As filed with
the Securities and Exchange Commission on August 31, 2020
File No. 033-05033
File No. 811-04642
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
Under the SECURITIES ACT OF 1933
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 87
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and/or
REGISTRATION STATEMENT
Under the INVESTMENT COMPANY ACT OF 1940
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 89
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(Check appropriate box or boxes)
Virtus Variable Insurance
Trust
(Exact Name of Registrant as Specified
in Charter)
Area Code and Telephone Number: (800) 367-5877
One Financial Plaza
Hartford, Connecticut 06103
(Address of Principal Executive Offices)
Jennifer S. Fromm, Esq.
Vice President and Senior Counsel
Virtus Investment Partners, Inc.
One Financial Plaza
Hartford, Connecticut 06103
(Name and Address of Agent for Service)
Copies of All Correspondence to:
David C. Mahaffey, Esq.
Sullivan & Worcester LLP
1666 K Street, N.W.
Washington, D.C. 20006
It is proposed that this filing will become
effective (check appropriate box):
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immediately upon filing pursuant to paragraph (b)
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on _____________ pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a)(1)
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on or at such later date as the Commission shall order pursuant to paragraph (a)(2)
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75 days after filing pursuant to paragraph (a)(2)
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on _____________ pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
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this post-effective amendment designates a new effective date for a previously filed post-effective amendment.
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This Post-Effective Amendment consists of
the following:
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1.
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Facing Sheet of the Registration Statement
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3.
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Statutory prospectus for the Virtus KAR Equity Income
Series
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4.
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Amendment to the Statement of Additional Information,
dated April 30, 2020, as supplemented, which contains disclosure changes for Virtus KAR Equity Income Series which will become
effective on August 31, 2020.
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This Post-Effective Amendment No. 87 is being filed for the
sole purpose of incorporating certain disclosure changes into the Summary and Statutory Prospectuses for Virtus KAR Equity Income
Series (f/k/a Virtus Rampart Enhanced Core Equity Series) and the Statement of Additional Information for Virtus Variable Insurance
Trust. But for the supplemental disclosure filed herewith, the multi-fund Virtus Variable Insurance Trust Statutory Prospectus
included in Part A and the Statement of Additional Information included in Part B of Registrant’s Post-Effective Amendment
No. 84 to its registration statement filed on April 22, 2020, effective April 30, 2020, and supplemented on June 18 and June 19,
2020, which are incorporated by reference herein, are unchanged.
PROSPECTUS
VIRTUS VARIABLE INSURANCE TRUST
Virtus KAR Equity Income Series
The Prospectus describes the Virtus KAR Equity Income Series (the “Series”), which is available as an underlying investment through a variable life insurance policy or a variable annuity contract (a “variable contract”). For information about your variable contract, including information about insurance-related expenses, see the prospectus for your variable contract.
The Securities and Exchange Commission has not approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Please carefully consider the investment objectives, risks, charges and expenses of the Series before investing. For this and other information about any Virtus Variable Insurance Trust series, call 800-367-5877 or visit virtus.com for a prospectus. Read it carefully before you invest.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may no longer receive paper copies of the Series’ shareholder reports from your insurance company unless you specifically request paper copies from the insurance company. If your insurance company elects to use this method of delivery, the shareholder reports will be made available on a website, and the insurance company will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action.
You may elect to receive shareholder reports and other communications from the insurance company electronically by following the instructions provided by the insurance company.
You may elect to receive all future shareholder reports in paper free of charge from the insurance company. (Please note that the Series will incur additional expenses when printing and mailing any paper shareholder reports, and Series expenses pass indirectly to all shareholders.) You can do so by contacting the insurance company. Your election to receive reports in paper likely will apply to all of the funds available in your insurance product, but you should ask your insurance company whether this is the case.
Not FDIC Insured • No Bank Guarantee • May Lose Value
Virtus KAR Equity Income Series
Table of Contents
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Fund Summary
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Virtus KAR Equity Income Series
Fund Summary
Investment Objective
The Series has investment objectives of capital appreciation and current income.
Fees and Expenses
The following table describes the fees and expenses you may pay if you buy and hold shares of the Virtus KAR Equity Income Series. The table does not include any fees or sales charges imposed under the variable contracts for which the Series is an investment option. If they were included, your costs would be higher.
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Shareholder Fees (fees paid directly from your investment)
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Class A
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Shareholder Fees
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Non
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e
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Annual Series Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
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Class A
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Management Fees
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0.70
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%
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Distribution and/or Service (12b-1) Fees
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0.25
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%
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Other Expenses
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0.18
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%
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Acquired Fund Fees and Expenses
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0.01
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%
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Total Annual Series Operating Expenses (a)
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1.14
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%
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Less: Expense Reimbursement(b)
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(0.15)
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%
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Total Annual Series Operating Expenses After Expense Reimbursement (a)(b)
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0.99
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%
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(a)
The Total Annual Series Operating Expenses do not correlate to the ratio of expenses to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the Series and do not include acquired fund fees and expenses.
(b)
The Series’ investment adviser has contractually agreed to limit the Series’ total annual operating expenses (excluding certain expenses, such as front-end sales charges, taxes, leverage and borrowing expenses (such as commitment, amendment and renewal expenses on credit or redemption facilities), interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, unusual or infrequently occurring expenses (such as litigation), acquired fund fees and expenses, and dividend expenses, if any) so that such expenses do not exceed 0.98% through April 30, 2022. Following the contractual period, the adviser may discontinue these expense reimbursement arrangements at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under these arrangements for a period of three years after the date on which it was incurred or waived by Virtus.
Example
This example is intended to help you compare the cost of investing in the Series with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Series for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year, that the Series’ total operating expenses remain the same and that the expense reimbursement arrangement remains in place for the contractual period. The example does not reflect variable contract fees and charges, and if it did, the costs shown would be higher. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Class A
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$101
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$347
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$613
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$1,373
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Portfolio Turnover
The Series pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Series Operating Expenses or in the Example, affect the Series’ performance. During the most recent fiscal year, the Series’ portfolio turnover rate was 27% of the average value of its portfolio.
Principal Investment Strategies
The Series invests in a diversified portfolio of primarily high-quality, dividend-paying U.S. companies. The investment strategy emphasizes companies the subadviser believes to have a durable competitive advantage, strong management and low financial risk and to be able to grow over market cycles. The Series typically invests in the securities of medium to large capitalization companies, but it is not limited to investing in the securities of companies of any particular size.
Virtus KAR Equity Income Series1
Under normal circumstances, the Series invests at least 80% of its assets in dividend paying equity securities. Generally, the Series invests in approximately 25 to 50 securities at any given time.
Principal Risks
The Series may not achieve its objective(s), and it is not intended to be a complete investment program. The value of the Series’ investments that supports your share value may decrease. If between the time you purchase shares and the time you sell shares the value of the Series’ investments decreases, you will lose money. Investment values can decrease for a number of reasons. Conditions affecting the overall economy, specific industries or companies in which the Series invests can be worse than expected, and investments may fail to perform as the subadviser expects. As a result, the value of your shares may decrease. Purchase and redemption activities by separate accounts of participating insurance companies may impact the management of the Series and its ability to achieve its investment objective(s). The principal risks of investing in the Series are:
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Equity Securities Risk. The value of the stocks held by the Series may be negatively affected by the financial market, industries in which the fund invests, or issuer-specific events. Focus on a particular style or in small or medium-sized companies may enhance that risk.
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Limited Number of Investments Risk. Because the Series may have a limited number of securities, it may be more susceptible to factors adversely affecting its securities than a Series with a greater number of securities.
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Large Market Capitalization Companies Risk. The value of investments in larger companies may not rise as much as smaller companies, or larger companies may be unable to respond quickly to competitive challenges, such as changes in technology and consumer tastes.
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Market Volatility Risk. The value of the securities in the Series may go up or down in response to the prospects of individual companies and/or general economic conditions. Price changes may be short- or long-term. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issue, recessions, or other events could have a significant impact on the Series and its investments, including hampering the ability of the Series’ portfolio manager(s) to invest the Series assets as intended.
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Redemption Risk. One or more large shareholders or groups of shareholders may redeem their holdings in the Series, resulting in an adverse impact on remaining shareholders in the Series by causing the Series to take actions it would not otherwise have taken.
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Small and Medium Market Capitalization Companies Risk. The Series’ investments in small and medium market capitalization companies may increase the volatility and risk of loss to the Series, as compared with investments in larger, more established companies.
Performance
The following bar chart and table provide some indication of the risks of investing in the Series. The bar chart shows changes in the Series’ performance from year to year over a 10-year period. The table shows how the Series’ average annual returns compare to those of a broad-based securities market index. The Series’ past performance is not necessarily an indication of how the Series will perform in the future. The current subadviser commenced providing services for the fund in September 2020 and therefore the returns shown in the table for periods prior to that date reflect the performance of other investment professionals. The Series’ returns in the chart and table do not reflect the deduction of any separate account or variable contract charges. The returns would have been less than those shown if such charges were deducted.
2Virtus KAR Equity Income Series
Calendar Year Annual Total Returns for Class A Shares
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Best Quarter:
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1Q/2012:
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14.78%
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Worst Quarter:
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3Q/2011:
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-17.47%
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Year to date (3/31/20):
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-21.22%
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Average Annual Total Returns (for the periods ended 12/31/19)
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1 Year
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5 Years
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10 Years
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Class A
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28.67
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%
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6.56
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%
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9.72
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%
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MSCI U.S. High Dividend Yield Index (net) (does not reflect fees or expenses)
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21.26
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%
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9.78
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%
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12.65
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%
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S&P 500® Index (does not reflect fees or expenses)
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31.49
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%
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11.70
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%
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13.56
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%
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As of September 1, 2020 the benchmark to which performance of the Series is compared is the MSCI USA High Dividend Yield Index (net) replacing the Series’ previous primary benchmark, the S&P 500® Index. The Series’ new subadviser believes the MSCI USA High Dividend Yield Index (net) better reflects the markets and securities in which the Series will be invested than the Series’ previous benchmark. The MSCI USA High Dividend Yield Index (net) is designed to reflect the performance of equities in the parent index (excluding REITs) with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent. The index also applies quality screens and reviews 12-month past performance to omit stocks with potentially deteriorating fundamentals that could force them to cut or reduce dividends. The index is calculated on a total-return basis with dividends reinvested. The index is unmanaged and not available for direct investment.
Management
The Adviser and Subadviser
Virtus Investment Advisers, Inc. (“VIA”) is the investment adviser to the Series.
Kayne Anderson Rudnick Investment Management, LLC (“KAR”), an affiliate of VIA, is the subadviser to the Series (since September 2020).
Portfolio Manager
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Richard Sherry, CFA, Senior Research Analyst at KAR. Mr. Sherry has served as a Portfolio Manager of the fund since September 2020.
Purchase and Sale of Series Shares
The Series does not offer its shares to the general public. The Series currently offers shares only to the separate accounts of participating insurance companies. Virtus Variable Insurance Trust (the “Trust”), of which the Series is a separate investment portfolio, has entered into an agreement with the insurance company sponsor of each separate account (participation agreement) setting forth the terms and conditions pursuant to which the insurance company will purchase and redeem shares of the Series. For information concerning the purchase of units of the separate accounts, see the variable contract prospectus.
Tax Information
Since the separate accounts are the only shareholders of the Series, no discussion is included herein as to the federal income tax consequences at the shareholder level. For information concerning the federal income tax consequences to the purchasers of variable contracts, see the variable contract prospectus which describes the particular separate account and variable contract.
Payments to Insurance Companies and Other Financial Intermediaries
Series shares are generally available only through intermediaries, i.e., the separate accounts. The Series (and/or its related companies) may pay the insurance companies (and/or their related companies) for distribution and/or other
Virtus KAR Equity Income Series3
services; some of the payments may, in turn, go to broker-dealers and other financial intermediaries. For example, the Series may make payments for sub-transfer agency services to one or more of the insurance companies. Such payments may create a conflict of interest for an intermediary by influencing the intermediary’s investment recommendations, or be a factor in the insurance company’s decision to include the Series as an underlying investment option in a variable contract. Ask your salesperson or review your variable contract prospectus for more information.
More About Principal Investment Strategies
The Series invests in dividend paying equity securities of U.S. companies. The Series typically invests in the securities of medium to large capitalization companies, but it is not limited to investing in the securities of companies of any particular size. Under normal circumstances, the Series invests at least 80% of its assets in dividend paying equity securities. The Series’ policy of investing 80% of its assets in dividend paying equity securities may be changed only upon 60 days’ written notice to shareholders.
The subadviser believes that owning a focused yet economically diversified portfolio of high quality companies will achieve attractive long-term risk-adjusted investment returns. The subadviser defines “high quality” as a qualitative business characteristic that enables a company to resist competitive forces and thereby produce high and enduring profitability. The subadviser applies thorough fundamental analysis to evaluate a company’s competitive attributes in order to identify high quality companies for the Series’ portfolio. Generally, the Series invests in approximately 25 to 50 securities at any given time.
The subadviser’s sell discipline seeks to dispose of holdings that, among other things, are the subject of negative developments individually or as an industry, or as necessary to provide funding to upgrade and improve portfolio holdings or meet diversification requirements.
The Series’ investment objective is non-fundamental, which means it may be changed without shareholder approval.
Temporary Defensive Strategy: During periods of adverse market conditions, the Series may take temporary defensive positions that are inconsistent with its principal investment strategies by holding all or part of its assets in cash or short-term money market instruments including obligations of the U.S. Government, high-quality commercial paper, certificates of deposit, bankers acceptances, bank interest-bearing demand accounts, and repurchase agreements secured by U.S. Government securities. When this allocation happens, the Series may not achieve its objectives.
Please see “More About Principal Risks” for information about the risks of investing in the Series. Please refer to “Additional Risks Associated with Investment Techniques and Series Operations” for other investment techniques of the Series.
More About Principal Risks
The Series’ investments are subject generally to market risk and the risk of selecting underperforming securities and asset classes, which may adversely affect the Series and lead to loss of principal.
Equity Securities
Generally, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, equity securities will respond to events that affect entire financial markets or industries (such as changes in inflation or consumer demand) and to events that affect particular issuers (such as news about the success or failure of a new product). Equity securities also are subject to “stock market risk,” meaning that stock prices in general may decline over short or extended periods of time. When the value of the stocks held by the Series goes down, the value of the Series’ shares will be affected.
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Large Market Capitalization Companies Risk. The value of investments in larger companies may not rise as much as smaller companies, or larger companies may be unable to respond quickly to competitive challenges, such as changes in technology and consumer tastes.
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Small and Medium Market Capitalization Companies Risk. Small and medium-sized companies often have narrower markets, fewer products or services to offer, and more limited managerial and financial resources than
4Virtus KAR Equity Income Series
larger, more established companies. As a result, the performance of small and medium-sized companies may be more volatile, and they may face a greater risk of business failure, which could increase the volatility and risk of loss to the Series.
Limited Number of Investments
Because the Series invests in a limited number of securities, the Series’ portfolio will be more susceptible to factors adversely affecting issuers of securities in the Series’ portfolio than would a series holding a greater number of securities.
Market Volatility
The value of the securities in which the Series invests may go up or down in response to the prospects of individual companies and/or general economic conditions. Price changes may be temporary or may last for extended periods.
Instability in the financial markets has exposed the Series to greater market and liquidity risk and potential difficulty in valuing portfolio instruments that it holds. In response to financial markets that experienced extreme volatility, and in some cases a lack of liquidity, the US Government has taken a number of unprecedented actions, including acquiring distressed assets from financial institutions and acquiring ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear. Additional legislation or government regulation may also change the way in which the Series itself is regulated, which could limit or preclude the Series’ ability to achieve its investment objective. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issue, recessions, or other events could have a significant impact on the Series and its investments, hampering the ability of the Series’ portfolio manager(s) to invest the Series’ assets as intended.
Redemption
The redemption by one or more large variable contract owners of their holdings in the Series could have an adverse impact on the remaining variable contract owners in the Series by, for example, accelerating the realization of capital gains and/or increasing the Series’ transaction costs.
Management of the Series
The Adviser
VIA has served as the investment adviser to the Series since November 2010. VIA, located at One Financial Plaza, Hartford, CT 06103, acts as the investment adviser for over 40 mutual funds and as adviser to institutional clients. As of June 30, 2020, VIA had approximately $32.1 billion in assets under management. VIA has acted as an investment adviser for over 80 years and is an indirect wholly-owned subsidiary of Virtus Investment Partners, Inc., a publicly traded multi-manager asset management business.
Pursuant to the Investment Advisory Agreement with the Series and subject to the direction of the Trust’s Board of Trustees, VIA is responsible for managing the Series’ investment program in conformity with the stated policies of the Series as described in this prospectus. VIA, with the approval of the Trust’s Board of Trustees, has selected KAR, an affiliate of VIA, to serve as subadviser and perform the day-to-day portfolio management of the Series. KAR, subject to the supervision of VIA, is responsible for deciding which securities to purchase and sell for the Series and for placing the Series’ transactions.
The Series pays VIA an investment management fee that is accrued daily against the value of the Series’ net assets at the following annual rate:
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1st $250 million
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$250+ million through $500 million
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Over $500 million
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0.70%
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0.65%
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0.60%
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For its last fiscal year, the Series paid advisory fees at the rate of 0.70% of its average net assets.
The Trust has entered into an expense limitation agreement with VIA whereby VIA has agreed to reimburse the Series for expenses necessary or appropriate for the operation of the Series (excluding certain expenses, such as front-end sales charges, taxes, leverage and borrowing expenses (such as commitment, amendment and renewal expenses on credit or redemption facilities), interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, unusual or infrequently occurring expenses (such as litigation), acquired fund fees and expenses, and dividend expenses, if any) to the extent that such expenses exceed 0.98% of the Series’ average net assets. This
Virtus KAR Equity Income Series5
expense limitation agreement is in place through April 30, 2022. After April 30, 2022, VIA may discontinue this expense reimbursement arrangement at any time. Under certain conditions, VIA may recapture operating expenses reimbursed under an expense reimbursement arrangement for a period of three years after the date on which it was incurred or waived by Virtus.
VIA serves as a manager of managers of the Series. In this capacity, VIA: (i) sets the Series’ overall investment strategies; (ii) evaluates, selects, and recommends to the Board one or more subadvisers needed to manage all or part of the assets of the Series; (iii) monitors and evaluates the subadvisers’ investment programs and results as well as the performance of the subadvisers relative to the applicable benchmark indexes; and (iv) reviews the Series’ compliance with its investment objectives, policies and restrictions.
The Trust and VIA have received shareholder approval to rely on an exemptive order from the Securities and Exchange Commission (“SEC”) that permits VIA, subject to certain conditions and without the approval of shareholders to: (a) select both unaffiliated subadvisers and certain wholly owned affiliated subadvisers to manage all or a portion of the assets of a Series, and enter into subadvisory agreements with such subadvisers; (b) materially amend subadvisory agreements with such subadvisers; and (c) continue the employment of an existing subadviser on the same subadvisory agreement terms where an agreement has been assigned because of a change in control of the subadviser. In such circumstances, shareholders would receive notice of such action, including, if applicable, instructions regarding how to obtain the information concerning the new subadviser that normally is provided in a proxy statement.
The Subadviser
KAR, an affiliate of VIA, is located at 1800 Avenue of the Stars, 2nd Floor, Los Angeles, CA 90067. KAR acts as subadviser to mutual funds and as investment adviser to institutions and individuals. KAR has subadvised the Virtus KAR Equity Income Series since September 2020. As of June 30, 2020, KAR had approximately $37.0 billion in assets under management.
From its investment advisory fee, VIA, and not the Series, pays KAR for its subadvisory services at the rate of 50% of the net advisory fee.
Board of Trustees’ Approval of Investment Advisory and Subadvisory Agreements
The Trust’s semiannual report to shareholders for the period ended June 30, 2020 contains a discussion regarding the basis for the Trust’s Board of Trustees’ approval of the investment advisory and investment subadvisory agreements for the Series.
Portfolio Management
Richard Sherry, CFA manages the investments of the Series (since September 2020) and is primarily responsible for the day-to-day management of the Series’ investments.
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Mr. Sherry is a Portfolio Manager for large-capitalization portfolios and a Senior Research Analyst at KAR. Before joining KAR in 1995, Mr. Sherry was an operations/marketing supervisor at Pilgrim Asset Management. He has approximately 25 years of investment industry experience.
The statement of additional information (“SAI”) provides additional information about the portfolio manager’s compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of securities in the Series.
Additional Risks Associated with Investment Techniques and Series Operations
Information about the Series’ principal investment strategies and risks appears in the Fund Summary section and the sections entitled “More About Principal Investment Strategies” and “More About Principal Risks” above. The information below describes other investment strategies that the Series may use that are not principal strategies and the risks of those strategies, arranged in alphabetical order, as well as other operational risks. Further descriptions of these investment strategies and practices can be found in the SAI.
The greater an investment in a particular asset class by the Series, the greater the impact to the Series of the risks related to the class.
6Virtus KAR Equity Income Series
Cybersecurity
With the increased use of technologies such as the Internet to conduct business, the Series have become potentially more susceptible to operational and information security risks through breaches in cybersecurity. In general, a breach in cybersecurity can result from either a deliberate attack or an unintentional event. Cybersecurity breaches may involve, among other things, infection by computer viruses or other malicious software code or unauthorized access to the digital information systems, networks or devices of the Series or their service providers (including, but not limited to, the Series’ investment adviser, transfer agent, custodian, administrators and other financial intermediaries) through “hacking” or other means, in each case for the purpose of misappropriating assets or sensitive information (including, for example, personal shareholder information), corrupting data or causing operational disruption or failures in the physical infrastructure or operating systems that support the Series. Any such cybersecurity breaches or losses of service may cause the Series to lose proprietary information, suffer data corruption or lose operational capacity, which, in turn, could cause the Series to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures, and/or financial loss. While the Series and their service providers have established business continuity plans and risk management systems designed to prevent or reduce the impact of cybersecurity attacks, there are inherent limitations in such plans and systems due in part to the ever-changing nature of technology and cybersecurity attack tactics, and there is a possibility that certain risks have not been adequately identified or prepared for. Cybersecurity risks may also impact issuers of securities in which the Series invest, which may cause the Series’ investments in such issuers to lose value.
Exchange-Traded Funds (“ETFs”)
ETFs invest in a portfolio of securities designed to track a particular market segment or index. The risks associated with investing in ETFs generally reflect the risks of owning shares of the underlying securities the ETF is designed to track, although lack of liquidity in an ETF could result in its value being more volatile than the underlying portfolio of securities. Assets invested in ETFs incur a layering of expenses, including operating costs and advisory fees that Series shareholders indirectly bear; such expenses may exceed the expenses the Series would incur if it invested directly in the underlying portfolio of securities the ETF is designed to track. Shares of ETFs trade on a securities exchange and may trade at, above, or below their net asset value.
Operational
An investment in the Series, like any mutual fund, can involve operational risks arising from factors such as processing errors, human errors, inadequate or failed internal or external processes, failures in systems and technology, changes in personnel and errors caused by third-party service providers. The occurrence of any of these failures, errors or breaches could result in a loss of information, regulatory scrutiny, reputational damage or other events, any of which could have a material adverse effect on the Series. While the Series seeks to minimize such events through controls and oversight, there may still be failures that could cause losses to the Series.
Securities Lending
The Series may loan portfolio securities with a value up to one-third of its total assets to increase its investment returns. If the borrower is unwilling or unable to return the borrowed securities when due, the lending Series can suffer losses. In addition, there is a risk of delay in receiving additional collateral or in the recovery of the securities, and a risk of loss of rights in the collateral, in the event that the borrower fails financially. There is also a risk that the value of the investment of the collateral could decline, causing a loss to the Series.
Short-Term Investments
Short-term investments include money market instruments, repurchase agreements, certificates of deposit, bankers’ acceptances and other short-term instruments that are not U.S. Government securities. These securities generally present less risk than many other investments, but they are generally subject to credit risk and may be subject to other risks as well.
Virtus KAR Equity Income Series7
Distribution Plan
The Trust, on behalf of each series of the Trust, including Class A Shares of the Virtus KAR Equity Income Series, has adopted a plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the “Distribution Plan”). The Trust has entered into an Underwriting Agreement relating to the Distribution Plan with VP Distributors, LLC (the “Distributor”) located at One Financial Plaza, Hartford, CT 06103. The Distributor is an affiliate of the adviser, and serves as principal underwriter for the Trust. The Distribution Plan permits the use of Series assets to help finance the distribution of the shares of the Series.
Under the Distribution Plan, the Trust, on behalf of each Series, is permitted to pay to the Distributor (who may in turn pay other service providers) up to a total of 0.25% of the average daily net assets of Class A of the Series, as payment for services rendered in connection with the distribution of shares. Because these fees are paid out of Series assets on an ongoing basis, over time these costs will increase the cost of your investment and may cost you more than other types of sales charges.
More About the Trust and the Series
Organization of the Trust
The Trust was organized as a Massachusetts business trust on February 18, 1986. It was subsequently reorganized into a Delaware statutory trust on February 14, 2011. The Trust currently consists of eight series of which the Series is one. The Trust’s business and affairs are managed by its Board of Trustees.
Shares of Beneficial Interest
Shares (including fractional shares) of the Series have equal rights with regard to voting, redemptions, dividends, distributions and liquidations with respect to the Series. All voting rights of the separate accounts as shareholders are passed through to the variable contract owners. Shareholders of all series of the Trust currently vote on the election of Trustees and other matters. On matters affecting an individual series such as the Series (such as approval of an advisory or subadvisory agreement or a change in fundamental investment policies), a separate vote of that series is required. On matters affecting an individual class (such as approval of matters relating to a Distribution Plan for a particular class of shares), a separate vote of that class is required. The Trust is not required to hold annual shareholder meetings.
Series shares attributable to any insurance company assets and Series shares for which no timely instructions from variable contract owners are received will be voted by the appropriate insurance company in the same proportion as those shares for which instructions are received.
The assets received by the Trust for the issue or sale of shares of the Series, and all income, earnings, profits and proceeds thereof, subject only to the rights of creditors, are allocated to the Series, and constitute the underlying assets of the Series. The underlying assets of the Series are required to be segregated on the books of account, and are to be charged with the expenses of the Series and with a share of the general expenses of the Trust. Any general expenses of the Trust not readily identifiable as belonging to a particular series shall be allocated by or under the direction of the Trustees in such manner as the Trustees determine to be fair and equitable.
Taxes
The Trust intends for the Series to qualify as a regulated investment company (“RIC”) by satisfying the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), including requirements with respect to diversification of assets, distribution of income, and sources of income. In general, a series that qualifies as a RIC will be relieved of federal income tax on its net investment income and net capital gains distributed to its shareholders. In addition, the Trust intends for the Series to comply with the investment diversification requirements for variable contracts contained in the Code. Moreover, the Trust intends to distribute sufficient net investment income and net capital gains of the Series to avoid imposition of any federal excise tax.
Accordingly, the Trust intends that, at the close of each quarter of the taxable year, (i) not more than 25% of the market value of the Series’ total assets will be invested in the securities of a single issuer and (ii) with respect to 50% of the market value of the Series’ total assets, not more than 5% of the market value of the Series’ total assets will be invested in the securities of a single issuer and the Series will not own more than 10% of the outstanding voting securities of a single issuer.
8Virtus KAR Equity Income Series
Actual and deemed distributions of ordinary income and net capital gains generally are taxable to the Series’ shareholders, which in this case are the separate accounts. Because the sole shareholders of the Series will be the separate accounts, no discussion is included in this prospectus as to the federal income tax consequences at the shareholder level. For information concerning the federal income tax consequences to purchasers of the variable contracts, please see the variable contract prospectuses.
Disruptive Trading and Market Timing
As an investment vehicle for variable contracts, which are designed as long-term investments, the Series is not appropriate for “market timing” or other trading strategies that entail rapid or frequent investment and trading. Frequent purchases, redemptions and transfers, transfers into and then out of the Series in a short period of time, and transfers of large amounts at one time may be indicative of market timing and otherwise disruptive trading (“Disruptive Trading”), which can have risks and harmful effects for other investors. These risks and harmful effects include:
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dilution of the interests of long-term investors, if market timers or others transfer into the Series at prices that are below the true value or exchange out of the Series at prices that are higher than the true value;
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an adverse effect on portfolio management, such as causing the Series to maintain a higher level of cash than would otherwise be the case, or causing the Series to liquidate investments prematurely; and
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increased brokerage and administrative expenses.
Funds that invest primarily in international securities may be more susceptible to pricing arbitrage opportunities because of time zone differences between the closing of international and domestic markets. Funds that invest primarily in small and mid-cap securities may be more susceptible to arbitrage opportunities because of the less liquid nature of small and mid-cap securities. In addition, funds that hold significant investments in high yield bonds may also be susceptible to market timing because high yield bonds are often thinly traded so that their market prices may not accurately reflect current market developments. To the extent that the Series invests in these types of securities, it may be more susceptible to the risks of Disruptive Trading.
In order to attempt to protect Trust investors, the Trust’s Board of Trustees has adopted market timing policies reasonably designed to discourage Disruptive Trading. The Trust reserves the right to amend these policies at any time without prior notice. Because the record owners of the Series are the insurance companies and not the variable contract owners, the Trust is not ordinarily in a position to monitor for or uncover Disruptive Trading by variable contract owners. Therefore, under the Trust’s policies, the Trust delegates to each insurance company the duty to establish and maintain policies and procedures designed to detect, monitor and deter (including, without limitation, by rejecting specific purchase orders) investors (or their agents) whose purchase and redemption activity follows a Disruptive Trading pattern, and to take such other actions as the insurance company may deem necessary to discourage or reduce Disruptive Trading activities. An insurance company may only modify such policies and procedures if it provides reasonable notice to the Trust and the Trust’s Chief Compliance Officer. Please see your variable contract prospectus for information relating to applicable restrictions on purchases or transfers through your variable contract.
The Trust may also take certain actions to stop Disruptive Trading, including imposing redemption fees for the Series and ceasing sales of additional shares of the Series to a separate account through which variable contract owners are engaging in Disruptive Trading. Because the Trust reserves discretion in applying these policies, they may not be applied uniformly. In addition, the Trust, as required under SEC regulations, has entered into an agreement with each insurance company under which the insurance companies have agreed to provide the Trust or its designee with information about variable contract owner transactions in the Series upon request.
Although the Trust will endeavor to ensure that each insurance company can and does identify and deter Disruptive Trading by its variable contract owners, the Trust cannot control their efforts or guarantee their success at deterrence. In addition, the Trust cannot guarantee that monitoring by the insurance companies and the Trust will be 100% successful in detecting all Disruptive Trading activity. Consequently, there is a risk that some investors could engage in Disruptive Trading while others will bear the effects of their Disruptive Trading activities.
Portfolio Holdings
A description of the Trust’s policies and procedures with respect to the disclosure of the Series’ portfolio securities is available in the SAI.
Virtus KAR Equity Income Series9
Investing in the Series
Shares of the Series are not available to the public directly. You may invest in the Series by buying a variable accumulation annuity contract or a variable universal life insurance policy from an insurance company and directing the allocation of the net purchase payment(s) to the investment option corresponding to the Series. The appropriate insurance company will, in turn, invest payments in shares of the Series as the investor directs at the net asset value next determined.
The Series offers only Class A Shares.
Sales Charge and Surrender Charges
The Series does not assess any sales charge, either when it sells or when it redeems securities. The sales charges that may be assessed under the variable contracts or policies are described in the variable contract prospectuses, as are other charges.
Determination of Net Asset Value
The Series calculates a share price for each class of its shares. The share price (net asset value or “NAV”) for each class is based on the net assets of the Series and the number of outstanding shares of that class. In general, each Series calculates a share price for each class by:
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adding the values of all securities and other assets of the Series;
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subtracting liabilities; and
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dividing the result by the total number of outstanding shares of that class.
Assets: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or, if no closing price is available, at the last bid price. Shares of other investment companies are valued at such companies’ NAVs. Debt instruments, including restricted securities, are valued based on evaluated quotations received from independent pricing services or from dealers who make markets in such securities. Other assets, such as accrued interest, accrued dividends and cash are also included in determining a fund’s NAV. As required, some securities and assets are valued at fair value as determined in good faith by, or under the direction of, the Board of Trustees.
Liabilities: Accrued liabilities for class-specific expenses (if any), distribution fees, service fees and other liabilities are deducted from the assets of each class. Accrued expenses and liabilities that are not class-specific (such as management fees) are allocated to each class in proportion to each class’s net assets except where an alternative allocation can be more appropriately made.
Net Asset Value (“NAV”): The liabilities allocated to a class are deducted from the proportionate interest of such class in the assets of the applicable Series. The resulting amount for each class is then divided by the number of shares outstanding of that class to produce each class’s NAV per share.
The NAV per share of each class of the Series is determined as of the close of regular trading (generally 4:00 PM Eastern Time) on days when the New York Stock Exchange (“NYSE”) is open for trading. The Series will not calculate its NAV per share class on days when the NYSE is closed for trading. If the Series (or underlying fund, as applicable) holds securities that are traded on foreign exchanges that trade on weekends or other holidays when the Series does not price its shares, the NAV of the Series’ shares may change on days when shareholders will not be able to purchase or redeem the Series’ shares.
Fair Valuation
If market quotations are not readily available or available prices are not reliable, the Series determines a “fair value” for an investment according to policies and procedures approved by the Board of Trustees. The types of assets for which such pricing might be required include: (i) securities whose trading has been suspended; (ii) securities where the trading market is unusually thin or trades have been infrequent; (iii) debt instruments that have recently gone into default and for which there is no current market quotation; (iv) a security whose market price is not available from an independent pricing source and for which otherwise reliable quotes are not available; (v) securities of an issuer that has entered into a restructuring; (vi) a security whose price as provided by any pricing source does not, in the opinion of the adviser/subadviser, reflect the security’s market value; (vii) foreign securities subject to trading collars for which no or limited trading takes place; (viii) securities where the market quotations are not readily available as a result of “significant” events; and (ix) securities whose principal exchange or trading market is closed for an entire business day
10Virtus KAR Equity Income Series
on which the Series needs to determine its NAV. This list is not inclusive of all situations that may require a security to be fair valued, nor is it intended to be conclusive in determining whether a specific event requires fair valuation.
The value of any portfolio security held by the Series for which market quotations are not readily available shall be determined in good faith and in a manner that assesses the security’s “fair value” on the valuation date (i.e., the amount that the Series might reasonably expect to receive for the security upon its current sale), based on a consideration of all available facts and all available information, including, but not limited to, the following: (i) the fundamental analytical data relating to the investment; (ii) the value of other relevant financial instruments, including derivative securities, traded on other markets or among dealers; (iii) an evaluation of the forces which influence the market in which these securities are purchased and sold (e.g., the existence of merger proposals or tender offers that might affect the value of the security); (iv) the type of the security; (v) the size of the holding; (vi) the initial cost of the security; (vii) trading volumes on markets, exchanges or among broker-dealers; (viii) price quotes from dealers and/or pricing services; (ix) values of baskets of securities traded on other markets, exchanges, or among dealers; (x) changes in interest rates; (xi) information obtained from the issuer, analysts, other financial institutions and/or the appropriate stock exchange (for exchange traded securities); (xii) an analysis of the company’s financial statements; (xiii) government (domestic or foreign) actions or pronouncements (xiv) recent news about the security or issuer; (xv) whether two or more dealers with whom the adviser/subadviser regularly effects trades are willing to purchase or sell the security at comparable prices; and (xvi) other news events or relevant matters.
Certain non-U.S. securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that non-U.S. markets close (where the security is principally traded) and the time that a Series calculates its NAV (generally, at the close of regular trading on the NYSE (generally 4 p.m. Eastern time) that may impact the value of securities traded in these non-U.S. markets. In such cases, the Series fair value non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. security to the intraday trading in the U.S. markets for investments such as ADRs, financial futures, ETFs, and certain indexes, as well as prices for similar securities. Because the frequency of significant events is not predictable, fair valuation of certain non-U.S. common stocks may occur on a frequent basis.
The value of a security, as determined using the Series’ fair valuation procedures, may not reflect such security’s market value.
Redemptions
The Series will redeem any shares presented for redemption by the insurance companies holding such shares. Your insurance company’s policies on when and whether to redeem Series shares are described in your variable accumulation annuity contract prospectus or variable universal life insurance policy. The Series expects to meet redemption requests, both under normal circumstances and during periods of stressed market conditions, by using cash, by selling portfolio assets to generate cash, or by borrowing funds under a line of credit, subject to availability of capacity in such line of credit.
Virtus KAR Equity Income Series11
Financial Highlights
The financial highlights table provided below is intended to help you understand the Series’ financial performance for the past five years. Certain information reflects financial results for a single share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Series (assuming reinvestment of all dividends and distributions). These figures do not include the imposition of separate account fees or expenses. If such fees or expenses were reflected, performance would be lower. This information has been audited by PricewaterhouseCoopers LLP, the independent registered public accounting firm for the Series. Their report and the Series’ financial statements are included in the Series’ annual report to shareholders and incorporated by reference in the SAI.
Virtus KAR Equity Income Series—Class A Shares
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1/1/19 to
12/31/19
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1/1/18 to
12/31/18
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1/1/17 to
12/31/17
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1/1/16 to
12/31/16
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1/1/15 to
12/31/15
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Net Asset Value, Beginning of Period
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$
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10.34
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12.00
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11.97
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13.67
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16.91
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Net Investment Income (Loss)(1)
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0.12
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0.11
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0.12
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0.25
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0.13
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Net Realized and Unrealized Gain (Loss)
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2.84
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(1.65)
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2.58
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1.01
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(1.55)
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Total from Investment Operations
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2.96
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(1.54)
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2.70
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1.26
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(1.42)
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Dividends from Net Investment Income
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(0.15)
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(0.12)
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(0.21)
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(0.18)
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(0.14)
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Distributions from Net Realized Gains
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—
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—
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(2.39)
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(2.78)
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(1.68)
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Return of Capital
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—
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—
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(0.07)
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—
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—
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Total Distributions
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(0.15)
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(0.12)
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(2.67)
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(2.96)
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(1.82)
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Change in Net Asset Value
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2.81
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(1.66)
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0.03
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(1.70)
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(3.24)
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Net Asset Value, End of Period
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$
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13.15
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10.34
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12.00
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11.97
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13.67
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Total Return(2)
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28.67%
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(12.86)
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22.96
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9.41(5)
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(8.91)
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Net Assets, End of Period (in thousands)
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$
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97,185
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85,845
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111,386
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104,587
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109,913
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Ratio of Net Operating Expenses to Average Net Assets(3)
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0.98%
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0.98
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0.98
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0.99(4)(5)
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0.99(4)
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Ratio of Gross Operating Expenses to Average Net Assets
(before waivers and reimbursements)(3)
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1.13%
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1.14
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1.16
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1.20
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1.23
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Ratio of Net Investment Income to Average Net Assets
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1.00%
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0.97
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0.96
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1.41(5)
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0.83
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Portfolio Turnover Rate
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27%
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26
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241
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241(6)
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94
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Footnote Legend:
(1)
Computed using average shares outstanding.
(2)
The total return does not include the expenses associated with the annuity or life insurance policy through which you invest.
(3)
The Series will also indirectly bear their prorated share of expenses of any underlying funds in which it invests. Such expenses are not included in the calculation of this ratio.
(4)
Net expense ratios include proxy expenses.
(5)
State Street Bank & Trust, custodian for the Series through January 29, 2010, reimbursed the Series for out-of-pocket custody expenses overbilled for the period 1998 through January 29, 2010. Custody fees reimbursed were excluded from the Ratio of Net Expenses to Average Net Assets and Ratio of Net Investment Income (Loss) to Average Net Assets. If included the impact would have been to lower the Ratio of Net Expenses to Average Net Assets and increase the Ratio of Net Investment Income (Loss) to Average Net Assets by 0.46%. Custody fees reimbursed were included in Total Return. If excluded the impact would have been to lower the Total Return by 0.44%.
(6)
The increase in the portfolio turnover rate is due to a change in the subadviser associated with a strategy change on the Series.
12Virtus KAR Equity Income Series
One Financial Plaza
Hartford, CT 06103
ADDITIONAL INFORMATION
You can find more information about the Series in the following documents:
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the Series’ investments. The annual report discusses the market conditions and investment strategies that significantly affected the Series’ performance during the last fiscal year.
Statement of Additional Information (SAI)
The SAI contains more detailed information about the Series. It is incorporated by reference and is legally part of the prospectus.
To obtain free copies of these documents, you can download copies at virtus.com or you can request copies by calling us toll-free at 800-367-5877. You can also call this number to request other information about the Series or to make shareholder inquiries.
Information about the Series (including the SAI) can be reviewed and copied at the Securities and Exchange Commission’s (SEC) Public Reference Room in Washington, DC. For information about the operation of the Public Reference Room, call 202-551-8090. This information is also available on the SEC’s Internet site at www.sec.gov. You may also obtain copies upon payment of a duplicating fee by writing the Public Reference Section of the SEC, Washington, DC 20549-6009 or by electronic request at publicinfo@sec.gov.
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Virtus Variable Insurance Trust (VVIT)
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Investment Company Act File No. 811-04642
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8-20
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8503
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Virtus Rampart Enhanced Core Equity Series
(the “Series”),
a series of Virtus Variable Insurance
Trust
Amendment dated August 31, 2020, to the
Statement of Additional Information (“SAI”)
for Virtus Variable Insurance Trust
dated April 30, 2020, as supplemented
As approved by the Board of Trustees of Virtus Variable Insurance
Trust, effective September 1, 2020, Kayne Anderson Rudnick Investment Management, LLC (“KAR”), will manage the Series
and Rampart Investment Management Company LLC (“Rampart”) will be removed as subadviser. Accordingly, all references
to Rampart as subadviser to the Series, Michael Davis, Brendan R. Finneran, Robert F. Hofeman Jr., and Warun Kumar as portfolio
managers, will be removed from the Series’ SAI. Virtus Investment Advisers, Inc. (“VIA”) will continue to serve
as the Series’ investment adviser.
Additionally, effective August 31, 2020, Virtus Rampart Enhanced
Core Equity Series’ name will change to Virtus KAR Equity Income Series and all references in the Series’
SAI to the Series’ former name will be deemed changed to Virtus KAR Equity Income Series.
Additional disclosure changes resulting from the subadviser
change are described below.
In the “Glossary” beginning on page 3, the entry
for KAR will be revised as shown below:
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KAR
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Kayne Anderson Rudnick Investment Management LLC, subadviser
to the
KAR Capital Growth Series, KAR Equity Income Series, KAR Small-Cap
Growth Series, KAR Small-Cap Value Series and the Strategic Allocation Series (equity portion)
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Also in the “Glossary,” the entry labeled “Rampart
Enhanced Core Equity Fund” will be deleted and the following entry will be added:
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KAR Equity Income Series
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Virtus KAR Equity Income Series
|
Under “More Information about Series Investment Strategies
and Related Risks,” in the subsection “Borrowing” on page 51, the disclosure about the Series in the right-hand
column will be deleted, and in the subsection “Warrants or Rights to Purchase Securities” on page 59, the reference
to the Series in the right-hand column will be deleted.
Under “Investment Limitations,” in the subsection
“Non-Fundamental Investment Limitations” beginning on page 62, the disclosure about the Series will be deleted.
Under “Proxy Voting Policies” beginning on page
78, the disclosure for the Series describing Rampart’s proxy voting policies will be deleted. Additionally, the heading above
the disclosure describing KAR’s proxy voting policies will be revised to include the Series.
In the “Investment Advisory Agreement and Expense Limitation
Agreement” section, the paragraph above the Expense Cap table beginning on page 83 will be replaced with the following:
VIA has contractually agreed to reimburse expenses
of the Series (except KAR Equity Income Series, f/k/a Rampart Enhanced Core Equity Series) until at least April 30, 2021, to the
extent that total operating expenses (excluding certain expenses, such as front-end sales charges, taxes, leverage and borrowing
expenses (such as commitment, amendment and renewal expenses on credit or redemption facilities), interest, brokerage commissions,
expenses incurred in connection with any merger or reorganization, unusual or infrequently occurring expenses (such as litigation),
acquired fund fees and expenses, and dividend expenses, if any) exceed the maximum total operating expenses of the Series’
average net assets (the “expense caps”) listed in the chart below. VIA has contractually agreed to reimburse expenses
of the KAR Equity Income Series until at least April 30, 2022.
Under “Subadvisers and Subadvisory Agreements” beginning
on page 84, the disclosure describing Rampart will be deleted and the heading for KAR will be amended to include the Series. The
entry in the table with respect to the Series will read as follows:
|
Series
|
Subadvisory Fee
|
|
KAR Equity Income Series
|
50% of the net advisory fee
|
Under “Portfolio Managers” on page 90, the
table listing the portfolio managers will be revised by replacing the row for the Series with the following:
|
Series
|
Portfolio Manager(s)
|
|
KAR Equity Income Series
|
Richard Sherry
|
Under “Other Accounts Managed (No Performance-Based Fees)”
beginning on page 90, the following information will be added for Mr. Sherry, and a footnote added as shown below:
|
|
Registered Investment
Companies
|
Other Pooled Investment
Vehicles (PIVs)
|
Other Accounts
|
|
Portfolio Manager
|
Number of
Accounts
|
Total Assets
|
Number of
Accounts
|
Total Assets
|
Number of
Accounts
|
Total Assets
|
|
Richard Sherry**
|
1
|
$33.3 million
|
0
|
N/A
|
706
|
$568 million
|
** Information shown as of June 30, 2020.
Under “Portfolio Manager Series Ownership”
beginning on page 92, the information will be added for Mr. Sherry, and a footnote added as shown below:
|
Portfolio Manager
|
Fund
|
Dollar Range of
Equity Securities
Beneficially Owned in
Series Managed
|
Dollar Range of
Financial Exposure Through Similar
Strategies
|
Total
Ownership/ Financial Exposure
|
|
Richard Sherry**
|
KAR Equity Income Series
|
None
|
$100,001 - $500,000
|
$100,001 - $500,000
|
** Information shown as of June 30, 2020.
All other disclosure concerning the Series,
including fees and expenses, remains unchanged from the SAI dated April 30, 2020.
VVIT 8500B SAI/ECEKARSeriesChanges (8/2020)
VIRTUS VARIABLE INSURANCE TRUST
PART C — OTHER INFORMATION
|
|
(a)
|
Agreement and Declaration of Trust
|
|
|
(c)
|
See Articles III and V of the Agreement and Declaration
of Trust; and Article II of the Bylaws.
|
|
|
(d)
|
Investment Advisory Contracts.
|
|
|
1.
|
Investment
Advisory Agreement between Registrant and Virtus Investment Advisers, Inc. (“VIA”), dated November 5, 2010, on behalf
of Virtus KAR Capital Growth Series (f/k/a Virtus Capital Growth Series), Virtus SGA International Growth Series (f/k/a Virtus
Duff & Phelps International Series), Virtus Newfleet Multi-Sector Intermediate Bond Series (f/k/a Virtus Multi-Sector Fixed
Income Series), Virtus Duff & Phelps Real Estate Securities Series (f/k/a Virtus Real Estate Securities Series), Virtus KAR
Small-Cap Growth Series (f/k/a Virtus Small-Cap Growth Series), Virtus KAR Small-Cap Value Series (f/k/a/ Virtus Small-Cap Value
Series) and Virtus Strategic Allocation Series, filed via EDGAR (as Exhibit d.1) with Post-Effective Amendment No. 61 to the Registration
Statement (File No. 033-05033) on December 1, 2010, and incorporated herein by reference.
|
|
|
(e)
|
Underwriting Contracts
|
|
|
i)
|
Amendment to Custody Agreement between VAST, Virtus
Mutual Funds, VRT, VAT, VVIT and The Bank of New York Mellon dated as of [_____] [__], 2020, to be filed by amendment.
|
|
|
i)
|
Amendment to Foreign Custody Manager Agreement between
VAST, Virtus Mutual Funds, VAT, VRT VVIT and The Bank of New York Mellon dated as of [_____] [__], 2020, to be filed by amendment.
|
|
|
(h)
|
Other Material Contracts.
|
|
|
h)
|
Joinder
Agreement and Amendment to Sub-Administration and Accounting Services Agreement among Registrant, Virtus Mutual Funds, VAST, VATS
Offshore Fund, Ltd. (“VATS”), Virtus Fund Services and BNY Mellon, effective as of February 24, 2014, filed via EDGAR
(as Exhibit h.4.h) with Pre-Effective Amendment No. 3 (File No. 333-191940) to VAST’s Registration Statement on March 28,
2014, and incorporated herein by reference.
|
|
|
i)
|
Joinder
Agreement to Sub-Administration and Accounting Services Agreement among Registrant, Virtus Mutual Funds, VRT, VAST, VATS, Virtus
Fund Services and BNY Mellon, effective as of December 10, 2015, filed via EDGAR (as Exhibit h.4.i) with Post-Effective Amendment
No. 35 to VRT’s Registration Statement (File No. 033-80057) on January 8, 2016, and incorporated herein by reference.
|
|
|
r)
|
Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VVIT,
VRT, VAST, VAT, Virtus Fund Services and BNY Mellon dated as of [_____] [__], 2020, to be filed by amendment.
|
|
|
8.
|
Participation
Agreement among Registrant, VP Distributors, Phoenix Life Insurance Company, PHL Variable Insurance Company, Phoenix Life and
Annuity Company, and 1851 Securities, Inc., dated as of November 5, 2010, filed via EDGAR (as Exhibit h.4) with Post-Effective
Amendment No. 61 (File No. 033-05033) on December 1, 2010, and incorporated herein by reference.
|
|
|
Item 29.
|
Persons Controlled by or Under Common Control with
Registrant
|
None.
The indemnification
of Registrant’s principal underwriter against certain losses is provided for in Section 2 of the Underwriting Agreement incorporated
herein by reference to Exhibit e.1. Indemnification of Registrant’s Custodian is provided for in Section 9.9, among others,
of the Custody Agreement incorporated herein by reference to Exhibit g.1. The indemnification of Registrant’s Transfer Agent
is provided for in Section 11 of the Transfer Agency Services Agreement incorporated herein by reference to Exhibit h.1. The Trust
has entered into Indemnification Agreements with each trustee, the form of which is incorporated herein by reference to Exhibits
h.5, h.5.a, h.5.b, h.6 and h.7 of the Registrant’s Registration Statement, whereby the Registrant shall indemnify the trustee
for expenses incurred in any proceeding in connection with the trustee’s service to the Registrant subject to certain limited
exceptions.
In addition, Article
VII sections 2 and 3 of the Registrant’s Agreement and Declaration of Trust incorporated herein by reference to Exhibit a.1-3,
provides in relevant part as follows:
“A Trustee,
when acting in such capacity, shall not be personally liable to any Person, other than the Trust or a Shareholder to the extent
provided in this Article VII, for any act, omission or obligation of the Trust, of such Trustee or of any other Trustee. The Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, Manager or Principal
Underwriter of the Trust. The Trust (i) may indemnify an agent of the Trust or any Person who is serving or has served at the Trust’s
request as an agent of another organization in which the Trust has any interest as a shareholder, creditor or otherwise and (ii)
shall indemnify each Person who is, or has been, a Trustee, officer or employee of the Trust and any Person who is serving or has
served at the Trust’s request as a director, officer, trustee, or employee of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise, in the case of (i) and (ii), to the fullest extent consistent with the 1940
Act and in the manner provided in the By-Laws; provided that such indemnification shall not be available to any of the foregoing
Persons in connection with a claim, suit or other proceeding by any such Person against the Trust or a Series (or Class) thereof.
All persons extending
credit to, contracting with or having any claim against the Trust or the Trustees shall look only to the assets of the appropriate
Series (or Class thereof if the Trustees have included a Class limitation on liability in the agreement with such person as provided
below), or, if the Trustees have yet to establish Series, of the Trust for payment under such credit, contract or
claim; and neither the Trustees nor the
Shareholders, nor any of the Trust’s officers, employees or agents, whether past, present or future, shall be personally
liable therefor.
Every note, bond,
contract, instrument, certificate or undertaking and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees by any of them in connection with the Trust shall conclusively be deemed to have been executed or done only
in or with respect to his or their capacity as Trustee or Trustees, and such Trustee or Trustees shall not be personally liable
thereon. …
… A Trustee
shall be liable to the Trust and to any Shareholder solely for her or his own willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the office of Trustee, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation
of this Declaration of Trust, and shall be under no liability for any act or omission in accordance with such advice nor for failing
to follow such advice.”
In addition, Article
III section 7 of such Agreement and Declaration of Trust provides for the indemnification of shareholders of the Registrant as
follows: “If any Shareholder or former Shareholder shall be exposed to liability by reason of a claim or demand relating
to such Person being or having been a Shareholder, and not because of such Person's acts or omissions, the Shareholder or former
Shareholder (or such Person's heirs, executors, administrators, or other legal representatives or in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified out of the
assets of the Trust against all cost and expense reasonably incurred in connection with such claim or demand, but only out of the
assets held with respect to the particular Series of Shares of which such Person is or was a Shareholder and from or in relation
to which such liability arose. The Trust may, at its option and shall, upon request by the Shareholder, assume the defense of any
claim made against the Shareholder for any act or obligation of the Trust and satisfy any judgment thereon from the assets held
with respect to the particular series.”
Article VI Section
2 of the Registrant’s Bylaws incorporated herein by reference to Exhibit b of the Registrant’s Registration Statement,
provides in relevant part, subject to certain exceptions and limitations, “every agent shall be indemnified by the Trust
to the fullest extent permitted by law against all liabilities and against all expenses reasonably incurred or paid by him or her
in connection with any proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or
having been an agent.” Such indemnification would not apply in the case of any liability to which the Registrant would otherwise
be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person’s duties.
The Investment Advisory
Agreement, Subadvisory Agreements, Custody Agreement, Foreign Custody Manager Agreement, Sub-Administration and Accounting Services
Agreement and Transfer Agency and Service Agreement, each as amended, respectively provide that the Registrant will indemnify the
other party (or parties, as the case may be) to the agreement for certain losses. Similar indemnities to those listed above may
appear in other agreements to which the Registrant is a party.
The Registrant, in
conjunction with VIA, the Registrant’s Trustees, and other registered investment management companies managed by VIA or its
affiliates, maintains insurance on behalf of any person who is or was a Trustee, officer, employee, or agent of the Registrant,
or who is or was serving at the request of the Registrant as a trustee, director, officer, employee or agent of another trust or
corporation, against any liability asserted against such person and incurred by him or arising out of his position. However, in
no event will Registrant maintain insurance to indemnify any such person for any act for which the Registrant itself is not permitted
to indemnify him or her.
Insofar as indemnification
for liability arising under the Securities Act of 1933, as amended (the “Act”), may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
|
|
Item 31.
|
Business and Other Connections of the Investment Adviser and Subadvisers
|
See “Management”
in the Prospectus and “The Investment Adviser, Subadvisers and Portfolio Managers” and “Management of the Trust”
in the Statement of Additional Information for information which is included in this Post-Effective Amendment regarding the business
of the Adviser and Subadvisers. For information as to the business, profession, vocation or employment of a substantial nature
of the directors and officers of the Adviser and Subadvisers, in the last two years, reference is made to the Adviser’s and
each Subadviser’s current Form ADV filed under the Investment Advisers Act of 1940, incorporated herein by reference.
|
Adviser
|
SEC File No.:
|
|
VIA
|
801-5995
|
|
Duff & Phelps
|
801-14813
|
|
KAR
|
801-24241
|
|
Newfleet
|
801-51559
|
|
SGA
|
028-11076
|
|
|
Item 32.
|
Principal Underwriter
|
VP Distributors also serves as the principal underwriter
for the following registrants: Virtus Alternative Solutions Trust, Virtus Asset Trust, Virtus Equity Trust, Virtus Opportunities
Trust and Virtus Retirement Trust.
|
|
(b)
|
Directors and executive officers of VP Distributors, One
Financial Plaza, Hartford, CT 06103 are as follows:
|
|
Name and Principal Business Address
|
Positions and Offices with Distributor
|
Positions and Offices with Registrant
|
|
George R. Aylward
|
Executive Vice President
|
President and Trustee
|
|
Kevin J. Carr
|
Vice President, Counsel and Secretary
|
Assistant Secretary
|
|
Jennifer S. Fromm
|
Securities Counsel and Assistant Secretary
|
Vice President, Counsel, Chief Legal Officer and Secretary
|
|
Nancy J. Engberg
|
Senior Vice President and Assistant Secretary
|
Senior Vice President and Chief Compliance Officer
|
|
David Hanley
|
Senior Vice President and Treasurer
|
None
|
|
Barry Mandinach
|
President
|
None
|
|
David C. Martin
|
Vice President and Chief Compliance Officer
|
Anti-Money Laundering Officer
|
|
Francis G. Waltman
|
Executive Vice President
|
Executive Vice President
|
|
|
(c)
|
To the best of the Registrant’s knowledge, no commissions
or other compensation was received by any principal underwriter who is not an affiliated person of the Registrant or an affiliated
person of such affiliated person, directly or indirectly, from the Registrant during the Registrant’s last fiscal year.
|
|
|
Item 33.
|
Location of Accounts and Records
|
Persons maintaining physical possession
of accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and
the Rules promulgated thereunder include:
Secretary of the Trust:
Jennifer Fromm, Esq.
One Financial Plaza
Hartford, CT 06103
Investment Adviser:
Virtus Investment Advisers, Inc.
One Financial Plaza
Hartford, CT 06103
Subadviser for Virtus Duff & Phelps Real Estate Securities
Series:
Duff & Phelps Investment Management Co.
200 South Wacker Drive, Suite 500
Chicago, IL 60606
Subadviser to Virtus KAR Capital Growth Series, Virtus KAR Equity
Income Series, Virtus KAR Small-Cap Growth Series, Virtus KAR Small-Cap Value Series and Virtus Strategic Allocation Series:
Kayne Anderson Rudnick Investment Management, LLC
1800 Avenue of the Stars
Second Floor
Los Angeles, CA 90067
Subadviser to Virtus Newfleet Multi-Sector Intermediate Bond
Series and Virtus Strategic Allocation Series:
Newfleet Asset Management, LLC
One Financial Plaza
Hartford, CT 06103
Subadviser to Virtus SGA International Growth Series:
Sustainable Growth Advisers
301 Tresser Blvd. Suite 1310
Stamford, CT 06901
Principal Underwriter:
VP Distributors, LLC
One Financial Plaza
Hartford, CT 06103
Custodian:
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Administrator:
Virtus Fund Services, LLC
One Financial Plaza
Hartford, CT 06103
Transfer Agent, Fund Accountant, Subadministrator and Dividend
Dispersing Agent:
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
|
|
Item 34.
|
Management Services
|
None.
Not applicable.
Exhibit Index
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the
requirements for effectiveness for this registration statement under Rule 485(b) of the Securities Act and has duly caused this
amendment to the registration statement to be signed on its behalf by the undersigned, duly authorized, in the City of Hartford
and the State of Connecticut on the 31st day of August, 2020.
|
VIRTUS VARIABLE INSURANCE TRUST
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ George R. Aylward
|
|
|
|
George R. Aylward
|
|
|
|
President
|
|
Pursuant to the requirements
of the Securities Act of 1933, as amended, this amendment to the registration statement has been signed below by the following
persons in the capacities indicated on the 31st day of August, 2020.
|
Signature
|
|
Title
|
|
|
|
|
|
/s/ George R. Aylward
|
|
Trustee and President
|
|
George R. Aylward
|
|
(principal executive officer)
|
|
|
|
|
|
/s/ W. Patrick Bradley
|
|
Chief Financial Officer and Treasurer
|
|
W. Patrick Bradley
|
|
(principal financial and accounting officer)
|
|
|
|
|
|
*
|
|
|
|
Thomas J. Brown
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
Donald C. Burke
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
Sidney E. Harris
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
John R. Mallin
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
Hassell H. McClellan
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
Connie D. McDaniel
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
Philip R. McLoughlin
|
|
Trustee and Chairman
|
|
|
|
|
|
*
|
|
|
|
Geraldine M. McNamara
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
James M. Oates
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
Richard E. Segerson
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
R. Keith Walton
|
|
Trustee
|
|
|
|
|
|
*
|
|
|
|
Brian T. Zino
|
|
Trustee
|
|
*By:
|
/s/ George
R. Aylward
|
|
|
|
*George R. Aylward,
Attorney-in-Fact, pursuant to
a power of attorney
|
|
Exhibit d.7
VIRTUS VARIABLE INSURANCE TRUST
Virtus KAR Equity Income Series
SUBADVISORY AGREEMENT
September 1, 2020
Kayne Anderson Rudnick Investment Management,
LLC
1800 Avenue of the Stars, 2nd Floor
Los Angeles, CA 90067
|
|
RE:
|
Subadvisory Agreement
|
Ladies and Gentlemen:
Virtus Variable Insurance Trust (the “Trust”)
is an open-end investment company of the series type registered under the Investment Company Act of 1940, as amended (the “Act”),
and is subject to the rules and regulations promulgated thereunder. The shares of the Trust are offered or may be offered in several
series (sometimes hereafter referred to as the “Series”), including Virtus KAR Equity Income Series.
Virtus Investment Advisers, Inc. (the “Adviser”)
evaluates and recommends series advisers for the Series and is responsible for the day-to-day management of the Series.
|
|
1.
|
Appointment as a Subadviser. The Adviser, being
duly authorized, hereby appoints Kayne Anderson Rudnick Investment Management, LLC (the “Subadviser”) as a discretionary
series adviser to invest and reinvest the assets of the Series designated by the Adviser as set forth on Schedule F attached hereto
(the “Designated Series”) on the terms and conditions set forth herein. The services of the Subadviser hereunder are
not to be deemed exclusive; the Subadviser may render services to others and engage in other activities that do not conflict in
any material manner with the Subadviser’s performance hereunder.
|
|
|
2.
|
Acceptance of Appointment; Standard of Performance.
The Subadviser accepts its appointment as a discretionary series adviser of the Designated Series and agrees, subject to the oversight
of the Board of Trustees of the Trust (the “Board”) and the Adviser, to use its best professional judgment to make
investment decisions for the Designated Series in accordance with the provisions of this Agreement and as set forth in Schedule
D attached hereto and made a part hereof. The Subadviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or otherwise), have no authority or obligation to act for
or represent the Adviser, the Trust or the Series in any way.
|
|
|
3.
|
Services of Subadviser. In providing management
services to the Designated Series, the Subadviser shall be subject to the investment objectives, policies and restrictions of
the Trust as they apply to the Designated Series and as set forth in the Trust’s then current prospectus (“Prospectus”)
and statement of additional information (“Statement of Additional Information”) filed with the Securities and Exchange
Commission (the “SEC”) as part of the Trust’s registration statement (the “Registration Statement”),
as may be periodically amended and provided to the Subadviser by the Adviser, and to the investment restrictions set forth in
the Act and the Rules thereunder, to the supervision and control of the Board, and to instructions from the Adviser. The Subadviser
shall not, without the Trust’s prior written approval, effect any transactions that would cause the Designated Series at
the time of the transaction to be out of compliance with any of such restrictions or policies.
|
|
|
4.
|
Transaction Procedures. All series transactions
for the Designated Series shall be consummated by payment to, or delivery by, the custodian(s) from time to time designated by
the Trust (the “Custodian”), or such depositories or agents as may be designated by the Custodian in writing, of all
cash and/or securities due to
|
or
from the Designated Series. The Subadviser shall not have possession or custody of such cash and/or securities or any responsibility
or liability with respect to such custody. The Subadviser shall advise the Custodian and confirm in writing to the Trust all investment
orders for the Designated Series placed by it with brokers and dealers at the time and in the manner set forth in Schedule A hereto
(as amended from time to time). The Trust shall issue to the Custodian such instructions as may be appropriate in connection with
the settlement of any transaction initiated by the Subadviser. The Trust shall be responsible for all custodial arrangements and
the payment of all custodial charges and fees, and, upon giving proper instructions to the Custodian, the Subadviser shall have
no responsibility or liability with respect to custodial arrangements or the acts, omissions or other conduct of the Custodian.
|
|
5.
|
Allocation of Brokerage. The Subadviser shall have
authority and discretion to select brokers and dealers to execute Designated Series transactions initiated by the Subadviser,
and to select the markets on or in which the transactions will be executed.
|
|
|
A.
|
In placing orders for the sale and purchase of Designated
Series securities for the Trust, the Subadviser’s primary responsibility shall be to seek the best execution of orders at
the most favorable prices. However, this responsibility shall not obligate the Subadviser to solicit competitive bids for each
transaction or to seek the lowest available commission cost to the Trust, as long as the Subadviser reasonably believes that the
broker or dealer selected by it can be expected to obtain a “best execution” market price on the particular transaction
and determines in good faith that the commission cost is reasonable in relation to the value of the brokerage and research services
(as defined in Section 28(e)(3) of the Securities Exchange Act of 1934, as amended) provided by such broker or dealer to the Subadviser,
viewed in terms of either that particular transaction or of the Subadviser’s overall responsibilities with respect to its
clients, including the Trust, as to which the Subadviser exercises investment discretion, notwithstanding that the Trust may not
be the direct or exclusive beneficiary of any such services or that another broker may be willing to charge the Trust a lower
commission on the particular transaction.
|
|
|
B.
|
The Subadviser may manage other portfolios and expects
that the Trust and other portfolios the Subadviser manages will, from time to time, purchase or sell the same securities. The
Subadviser may aggregate orders for the purchase or sale of securities on behalf of the Designated Series with orders on behalf
of other portfolios the Subadviser manages. Securities purchased or proceeds of securities sold through aggregated orders, as
well as expenses incurred in the transaction, shall be allocated to the account of each portfolio managed by the Subadviser that
bought or sold such securities in a manner considered by the Subadviser to be equitable and consistent with the Subadviser’s
fiduciary obligations in respect of the Designated Series and to such other accounts.
|
|
|
C.
|
The Subadviser shall not execute any transactions for
the Designated Series with a broker or dealer that is an “affiliated person” (as defined in the Act) of (i) the Designated
Series; (ii) another Series; (iii) the Adviser; (iv) the Subadviser or any other subadviser to the Designated Series; (v) a principal
underwriter of the Trust’s shares; or (vi) any other affiliated person of the Designated Series, in each case, unless such
transactions are permitted by applicable law or regulation and carried out in compliance with any applicable policies and procedures
of the Trust. The Trust shall provide the Subadviser with a list of brokers and dealers that are “affiliated persons”
of the Trust, the Adviser or the principal underwriter, and applicable policies and procedures. Upon the request of the Adviser,
the Subadviser shall promptly, and in any event within three business days of a request, indicate whether any entity identified
by the Adviser in such request is an “affiliated person,” as such term is defined in the Act, of (i) the Subadviser
or (ii) any affiliated person of the Subadviser, subject in each case to any confidentiality requirements applicable to the Subadviser
and/or its affiliates. Further, the Subadviser shall provide the Adviser with a list of (x) each broker-dealer entity that is
an “affiliated person,” as such term is defined in the Act, of the Subadviser and (y) each affiliated person of the
Subadviser that has outstanding publicly-issued debt or equity. Each of the Adviser and the Subadviser agrees promptly to update
such list(s) whenever the Adviser or the Subadviser becomes aware of any changes that should be added to or deleted from such
list of affiliated persons.
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D.
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Consistent with its fiduciary obligations to the Trust
in respect of the Designated Series and the requirements of best price and execution, the Subadviser may, under certain circumstances,
arrange to have purchase and sale transactions effected directly between the Designated Series and another account managed by
the Subadviser (“cross transactions”), provided that such transactions are carried out in accordance with applicable
law or regulation and any applicable policies and procedures of the Trust. The Trust shall provide the Subadviser with applicable
policies and procedures.
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6.
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Proxies and Other Shareholder Actions.
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A.
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Unless the Adviser or the Trust gives the Subadviser
written instructions to the contrary, the Subadviser, or a third party designee acting under the authority and supervision of
the Subadviser, shall review all proxy solicitation materials and be responsible for voting and handling all proxies in relation
to the assets of the Designated Series. Unless the Adviser or the Trust gives the Subadviser written instructions to the contrary,
provided that the Adviser has reviewed the Subadviser’s proxy voting procedures then in effect and determined them to comply
with the requirements of the Trust’s proxy voting policy, the Subadviser will, in compliance with the Subadviser’s
proxy voting procedures then in effect, vote or abstain from voting, all proxies solicited by or with respect to the issuers of
securities in which assets of the Designated Series may be invested. The Adviser shall cause the Custodian, the Administrator
or another party, to forward promptly to the Subadviser all proxies upon receipt, so as to afford the Subadviser a reasonable
amount of time in which to determine how to vote such proxies. The Subadviser agrees to provide the Adviser in a timely manner
with any changes to the Subadviser’s proxy voting procedures. The Subadviser further agrees to provide the Adviser in a
timely manner with a record of votes cast containing all of the voting information required by Form N-PX in an electronic format
to enable the Trust to file Form N-PX as required by Rule 30b1-4 under the Act. The Subadviser shall provide disclosure regarding
its proxy voting policies and procedures in accordance with the requirements of Form N-1A for inclusion in the Registration Statement
of the Trust. During any annual period in which the Subadviser has voted proxies for the Trust, the Subadviser shall, as may reasonably
be requested by the Adviser, certify as to its compliance with its proxy voting policies and procedures and applicable federal
statutes and regulations.
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B.
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The Subadviser is authorized to deal with reorganizations,
exchange offers and other voluntary corporate actions with respect to securities held in the Designated Series in such manner
as the Subadviser deems advisable, unless the Trust or the Adviser otherwise specifically directs in writing. It is acknowledged
and agreed that the Subadviser shall not be responsible for the filing of claims (or otherwise causing the Trust to participate)
in class action settlements or similar proceedings in which shareholders may participate related to securities currently or previously
associated with the Designated Series. With the Adviser’s approval, on a case-by-case basis the Subadviser may obtain the
authority and take on the responsibility to: (i) identify, evaluate and pursue legal claims, including commencing or defending
suits, affecting the securities held at any time in the Designated Series, including claims in bankruptcy, class action securities
litigation and other litigation; (ii) participate in such litigation or related proceedings with respect to such securities as
the Subadviser deems appropriate to preserve or enhance the value of the Designated Series, including filing proofs of claim and
related documents and serving as “lead plaintiff” in class action lawsuits; (iii) exercise generally any of the powers
of an owner with respect to the supervision and management of such rights or claims, including the settlement, compromise or submission
to arbitration of any claims, the exercise of which the Subadviser deems to be in the best interest of the Designated Series or
required by applicable law, including ERISA, and (iv) employ suitable agents, including legal counsel, and to pay their reasonable
fees, expenses and related costs from the Designated Series.
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7.
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Prohibited Conduct. In accordance with Rule 12d3-1
and Rule 17a-10 under the 1940 Act and any other applicable law or regulation, the Subadviser’s responsibility regarding
investment advice hereunder is limited to the Designated Series, and the Subadviser will not consult with any other investment
advisory firm that provides investment advisory services to the Trust or any other investment company sponsored by Virtus Investment
Partners, Inc. or its affiliates regarding transactions in securities or other assets for the Trust. The Trust shall provide the
Subadviser with a list of investment companies sponsored by Virtus Investment
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Partners,
Inc. and its affiliates, and the Subadviser shall be in breach of the foregoing provision only if the investment company is included
in such a list provided to the Subadviser prior to such prohibited action. The Subadviser, and its affiliates and agents, shall
refrain from making any written or oral statements concerning the Designated Series, the Trust, any other investment company sponsored
by Virtus Investment Partners, Inc. or its affiliates, and any substantially similar products, that are reasonably likely to mislead
investors regarding either (i) the services rendered by the Subadviser to the Designated Series or the Trust, or (ii) the Designated
Series, including without limitation with respect to the investment strategies and/or risks, and/or the performance thereof. In
addition, the Subadviser shall not, without the prior written consent of the Trust and the Adviser, delegate any obligation assumed
pursuant to this Agreement to any affiliated or unaffiliated third party. The parties acknowledge and agree that the Subadviser
may, in its discretion, utilize personnel employed by affiliates of the Subadviser to perform services pursuant to this Agreement
by way of a “participating affiliate” agreement in accordance with, and to the extent permitted by, the Act and the
Investment Advisers Act of 1940, as amended (the “Advisers Act”), including the published interpretations thereof
by the SEC or its staff. Such participating affiliate agreement shall subject the personnel providing such services to the Subadviser’s
compliance and other programs with respect to their activities on behalf of the Designated Series. For the avoidance of doubt,
it is acknowledged and agreed that the Subadviser assumes full responsibility for all actions, and any failure to act, by each
person utilized by the Subadviser to perform services under this Agreement.
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8.
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Information and Reports.
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A.
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The Subadviser shall keep the Trust and the Adviser
informed of developments relating to its duties as Subadviser of which the Subadviser has, or should have, knowledge that would
materially affect the Designated Series. In this regard, the Subadviser shall provide the Trust, the Adviser and their respective
officers with such periodic reports concerning the obligations the Subadviser has assumed under this Agreement as the Trust and
the Adviser may from time to time reasonably request. In addition, prior to each meeting of the Board, the Subadviser shall provide
the Adviser and the Board with reports regarding the Subadviser’s management of the Designated Series during the most recently
completed quarter, which reports: (i) shall include Subadviser’s representation that its performance of its investment management
duties hereunder is in compliance with the Designated Series’ investment objectives and practices, the Act and applicable
rules and regulations under the Act, and the diversification and minimum “good income” requirements of Subchapter
M under the Internal Revenue Code of 1986, as amended, and (ii) otherwise shall be in such form as may be reasonably required
by the Adviser.
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B.
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Each of the Adviser and the Subadviser shall provide
the other party with a list, to the best of the Adviser’s or the Subadviser’s respective knowledge, of each affiliated
person (and any affiliated person of such an affiliated person) of the Adviser or the Subadviser, as the case may be, and each
of the Adviser and Subadviser agrees promptly to update such list whenever the Adviser or the Subadviser becomes aware of any
changes that should be added to or deleted from the list of affiliated persons.
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C.
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The Subadviser shall also provide the Adviser with any
information reasonably requested by the Adviser regarding its management of the Designated Series required for any shareholder
report, amended Registration Statement, or Prospectus supplement to be filed by the Trust with the SEC.
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D.
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The Subadviser shall promptly notify the Adviser and
the Trust in the event that any of the Subadviser’s employees or contractors raise any issues concerning any actual or potential
material violation of any law, regulation or internal policy of the Subadviser, in each case actually or potentially affecting
the Designated Series.
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9.
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Fees for Services. The compensation of the Subadviser
for its services under this Agreement shall be calculated and paid by the Adviser in accordance with the attached Schedule C.
Pursuant to the Investment Advisory Agreement between the Trust and the Adviser, the Adviser is solely responsible for the payment
of fees to the Subadviser.
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10.
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Limitation of Liability. Absent
the Subadviser’s breach of this Agreement or the willful misconduct, bad faith, gross negligence, or reckless disregard
of the obligations or duties hereunder on the part of the Subadviser, or its officers, directors, partners, agents, employees
and controlling persons, the Subadviser shall not be liable for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase, holding or sale of any position; provided,
however, that the Subadviser shall be responsible for, and shall indemnify and hold the Trust and the Adviser and each of
their respective directors or trustees, members, officers, employees and shareholders, and each person, if any, who controls the
Trust or the Adviser within the meaning of Section 15 of the Securities Act of 1933, as amended (the “Securities Act”),
harmless against, any and all Losses (as defined below) arising out of or resulting from a “Trade Error” (as defined
in the compliance policies and procedures of the Trust), as the same may be amended from time to time) caused by the negligent
action or negligent omission of the Subadviser or its agent. The Adviser agrees to provide prior written notice to the Subadviser
of any material changes to the definition of Trade Error becoming effective with respect to the Designated Series unless, in the
reasonable discretion of the Adviser, such change must become effective earlier due to any applicable law, rule, regulation or
court order. It is acknowledged and agreed that any Trade Error that results in a gain to the Designated Series shall inure to
the benefit of the Designated Series. For the avoidance of doubt, it is acknowledged and agreed that the Designated Series is
a third party beneficiary of the indemnity granted in this Section 10, and the indemnity is intended to cover claims by the
Designated Series, the Trust (on behalf of the Designated Series), or the Adviser against the Subadviser for recovery pursuant
to this section.
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11.
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Confidentiality. Subject to the duty of the Subadviser
and the Trust to comply with applicable law, including any demand of any regulatory or taxing authority having jurisdiction, the
parties hereto shall treat as confidential all information pertaining to the Designated Series and the actions of the Subadviser
and the Trust in respect thereof. Notwithstanding the foregoing, the Trust and the Adviser agree that the Subadviser may (i) disclose
in marketing materials and similar communications that the Subadviser has been engaged to manage assets of the Designated Series
pursuant to this Agreement, and (ii) include performance statistics regarding the Designated Series in composite performance statistics
regarding one or more groups of Subadviser’s clients published or included in any of the foregoing communications, provided
that the Subadviser does not identify any performance statistics as relating specifically to the Designated Series.
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12.
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Assignment. This Agreement shall terminate automatically
in the event of its assignment, as that term is defined in Section 2(a)(4) of the Act. The Subadviser shall notify the Trust and
the Adviser in writing sufficiently in advance of any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Trust to consider whether an assignment as defined in Section 2(a)(4) of the Act will occur, and to take the steps
necessary to enter into a new contract with the Subadviser.
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13.
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Representations, Warranties and Agreements of the Subadviser.
The Subadviser represents, warrants and agrees that:
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A.
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It is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization, and is qualified to do business in each jurisdiction in which
failure to be so qualified would reasonably be expected to have a material adverse effect upon it. It (i) is registered as an
“investment adviser” under the Investment Advisers Act of 1940, as amended (“Advisers Act”) and will continue
to be so registered for so long as this Agreement remains in effect; (ii) is not prohibited by the Act or the Advisers Act from
performing the services contemplated by this Agreement; provided, however, that the Subadviser makes no representation or warranty
with regard to the approval of this Agreement by the Board under Section 15 of the Act; (iii) has appointed a Chief Compliance
Officer under Rule 206(4)-7 under the Advisers Act; (iv) has adopted written policies and procedures that are reasonably designed
to prevent violations of the Advisers Act from occurring, and correct promptly any violations that have occurred, and will provide
notice promptly to the Adviser of any material violations relating to the Trust; (v) has materially met and will seek to continue
to meet for so long as this Agreement remains in effect, any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency.
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B.
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It is either registered as a commodity trading advisor
or duly exempt from such registration with the U.S. Commodity Futures Trading Commission (“CFTC”), and it will maintain
such registration or exemption continuously during the term of this Agreement or, alternatively, will become a commodity trading
advisor duly registered with the CFTC and will be a member in good standing with the National Futures Association.
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C.
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It will maintain, keep current and preserve on behalf
of the Trust, records in the manner required or permitted by the Act and the Rules thereunder including the records identified
in Schedule B (as Schedule B may be amended from time to time). The Subadviser agrees that such records are the property of the
Trust, and shall be surrendered to the Trust or to the Adviser as agent of the Trust promptly upon request of either. The Trust
acknowledges that the Subadviser may retain copies of all records required to meet the record retention requirements imposed by
law and regulation.
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D.
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It shall maintain a written code of ethics (the “Code
of Ethics”) complying with the requirements of Rule 204A-1 under the Advisers Act and Rule 17j-1 under the Act and shall
provide the Trust and the Adviser with a copy of the Code of Ethics and evidence of its adoption. It shall institute procedures
reasonably necessary to prevent Access Persons (as defined in Rule 17j-1) from violating its Code of Ethics. The Subadviser acknowledges
receipt of the written code of ethics adopted by and on behalf of the Trust. Each calendar quarter while this Agreement is in
effect, a duly authorized compliance officer of the Subadviser shall certify to the Trust and to the Adviser that the Subadviser
has complied with the requirements of Rules 204A-1 and 17j-1 during the previous calendar quarter and that there has been no material
violation of its Code of Ethics, or of Rule 17j-1(b), or that any persons covered under its Code of Ethics has divulged or acted
upon any material, non-public information, as such term is defined under relevant securities laws, and if such a violation of
the code of ethics of the Trust has occurred, or if such a violation of its Code of Ethics has occurred, that appropriate action
was taken in response to such violation. The Subadviser shall notify the Adviser promptly of any material violation of the Code
of Ethics involving the Trust. The Subadviser will provide such additional information regarding violations of the Code of Ethics
directly affecting the Trust as the Trust or its Chief Compliance Officer on behalf of the Trust or the Adviser may reasonably
request in order to assess the functioning of the Code of Ethics or any harm caused to the Trust from a violation of the Code
of Ethics. Further, the Subadviser represents that it has policies and procedures regarding the detection and prevention of the
misuse of material, nonpublic information by the Subadviser and its employees. The Subadviser will explain what it has done to
seek to ensure such compliance in the future. Annually, the Subadviser shall furnish to the Trust and the Adviser a written report
which complies with the requirements of Rule 17j-1 concerning the Subadviser’s Code of Ethics. The Subadviser shall permit
the Trust and the Adviser to examine the reports required to be made by the Subadviser under Rules 204A-1(b) and 17j-1(d)(1) and
this subparagraph.
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E.
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It has adopted and implemented, and throughout the term
of this Agreement shall maintain in effect and implement, policies and procedures reasonably designed to prevent, detect and correct
violations by the Subadviser and its supervised persons, and, to the extent the activities of the Subadviser in respect of the
Trust could affect the Trust, by the Trust, of “federal securities laws” (as defined in Rule 38a-1 under the Act),
and that the Subadviser has provided the Trust with true and complete copies of its policies and procedures (or summaries thereof)
and related information reasonably requested by the Trust and/or the Adviser. The Subadviser agrees to cooperate with periodic
reviews by the Trust’s and/or the Adviser’s compliance personnel of the Subadviser’s policies and procedures,
their operation and implementation and other compliance matters and to provide to the Trust and/or the Adviser from time to time
such additional information and certifications in respect of the Subadviser’s policies and procedures, compliance by the
Subadviser with federal securities laws and related matters as the Trust’s and/or the Adviser’s compliance personnel
may reasonably request. The Subadviser agrees to promptly notify the Adviser of any compliance violations which affect the Designated
Series.
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F.
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The Subadviser will immediately notify the Trust and
the Adviser of the occurrence of any event which would disqualify the Subadviser from serving as an investment adviser of an investment
company pursuant to Section 9 of the Act or otherwise. The Subadviser will also immediately notify the Trust and the Adviser if
it is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before
or by any court, public board or body, including but not limited to the SEC and the CFTC, involving the affairs of the Designated
Series.
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G.
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To the best of its knowledge, there are no material
pending, threatened, or contemplated actions, suits, proceedings, or investigations before or by any court, governmental, administrative
or self-regulatory body, board of trade, exchange, or arbitration panel to which it or any of its directors, officers, employees,
partners, shareholders, members or principals, or any of its affiliates is a party or to which it or its affiliates or any of
its or its affiliates’ assets are subject, nor has it or any of its affiliates received any notice of an investigation,
inquiry, or dispute by any court, governmental, administrative, or self-regulatory body, board of trade, exchange, or arbitration
panel regarding any of its or their activities, which might reasonably be expected to result in (i) a material adverse effect
on the Trust or (ii) a material adverse change in the Subadviser’s condition (financial or otherwise) or business, or which
might reasonably be expected to materially impair the Subadviser’s ability to discharge its obligations under this Agreement.
The Subadviser will also immediately notify the Trust and the Adviser if the representation in this Section 13.G is no longer
accurate.
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H.
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The Subadviser shall promptly notify the Adviser of
any changes in its executive officers, partners or in its key personnel, including, without limitation, any change in the portfolio
manager(s) responsible for the Designated Series or if there is an actual or expected change in control or management of the Subadviser.
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14.
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No Personal Liability. Reference is hereby made
to the Declaration of Trust establishing the Trust, a copy of which has been filed with the SEC, and to any and all amendments
thereto so filed or hereafter filed. The name “Virtus Variable Insurance Trust” refers to the Board under said Declaration
of Trust, as trustees and not personally, and no trustee, shareholder, officer, agent or employee of the Trust shall be held to
any personal liability in connection with the affairs of the Trust; only the trust estate under said Declaration of Trust is liable.
Without limiting the generality of the foregoing, neither the Subadviser nor any of its officers, directors, partners, shareholders
or employees shall, under any circumstances, have recourse or cause or willingly permit recourse to be had directly or indirectly
to any personal, statutory, or other liability of any shareholder, Trustee, officer, agent or employee of the Trust or of any
successor of the Trust, whether such liability now exists or is hereafter incurred for claims against the trust estate.
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15.
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Entire Agreement; Amendment. This Agreement, together
with the Schedules attached hereto, constitutes the entire agreement of the parties with respect to the subject matter hereof
and supersedes any prior written or oral agreements pertaining to the subject matter of this Agreement. This Agreement may be
amended at any time, but only by written agreement among the Subadviser, the Adviser and the Trust, which amendment, other than
amendments to Schedules A, B, D, E and F, is subject to the approval of the Board (including those trustees who are not “interested
persons” of the Trust) and, if required by the Act or applicable SEC rules and regulations, a vote of a majority of the
Designated Series’ outstanding voting securities; provided, however, that, notwithstanding the foregoing, this Agreement
may be amended or terminated in accordance with any exemptive order issued to the Adviser, the Trust or its affiliates.
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16.
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Effective Date; Term. This Agreement shall become
effective on the date set forth on the first page of this Agreement, and shall continue in effect until December 31, 2021. The
Agreement shall continue from year to year thereafter only so long as its continuance has been specifically approved at least
annually (i) by a vote of the Board of the Trust or by vote of a majority of outstanding voting securities of the Designated Series
and (ii) by vote of a majority of the trustees who are not interested persons of the Trust (as defined in the Act) or of any person
party to this Agreement, cast in person (or otherwise, as
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consistent
with applicable laws, regulations and related guidance and relief) at a meeting called for the purpose of such approval.
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17.
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Termination. This Agreement may be terminated at
any time without payment of any penalty (i) by the Board, or by a vote of a majority of the outstanding voting securities of the
Designated Series, upon 60 days’ prior written notice to the Adviser and the Subadviser, (ii) by the Subadviser upon 60
days’ prior written notice to the Adviser and the Trust, or (iii) by the Adviser upon 60 days’ prior written notice
to the Subadviser. This Agreement may also be terminated, without the payment of any penalty, by the Adviser or the Board immediately
(i) upon the material breach by the Subadviser of this Agreement or (ii) at the terminating party’s discretion, if the Subadviser
or any officer, director or key portfolio manager of the Subadviser is accused in any regulatory, self-regulatory or judicial
investigation or proceeding as having violated the federal securities laws or engaged in criminal conduct. This Agreement shall
terminate automatically and immediately upon termination of the Advisory Agreement. This Agreement shall terminate automatically
and immediately in the event of its assignment, as such term is defined in and interpreted under the terms of the 1940 Act and
the rules promulgated thereunder. Termination of this Agreement will not affect any outstanding orders or transactions or any
legal rights or obligations which may already have arisen. Transactions in progress at the date of termination will be completed
by the Subadviser as soon as reasonably practicable. Provisions of this Agreement relating to indemnification and the preservation
of records, as well as any responsibilities or obligations of the parties hereto arising from matters initiated prior to termination,
shall survive any termination of this Agreement.
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18.
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Applicable Law. To the extent that state law is
not preempted by the provisions of any law of the United States heretofore or hereafter enacted, as the same may be amended from
time to time, this Agreement shall be administered, construed and enforced according to the laws of the State of Delaware applicable
to contracts entered into and fully performed within the State of Delaware.
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19.
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Severability. If any term or condition of this
Agreement shall be invalid or unenforceable to any extent or in any application, then the remainder of this Agreement shall not
be affected thereby, and each and every term and condition of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
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20.
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Notices. Any notice or other communication required
to be given pursuant to this Agreement shall be deemed duly given if delivered personally or by overnight delivery service or
mailed by certified or registered mail, return receipt requested and postage prepaid, or sent by facsimile or e-mail transmission
addressed to the parties at their respective addresses set forth below, or at such other address as shall be designated by any
party in a written notice to the other party.
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(a)
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To the Adviser or the Trust, to such party at:
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One Financial Plaza
Hartford, Connecticut 06103
Attn: Jennifer Fromm
Facsimile: (860) 241-1028
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(b)
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To the Subadviser at:
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Kayne Anderson Rudnick Investment Management,
LLC
1800 Avenue of the Stars, 2nd
Floor
Los Angeles, CA 90067
Attn: Michael Shoemaker, Chief Compliance
Officer
Facsimile: (800) 231-7414
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21.
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Certifications. The Subadviser shall timely provide
to the Adviser and the Trust, all information and documentation they may reasonably request as necessary or appropriate in order
for the Adviser and the Board to oversee the activities of the Subadviser and in connection with the compliance by any of them
with the requirements of this Agreement, the Registration Statement, the policies and procedures referenced herein, and any applicable
law, including, without limitation, (i) information and commentary relating to the Subadviser or the Designated Series for the
Trust’s annual and semi-annual reports, in a format reasonably approved by the Adviser, together with (A) a certification
that such information and commentary discuss all of the factors that materially affected the performance of the Designated Series,
including the relevant market conditions and the investment techniques and strategies used and (B) additional certifications related
to the Subadviser’s management of the Trust in order to support the Trust’s filings on Form N-CSR, Form N-Q and other
applicable forms, and the Trust’s Principal Executive Officer’s and Principal Financial Officer’s certifications
under Rule 30a-2 under the Act, thereon; (ii) within 5 business days of a quarter-end, a quarterly certification with respect
to compliance and operational matters related to the Subadviser and the Subadviser’s management of the Designated Series
(including, without limitation, compliance with the applicable procedures), in a format reasonably requested by the Adviser, as
it may be amended from time to time; and (iii) an annual certification from the Subadviser’s Chief Compliance Officer, appointed
under Rule 206(4)-7 under the Advisers Act with respect to the design and operation of the Subadviser’s compliance program,
in a format reasonably requested by the Adviser or the Trust. Without limiting the foregoing, the Subadviser shall provide a quarterly
certification in a form substantially similar to that attached as Schedule E.
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A.
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The Subadviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities, or damages (including reasonable attorney’s fees and other
related expenses) (collectively, “Losses”) arising from the Subadviser’s willful misfeasance, bad faith, gross
negligence, or reckless disregard of its duties under this Agreement in the performance of its obligations under this Agreement;
provided, however, that the Subadviser’s obligation under this Section 22 shall be reduced to the extent that the claim
against, or the loss, liability, or damage experienced by the Adviser, is caused by or is otherwise directly related to (i) any
breach by the Adviser of its representations or warranties made herein, (ii) any willful misconduct, bad faith, reckless disregard
or negligence of the Adviser in the performance of any of its duties or obligations hereunder, or (iii) any untrue statement of
a material fact contained in the Registration Statement, proxy materials, reports, advertisements, sales literature, or other
materials pertaining to the Trust or the omission to state therein a material fact known to the Adviser that was required to be
stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance
upon information furnished to the Subadviser or the Trust, or the omission of such information, by the Adviser for use therein.
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B.
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The Adviser shall indemnify and hold harmless the Subadviser
from and against any and all Losses arising from the Adviser’s willful misfeasance, bad faith, gross negligence, or reckless
disregard of its duties under this Agreement in the performance of its obligations under this Agreement; provided, however, that
the Adviser’s obligation under this Section 22 shall be reduced to the extent that the claim against, or the loss, liability,
or damage experienced by the Subadviser, is caused by or is otherwise directly related to (i) any breach by the Subadviser of
its representations or warranties made herein, (ii) any willful misconduct, bad faith, reckless disregard or negligence of the
Subadviser in the performance of any of its duties or obligations hereunder, or (iii) any untrue statement of a material fact
contained in the Registration Statement, proxy materials, reports, advertisements, sales literature, or other materials pertaining
to the Trust or the omission to state therein a material fact known to the Subadviser that was required to be stated therein or
necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon information furnished
to the Adviser or the Trust, or the omission of such information, by the Subadviser for use therein.
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C.
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A party seeking indemnification hereunder (the “Indemnified
Party”) will (i) provide prompt written notice to the other of any claim (“Claim”) for which it intends to seek
indemnification, (ii) grant control of the defense and /or settlement of the Claim to the other party, and (iii) cooperate with
the other party in the defense thereof. The Indemnified Party will have the right at its own expense to participate in the defense
of any Claim, but will not have the right to control the defense, consent to judgment or agree to the settlement of any Claim
without the written consent of the other party. The party providing the indemnification will not consent to the entry of any judgment
or enter any settlement which (i) does not include, as an unconditional term, the release by the claimant of all liabilities for
Claims against the Indemnified Party or (ii) which otherwise adversely affects the rights of the Indemnified Party.
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D.
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No party will be liable to another party for consequential
damages under any provision of this Agreement.
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23.
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Receipt of Disclosure Documents. The Trust and
the Adviser acknowledge receipt, at least 48 hours prior to entering into this Agreement, of a copy of Part 2 of the Subadviser’s
Form ADV containing certain information concerning the Subadviser and the nature of its business. The Subadviser will, promptly
after making any amendment to its Form ADV, furnish a copy of such amendment to the Adviser. On an annual basis and upon request,
the Subadviser will provide a copy of its audited financial statements, including balance sheets, for the two most recent fiscal
years and, if available, each subsequent fiscal quarter. At the time of providing such information, the Subadviser shall describe
any material adverse change in its financial condition since the date of its latest financial statement.
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24.
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Counterparts; Fax Signatures. This Agreement may
be executed in any number of counterparts (including executed counterparts delivered and exchanged by facsimile transmission)
with the same effect as if all signing parties had originally signed the same document, and all counterparts shall be construed
together and shall constitute the same instrument. For all purposes, signatures delivered and exchanged by facsimile transmission
shall be binding and effective to the same extent as original signatures.
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25.
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Bankruptcy and Related Events. Each of the Adviser
and the Subadviser agrees that it will provide prompt notice to the other in the event that: (i) it makes an assignment for the
benefit of creditors, files a voluntary petition in bankruptcy, or is otherwise adjudged bankrupt or insolvent by a court of competent
jurisdiction; or (ii) a material event occurs that could reasonably be expected to adversely impair its ability to perform this
Agreement. The Adviser further agrees that it will provide prompt notice to the Subadviser in the event that the Trust ceases
to be registered as an investment company under the Act.
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[signature page follows]
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VIRTUS VARIABLE INSURANCE TRUST
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By:
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/s/ W. Patrick Bradley
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Name:
Title:
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W. Patrick Bradley
Executive Vice President,
Chief Financial Officer & Treasurer
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VIRTUS INVESTMENT ADVISERS, INC.
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By:
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/s/ Francis G. Waltman
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Name:
Title:
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Francis G. Waltman
Executive Vice President
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ACCEPTED:
KAYNE ANDERSON RUDNICK INVESTMENT MANAGEMENT,
LLC
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By:
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/s/ Jeannine Vanian
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Name:
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Jeannine Vanian
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Title:
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Chief Operating
Officer
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SCHEDULES:
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A.
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Operational Procedures
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B.
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Record Keeping Requirements
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C.
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Fee Schedule
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D.
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Subadviser Functions
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E.
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Form of Sub-Certification
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F.
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Designated Series
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SCHEDULE A
OPERATIONAL PROCEDURES
In order to minimize operational problems,
it will be necessary for a flow of information to be supplied in a secure manner by Subadviser to the Trust’s service providers,
including: The Bank of New York Mellon (the “Custodian”), Virtus Fund Services, LLC (the “Fund Administrator”),
BNY Mellon Investment Servicing (US) Inc., (the “Accounting Agent”), any Prime Broker to the Series, and all other
Counterparties/Brokers as required.
The Subadviser must furnish the Trust’s
service providers with required daily information as to executed trades in a format and time-frame agreed to by the Subadviser,
Custodian, Fund Administrator, Accounting Agent and Prime Broker/Counterparties and designated persons of the Trust. Trade
information sent to the Custodian, Fund Administrator, Accounting Agent and Prime Broker/Counterparties must include all necessary
data within the required timeframes to allow such parties to perform their obligations to the Designated Series.
The Accounting Agent specifically requires
a daily trade blotter with a summary of all trades, in addition to trade feeds, including, if no trades are executed, a report
to that effect. Daily information as to executed trades for same-day settlement and future trades must be sent to the Accounting
Agent no later than 5:00 p.m. (Eastern Time) on the day of the trade each day the Trust is open for business. All other executed
trades must be delivered to the Accounting Agent on trade date +1 by 11:00 a.m. (Eastern Time) to ensure that they are part of
the Designated Series’ NAV calculation. (Subadviser will be responsible for reimbursement to the Trust for any loss caused
by the Subadviser’s failure to comply with the requirements of this Schedule A.) On fiscal quarter ends and calendar quarter
ends, all trades must be delivered to the Accounting Agent by 4:30 p.m. (Eastern Time) for inclusion in the financial statements
of the Designated Series. The data to be sent to the Accounting Agent and/or Fund Administrator will be as agreed by the Subadviser,
Fund Administrator, Accounting Agent and designated persons of the Trust and shall include (without limitation) the following:
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1.
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Transaction type (e.g., purchase, sale, open, close,
put call);
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2.
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Security type (e.g., equity, fixed income, swap, future,
option, short, long);
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4.
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Exchange identifier (e.g., CUSIP, ISIN, Sedol, OCC Symbol)
(as applicable);
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5.
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Number of shares and par, original face, contract amount,
notional amount;
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6.
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Transaction price per share (clean if possible);
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8.
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Aggregate principal amount;
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13.
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Aggregate commission or if a net trade;
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14.
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Interest purchased or sold from interest bearing security;
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15.
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Net proceeds of the transaction;
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16.
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Trade commission reason: best execution, soft dollar
or research (to be provided quarterly);
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18.
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Non-deliverable forward classification (to be provided
quarterly);
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19.
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Maturity/expiration date; and
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20.
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Details of margin and collateral movement.
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When opening accounts with brokers for,
and in the name of, the Trust, the account must be a cash account. No margin accounts are to be opened by the Subadviser in the
name of the Trust or any Series except as specifically approved by the Trust and the Fund Administrator. Delivery instructions
are as specified by the Custodian. The Custodian will supply the Subadviser daily with a cash availability report via access to
the Custodian website, or by email or by facsimile and the Accounting Agent will provide a five-day cash projection. This will
normally be done
by email or, if email is unavailable, by
another form of immediate written communication, so that the Subadviser will know the amount available for investment purposes.
SCHEDULE B
RECORDS TO BE MAINTAINED BY THE SUBADVISER
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1.
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(Rule 31a-1(b)(5) and (6)) A record of each brokerage
order, and all other series purchases and sales, given by the Subadviser on behalf of the Trust for, or in connection with, the
purchase or sale of securities, whether executed or unexecuted. Such records shall include:
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A.
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The name of the broker;
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B.
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The terms and conditions of the order and of any modifications or cancellations thereof;
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C.
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The time of entry or cancellation;
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D.
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The price at which executed;
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E.
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The time of receipt of a report of execution; and
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F.
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The name of the person who placed the order on behalf
of the Trust.
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2.
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(Rule 31a-1(b)(9)) A record for each fiscal quarter, completed
within ten (10) days after the end of the quarter, showing specifically the basis or bases upon which the allocation of orders
for the purchase and sale of series securities to named brokers or dealers was effected, and the division of brokerage commissions
or other compensation on such purchase and sale orders. Such record:
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A.
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Shall include the consideration given to:
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(i)
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The sale of shares of the Trust by brokers or dealers.
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(ii)
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The supplying of services or benefits by brokers or dealers
to:
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(d)
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Any person other than the foregoing.
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(iii)
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Any other consideration other than the technical qualifications
of the brokers and dealers as such.
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B.
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Shall show the nature of the services or benefits made available.
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C.
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Shall describe in detail the application of any general or specific formula or other determinant
used in arriving at such allocation of purchase and sale orders and such division of brokerage commissions or other compensation.
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D.
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Shall show the name of the person responsible for making the determination of such allocation and
such division of brokerage commissions or other compensation.
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3.
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(Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum identifying the person or
persons, committees or groups authorizing the purchase or sale of series securities. Where a committee or group makes an authorization,
a record shall be kept of the names of its members who participate in the authorization. There shall be retained as part of this
record: any memorandum, recommendation or instruction supporting or authorizing the purchase or sale of series securities and such
other information as is appropriate to support the authorization.*
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4.
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(Rule 31a-1(f)) Such accounts, books and other documents as are required to be maintained by registered
investment advisers by rule adopted under Section 204 of the Advisers Act, to the extent such records are necessary or appropriate
to record the Subadviser’s transactions for the Trust.
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5.
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Records as necessary under Board-approved policies and procedures of the Trust, including without
limitation those related to valuation determinations.
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*
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Such information might include: current financial information,
annual and quarterly reports, press releases, reports by analysts and from brokerage firms (including their recommendations, i.e.,
buy, sell, hold) or any internal reports or subadviser review.
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SCHEDULE C
SUBADVISORY FEE
For services provided
to the Trust, the Adviser will pay to the Subadviser a fee, payable monthly in arrears, equal to 50% of the net advisory fee applicable
to the Designated Series, calculated as follows:
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1.
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The total expenses of the Designated Series will be
calculated in accordance with the terms of its prospectus, including application of the gross advisory fee.
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2.
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Such total expenses will be reduced by the application
of any applicable fee waiver and/or expense limitation agreement, in accordance with the terms thereof.
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3.
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The net advisory fee applicable to the Designated Series
will then be calculated by subtracting from the gross advisory fee any amount required to be waived under the applicable fee waiver(s)
and/or reimbursed under such applicable expense limitation agreement.
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4.
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In the event that the Adviser waives its entire fee
and also assumes expenses of the Designated Series pursuant to an applicable expense limitation agreement, the Subadviser will
similarly waive its entire fee and will share in the expense assumption by contributing 50% of the assumed amount.
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5.
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If during the term of this Agreement the Adviser later
recaptures some or all of the fees waived or expenses assumed by the Adviser and the Subadviser together, the Adviser shall pay
to the Subadviser a pro rata amount of the fee(s)/expense(s) recaptured that is attributable to the Subadviser’s portion
of the original waiver/assumed expense.
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SCHEDULE D
SUBADVISER FUNCTIONS
With respect to managing
the investment and reinvestment of the Designated Series’ assets, the Subadviser shall provide, at its own expense:
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(a)
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An investment program for the Designated Series consistent with its investment objectives based
upon the development, review and adjustment of buy/sell strategies approved from time to time by the Board and the Adviser in paragraph
3 of this Subadvisory Agreement and implementation of that program;
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(b)
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Periodic reports, on at least a quarterly basis, in form and substance acceptable to the Adviser,
with respect to: i) compliance with the Code of Ethics and the Trust’s code of ethics; ii) compliance with procedures adopted
from time to time by the Board relative to securities eligible for resale under Rule 144A under the Securities Act of 1933, as
amended; iii) diversification of Designated Series assets in accordance with the then prevailing Prospectus and Statement of Additional
Information pertaining to the Designated Series and governing laws, regulations, rules and orders; iv) compliance with governing
restrictions relating to the fair valuation of securities for which market quotations are not readily available or considered “illiquid”
for the purposes of complying with the Designated Series’ limitation on acquisition of illiquid securities; v) any and all
other reports reasonably requested in accordance with or described in this Agreement; vi) the implementation of the Designated
Series’ investment program, including, without limitation, analysis of Designated Series performance; vii) compliance with
the Investment Guidelines; viii) description of material changes in policies or procedures; and ix) description of any significant
firm related developments;
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(c)
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Promptly after filing with the SEC an amendment to its Form ADV, a copy of such amendment to the
Adviser and the Board;
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(d)
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Attendance by appropriate representatives of the Subadviser at meetings requested by the Adviser
or Board at such time(s) and location(s) as reasonably requested by the Adviser or Board; and
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(e)
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Notice to the Board and the Adviser of the occurrence of any event which would disqualify the Subadviser
from serving as an investment adviser of an investment company pursuant to Section 9(a) of the Act or otherwise.
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(f)
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Reasonable assistance in the valuation of securities including the participation of appropriate
representatives at fair valuation committee meetings.
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SCHEDULE E
FORM OF SUB-CERTIFICATION
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Re:
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Subadviser’s Form N-CSR and Form N-Q Certification for the [Name of Designated Series].
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From:
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[Name of Subadviser]
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Representations in support of
Investment Company Act Rule 30a-2 certifications of Form N-CSR and Form N-Q.
[Name of Designated
Series].
In connection with your certification
responsibility under Rule 30a-2 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, I have reviewed the following information
presented in the schedule of investments for the period ended [Date of Reporting Period] (the “Report”) which forms
part of the N-CSR or N-Q, as applicable, for the Trust.
Schedule of Investments
Our organization has designed, implemented
and maintained internal controls and procedures, designed for the purpose of ensuring the accuracy and completeness of relevant
portfolio trade data transmitted to those responsible for the preparation of the Schedule of Investments. As of the date of this
certification there have been no material modifications to these internal controls and procedures.
In addition, our organization has:
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a.
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Designed such internal controls and procedures to ensure that material information is made known
to the appropriate groups responsible for servicing the above-mentioned mutual fund.
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b.
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Designed and implemented controls which ensure that all transactions provided to the fund’s
custodians/prime broker and accounting agent (“vendors”) have been delivered in a secure manner by authorized persons, and
that access to the fund’s records maintained by the fund’s vendors is restricted to authorized persons of our
firm or, if applicable, any third party administrator utilized by our firm. Such controls include review of the authorized
persons at least annually and prompt communication of any changes to authorized persons to the fund’s vendors.
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c.
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Evaluated the effectiveness of our internal controls and procedures, as of a date within 90 days
prior to the date of this certification and we have concluded that such controls and procedures are effective.
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d.
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In addition, to the best of my knowledge, there has been no fraud, whether or not material, that
involves our organization’s management or other employees who have a significant role in our organization’s control
and procedures as they relate to our duties as subadviser to the Designated Series.
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I have read the draft of the Report which
I understand to be current as of [Date of Reporting Period] and based on my knowledge, such draft of the Report, including the
Fund Summary and Asset Allocations (as applicable), does not, with respect to the Designated Series, contain any untrue statement
of a material fact or omit to state a material fact necessary to make the information contained therein, in light of the circumstances
under which such information is presented, not misleading with respect to the period covered by such draft Report.
I have disclosed, based on my most recent
evaluation, to the Designated Series’ Chief Accounting Officer:
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a.
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All significant changes, deficiencies and material weakness, if any, in the design or operation
of the Subadviser’s internal controls and procedures which could adversely affect the Registrant’s ability to record,
process, summarize and report financial data with respect to the Designated Series in a timely fashion;
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b.
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Any fraud, whether or not material, that involves the Subadviser’s management or other employees
who have a significant role in the Subadviser’s internal controls and procedures for financial reporting.
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I certify that to the best of my knowledge:
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a.
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The Subadviser’s Portfolio Manager(s) has/have complied with the restrictions and reporting
requirements of the Code of Ethics (the “Code”). The term Portfolio Manager is as defined in the Code.
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b.
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The Subadviser has complied with the Prospectus and Statement of Additional Information of the
Designated Series and the Policies and Procedures of the Designated Series as adopted by the Designated Series Board of Trustees.
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c.
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I have no knowledge of any compliance violations except as disclosed in writing to the Virtus Compliance
Department by me or by the Subadviser’s compliance administrator.
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d.
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The Subadviser has complied with the rules and regulations of the 33 Act and 40 Act, and such other
regulations as may apply to the extent those rules and regulations pertain to the responsibilities of the Subadviser with respect
to the Designated Series as outlined above.
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e.
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Since the submission of our most recent certification there have not been any divestments of securities
of issuers that conduct or have direct investments in business operations in Iran or Sudan.
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f.
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The subadviser has disclosed to the Adviser or the Designated Series any holdings required to be
disclosed under the Iran Threat Reduction and Syria Human Rights Act of 2012, the Comprehensive Iran Sanctions, Accountability,
and Divestment Act of 2010, the Iran Sanctions Act of 1996, as Amended and Executive Orders 13224, and 13382.
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This certification relates solely to the
Designated Series named above and may not be relied upon by any other fund or entity.
The Subadviser does not maintain the official
books and records of the above Designated Series. The Subadviser’s records are based on its own portfolio management system,
a record-keeping system that is not intended to serve as the Designated Series official accounting system. The Subadviser is not
responsible for the preparation of the Report.
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[Name of Subadviser]
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Date
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[Name of Authorized Signer]
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[Title of Authorized Signer]
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SCHEDULE F
DESIGNATED SERIES
Virtus KAR Equity Income Series
Exhibit h.4
THIRTEENTH AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
VIRTUS VARIABLE INSURANCE TRUST
This Thirteenth Amended
and Restated Expense Limitation Agreement (the “Agreement”) effective as of September 1, 2020, amends and restates
that Twelfth Amended and Restated Expense Limitation Agreement effective as of April 30, 2020, by and between Virtus Variable Insurance
Trust, a Delaware statutory trust (the “Registrant”), on behalf of each series of the Registrant listed in Appendix
A (each a “Fund” and collectively, the “Funds”) and the Adviser of each of the Funds, Virtus Investment
Advisers, Inc., a Massachusetts corporation (the “Adviser”).
WHEREAS, the Adviser
renders advice and services to the Funds pursuant to the terms and provisions of one or more Investment Advisory Agreements entered
into between the Registrant and the Adviser (the “Advisory Agreement”);
WHEREAS, the Adviser
desires to maintain the expenses of each Fund at a level below the level to which each such Fund might otherwise be subject; and
WHEREAS, the Adviser
understands and intends that the Registrant will rely on this Agreement in accruing the expenses of the Registrant for purposes
of calculating net asset value and for other purposes, and expressly permits the Registrant to do so.
NOW, THEREFORE, the parties hereto agree
as follows:
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1.
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Limit on Fund Expenses. The Adviser hereby agrees to limit the Expenses of each class of each Fund
to the respective rate of Total Fund Operating Expenses (“Expense Limit”) specified for that class in Appendix A of
this Agreement for the time period indicated.
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2.
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Definition. For purposes of this Agreement, the term “Total Fund Operating Expenses”
with respect to a Fund is defined to include all expenses necessary or appropriate for the operation of the Fund including the
Adviser’s investment advisory or management fee under the Advisory Agreement and other expenses described in the Advisory
Agreement that the Fund is responsible for and have not been assumed by the Adviser, but excludes front-end or contingent deferred
loads, taxes, leverage and borrowing expenses (such as commitment, amendment and renewal expenses on credit or redemption facilities),
interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, unusual or infrequently occurring
expenses (such as litigation), acquired fund fees and expenses, and dividend expenses, if any.
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3.
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Recoupment and Recapture of Fees and Expenses. Each Fund agrees to reimburse the Adviser and/or
certain of its affiliates (collectively, “Virtus”) out of assets belonging to the relevant class of the Fund for any
Total Fund Operating Expenses of the relevant class of the Fund in excess of the Expense Limit paid, waived or assumed by Virtus
for that Fund, provided that Virtus would not be entitled to reimbursement for any amount that would cause Total Fund Operating
Expenses to exceed either the Expense Limit in place at the time of the applicable waiver or assumption of expenses by Virtus or,
if less, any contractual Expense Limit in place at the time that the reimbursement would be made, and provided further that no
amount would be reimbursed by the Fund more than three years after the date on which it was incurred or waived by Virtus. The terms,
conditions and rights of this section shall survive any termination of this Agreement.
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4.
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Term, Termination and Modification. This Agreement is effective for the time period indicated on
Appendix A, unless sooner terminated as provided below in this Paragraph. This Agreement may be terminated by mutual agreement
of the parties at any time or by the Registrant on behalf of any one or more of the Funds upon thirty (30) days’ written
notice to the Adviser. In addition, this Agreement shall terminate with respect to a Fund upon termination of the Advisory Agreement
with respect to such Fund.
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5.
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Assignment. This Agreement and all rights and obligations hereunder may not be assigned without the written consent of the
other party.
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6.
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Severability. If any provision of this Agreement shall be held or made invalid by a court decision, statute or rule, or shall
otherwise be rendered invalid, the remainder of this Agreement shall not be affected thereby.
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7.
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Captions. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or effect.
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8.
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Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of Delaware without giving effect
to the conflict of laws principles thereof; provided that nothing herein shall be construed to preempt, or to be inconsistent with,
any Federal securities law, regulation or rule, including the Investment Company Act of 1940, as amended, and the Investment Advisers
Act of 1940, as amended, and any rules and regulations promulgated thereunder.
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9.
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Computation. If the fiscal year-to-date Total Fund Operating Expenses of a Fund at the end of any
month during which this Agreement is in effect exceed the Expense Limit for that Fund (the “Excess Amount”), the Adviser
shall (at its option) waive or reduce its fee under the Advisory Agreement and/or remit to that Fund (or cause another Virtus entity
to waive or reduce its fee under another agreement and/or remit to that Fund) an amount that is sufficient to pay the Excess Amount
computed on the last day of the month.
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10.
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Liability. Virtus agrees that it shall look only to the assets of the relevant class of each respective
relevant Fund for performance of this Agreement and for payment of any claim Virtus may have hereunder, and neither any other series
(including the other series of the Registrant) or class of the Fund, nor any of the Registrant’s trustees, officers, employees,
agents or shareholders, whether past, present or future, shall be personally liable therefor.
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IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed by their duly authorized officers.
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VIRTUS VARIABLE INSURANCE TRUST
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VIRTUS
INVESTMENT ADVISERS, INC.
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By:
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/s/ W. Patrick Bradley
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By:
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/s/ Francis G. Waltman
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W. Patrick Bradley
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Francis G. Waltman
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Executive Vice President, Chief Financial
Officer and Treasurer
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Executive Vice President
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APPENDIX A
Contractual Expense Limitations
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Fund
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Total Fund Operating Expense Limit
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Term
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Virtus Duff & Phelps Real Estate Securities Series
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Class A
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1.14%
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Through April 30, 2021
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Class I
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0.89%
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Through April 30, 2021
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Virtus KAR Capital Growth Series
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Class A
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1.03%
|
Through April 30, 2021
|
|
|
|
Virtus KAR Equity Income Series (fka Virtus Rampart Enhanced Core Equity Series) Class A 0.98% Through April 30, 2022
|
|
|
|
Virtus KAR Small-Cap Growth Series
|
|
Class A
|
1.16%
|
Through April 30, 2021
|
|
Class I
|
0.91%
|
Through April 30, 2021
|
|
|
|
Virtus KAR Small-Cap Value Series
|
|
Class A
|
1.10%
|
Through April 30, 2021
|
|
|
|
|
|
|
|
Virtus Newfleet Multi-Sector Intermediate Bond Series
|
|
Class A
|
0.94%
|
Through April 30, 2021
|
|
Class I
|
0.69%
|
Through April 30, 2021
|
|
|
|
Virtus SGA International Growth Series
|
|
Class A
|
1.16%
|
Through April 30, 2021
|
|
Class I
|
0.91%
|
Through April 30, 2021
|
|
|
|
Virtus Strategic Allocation Series
|
|
Class A
|
0.98%
|
Through April 30, 2021
|
|
|
|
|
![[MISSING IMAGE: LG_VIRTUSFUNDS-2019.JPG]](https://content.edgar-online.com/edgar_conv_img/2020/08/31/0001104659-20-100847_LG_VIRTUSFUNDS-2019.JPG)
![[MISSING IMAGE: ADLRE0U0V7O8LBT7CQ7JPB3FIHBD.JPG]](https://content.edgar-online.com/edgar_conv_img/2020/08/31/0001104659-20-100847_ADLRE0U0V7O8LBT7CQ7JPB3FIHBD.JPG)