| 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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• |
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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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• |
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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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• |
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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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• |
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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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• |
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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 |
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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 subadvisers, Duff & Phelps Investment Management Co.
(“Duff & Phelps”) and/or Newfleet Asset Management, a division of Virtus Fixed Income Advisers, LLC (“Newfleet”). Following are summaries of their proxy voting policies.
Duff & Phelps
Duff & Phelps has
adopted proxy voting guidelines (the “Guidelines”) in an effort to ensure shares are voted in the best interests of its clients and the value of the investment, and to address any real or perceived conflicts of interest in proxy voting.
The Guidelines allow Duff & Phelps to utilize a qualified, non-affiliated third-party vendor to assist in the review of proxy proposals and making of voting recommendations on behalf of clients
consistent with the Guidelines and Duff & Phelps’ clients’ proxy voting guidelines including the Policy, or as determined to be in the best economic interest of Duff & Phelps’ clients.
Duff & Phelps has procedures in place to address conflicts of interest or potential conflicts of interest relating to proxy proposals. Generally,
where the Guidelines outline a voting position, either as for or against such proxy proposal, voting will be according to either the Guidelines or the third-party vendor’s
policies. The Proxy Committee will vote the proxy according to either its determination of the client’s best interests or by client direction. In performing its analysis of how to vote on a
proposal, the Proxy Committee will begin by considering the voting recommendation of the third-party vendor and will then override such vendor’s recommendation if the Proxy Committee determines that such recommendation is not in the best
interest of Duff & Phelps clients. The firm seeks not to finalize its votes until close to the deadline for being able to vote, so as to be able to consider any additional information that may become available, including from the company in
response to a recommendation that has been made by a proxy advisory firm. The Proxy Committee incorporates consideration of ESG issues into its evaluation of recommendations of the proxy advisory firm and the voting of proxies generally. The firm
has additionally adopted proxy voting guidelines that serve as a guide to voting with regard to certain recurring proposals. The vote the Proxy Committee selects will depends on the facts and circumstances of each situation as well as requirements
of applicable law.
Duff & Phelps may choose not to vote proxies in certain situations or for certain accounts, such as when:
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it deems the cost of voting to exceed any anticipated benefit to client; |
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a proxy is received for a security it no longer manages due to the entire position being sold; or
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| • |
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exercising voting rights could restrict the ability of the portfolio manager to freely trade the security.
|
Duff & Phelps may also not be able to vote proxies for any client account that participates in securities lending programs.
A complete copy of Duff & Phelps’ current Proxy Voting Policies, Procedures and Guidelines may be obtained by sending a written request to
Duff & Phelps Investment Management Co., Attn: Compliance, 200 S. Wacker Drive, Suite 500, Chicago, Illinois 60606.
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.
|
| (a)(1) |
Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio
Manager(s) or Management Team Members |
As of the date of filing this report, the Fund’s sub-advisers are Duff & Phelps Investment Management Co. (“Duff & Phelps”) and Newfleet Asset Management, LLC (“Newfleet”). 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:
Duff & Phelps
Connie M. Luecke, CFA
Ms. Luecke is a Senior Managing Director and Senior Portfolio Manager at Duff & Phelps, an affiliated manager of Virtus. She is
the senior portfolio manager for the firm’s global listed infrastructure strategies and is chief investment officer of DNP Select Income Fund Inc. (NYSE: DNP). She has been a portfolio manager for the Virtus Duff & Phelps Global
Infrastructure Fund since its inception in 2004, as well as portfolio manager for all Global Listed Infrastructure.
Prior to joining
Duff & Phelps in 1992, Ms. Luecke served as a financial valuation consultant at Coopers & Lybrand, and as a research associate at Harris Associates L.P.
Ms. Luecke earned a B.S. from DePaul University and an M.B.A. from Loyola University of Chicago. She is a Chartered Financial Analyst® (CFA®) charter-holder, a member of the CFA Institute and the CFA Society of Chicago, and a past president of the Utility and
Telecommunications Securities Club of Chicago. She began her career in the investment industry in 1983.
Newfleet
David L. Albrycht, CFA
David Albrycht is president and chief investment officer of Newfleet, an affiliated manager of 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 and its predecessor since 2016, Virtus Newfleet
Multi-Sector Short Term Bond Fund since 1993, Virtus Newfleet Multi-Sector Intermediate Bond Fund since 1994, and co-manager of 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
manager of another closed-end fund, Virtus Global Multi-Sector Income Fund (NYSE: VGI). 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.
| (a)(2) |
Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest
|
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 Directors 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 the 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.
Other Accounts Managed by Portfolio Manager(s) or Management Team Member
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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 |
|
| 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 |
|
| Connie M. Luecke |
|
Registered Investment Companies: |
|
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2 |
|
|
|
4,520.7 |
|
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0 |
|
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0 |
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Other Pooled Investment Vehicles: |
|
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2 |
|
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|
282.5 |
|
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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 |
|
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0 |
|
| (a)(3) |
Compensation Structure of Portfolio Manager(s) or Management Team Members |
Virtus, along with certain of its affiliated investment management firms, including Duff & Phelps and Newfleet (collectively,
“Virtus”), believes 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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• |
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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. |
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• |
|
Incentive Bonus: Annual incentive payments are based on targeted compensation levels, adjusted based on
profitability and 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 the 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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• |
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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 Mr. Albrycht and
Ms. Luecke, 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 |
|
| Connie M. Luecke |
|
$ |
50,001-100,000 |
|
| 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 directors, 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.