industry for Shawmut Bank, Ironwood Capital, and Citizens Bank.
Mr. Jennings earned a B.S. in finance from the University of Connecticut and is a Chartered Financial Analyst® (CFA®) charterholder. He began his career in the investment industry in 1992.
Daniel Senecal, CFA. Daniel Senecal is a managing director and credit analyst at Newfleet. Mr. Senecal is a sector manager within
the emerging markets analyzing both sovereign and corporate debt.
Prior to joining Newfleet in 2011, Mr. Senecal was on the fixed
income team at Goodwin Capital Advisers, a former Virtus investment management subsidiary. He began at Goodwin Capital in 1997 as a corporate credit research analyst, followed by several roles, including sector manager for investment grade corporate
credit and sovereign credit. He was also the lead portfolio manager for the Phoenix High Yield Fund from 2003 until 2005 and the Phoenix Emerging Market Fund from 2004 to 2005.
Earlier in his career, Mr. Senecal completed a formal credit training program at Shawmut National Bank where he was a credit research
analyst and lender. He also worked at BankBoston as a corporate bond analyst.
Mr. Senecal earned a B.A. in economics and English
from Assumption College and an M.B.A. in finance from the University of Connecticut. He is a Chartered Financial Analyst® (CFA®)
charterholder, and he began his career in the investment industry in 1990.
| (a)(2) |
Other Accounts Managed by Portfolio Manager(s) or Management Team Member |
There may be certain inherent conflicts of interest that arise in connection with the portfolio managers’ management of the Fund’s
investments and the investments of any other accounts they manage. Such conflicts could include the aggregation of orders for all accounts managed by a particular portfolio manager, the allocation of purchases across all such accounts, the
allocation of IPOs and any soft dollar arrangements that the adviser/subadviser may have in place that could benefit the Fund and/or such other accounts. The Board of Trustees has adopted policies and procedures designed to address any such
conflicts of interest to ensure that all transactions are executed in the best interest of the Fund’s shareholders. Each adviser/subadviser is required to certify its compliance with these procedures on a quarterly basis. There have been no
material compliance issues with respect to any of these policies and procedures during the Fund’s most recent fiscal year. Additionally, there are no material conflicts of interest between the investment strategy of the Fund and the investment
strategy of other accounts managed by portfolio managers since the portfolio managers generally manage funds and other accounts having similar investment strategies.
The following table provides information as of November 30, 2022, regarding any other accounts managed by the portfolio managers and
portfolio management team members for the Fund. As noted in the table, the portfolio managers managing the Fund may also manage or be members of management teams for other mutual funds within the Virtus Fund complex or other similar accounts.
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| Name of Portfolio Manager or
Team Member |
|
Type of Accounts |
|
Total
No. of
Accounts
Managed |
|
|
Total
Assets
(in
millions) |
|
|
No. of
Accounts
where
Advisory
Fee is Based
on
Performance |
|
|
Total Assets
in Accounts
where
Advisory
Fee is Based
on
Performance
(in millions) |
|
| David L. Albrycht |
|
Registered Investment Companies: |
|
|
17 |
|
|
$ |
7,640 |
|
|
|
1 |
|
|
$ |
58.5 |
|
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|
Other Pooled Investment Vehicles: |
|
|
2 |
|
|
|
90.6 |
|
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|
0 |
|
|
|
0 |
|
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|
Other Accounts: |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
| Benjamin Caron |
|
Registered Investment Companies: |
|
|
5 |
|
|
|
987 |
|
|
|
0 |
|
|
|
0 |
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|
Other Pooled Investment Vehicles: |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
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|
Other Accounts: |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
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| Kyle A. Jennings |
|
Registered Investment Companies: |
|
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4 |
|
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880.7 |
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|
0 |
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|
0 |
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|
Other Pooled Investment Vehicles: |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
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Other Accounts: |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
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| Daniel Senecal |
|
Registered Investment Companies: |
|
|
1 |
|
|
|
101.2 |
|
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|
0 |
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0 |
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Other Pooled Investment Vehicles: |
|
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0 |
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|
0 |
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|
0 |
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|
|
0 |
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Other Accounts: |
|
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0 |
|
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|
0 |
|
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|
0 |
|
|
|
0 |
|
| (a)(3) |
Compensation Structure of Portfolio Manager(s) or Management Team Members |
Virtus, along with certain of its affiliated investment management firms, including Newfleet (collectively, “Virtus”), believe that the firm’s
compensation program is adequate and competitive to attract and retain high-caliber investment professionals. Investment professionals at Virtus receive a competitive base salary, an incentive bonus opportunity, and a benefits package. Certain
professionals who supervise and manage others also participate in a management incentive program reflecting their personal contribution and team performance. Certain key individuals also have the opportunity to take advantage of a long-term
incentive compensation program, including potential awards of Virtus restricted stock units (“RSUs”) with multi-year vesting, subject to Virtus board of directors’ approval.
Following is a more detailed description of the compensation structure:
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Base Salary: Each portfolio manager is paid a fixed based salary, which is designed to be competitive in
light of the individual’s experience and responsibilities. Base salary is determined using compensation survey results of investment industry compensation conducted by an independent third party in evaluating competitive market compensation for
its investment management professionals. |
Incentive Bonus: Annual incentive payments are based on targeted
compensation levels, adjusted based on profitability, investment performance factors and a subjective assessment of contribution to the team effort. The short-term incentive payment is generally paid in cash, but a portion may be payable in RSUs and
mutual fund investments that appreciate or depreciate in value based on returns of one or more mutual funds managed by the investment professional. Individual payments are assessed using comparisons of actual investment performance with specific
peer group or index measures. Performance of funds managed is generally measured over one-, three-, and five-year periods and an individual manager’s participation is based on the performance of each
fund/account managed.
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Other Benefits: Portfolio managers are also eligible to participate in broad-based plans offered generally
to employees of Virtus and its affiliates, including 401(k), health, and other employee benefit plans. |
While portfolio managers compensation contains a performance component, this component is adjusted to reward
investment personnel for managing within the stated framework and for not taking unnecessary risk. This approach helps ensure that investment management personnel remain focused on managing and acquiring securities that correspond to a fund’s
mandate and risk profile and are discouraged from taking on more risk and unnecessary exposure to chase performance for personal gain. Virtus believes it has appropriate controls in place to handle any potential conflicts that may result from a
substantial portion of portfolio manager compensation being tied to performance.
| (a)(4) |
Disclosure of Securities Ownership |
For the most recently completed fiscal year ended November 30, 2022, beneficial ownership of shares of the Fund by Messrs. Albrycht,
Caron, Jennings and Senecal are as follows. Beneficial ownership was determined in accordance with rule 16a-1(a)(2) under the Securities Exchange Act of 1934 (17 CFR
240.161-1(a)(2)).
|
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| Name of Portfolio Manager or
Team Member |
|
Dollar ($) Range of
Fund Shares
Beneficially Owned |
|
| David L. Albrycht |
|
$ |
0 |
|
| Benjamin Caron |
|
|
100,001-500,000 |
|
| Kyle A. Jennings |
|
|
0 |
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| Daniel Senecal |
|
|
0 |
|
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 were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s
Board of Trustees that 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.