Virtus Newfleet Multi-Sector Intermediate Bond

Objective And Strategy

Objective
Long-term total return.

Strategy
The Series seeks to generate high current income and total return by applying extensive credit research and a time-tested approach to capitalize on opportunities across undervalued sectors of the bond market. The portfolio seeks diversification among 14 sectors in order to increase return potential and reduce risk. Under normal circumstances, the Series invests at least 80% of its assets in securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities; debt securities issued by foreign issuers, including foreign governments and their political subdivisions and issuers located in emerging market countries; Investment grade securities; and High yield-high risk fixed income securities of U.S. issuers.
Tax Inefficient Fund

Principal Risks

* This portfolio invests in securities of foreign issuers which involves risks not typically associated with domestic issuers, including currency fluctuations and the possibility of political and economic instability. Emerging markets involve risks in addition to those generally associated with foreign securities, because political and economic structures in many emerging markets may be undergoing significant evolution and rapid development.

* The Fund could lose money if the issuer of a debt security is unable to meet its financial obligations or goes bankrupt. This fund may invest in securities rated below investment grade or "junk bonds." Junk bonds may be sensitive to economic changes, political changes, or adverse developments specific to a company.

* Payment of interest and repayment of principal may be impacted by the cash flows generated by the assets backing these securities.

* The value of your investment in a Fund is based on the net asset value ("NAV") of the underlying funds and, in turn, the securities that the underlying funds hold. The Funds are subject to the risk that one or more underlying funds will not perform as expected or will underperform other similar funds or that the combination of underlying funds selected by the Funds' investment will not perform as expected. The Funds will be exposed to all of the risk of an investment in the underlying Funds.

* Fixed income securities are subject to interest rate risk because the prices of fixed income securities tend to move in the opposite direction of interest rates. When interest rates rise, fixed income security prices fall. When interest rates fall, fixed income security prices rise.

* Credit risk is the risk that the issuer of a security may be unable to make interest payments and/or repay principal when due. A downgrade to an issuer's credit rating or a perceived change in an issuer's financial strength may affect a security's value, and thus, impact the VA Short-Term Fixed Portfolio's performance.

* Changes in government regulation may adversely affect the value of a security.