Forward Looking Statements

This Quarterly Report on Form 10-Q contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. These statements may be identified by such forward-looking terminology as "expect," "estimate," "plan," "intend," "believe," "anticipate," "may," "should," or similar statements or variations of such terms.

Our forward-looking statements are based on a series of expectations, assumptions and projections about our Company, are not guarantees of future results or performance, and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, cash inflows and outflows, operating cash flows, and future credit facilities, for all forward periods. All of our forward-looking statements are as of the date of this Quarterly Report only. The Company can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially.

Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report, as well as the following risks and uncertainties: (a) the effects of recent adverse market and economic developments on all aspects of our business; (b) the poor performance of the securities markets; (c) the poor relative investment performance of some of our asset management strategies and the resulting outflows in our assets under management; (d) any lack of availability of additional financing on satisfactory terms or at all; (e) any inadequate performance of third-party relationships; (f) the withdrawal of assets from our management; (g) the impact of our separation from PNX; (h) our ability to attract and retain key personnel in a competitive environment;
(i) the ability of independent trustees of our mutual funds and closed-end funds, intermediary program sponsors, managed account clients and institutional asset management clients to terminate their relationships with us; (j) the possibility that our goodwill or intangible assets could become further impaired, requiring a charge to earnings; (k) the strong competition we face in our business from mutual fund companies, banks and asset management firms, most of which are larger than we are; (l) potential adverse regulatory and legal developments; (m) the difficulty of detecting misconduct by our employees, sub-advisors and distribution partners; (n) changes in accounting standards; and
(o) certain other risks and uncertainties described in our 2008 Annual Report on Form 10-K or in any of our filings with the Securities and Exchange Commission ("SEC").

Certain other factors which may impact our continuing operations, prospects, financial results and liquidity or which may cause actual results to differ from such forward-looking statements are discussed or included in the Company's periodic reports filed with the SEC and are available on the our website at www.virtus.com under "Investor Relations". You are urged to carefully consider all such factors.

The Company does not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this Quarterly Report, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If there are any future public statements or disclosures by us which modify or impact any of the forward-looking statements contained in or accompanying this Quarterly Report, such statements or disclosures will be deemed to modify or supersede such statements in this Quarterly Report.

Overview

Separation from The Phoenix Companies, Inc.

Prior to December 31, 2008, we were an indirect majority-owned subsidiary of The Phoenix Companies, Inc. ("PNX"). On February 7, 2008, PNX announced that its board of directors had determined to pursue the spin-off of the Company, the asset management business of PNX, excluding the net assets and business of the Company's subsidiary, Goodwin Capital Advisers, Inc. ("Goodwin"). Goodwin, which historically had been a subsidiary of Virtus, was distributed to PNX in connection with the spin-off. On December 12, 2008, the PNX board of directors formally approved the spin-off and declared a dividend payable to each PNX stockholder of record at the close of business on the record date for the distribution of one share of Virtus common stock for every 20 shares of PNX common stock. The distribution of 100% of Virtus common stock to PNX stockholders (other than shares withheld to satisfy certain withholding obligations) was made on December 31, 2008. Following the spin-off, PNX does not have any ownership interest in the Company.

As a new standalone public company after the spin-off, we have completed the rebranding of our company as "Virtus," relocated our corporate offices to a new facility, hired employees and service providers necessary to replace those services that had historically been provided by PNX and obtained standalone insurance, legal, audit and other services. We believe the spin-off provides the opportunity to more efficiently operate our business and deploy resources based on the best long-term interests of our core asset management business.

Our Business

We are a provider of investment management products and services to individuals and institutions. We operate a multi-manager asset management business, comprising a number of individual affiliated managers, each having its own distinct investment style, autonomous investment process and brand. We believe our customers value this approach, especially institutional customers who appreciate individual managers with distinctive cultures and styles.

Investors have an array of needs driven by factors such as market conditions, risk tolerance and investment goals. A key element of our business is offering a variety of investment styles and multiple disciplines to meet those needs. To that end, for our mutual funds, we supplement the investment capabilities of our affiliated managers with those of select unaffiliated sub-advisors. We do that by partnering with these sub-advisors whose strategies are not typically available to retail mutual fund customers.

We provide our products in a number of forms and through multiple distribution channels. Our retail products include open-end mutual funds, closed-end funds and separately managed accounts. Our fund family of 49 open-end funds is distributed primarily through intermediaries. Our five closed-end funds trade on the New York Stock Exchange. Retail separately managed accounts are comprised of intermediary programs sponsored and distributed by unaffiliated brokerage firms, as well as private client offerings, originated and maintained by our affiliated managers. We also manage institutional accounts for corporations, multi-employer retirement funds and foundations, endowments, special purpose funds and other types of institutions. Our earnings are primarily driven by asset-based investment management fees charged on these various products. These fees are based on a percentage of assets under management and are calculated using daily or weekly average assets or assets at the end of the preceding quarter.

Recent Market Developments

Financial markets have experienced unprecedented credit and liquidity issues as well as volatility and declines in the equity and fixed income markets. Credit markets have suffered significantly, with many lenders and institutional investors reducing, and in some cases, ceasing to provide funding to borrowers, including other financial institutions. Additionally, concerns over increasing unemployment, fluctuating inflation and energy costs have contributed to diminished expectations for the economy and the financial markets going forward. These factors, combined with declining business and consumer confidence and increased unemployment, have precipitated an economic slowdown and fears of a deep and prolonged recession. As a result, there has been a severe impact on the global financial markets and economies.

This economic environment has had a direct impact on the actions of both retail and institutional investors. The continued erosion of the equity and fixed income markets has impacted the value of our assets under management which has resulted in lower fee revenues. The continuing turmoil in the equity and debt markets impacts investor confidence and investors favoring significantly lower investment risk. The adverse conditions of the capital markets and the economic environment, which is expected to continue through 2009 and possibly beyond, has and will continue to have a negative impact on our assets under management and our revenues. In addition, because we experienced a significant decline in our assets under management in the third and fourth quarters of 2008 and, to a lesser extent, in the first quarter of 2009, our assets under management at March 31, 2009 are significantly below our average assets under management for the preceding twelve months and it is likely that we will experience a material decrease in revenue in 2009 absent significant improvement in the global economy and capital markets.

The decrease in our assets under management is driven in great part by the performance of the equity markets, with the S&P 500 Index down 11.7% for the three months ended March 31, 2009 after having been down 22.5% for the quarter ended December 31, 2008. We have seen decreased investment inflows and increased redemptions of certain products over this period as a result of the adverse market conditions.

Assets Under Management

Our total assets under management as of March 31, 2009 were $20.8 billion, a decrease of $11.8 billion from the $32.6 billion of assets under management at March 31, 2008 (which excludes $14.7 billion of fixed income assets managed by Goodwin as of March 31, 2008 which, as a result of the spin-off, are no longer managed by us after December 31, 2008). Our assets under management as of March 31, 2009 decreased $1.8 billion from December 31, 2008 (which excludes $14.0 billion of Goodwin-managed fixed income assets at that date). The discussion and analysis of our assets under management excludes the Goodwin-managed assets unless expressly noted otherwise.

Assets Under Management by Product

The following table presents our assets under management by product:



                                                    As of March 31,
                                                    2009        2008
                ($ in billions)
                Retail assets
                Mutual fund assets
                Money market funds                $     4.3    $  5.2
                Long-term open-end funds                6.1      10.1
                Closed-end funds                        3.6       4.8

                Total mutual fund assets               14.0      20.1

                Separately managed accounts
                Intermediary sponsored programs         1.1       2.2
                Private client accounts                 1.6       2.4

                Total managed account assets            2.7       4.6

                Total retail assets                    16.7      24.7


                Institutional assets
                Institutional accounts                  3.4       5.5
                Structured finance products             0.7       2.4

                Total institutional assets              4.1       7.9

                Total (1)                         $    20.8    $ 32.6

(1) Excludes Goodwin-managed assets as of March 31, 2008 as follows:

                       Institutional assets           $  1.7
                       Structured finance products       0.2
                       PNX general account assets       12.8

                       Total Goodwin-managed assets   $ 14.7

The following table summarizes our asset flows by product for the periods indicated. For the three months ended March 31, 2008, $14.7 billion of assets managed by Goodwin prior to the spin-off are excluded from the table below.

                                                   Three Months ended
                                                        March 31,
                                                   2009           2008
           ($ in billions)
           Retail Products
           Mutual Funds
           Beginning balance                     $    15.4       $  22.3
           Sales                                       0.5           0.7
           Redemptions                                (0.7 )        (0.9 )

           Net flows                                  (0.2 )        (0.2 )
           Market appreciation (depreciation)         (0.8 )        (1.0 )
           Change in cash management products         (0.3 )        (1.0 )
           Acquisitions (dispositions) / Other        (0.1 )          -

           Change in assets under management          (1.4 )        (2.2 )

           Ending balance                        $    14.0       $  20.1

           Separately Managed Accounts
           Beginning balance                     $     3.1       $   5.4
           Sales                                       0.2           0.3
           Redemptions                                (0.4 )        (0.6 )

           Net flows                                  (0.2 )        (0.3 )
           Market appreciation (depreciation)         (0.2 )        (0.5 )
           Acquisitions (dispositions) / Other          -             -

           Change in assets under management          (0.4 )        (0.8 )

           Ending balance                        $     2.7       $   4.6

           Institutional Products
           Beginning balance                     $     3.4       $   9.4
           Sales                                        -            0.3
           Redemptions                                (0.1 )        (4.1 )

           Net flows                                  (0.1 )        (3.8 )
           Market appreciation (depreciation)         (0.2 )        (0.1 )
           Acquisitions (dispositions) / Other         0.3            -

           Change in assets under management            -           (3.9 )

           Ending balance                        $     3.4       $   5.5 (1)

           Structured Finance Products
           Beginning balance                     $     0.7       $   3.3
           Sales                                        -             -
           Redemptions                                  -             -

           Net flows                                    -             -
           Market appreciation (depreciation)           -           (0.9 )

           Change in assets under management            -           (0.9 )

           Ending balance                        $     0.7       $   2.4 (2)

           Total
           Beginning balance                          22.6          40.4
           Sales                                       0.7           1.3
           Redemptions                                (1.2 )        (5.6 )

           Net flows                                  (0.5 )        (4.3 )
           Market appreciation (depreciation)         (1.2 )        (2.5 )
           Change in cash management products         (0.3 )        (1.0 )
           Acquisitions (dispositions) / Other         0.2            -

           Change in assets under management          (1.8 )        (7.8 )

           Ending balance                        $    20.8       $  32.6 (3)

(1) Excludes $1.7 billion of assets managed by Goodwin (including Goodwin managed assets, $7.2 billion).

(2) Excludes $0.2 billion of assets managed by the Company that were serviced by Goodwin (including Goodwin serviced assets, $2.6 billion).

(3) Excludes $14.7 billion of assets managed by Goodwin, including $12.8 billion of PNX general account assets (including Goodwin managed assets, $47.3 billion).

Assets Under Management by Investment Category

The following table summarizes our assets under management by investment
category (excluding Goodwin assets in 2008 that are no longer managed by the
Company after the spin-off):



                                               As of March 31,
                                               2009        2008
                     ($ in billions)
                     Investment Categories
                     Equity assets           $     8.3    $ 14.6
                     Fixed income assets           8.2      12.8
                     Money market assets           4.3       5.2

                     Total                   $    20.8    $ 32.6

At March 31, 2009, we managed $20.8 billion in total assets representing a decrease of $11.8 billion from the $32.6 billion managed at March 31, 2008 and a decrease of $1.8 billion from the $22.6 billion managed at December 31, 2008. Net outflows were $0.5 billion and market depreciation was $1.2 billion during the quarter. The remaining decrease during the quarter was primarily the result of the net change in our money market assets. Our sales decreased $0.6 billion in the first quarter of 2009 as compared to the same period in the prior year. Our open-end mutual fund sales decreased 33% during the first quarter of 2009 compared to the same quarter in 2008. This decrease was consistent with the trend in the industry as investors were hesitant to invest due to the continuing declines in the securities markets that had been experienced over the past several quarters. Redemptions of $1.2 billion during the quarter decreased by $4.4 billion, including a $0.2 billion decrease in open-end mutual fund redemptions, compared to the prior year's same quarter. In the first quarter of 2008, institutional products experienced $4.1 billion of outflows of which $3.7 billion related to a terminated relationship with one institutional client, providing advisory services to the general account of a non-affiliated insurance company. The market depreciation across all asset groups in the first quarter of 2009 was primarily the result of the continued decline in the securities markets.

Average Fee Earning Assets Under Management and Average Basis Points

The following table summarizes average fee earning assets under management and
average management fee basis points (excluding Goodwin assets in 2008 that are
no longer managed by the Company after the spin-off):



                                                             Three Months Ended March 31,
                                             Average Fees Earned -           Average Fee Earning Assets
                                               Expressed in BPs                    ($ in billions)
                                              2009           2008              2009                2008
Products
Money market mutual funds (1)                       5              5     $            4.6     $          5.9
Long-term mutual funds (1)                         42             47                 10.3               15.4
Separately managed accounts                        47             46                  3.1                5.5
Institutional products                             27             24                  4.2               11.5

Total                                              33             33     $           22.2     $         38.3

(1) Average fees earned for money market and long-term mutual funds are net of non-affiliated sub-advisory fees.

The average fee earning assets under management and average fees earned expressed in basis points presented in the table above are intended to provide information in the analysis of our asset based revenue and distribution expenses. Money market and long-term mutual fund fees are calculated based on either average daily net assets or average weekly net assets. Separately managed accounts and institutional fees are generally calculated based on end of the preceding quarter's asset values. Structured finance product fees, which are included in institutional products, are calculated based on a combination of the underlying cash flows and the principal value of the product.

Results of Operations

Summary Financial Data



                                                    Three Months Ended
                                                        March 31,                   Increase/(Decrease)
                                                 2009             2008 (1)             2009 vs. 2008
($ in millions)
Results of Operations
Investment management fees                     $    17.8         $     36.0        $               (18.2 )
Other revenue                                        8.4               14.5                         (6.1 )

Total revenues                                      26.2               50.5                        (24.3 )

Operating expenses                                  28.8               46.2                        (17.4 )
Intangible asset impairment                           -                10.5                        (10.5 )
Intangible asset amortization                        1.9                7.5                         (5.6 )

Total expenses                                      30.7               64.2                        (33.5 )

Operating loss                                      (4.5 )            (13.7 )                       (9.2 )
Other expense, net                                  (0.9 )             (0.8 )                        0.1
Interest expense, net                               (0.3 )             (0.4 )                       (0.1 )

Loss before income taxes                            (5.7 )            (14.9 )                       (9.2 )
Income tax expense (benefit)                         0.1               (5.7 )                        5.8

Net loss                                            (5.8 )             (9.2 )                       (3.4 )
Preferred stockholder dividends                     (1.0 )               -                           1.0

Net loss available to common stockholders      $    (6.8 )       $     (9.2 )      $                (2.4 )

(1) Includes Goodwin operating results which, as a result of the spin-off on December 31, 2008 are no longer managed by the Company after December 31, 2008.

Revenues

The decrease in revenues in the first three months of 2009 as compared to the corresponding period in 2008 was primarily a result of a decrease in average assets under management. Assets under management decreased primarily due to an overall decline in the securities markets in the second half of 2008 and the first three months of 2009. Goodwin, which did not remain a part of the Company after the spin-off, generated $5.9 million of revenues for the three months ended March 31, 2008. Revenues by source, including those revenues earned by Goodwin in the three months ended March 31, 2008, were as follows:

                                                  Three Months Ended
                                                      March 31,                Increase/(Decrease)
                                                 2009            2008             2009 vs. 2008
($ in millions)
Investment management fees
Mutual funds                                  $     11.4      $     18.9      $                (7.5 )
Separately managed accounts                          3.5             6.2                       (2.7 )
Institutional accounts                               2.5             5.8                       (3.3 )
Structured finance products s                        0.4             1.9                       (1.5 )

Third-party management fees                         17.8            32.8                      (15.0 )
PNX general account                                   -              3.2                       (3.2 )

Total investment management fees                    17.8            36.0                      (18.2 )
Distribution and service fees                        5.3             8.5                       (3.2 )
Administration and transfer agent fees               2.8             5.2                       (2.4 )
Other income and fees                                0.3             0.8                       (0.5 )

Total revenues                                $     26.2      $     50.5      $               (24.3 )

Investment Management Fees

Net investment management fees decreased for the three months ended March 31, 2009 as compared to the same period in 2008 primarily due to a $16.1 billion or 42% decrease in average fee earning assets under management. Additionally, Goodwin generated revenues of $5.9 million in the first quarter of 2008. Average fee earning assets under management decreased primarily as a result of market depreciation combined with net redemptions in all products during the last twelve months. Net redemptions were $4.6 billion during that period. Our open-end mutual funds, separately managed accounts and institutional products experienced net redemptions of $0.2 billion, $0.2 billion and $0.1 billion, respectively, during the three months ended March 31, 2009.

Distribution and Service Fees

Distribution and service fees, which are asset-based fees collected from open-end mutual funds for sales, marketing and distribution services we perform on their behalf, declined by $3.2 million or 38% in the first three months of 2009 compared to the same period in 2008 due to lower assets under management. The decrease in fees was substantially offset by a corresponding decrease in trail commissions, which are a component of distribution expenses. Trail commissions represent asset-based payments to our distribution partners based on a percentage of our assets under management.

Administration and Transfer Agent Fees

Administration and transfer agent fees represent fees collected from our open-end mutual funds for fund administration and transfer agent services. Fund administration fees decreased $1.2 million or 35% in the first three months of 2009 compared to the prior year period due to a decline in average assets under management upon which these fees are based. Transfer agent fees decreased $1.2 million or 64% primarily due to a change in the contract with the service provider that also reduced our cost to provide these services. On July 1, 2008, we outsourced certain of the transfer agent functions. Transfer agent revenues are reported net of sub-transfer agent expenses. The additional sub-transfer agent fees reflected as a reduction of revenue are more than offset by the . . .