VIRTUS INVESTMENT PARTNERS, INC. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021, the end of the period covered by this Annual Report on Form 10-K. Changes in Internal Controls over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management's Report on Internal Control over Financial Reporting Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policy or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 based upon the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our internal control over financial reporting was effective as of December 31, 2021. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Deloitte & Touche LLP, our independent registered public accounting firm, as stated in their report, which is included in Item 15 "Exhibits and Financial Statement Schedules" of this Annual Report on Form 10-K. 37 Table of Contents Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 38 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance. Information required by this Item 10 is incorporated herein by reference to our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A under the Exchange Act. Item 11. Executive Compensation. Information required by this Item 11 is incorporated herein by reference to our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A under the Exchange Act. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Information required by Item 403 of Regulation S-K is incorporated herein by reference to our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A under the Exchange Act. The following table sets forth information as of December 31, 2021 with respect to compensation plans under which shares of our common stock may be issued: EQUITY COMPENSATION PLAN INFORMATION (a) (b) (c) Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights (1) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders (2) 430,730 $ — 807,671 Equity compensation plans not approved by security holders — — — Total 430,730 $ — 807,671 (1) The weighted-average exercise price set forth in this column is calculated excluding outstanding restricted stock unit awards ("RSUs") since recipients of such awards are not required to pay an exercise price to receive the shares subject to these awards. (2) Represents shares of our common stock issuable upon the vesting of RSUs outstanding under the Company's Omnibus Incentive and Equity Plan (the "Omnibus Plan"). Of the 3,370,000 maximum number of shares of our common stock authorized for issuance under the Omnibus Plan, 119,634 shares of common stock have been issued on a cumulative basis in the form of direct grants to directors. Item 13. Certain Relationships and Related Transactions, and Director Independence. Information required by this Item 13 is incorporated herein by reference to our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A under the Exchange Act. Item 14. Principal Accountant Fees and Services. Information required by this Item 14 is incorporated herein by reference to our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A under the Exchange Act. 39 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules. (a)(1) Financial Statements: The following Report of Independent Registered Public Accounting Firm and Consolidated Financial Statements of Virtus are included in this Annual Report: Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) Consolidated Balance Sheets as of December 31, 2021 and 2020 Consolidated Statements of Operations for the Years Ended December 31, 202 1 , 20 20 and 201 9 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 202 1 , 20 20 and 201 9 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 202 1 , 20 20 and 201 9 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 1 , 20 20 and 201 9 Notes to Consolidated Financial Statements (a)(2) Financial Statement Schedules: All financial statement schedules have been omitted because the required information is either presented on the consolidated financial statements or the notes thereto or is not applicable or required. 40 Table of Contents (a)(3) Exhibits: The following exhibits are filed herewith or incorporated herein by reference: Exhibit Number Exhibit Description (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession 2.1 Separation Agreement, Plan of Reorganization and Distribution by and between The Phoenix Companies, Inc. and the Registrant, dated as of December 18, 2008 (incorporated by reference to Exhibit 2.1 of the Registrant's Amendment No. 4 to Form 10, filed December 19, 2008). 2.2 Agreement and Plan of Merger dated as of December 16, 2016 among the Registrant, 100 Pearl Street 2, LLC, Lightyear Fund III, AIV-2, L.P., and RidgeWorth Holdings LLC (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K, filed December 22, 2016). 2.3 Securities Purchase Agreement among the Registrant, Sustainable Growth Advisers, LP ("SGA"), SGIA, LLC, Estancia Capital Partners, L.P. and each of the management partners of SGA named therein, dated as of February 1, 2018 (incorporated by reference to Exhibit 2.3 of the Registrant's Annual Report on Form 10-K, filed February 27, 2018). 2.4 Membership Interest Purchase Agreement by and among the Registrant, Westchester Capital Management, LLC, Westchester Capital Partners, LLC, LPC Westchester, LP, MTSWCM Holdings, LLC, RDBWCM Holdings, LLC, and the Individual Equityholders (as defined therein), dated February 1, 2021 (incorporated by reference to Exhibit 2.4 of the Registrant’s Annual Report on Form 10-K, filed February 26, 2021). (3) Articles of Incorporation and Bylaws 3.1 Amended and Restated Certificate of Incorporation of the Registrant, dated December 18, 2008 (incorporated by reference to Exhibit 3.1 of the Registrant's Amendment No. 4 to Form 10, filed December 19, 2008). 3.2 Amended and Restated Bylaws of the Registrant, as amended on February 14, 2018 (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K, filed February 16, 2018). 3.3 Certificate of Designations of Series A Non-Voting Convertible Preferred Stock and Series B Voting Convertible Preferred Stock of the Registrant, dated October 31, 2008 (incorporated by reference to Exhibit 4.2 of the Registrant's Amendment No. 2 to Form 10, filed November 14, 2008). 3.4 Certificate of Amendment of the Certificate of Designations of Series A Non-Voting Convertible Preferred Stock and Series B Voting Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Quarterly Report on Form 10-Q, filed August 13, 2009). 3.5 Certificate of Designations of Series C Junior Participating Preferred Stock of the Registrant, dated December 29, 2008 (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K, filed January 2, 2009). 3.6 Certificate of Designations of 7.25% Series D Mandatory Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K, filed February 1, 2017). (4) Instruments Defining the Rights of Security Holders including Indentures 4.1 Description of the Registrant's Common Stock (incorporated by reference to Exhibit 4.3 of the Registrant's Annual Report on Form 10-K, filed February 27, 2020) . (10) Material Contracts 10.1 Transition Services Agreement by and between The Phoenix Companies, Inc. and the Registrant, dated as of December 18, 2008 (incorporated by reference to Exhibit 10.1 of the Registrant's Amendment No. 4 to Form 10, filed December 19, 2008). 10.2 Tax Separation Agreement by and between The Phoenix Companies, Inc. and the Registrant, dated December 18, 2008 (incorporated by reference to Exhibit 10.2 of the Registrant's Amendment No. 4 to Form 10, filed December 19, 2008). 10.3 Amendment to Tax Separation Agreement, dated April 8, 2009, by and between The Phoenix Companies, Inc. and the Registrant, dated as of December 18, 2008 (incorporated by reference to Exhibit 10.15 of the Registrant's Annual Report on Form 10-K, filed April 10, 2009). 10.4 Employee Matters Agreement by and between The Phoenix Companies, Inc. and the Registrant, dated December 18, 2008 (incorporated by reference to Exhibit 10.3 of the Registrant's Amendment No. 4 to Form 10, filed December 19, 2008). 41 Table of Contents 10.5* Change in Control Agreement between George R. Aylward and the Registrant, effective as of December 31, 2008 (incorporated by reference to Exhibit 10.4 of the Registrant's Amendment No. 4 to Form 10, filed December 19, 2008). 10.6* Amended and Restated Virtus Investment Partners, Inc. Omnibus Incentive and Equity Plan (incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K, filed May 17, 2021). 10.7* Virtus Investment Partners, Inc. Non-Qualified Excess Investment Plan, effective as of November 1, 2008 (incorporated by reference to Exhibit 10.6 of the Registrant's Amendment No. 2 to Form 10, filed November 14, 2008). 10.8* First Amendment to the Virtus Investment Partners, Inc. Non-Qualified Excess Investment Plan, effective as of February 1, 2010 (incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q, filed May 4, 2010). 10.9* Virtus Investment Partners, Inc. Amended and Restated Executive Severance Allowance Plan, effective as of February 2, 2009 (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K, filed February 4, 2009). 10.10* Form of Non-Qualified Stock Option Agreement under the Virtus Investment Partners, Inc. Omnibus Incentive and Equity Plan (incorporated by reference to Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q, filed May 13, 2009). 10.11* Form of Restricted Stock Units Agreement under the Virtus Investment Partners, Inc. Omnibus Incentive and Equity Plan (incorporated by reference to Exhibit 10.5 of the Registrant's Quarterly Report on Form 10-Q, filed May 13, 2009). 10.12* Form of Performance Share Units Agreement under the Virtus Investment Partners, Inc. Omnibus Incentive and Equity Plan (incorporated by reference to Exhibit 10.30 of the Registrant's Quarterly Report on Form 10-Q, filed August 5, 2011). 10.13* Form of Indemnity Agreement (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q, filed November 4, 2009). 10.14* Offer Letter from the Registrant to Barry M. Mandinach dated April 4, 2014 (incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q, filed May 7, 2014). 10.15* Offer Letter from the Registrant to Wendy J. Hills dated July 26, 2019 (incorporated by reference to Exhibit 10.15 of the Registrant’s Annual Report on Form 10-K, filed February 26, 2021). 10.16* Offer Letter from the Registrant to Richard W. Smirl dated April 7, 2021 (incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q filed May 6, 2021). 10.17 Amended and Restated Credit Agreement, dated as of September 28, 2021, by and among Virtus Investment Partners, Inc. as borrower, Morgan Stanley Senior Funding, Inc. as administrative agent, and the Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed October 4, 2021). (21) Subsidiaries of the Registrant 21.1 Virtus Investment Partners, Inc. Subsidiaries List. (23) Consents of Experts and Counsel 23.1 Consent of Independent Registered Public Accounting Firm. 31.1 Certifications of Registrant's Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certifications of Registrant's Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certifications of Registrant's Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101 The following information is formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020, (ii) Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019, (v) Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2021, 2020 and 2019 and (vi) Notes to Consolidated Financial Statements. 104 Cover page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101) * Management contract, compensatory plan or arrangement. 42 Table of Contents The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs at the date they were made or at any other time. Item 16. Form 10-K Summary. None. 43 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 25, 2022 Virtus Investment Partners, Inc. By: /S/ MICHAEL A. ANGERTHAL Michael A. Angerthal Executive Vice President Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of February 25, 2022. /S/ TIMOTHY A. HOLT /S/ GEORGE R. AYLWARD Timothy A. Holt Director and Non-Executive Chairman George R. Aylward President, Chief Executive Officer and Director (Principal Executive Officer) /S/ PETER L. BAIN /S/ SUSAN S. FLEMING Peter L. Bain Director Susan S. Fleming, Ph.D. Director /S/ PAUL G. GREIG /S/ MELODY L. JONES Paul G. Greig Director Melody L. Jones Director /S/ W. HOWARD MORRIS /S/ STEPHEN T. ZARRILLI W. Howard Morris Director Stephen T. Zarrilli Director /S/ MICHAEL A. ANGERTHAL Michael A. Angerthal Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 44 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F- 2 Audited Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 2021 and 2020 F- 6 Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020, and 2019 F- 7 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 20 2 1 , 20 20 and 201 9 F- 8 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 202 1 , 20 20 and 201 9 F- 9 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 1 , 20 20 and 201 9 F- 10 Notes to Consolidated Financial Statements F- 12 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Virtus Investment Partners, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Virtus Investment Partners, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. F-2 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Assets Acquired - Refer to Notes 2 and 4 to the financial statements Critical Audit Matter Description During the year, the Company completed an asset acquisition as part of a strategic partnership with Allianz Global Investors ("AllianzGI"), and two business combinations of NFJ Investment Group ("NFJ") and Westchester Capital Management ("Westchester"). The Company recorded the investment contracts and tradenames acquired under the asset acquisition at cost based on their relative fair values, and at fair value for those assets acquired under the business combinations. Management estimated the fair value of the assets acquired under the asset acquisition and the business combinations using a discounted cash flow method for the investment contracts and a royalty savings method for the tradenames. The determination required management to make significant estimates and assumptions related to future cash flows and the selection of the discount rates and long-term growth rates for these assets. The inputs used in estimating the fair value are in most cases unobservable and reflect management’s own judgments about the assumptions market participants would use in pricing the assets. Auditing the valuations of the assets acquired involved a high degree of judgment and an increased extent of effort, including involving our internal fair value specialists in evaluating management’s judgments especially as it relates to management’s assumptions of future cash flows, discount rates, and long-term growth rates. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the valuation of assets acquired for the AllianzGI, NFJ, and Westchester included the following, among others: • We tested the design and operating effectiveness of controls over valuation of the assets acquired including controls over management’s projections of future cash flows, discount rates, and long-term growth rates. • We evaluated the reasonableness of significant business assumptions related to future cash flows, by comparing the projections to historical results and certain peer companies. We also held various discussions with accounting personnel and management regarding the business assumptions utilized in the valuation models and, on a sample basis, obtained audit evidence to substantiate the assumptions therein. • With the assistance of our internal fair value specialists we evaluated certain valuation assumptions, including discount rates and long-term growth rates. – We evaluated the reasonableness of the valuation methodologies used by management to determine whether they were consistent with generally accepted valuation practices. – We estimated the discount rates used by management to determine whether management's discount rate estimates were within our independent range. – We performed an analysis of inflation, economic, and industry growth statistics to determine whether management's long-term growth rate used in the income approach fell within a reasonable range of the market data. – We evaluated the appropriateness of management’s selection of guideline public companies used in developing the discount rates. • We evaluated whether the assumptions used were consistent with evidence obtained in other areas of the audit. Valuation of Contingent Consideration – Refer to Notes 2 and 4 to the financial statements Critical Audit Matter Description During the year, the Company entered into contingent payment arrangements for the asset acquisition as part of a strategic partnership with AllianzGI and the business combinations of NFJ and Westchester. Accordingly, at the respective acquisition F-3 Table of Contents dates, the contingent consideration liability was recorded. Subsequent to the acquisition dates, changes in the contingent consideration liability were recorded to reflect remeasurement and payments made, if applicable. The contingent consideration related to the AllianzGI asset acquisition was determined to be estimable and probable of payment, and therefore was recorded at the estimated value on the acquisition date and are periodically evaluated for remeasurement. Determining the estimated value of the contingent consideration involves significant management judgment in estimating revenue projections. The contingent payment obligations related to the NFJ and Westchester business combinations were recorded as a liability at fair value on the acquisition date and are remeasured at fair value each reporting date. Management uses a simulation model to determine the fair value of the Company's estimated contingent liability given the variable nature of the arrangements and the significant management judgments in estimating revenue projections, market rate assumptions, discount rates, and risk volatility assumptions. The valuation of the AllianzGI, NFJ and Westchester contingent consideration uses unobservable inputs and reflect management’s own judgments about the assumptions market participants would use in pricing the liabilities. Auditing the estimates involved a high degree of judgment and an increased extent of effort. For the fair value of the business combination contingent consideration, our internal fair value specialists were engaged to evaluate management’s judgments utilized within the simulation model especially as it relates to revenue projections, market rate assumptions, discount rates, and risk volatility assumptions. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the valuation of the contingent consideration liability for the AllianzGI, NFJ, and Westchester acquisitions included the following, among others: • We tested the design and operating effectiveness of controls over management’s valuation of the contingent consideration liability. • We held discussions with accounting personnel and management regarding the revenue projections utilized in the valuation models. We confirmed that the products included in the revenue projections utilized in the valuation models agreed to those within the respective acquisition agreements. • For the AllianzGI acquisition, we evaluated the methodology used to calculate the estimated value of the contingent payment obligations to confirm it was appropriate for an asset acquisition and confirmed that the amounts recorded were based on the revenue projections and the contractual payment rate. • With the assistance of our internal fair value specialists, we performed the below procedures related to the NFJ and Westchester contingent consideration liability: – We evaluated the valuation methodology used by management to determine whether they were consistent with generally accepted valuation practices. – We estimated the fair value of the contingent liability through the preparation of independent simulation models developed from the underlying acquisition agreements and using independently sourced input data. We compared the fair value estimate produced by our independent model to the model prepared by management. – We evaluated the appropriateness of management’s selection of guideline public companies used for market rate and risk volatility assumptions and the discount rates used by management in the simulation model. • We evaluated whether the assumptions used were consistent with evidence obtained in other areas of the audit. Consolidation — Consolidation of Investment Products - Refer to Notes 2 and 20 to the financial statements Critical Audit Matter Description The Company is required to consolidate investment products to which it provides investment management services when it (1) has a majority voting interest in an investment product that is a voting interest entity (VOE) or otherwise has the power to govern the financial and operating policies of the entity; or (2) it is considered the primary beneficiary of an investment product that is a variable interest entity (VIE). Management is required to evaluate whether an investment product is a VOE or a VIE upon its initial involvement with the investment product, or the occurrence of a reconsideration event. This assessment involves management’s judgment and is determined based on a variety of factors including the capital structure of the investment product, the investment product’s activities, the equity investment at risk, and the proportionate voting and economic interests of the investors in the investment product including the Company. For each investment product that is considered a VIE, management performs a primary beneficiary analysis to determine if it F-4 Table of Contents holds a controlling financial interest in the investment product. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Management’s evaluation of these two criteria involves judgments to analyze the governing documents of the investment product. The level of judgment required may vary in significance based on the complexity of the voting rights and structure economic interests of the investment product and the facts and circumstances of the Company’s investment. This required a high degree of auditor judgment and an increased extent of effort to evaluate management’s conclusions related to the power criterion and the economics criterion, including characterizing rights as protective or participating and evaluating all variable interests for the potential significance of economic exposure in the entity. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to testing the consolidation assessment of VIEs included the following, among others: • We tested the design and operating effectiveness of controls over management’s review of the consolidation analysis of new or modified investment products during the year. • We read and analyzed the governing documents (including the collateral management agreement, preference share subscription agreement and credit agreement, if applicable) of each investment product to assess management’s conclusions. Our procedures included evaluating the following: – Key facts included in management’s consolidation analysis are consistent with the governing documents and the Company’s interests in the investment products; – Relevant terms impacting the consolidation analysis under GAAP were considered including the evaluation of whether the investment product is a VOE or VIE; – Judgments made by management based on the capital structure of the investment product, the investment product’s activities, the equity investment at risk, and the proportionate voting and economic interests of the investors in the investment product including the Company were appropriate; – The determined primary beneficiary of those investment products possesses both (1) the power to direct activities of the VIE and (2) the obligation to absorb losses or the right to receive benefits from the VIE. /s/ DELOITTE & TOUCHE LLP Hartford, Connecticut February 25, 2022 We have served as the Company's auditor since 2018. F-5 Table of Contents Virtus Investment Partners, Inc. Consolidated Balance Sheets (in thousands, except share data) December 31, 2021 December 31, 2020 Assets: Cash and cash equivalents $ 378,921 $ 246,511 Investments 108,890 64,944 Accounts receivable, net 123,873 84,499 Assets of consolidated investment products ("CIP") Cash and cash equivalents of CIP 206,620 86,980 Cash pledged or on deposit of CIP 604 6,358 Investments of CIP 2,140,238 2,333,277 Other assets of CIP 44,210 13,430 Furniture, equipment and leasehold improvements, net 12,542 14,488 Intangible assets, net 500,571 280,264 Goodwill 338,406 290,366 Deferred taxes, net 19,204 9,538 Other assets 60,102 36,288 Total assets $ 3,934,181 $ 3,466,943 Liabilities and Equity Liabilities: Accrued compensation and benefits $ 187,449 $ 122,514 Accounts payable and accrued liabilities 48,496 25,357 Dividends payable 14,824 9,013 Contingent consideration 162,564 — Debt 266,346 201,212 Other liabilities 60,225 36,120 Liabilities of CIP Notes payable of CIP 2,033,617 2,190,445 Securities purchased payable and other liabilities of CIP 185,068 45,829 Total liabilities 2,958,589 2,630,490 Commitments and Contingencies (Note 12) Redeemable noncontrolling interests 138,965 115,513 Equity: Equity attributable to Virtus Investment Partners, Inc.: Common stock, $ 0.01 par value, 1,000,000,000 shares authorized; 11,906,747 shares issued and 7,506,151 shares outstanding at December 31, 2021 and 11,790,869 shares issued and 7,583,466 shares outstanding at December 31, 2020 119 118 Additional paid-in capital 1,276,424 1,298,002 Retained earnings (accumulated deficit) 60,962 ( 135,259 ) Accumulated other comprehensive income (loss) 20 29 Treasury stock, at cost, 4,400,596 and 4,207,403 shares at December 31, 2021 and December 31, 2020, respectively ( 509,248 ) ( 451,749 ) Total equity attributable to Virtus Investment Partners, Inc. 828,277 711,141 Noncontrolling interests 8,350 9,799 Total equity 836,627 720,940 Total liabilities and equity $ 3,934,181 $ 3,466,943 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents Virtus Investment Partners, Inc. Consolidated Statements of Operations Years Ended December 31, (in thousands, except per share data) 2021 2020 2019 Revenues Investment management fees $ 781,585 $ 505,338 $ 461,477 Distribution and service fees 90,555 38,425 40,898 Administration and shareholder service fees 102,531 59,463 59,884 Other income and fees 4,563 670 987 Total revenues 979,234 603,896 563,246 Operating Expenses Employment expenses 358,230 267,299 240,521 Distribution and other asset-based expenses 141,039 77,010 82,099 Other operating expenses 90,134 69,896 74,363 Other operating expenses of consolidated investment products ("CIP") 3,562 10,585 4,015 Change in fair value of contingent consideration 12,400 — — Restructuring and severance — 1,155 2,302 Depreciation expense 3,900 4,660 4,992 Amortization expense 44,481 30,127 30,244 Total operating expenses 653,746 460,732 438,536 Operating Income (Loss) 325,488 143,164 124,710 Other Income (Expense) Realized and unrealized gain (loss) on investments, net 3,907 7,139 7,044 Realized and unrealized gain (loss) of CIP, net ( 1,761 ) ( 1,965 ) ( 1,202 ) Other income (expense), net 4,230 1,876 2,411 Total other income (expense), net 6,376 7,050 8,253 Interest Income (Expense) Interest expense ( 9,240 ) ( 11,894 ) ( 19,473 ) Interest and dividend income 1,364 1,367 3,844 Interest and dividend income of investments of CIP 90,080 109,648 115,356 Interest expense of CIP ( 60,398 ) ( 85,437 ) ( 92,005 ) Total interest income (expense), net 21,806 13,684 7,722 Income (Loss) Before Income Taxes 353,670 163,898 140,685 Income tax expense (benefit) 90,835 43,935 35,177 Net Income (Loss) 262,835 119,963 105,508 Noncontrolling interests ( 54,704 ) ( 40,006 ) ( 9,859 ) Net Income (Loss) Attributable to Stockholders 208,131 79,957 95,649 Preferred stockholder dividends — — ( 8,337 ) Net Income (Loss) Attributable to Virtus Investment Partners, Inc. $ 208,131 $ 79,957 $ 87,312 Earnings (Loss) per Share-Basic $ 27.13 $ 10.49 $ 12.54 Earnings (Loss) per Share-Diluted $ 26.01 $ 10.02 $ 11.74 Weighted Average Shares Outstanding-Basic 7,672 7,620 6,963 Weighted Average Shares Outstanding-Diluted 8,003 7,976 8,149 The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents Virtus Investment Partners, Inc. Consolidated Statements of Comprehensive Income Years Ended December 31, (in thousands) 2021 2020 2019 Net Income (Loss) $ 262,835 $ 119,963 $ 105,508 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment, net of tax of $ 3 , $( 7 ) and $( 5 ) for the years ended December 31, 2021, 2020 and 2019, respectively ( 9 ) 20 14 Other comprehensive income (loss) ( 9 ) 20 14 Comprehensive income (loss) 262,826 119,983 105,522 Comprehensive (income) loss attributable to noncontrolling interests ( 54,704 ) ( 40,006 ) ( 9,859 ) Comprehensive income (loss) attributable to stockholders $ 208,122 $ 79,977 $ 95,663 The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents Virtus Investment Partners, Inc. Consolidated Statements of Changes in Stockholders' Equity Permanent Equity Temporary Equity Common Stock Preferred Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Attributed To Shareholders Non- controlling Interests Total Equity Redeemable Non- controlling Interests (in thousands, except share data) Shares Par Value Shares Amount Shares Amount Balances at December 31, 2018 6,997,382 $ 106 1,150,000 $ 110,843 $ 1,209,805 $ ( 310,865 ) $ ( 731 ) 3,555,242 $ ( 379,249 ) $ 629,909 $ 13,958 $ 643,867 $ 57,481 Net income (loss) — — — — — 95,649 — — — 95,649 ( 1,027 ) 94,622 10,886 Foreign currency translation adjustment — — — — — — 14 — — 14 — 14 — Net subscriptions (redemptions) and other — — — — 838 — — — — 838 ( 2,373 ) ( 1,535 ) ( 4,522 ) Reclassification from other comprehensive (income) loss — — — — — — 726 — — 726 — 726 — Cash dividends declared ($ 7.25 per preferred share) — — — — ( 8,337 ) — — — — ( 8,337 ) — ( 8,337 ) — Cash dividends declared ($ 2.44 per common share) — — — — ( 18,130 ) — — — — ( 18,130 ) — ( 18,130 ) — Repurchase of common shares ( 372,365 ) — — — — — — 372,365 ( 40,000 ) ( 40,000 ) — ( 40,000 ) — Issuance of common shares related to employee stock transactions 184,263 1 — — 1,552 — — — — 1,553 — 1,553 — Taxes paid on stock-based compensation — — — — ( 7,696 ) — — — — ( 7,696 ) — ( 7,696 ) — Stock-based compensation — — — — 21,173 — — — — 21,173 — 21,173 — Balances at December 31, 2019 6,809,280 107 1,150,000 110,843 1,199,205 ( 215,216 ) 9 3,927,607 ( 419,249 ) 675,699 10,558 686,257 63,845 Net income (loss) — — — — — 79,957 — — — 79,957 1,298 81,255 38,708 Foreign currency translation adjustment — — — — — — 20 — — 20 — 20 — Net subscriptions (redemptions) and other — — — — ( 167 ) — — — — ( 167 ) ( 2,057 ) ( 2,224 ) 12,960 Conversion of preferred stock 912,806 9 ( 1,150,000 ) ( 110,843 ) 110,834 — — — — — — — — Cash dividends declared ($ 2.98 per common share) — — — — ( 24,998 ) — — — — ( 24,998 ) — ( 24,998 ) — Repurchase of common shares ( 279,796 ) — — — — — — 279,796 ( 32,500 ) ( 32,500 ) — ( 32,500 ) — Issuance of common shares related to employee stock transactions 141,176 2 — — 184 — — — — 186 — 186 — Taxes paid on stock-based compensation — — — — ( 6,608 ) — — — — ( 6,608 ) — ( 6,608 ) — Stock-based compensation — — — — 19,552 — — — — 19,552 — 19,552 — Balances at December 31, 2020 7,583,466 118 — — 1,298,002 ( 135,259 ) 29 4,207,403 ( 451,749 ) 711,141 9,799 720,940 115,513 Net income (loss) — — — — — 208,131 — — — 208,131 817 208,948 53,887 Foreign currency translation adjustment — — — — — — ( 9 ) — — ( 9 ) — ( 9 ) — Net subscriptions (redemptions) and other — — — — — — — — — ( 2,266 ) ( 2,266 ) ( 30,435 ) Cash dividends declared ($ 4.64 per common share) — — — — ( 25,312 ) ( 11,910 ) — — ( 37,222 ) — ( 37,222 ) — Repurchase of common shares ( 193,193 ) — — — — — — 193,193 ( 57,499 ) ( 57,499 ) — ( 57,499 ) — Issuance of common shares related to employee stock transactions 115,878 1 — — 65 — — — — 66 — 66 — Taxes paid on stock-based compensation — — — — ( 19,509 ) — — — — ( 19,509 ) — ( 19,509 ) — Stock-based compensation — — — — 23,178 — — — — 23,178 — 23,178 — Balances at December 31, 2021 7,506,151 $ 119 — $ — $ 1,276,424 $ 60,962 $ 20 4,400,596 $ ( 509,248 ) $ 828,277 $ 8,350 $ 836,627 $ 138,965 The accompanying notes are an integral part of these consolidated financial statements. F-9 Table of Contents Virtus Investment Partners, Inc. Consolidated Statements of Cash Flow Years Ended December 31, (in thousands) 2021 2020 2019 Cash Flows from Operating Activities: Net income (loss) $ 262,835 $ 119,963 $ 105,508 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation expense, intangible asset and other amortization 50,769 38,853 39,643 Stock-based compensation 26,225 21,481 22,230 Amortization of deferred commissions 3,956 2,052 2,940 Payments of deferred commissions ( 5,963 ) ( 2,089 ) ( 2,097 ) Equity in earnings of equity method investments ( 4,403 ) ( 1,964 ) ( 2,600 ) Realized and unrealized (gains) losses on investments, net ( 2,721 ) ( 7,128 ) ( 6,855 ) Distributions from equity method investments 3,710 1,192 828 Sales (purchases) of investments, net ( 7,952 ) 12,296 9,057 (Gain) loss on extinguishment of debt — ( 705 ) — Change in fair value of contingent consideration 12,400 — — Deferred taxes, net ( 9,664 ) 6,332 5,982 Changes in operating assets and liabilities: Accounts receivable, net and other assets ( 30,057 ) ( 9,698 ) ( 1,382 ) Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities 72,628 13,743 ( 2,991 ) Operating activities of consolidated investment products ("CIP"): Realized and unrealized (gains) losses on investments of CIP, net ( 4,264 ) ( 5,889 ) ( 106 ) Purchases of investments by CIP ( 1,176,936 ) ( 1,304,723 ) ( 1,029,746 ) Sales of investments by CIP 1,454,591 883,888 810,749 Net proceeds (purchases) of short-term investments and securities sold short by CIP 16,272 ( 934 ) 5,643 Change in other assets and liabilities of CIP ( 856 ) ( 3,942 ) 1,969 Amortization of discount on notes payable of CIP 5,159 11,169 4,505 Net cash provided by (used in) operating activities 665,729 ( 226,103 ) ( 36,723 ) Cash Flows from Investing Activities: Capital expenditures and other asset purchases ( 5,838 ) ( 1,043 ) ( 7,555 ) Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net ( 13,559 ) 9,724 9,980 Acquisition of business, net of cash acquired of $ 1,197 ( 155,636 ) — — Sale of available-for-sale securities — — 2,023 Net cash provided by (used in) investing activities ( 175,033 ) 8,681 4,448 Cash Flows from Financing Activities: Refinancing of credit agreement 81,155 — — Payment of long-term debt ( 12,513 ) ( 79,086 ) ( 54,851 ) Payment of deferred financing costs ( 7,039 ) — — Repurchase of common shares ( 57,499 ) ( 32,500 ) ( 40,000 ) Preferred stock dividends paid — ( 2,084 ) ( 8,338 ) Common stock dividends paid ( 31,411 ) ( 22,800 ) ( 16,977 ) Proceeds from exercise of stock options 66 163 726 Taxes paid related to net share settlement of restricted stock units ( 19,509 ) ( 6,608 ) ( 7,696 ) Net contributions from (distributions to) noncontrolling interests ( 3,270 ) ( 7,263 ) 7,786 F-10 Table of Contents Years Ended December 31, 2020 2019 2018 Financing activities of CIP Borrowings by CIP 363,539 779,982 414,605 Payments on borrowings by CIP ( 557,919 ) ( 394,472 ) ( 195,697 ) Net cash provided by (used in) financing activities ( 244,400 ) 235,332 99,558 Net increase (decrease) in cash and cash equivalents 246,296 17,910 67,283 Cash, cash equivalents and restricted cash, beginning of year 339,849 321,939 254,656 Cash, cash equivalents and restricted cash, end of year $ 586,145 $ 339,849 $ 321,939 Supplemental Disclosure of Cash Flow Information Interest paid $ 6,478 $ 8,857 $ 18,072 Income taxes paid, net 95,411 35,388 29,062 Supplemental Disclosure of Non-Cash Investing and Financing Activities Capital expenditures $ ( 47 ) $ 55 $ ( 1,791 ) Conversion of preferred stock to common stock — 115,000 — Preferred stock dividends payable — — 2,084 Common stock dividends payable 11,261 6,218 4,562 Contingent consideration 150,164 — — Consolidation (Deconsolidation) of CIP, net ( 30,550 ) 17,137 ( 13,926 ) December 31, (in thousands) 2021 2020 Reconciliation of cash, cash equivalents and restricted cash Cash and cash equivalents $ 378,921 $ 246,511 Cash of consolidated investment products 206,620 86,980 Cash pledged or on deposit of consolidated investment products 604 6,358 Cash, cash equivalents and restricted cash at end of year $ 586,145 $ 339,849 The accompanying notes are an integral part of these consolidated financial statements. F-11 Table of Contents Virtus Investment Partners, Inc. Notes to Consolidated Financial Statements 1. Organization and Business Virtus Investment Partners, Inc. (the "Company," "we," "us," "our" or "Virtus"), a Delaware corporation, operates in the investment management industry through its subsidiaries. The Company provides investment management and related services to individuals and institutions. The Company's retail investment management services are provided to individuals through products consisting of mutual funds registered pursuant to the Investment Company Act of 1940, as amended, and Undertaking for Collective Investment in Transferable Securities ("UCITS" or "global funds" and collectively, with mutual funds, the "open-end funds"), exchange traded funds ("ETFs"), closed-end funds (collectively, with open-end funds and ETFs, the "funds") and retail separate accounts. Institutional investment management services are offered through separate accounts and pooled or commingled structures to a variety of institutional clients. The Company also provides subadvisory services to other investment advisers and serves as the collateral manager for structured products. 2. Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated financial statements include the accounts of the Company, its subsidiaries and investment products that are consolidated. Voting interest entities ("VOEs") are consolidated when the Company is considered to have a controlling financial interest, which is typically present when the Company owns a majority of the voting interest in an entity or otherwise has the power to govern the financial and operating policies of the entity. The Company evaluates any variable interest entity ("VIEs") in which the Company has a variable interest for consolidation. A VIE is an entity in which either (i) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (ii) where as a group, the holders of the equity investment at risk do not possess: (x) the power through voting or similar rights to direct the activities that most significantly impact the entity's economic performance; (y) the obligation to absorb expected losses or the right to receive expected residual returns of the entity; or (z) proportionate voting and economic interests and where substantially all of the entity's activities either involve or are conducted on behalf of an investor with disproportionately fewer voting rights. If an entity has any of these characteristics, it is considered a VIE and is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that has both the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. See Note 20 for additional information related to the consolidation of investment products. Intercompany accounts and transactions have been eliminated. Noncontrolling Interests Noncontrolling interests - CIP Noncontrolling interests - CIP represent third-party investments in the Company's CIP and are classified as redeemable noncontrolling interests on the Consolidated Balance Sheets because investors in those products are able to request withdrawal at any time. Noncontrolling interests - affiliate Noncontrolling interests - affiliate represent minority interests held in a consolidated affiliate. These interests are subject to holder put rights and Company call rights at established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value. The rights are exercisable at pre-established intervals (between four and seven years from their issuance) or upon certain conditions such as retirement. The put and call rights are not legally detachable or separately exercisable and are deemed to be embedded in the related noncontrolling interests. The Company, in purchasing affiliate equity, has the option to settle in cash or shares of the Company's common stock and is entitled to the cash flow associated with any purchased equity. Minority interests in an affiliate are recorded at estimated redemption value within redeemable noncontrolling interests on the Consolidated Balance Sheets and any changes in the estimated redemption value are recorded on the Consolidated Statements of Operations within noncontrolling interests. F-12 Table of Contents Notes to Consolidated Financial Statements—(Continued) Use of Estimates The preparation of the consolidated financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management believes the estimates used in preparing the consolidated financial statements are reasonable and prudent. Actual results could differ from those estimates. Segment Information Accounting Standards Codification ("ASC") 280, Segment Reporting , establishes disclosure requirements relating to operating segments in annual and interim financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources to the segment and assess its performance. The Company's Chief Executive Officer is the Company's chief operating decision maker. The Company operates in one business segment, namely as an asset manager providing investment management and related services for individual and institutional clients. Although the Company provides disclosures regarding assets under management and other asset flows by product, the Company's determination that it operates in one business segment is based on the fact that the same investment professionals manage both retail and institutional products, operational resources support multiple products, such products have the same or similar regulatory framework and the Company's chief operating decision maker reviews the Company's financial performance on a consolidated level. Investment managers within the Company are generally not aligned with a specific product type. Cash and Cash Equivalents Cash and cash equivalents consist of cash in banks and money market fund investments. Restricted Cash The Company considers cash and cash equivalents of CIP and cash pledged or on deposit of CIP to be restricted as it is not available to the Company for its general operations. Investments Investment securities - fair value Investment securities - fair value consist primarily of investments in the Company's sponsored funds and equity securities and are carried at fair value in accordance with ASC 320, Investments-Debt and Equity Securities ("ASC 320"), and Topic 321, Investments-Equity Securities ("ASC 321"). These securities are marked to market based on the respective publicly quoted net asset values of the funds or market prices of the equity securities or bonds. Transactions in these securities are recorded on a trade date basis. Any unrealized appreciation or depreciation on investment securities is reported on the Consolidated Statement of Operations within realized and unrealized gain (loss) on investments. Equity Method Investments Equity method investments consist of Company investments in noncontrolled entities, where the Company does not hold a controlling financial interest but has the ability to significantly influence operating and financial matters. Equity method investments are accounted for in accordance with ASC 323, Investments-Equity Method and Joint Ventures . Under the equity method of accounting, the Company's share of the noncontrolled entities' net income or loss is recorded in other income (expense), net on the Consolidated Statements of Operations. Distributions received reduce the Company's investment. The investment is evaluated for impairment if events or changes indicate that the carrying amount exceeds its fair value. If the carrying amount of an investment does exceed its fair value and the decline in fair value is deemed to be other-than-temporary, an impairment charge will be recorded. Non-qualified Retirement Plan Assets and Liabilities The Company has a non-qualified retirement plan (the "Excess Incentive Plan") that allows certain employees to voluntarily defer compensation. Assets held in trust, which are considered investment securities, are included in investments at fair value in accordance with ASC 820, Fair Value Measurement ("ASC 820"); the associated obligations to participants, which approximate the fair value of the associated assets, are included in other liabilities on the Consolidated Balance Sheets . See Note 6 for additional information related to the Excess Incentive Plan. F-13 Table of Contents Notes to Consolidated Financial Statements—(Continued) Deferred Commissions Deferred commissions, which are included in other assets on the Consolidated Balance Sheets, are commissions paid to broker-dealers on sales of certain mutual fund share classes. Deferred commissions are recovered by the receipt of monthly asset-based distributor fees from the mutual funds or contingent deferred sales charges received upon redemption of shares within the contingent deferred sales charge period, depending on the fund share class. The deferred costs resulting from the sale of shares are amortized on a straight-line basis over the period during which redemptions by the purchasing shareholder are subject to a contingent deferred sales charge, depending on the fund share class, or until the underlying shares are redeemed. Deferred commissions are periodically assessed for impairment. If impairment is indicated, impairment adjustments are recognized in operating income as a component of amortization of deferred commissions. Furniture, Equipment and Leasehold Improvements, Net Furniture, equipment and leasehold improvements are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of three to seven years for furniture and office equipment and three to five years for computer equipment and software. Leasehold improvements are depreciated over the shorter of the remaining estimated lives of the related leases or useful lives of the improvements. Major renewals or betterments are capitalized, and recurring repairs and maintenance are expensed as incurred. Leases The Company leases office space and equipment under various leasing arrangements. In accordance with Accounting Standards Update ("ASU") 2016-02, Leases, the Company's leases are evaluated and classified as either financing leases or operating leases, as appropriate. The Company recognizes a lease liability and a corresponding right of use ("ROU") asset on the commencement date of any lease arrangement. The lease liability is initially measured at the present value of the future lease payments over the lease term using the rate implicit in the arrangement or, if not readily determinable, the Company's incremental borrowing rate. The Company determines its incremental borrowing rate through market sources, including relevant industry rates. A ROU asset is measured initially as the value of the lease liability plus initial direct costs and prepaid lease payments, and less lease incentives received. Lease expense is recognized on a straight-line basis over the lease term and is recorded within other operating expenses on the Consolidated Statement of Operations. Goodwill and Intangible Assets Goodwill represents the excess of the purchase price of business combinations over the identified assets and liabilities acquired. In accordance with ASC 350, Goodwill and Other Intangible Assets, goodwill is not amortized. The Company has a single reporting unit for the purpose of assessing potential impairments of goodwill. An impairment analysis of goodwill is performed annually or more frequently, if warranted by events or changes in circumstances affecting the Company's business. The Company follows ASU 2011-08, Testing Goodwill for Impairment, which provides the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, it is determined that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The Company's 2021 and 2020 annual goodwill impairment analysis did not result in any impairment charges. Definite-lived intangible assets are comprised of certain fund investment advisory contracts, trade names and non-competition agreements. These assets are amortized on a straight-line basis over the estimated useful lives of such assets, which range from zero to five years . Definite-lived intangible assets are evaluated for impairment on an ongoing basis whenever events or circumstances indicate that the carrying value of the definite-lived intangible asset may not be recoverable. The Company determines if impairment has occurred by comparing estimates of future undiscounted cash flows to the carrying value of assets. Assets are considered impaired, and an impairment is recorded, if the carrying value exceeds the expected future undiscounted cash flows. Indefinite-lived intangible assets are comprised of certain trade names and fund investment advisory contracts. These assets are tested for impairment annually or when events or changes in circumstances indicate the assets might be impaired. The Company follows ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment , which provides the option to perform a qualitative assessment of indefinite-lived intangible assets other than goodwill for impairment to determine if additional impairment testing is necessary. The Company's 2021 and 2020 annual indefinite-lived intangible assets impairment analysis did not result in any impairment charges. F-14 Table of Contents Notes to Consolidated Financial Statements—(Continued) Contingent Consideration The Company periodically enters into contingent payment arrangements in connection with its business combinations or asset purchases. In contingent payment arrangements, the Company agrees to pay additional transaction consideration to the seller based on future performance. The Company estimates the value of estimated future payments of these potential future obligations at the time a business combination or asset purchase is consummated. Liabilities under contingent payment arrangements are recorded within contingent consideration on the Consolidated Balance Sheets. Contingent payment obligations related to business combinations are remeasured at fair value each reporting date using a simulation model with the assistance of an independent valuation firm and approved by management (level 3 fair value measurement). The change in fair value is recorded in the current period as a gain or loss. Gains and losses resulting from changes in the fair value of contingent payment obligations are reflected within change in fair value of contingent consideration on the Consolidated Statements of Operations. Contingent payment obligations related to our asset purchases, if estimable and probable of payment, are initially recorded at their estimated value and reviewed every reporting period for changes. Any changes to the estimated value are recorded as an update of the initial acquisition cost of the asset with a corresponding change to the estimated contingent payment obligation on the Consolidated Balance Sheets. Treasury Stock Treasury stock is accounted for under the cost method and is included as a deduction from equity on the Stockholders' Equity section of the Consolidated Balance Sheets. Upon any subsequent resale, the treasury stock account is reduced by the cost of such stock. Revenue Recognition The Company's revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers. Investment management fees, distribution and service fees, and administration and shareholder service fees are generally calculated as a percentage of average net assets of the investment portfolios managed. The net asset values from which these fees are calculated are variable in nature and subject to factors outside of the Company's control such as additional investments, withdrawals and market performance. Because of this, these fees are considered constrained until the end of the contractual measurement period (monthly or quarterly), which is when asset values are generally determinable. Investment Management Fees The Company provides investment management services pursuant to investment management agreements through its affiliated investment advisers (each an "Adviser"). Investment management services represent a series of distinct daily services that are performed over time. Fees earned on funds are based on each fund's average daily or weekly net assets and are generally calculated and received on a monthly basis. The Company records investment management fees net of the fees paid to unaffiliated subadvisers, as the Company is deemed to be the agent of the fund as it relates to the day-to-day investment management services performed by unaffiliated subadvisers, with the Company's performance obligation being to arrange for the provision of that service and not control the specified service before it is performed. Amounts paid to unaffiliated subadvisers for the years ended December 31, 2021, 2020 and 2019 were $ 115.5 million, $ 38.6 million and $ 40.5 million, respectively. Retail separate account fees are generally earned based on the end of the preceding or current quarter's asset values. Institutional account fees are generally earned based on an average of daily or month-end balances or the current quarter's asset values. Fees for structured finance products, for which the Company acts as the collateral manager, consist of senior, subordinated and, in certain instances, incentive management fees. Senior and subordinated management fees are earned at a contractual fee rate applied against the end of the preceding quarter par value of the total collateral being managed with subordinated fees being earned only after certain portfolio criteria are met. Incentive fees on certain of the Company's collateralized loan obligations ("CLOs") are typically a percentage of the excess cash flows available to holders of the subordinated notes, above a threshold level internal rate of return. Distribution and Service Fees Distribution and service fees are sales- and asset-based fees earned from open-end funds, for marketing and distribution F-15 Table of Contents Notes to Consolidated Financial Statements—(Continued) services. Depending on the fund type or share class, these fees primarily consist of an asset-based fee that is paid by the fund over a period of years to cover allowable sales and marketing expenses, or front-end sales charges that are based on a percentage of the offering price. Asset-based distribution and service fees are primarily earned as percentages of the average daily net assets value and are paid monthly pursuant to the terms of the respective distribution and service fee contracts. Distribution and service fees represent two performance obligations comprised of distribution and related shareholder servicing activities. Distribution services are generally satisfied upon the sale of a fund share. Shareholder servicing activities are generally services satisfied over time. The Company distributes its open-end funds through unaffiliated financial intermediaries that comprise national, regional and independent broker-dealers. These unaffiliated financial intermediaries provide distribution and shareholder service activities on behalf of the Company. The Company passes related distribution and service fees to these unaffiliated financial intermediaries for these services and considers itself the principal in these arrangements since it has control of the services prior to the services being transferred to the customer. These payments are classified within distribution and other asset-based expenses. Administration and Shareholder Service Fees The Company provides administrative fund services to its open-end mutual funds, ETFs and the majority of its closed-end funds and shareholder services to its open-end funds. Administration and shareholder services are performed over time. The Company earns fees for these services, that are calculated and paid monthly, based on each fund's average daily or weekly net assets. Administrative fund services include: record keeping, preparing and filing documents required to comply with securities laws, legal administration and compliance services, customer service, supervision of the activities of the funds' service providers, tax services and treasury services. The Company also provides office space, equipment and personnel that may be necessary for managing and administering the business affairs of the funds. Shareholder services include maintaining shareholder accounts, processing shareholder transactions, preparing filings and performing necessary reporting. Other Income and Fees Other income and fees primarily represent fees related to other fee earning assets and contingent sales charges earned from investor redemptions of certain shares sold without a front-end sales charge. Stock-based Compensation The Company accounts for stock-based compensation expense in accordance with ASC 718, Compensation—Stock Compensation ("ASC 718"), which requires the measurement and recognition of compensation expense for share-based awards based on the estimated fair value on the date of grant. Restricted stock units ("RSUs") are stock awards that entitle the holder to receive shares of the Company's common stock as the award vests over time or when certain performance metrics are achieved. The fair value of each RSU award is based on the fair market value price on the date of grant unless it contains a performance metric that is considered a "market condition." Compensation expense for RSU awards is recognized ratably over the vesting period on a straight-line basis. The value of RSUs that contain a performance metric ("PSUs") is determined based on (i) the fair market value price on the date of grant, for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718 or (ii) the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric under ASC 718. Compensation expense for PSU awards with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the end of the performance period. Compensation expense for PSU awards that contain a market condition is fixed at the date of grant and is not adjusted in future periods based upon the achievement of the market condition. Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes ("ASC 740"), which requires recognition of the amount of taxes payable or refundable for the current year as well as deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the reported amounts on the Consolidated Financial Statements. The Company's methodology for determining the realizability of deferred tax assets includes consideration of taxable income in prior carryback year(s), if carryback is permitted under the tax law, as well as consideration of the reversal of deferred tax liabilities that are in the same period and jurisdiction and are of the same character as the temporary differences F-16 Table of Contents Notes to Consolidated Financial Statements—(Continued) that gave rise to the deferred tax assets. The Company's methodology also includes estimates of future taxable income from its operations as well as the expiration dates and amounts of carry-forwards related to net operating losses and capital losses. These estimates are projected through the life of the related deferred tax assets based on assumptions that the Company believes to be reasonable and consistent with demonstrated operating results. Unanticipated changes in future operating results may have a significant impact on the realization of deferred tax assets. Valuation allowances are provided when it is determined that it is more likely than not that the benefit of deferred tax assets will not be realized. Comprehensive Income The Company reports all changes in comprehensive income on the Consolidated Statements of Changes in Stockholders' Equity and the Consolidated Statements of Comprehensive Income. Comprehensive income includes net income (loss) and foreign currency translation adjustments (net of tax). Earnings (Loss) per Share Earnings (loss) per share ("EPS") is calculated in accordance with ASC 260, Earnings per Share . Basic EPS is computed by dividing net income (loss) attributable to Virtus Investment Partners, Inc. by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, including shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock method, as determined under the if-converted method. For purposes of calculating diluted EPS, preferred stock dividends have been subtracted from net income (loss) in periods in which utilizing the if-converted method would be anti-dilutive. Fair Value Measurements and Fair Value of Financial Instruments ASC 820 establishes a framework for measuring fair value and a valuation hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. The Financial Accounting Standards Board (the "FASB") defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation hierarchy contains three levels as follows: Level 1—Unadjusted quoted prices for identical instruments in active markets. Level 1 assets and liabilities may include debt securities and equity securities that are traded in an active exchange market. Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs may include observable market data such as closing market prices provided by independent pricing services after considering factors such as the yields or prices of comparable investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. In addition, pricing services may determine the fair value of equity securities traded principally in foreign markets when it has been determined that there has been a significant trend in the U.S. equity markets or in index futures trading. Level 2 assets and liabilities may include debt and equity securities, purchased loans and over-the-counter derivative contracts whose fair value is determined using a pricing model without significant unobservable market data inputs. Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets. Recent Accounting Pronouncements New Accounting Standards Implemented In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) . This standard clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323 and the accounting for certain forward contracts and purchased options in Topic 815. The Company adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles of F-17 Table of Contents Notes to Consolidated Financial Statements—(Continued) Topic 740, Income Taxes , and improves consistent application by clarifying and amending existing guidance. The Company adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. 3. Revenues Revenue Disaggregated by Source The following table summarizes investment management fees by source: Years Ended December 31, (in thousands) 2021 2020 2019 Investment management fees Open-end funds $ 393,673 $ 247,519 $ 229,637 Closed-end funds 63,301 36,833 42,199 Retail separate accounts 174,919 104,932 82,999 Institutional accounts 143,487 109,531 96,429 Structured products 4,726 4,012 6,381 Other products 1,479 2,511 3,832 Total investment management fees $ 781,585 $ 505,338 $ 461,477 4. Acquisitions Westchester Capital Management On October 1, 2021, the Company completed the acquisition of Westchester Capital Management, LLC ("Westchester"), which was accounted for in accordance with ASC 805, Business Combinations ("ASC 805"). The total purchase price of $ 169.3 million was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition. Goodwill of $ 23.0 million and intangible assets of $ 144.4 million were recorded as a result of the acquisition. The Company expects $ 155.6 million of the purchase price to be tax deductible over 15 years. The revenues and operating income of Westchester were not material to the Company's results of operations for the year ended December 31, 2021. Transaction consideration consisted of $ 136.8 million in cash paid at closing and $ 32.5 million in contingent consideration, which represents future potential earn-out payments based on pre-established performance metrics related to retention and revenue growth rates. An initial contingent consideration payment of $ 20.0 million was earned and paid in December 2021 and future payments will be made, if earned, in 2025 and 2026. The remaining contingent consideration of $ 12.5 million at December 31, 2021 has been accounted for as a liability within contingent consideration on the Company's Consolidated Balance Sheet. The following table summarizes the identified acquired assets and liabilities assumed as of the Westchester acquisition date: October 1, 2021 (in thousands) Assets: Cash and cash equivalents $ 1,197 Intangible assets 144,400 Goodwill 23,040 Other assets 4,997 Total Assets 173,634 Liabilities Accounts payable and accrued liabilities 4,300 Total liabilities 4,300 Total Net Assets Acquired $ 169,334 F-18 Table of Contents Notes to Consolidated Financial Statements—(Continued) Identifiable Intangible Assets Acquired In connection with the allocation of the Westchester purchase price, the Company identified the following intangible assets: October 1, 2021 Approximate Fair Value ( in thousands) Weighted Average of Useful Life (in years) Definite-lived intangible assets: Investment management agreements $ 138,000 10 Trade names 6,400 10 Total definite-lived intangible assets $ 144,400 The fair value of investment management agreements was estimated using a discounted cash flow method and the fair value of the trade names was estimated using a royalty savings method which were prepared with the assistance of an independent valuation firm and approved by management. AllianzGI Strategic Partnership On February 1, 2021, the Company finalized a strategic partnership with Allianz Global Investors U.S. LLC ("AllianzGI"), pursuant to which the Company became the investment adviser, distributor and/or administrator of certain of AllianzGI's open-end, closed-end and retail separate account assets. This transaction was classified as an asset acquisition and the cost of the acquisition was allocated to the assets acquired on the basis of their relative fair values. Additionally, as part of the strategic partnership, AllianzGI’s Dallas-based Value Equity team joined the Company as a newly established affiliated manager, NFJ Investment Group ("NFJ"). The addition of NFJ was classified as a business combination under ASC 805 and assets acquired were recorded at fair value. Assets acquired primarily consisted of definite-lived intangible assets representing open-end, closed-end and retail separate account investment contracts as well as indefinite-lived assets consisting of goodwill related to NFJ. The revenues and operating income of NFJ were not material to the Company's results of operations for the year ended December 31, 2021. Transaction consideration consists of variable cash payments based on a percentage of the investment management fees earned on certain open-end, closed-end and retail separate account assets from the transaction. Payments are to be made annually on the anniversary of the closing date of the transactions over the next seven years . The initial estimated value of these future revenue participation payments was $ 137.7 million upon closing. These future payments have been recorded as a liability and included as Contingent Consideration on the Company's Consolidated Balance Sheet. In addition, the Company capitalized $ 7.7 million of costs associated with certain assets acquired. Contingent payment obligations related to the NFJ acquisition which is accounted for in accordance with ASC 805 was remeasured at fair value as of December 31, 2021, with the change in fair value recorded within the consolidated statement of operations. The estimated value of future revenue participation payments at December 31, 2021 was $ 150.1 million. The following table summarizes the identified acquired assets: February 1, 2021 Approximate Fair Value (in thousands) Weighted Average Useful Life (in years) Definite-lived intangible assets: Open-end and closed-end fund investment contracts $ 101,447 13 Retail separate account investment contracts 17,000 6 Trade name 1,941 8 Total definite-lived intangible assets 120,388 Goodwill 25,000 Total assets acquired $ 145,388 The fair value of the investment management agreements was estimated using a discounted cash flow method and the fair value of the trade names was estimated using a royalty savings method which were prepared with the assistance of an F-19 Table of Contents Notes to Consolidated Financial Statements—(Continued) independent valuation firm and approved by management. 5. Goodwill and Other Intangible Assets Below is a summary of intangible assets, net: Definite-Lived Indefinite-Lived Total (in thousands) Gross Book Value Accumulated Amortization Net Book Value Net Book Value Net Book Value Balances of December 31, 2019 $ 489,570 $ ( 222,695 ) $ 266,875 $ 43,516 $ 310,391 Additions — — — — — Intangible amortization — ( 30,127 ) ( 30,127 ) — ( 30,127 ) Balances of December 31, 2020 489,570 ( 252,822 ) 236,748 43,516 280,264 Additions/Transfers 266,006 — 266,006 ( 1,218 ) 264,788 Intangible amortization — ( 44,481 ) ( 44,481 ) — ( 44,481 ) Balances of December 31, 2021 $ 755,576 $ ( 297,303 ) $ 458,273 $ 42,298 $ 500,571 Activity in goodwill was as follows: Years Ended December 31, (in thousands) 2021 2020 2019 Goodwill Balance, beginning of period $ 290,366 $ 290,366 $ 290,366 Acquisitions 48,040 — — Balance, end of period $ 338,406 $ 290,366 $ 290,366 Definite-lived intangible asset amortization for the next five years and thereafter is estimated as follows: Fiscal Year Amount (in thousands) 2022 $ 56,520 2023 55,859 2024 50,217 2025 45,449 2026 45,419 2027 and Thereafter 204,809 $ 458,273 At December 31, 2021, the weighted average estimated remaining amortization period for definite-lived intangible assets was 9.8 years. 6. Investments Investments consist primarily of investments in the Company's sponsored products. The Company's investments, F-20 Table of Contents Notes to Consolidated Financial Statements—(Continued) excluding the assets of CIP discussed in Note 20, at December 31, 2021 and 2020 were as follows: December 31, (in thousands) 2021 2020 Investment securities - fair value $ 80,335 $ 39,990 Equity method investments (1) 13,038 12,676 Nonqualified retirement plan assets 13,321 10,612 Other investments 2,196 1,666 Total investments $ 108,890 $ 64,944 (1) The Company's equity method investments are valued on a three-month lag based upon the availability of financial information. Investment Securities - fair value Investment securities - fair value consist of investments in the Company's sponsored funds, separately managed accounts and trading debt securities. The composition of the Company's investment securities - fair value was as follows: December 31, 2021 December 31, 2020 (in thousands) Cost Fair Value Cost Fair Value Investment Securities - fair value: Sponsored funds $ 63,090 $ 66,326 $ 22,378 $ 25,909 Equity securities 10,659 14,009 9,614 14,078 Debt securities — — 7 3 Total investment securities - fair value $ 73,749 $ 80,335 $ 31,999 $ 39,990 For the years ended December 31, 2021, 2020 and 2019, the Company recognized a net realized gain of $ 5.0 million, $ 4.7 million and $ 0.8 million, respectively, on the sale of its investment securities - fair value. Equity Method Investments The Company's equity method investments primarily consist of an investment in a limited partnership. For the years ended December 31, 2021, 2020 and 2019, distributions from equity method investments were $ 3.7 million, $ 1.2 million and $ 0.8 million, respectively. The remaining capital commitment for one of the Company's equity method investments at December 31, 2021 is $ 0.1 million. Nonqualified Retirement Plan Assets The Company's Excess Incentive Plan allows certain employees to voluntarily defer compensation. The Company holds the Excess Incentive Plan assets in a rabbi trust, which is subject to the claims of the Company's creditors in the event of the Company's bankruptcy or insolvency. Each participant is responsible for designating investment options for their contributions, and the ultimate distribution paid to each participant reflects any gains or losses on the assets realized while in the trust. Assets held in trust are included in investments and are carried at fair value utilizing Level 1 valuation techniques in accordance with ASC 320; the associated obligations to participants are included in other liabilities on the Consolidated Balance Sheets . Other Investments Other investments represent interests in entities not accounted for under the equity method such as those accounted for under the cost method. F-21 Table of Contents Notes to Consolidated Financial Statements—(Continued) 7. Fair Value Measurements The Company's assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 20, as of December 31, 2021 and 2020, by fair value hierarchy level were as follows: December 31, 2021 (in thousands) Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 307,277 $ — $ — $ 307,277 Investment securities - fair value Sponsored funds 66,326 — — 66,326 Equity securities 14,009 — — 14,009 Nonqualified retirement plan assets 13,321 — — 13,321 Total assets measured at fair value $ 400,933 — $ — $ 400,933 Liabilities Contingent consideration $ — $ — $ 88,400 $ 88,400 Total liabilities measured at fair value $ — $ — $ 88,400 $ 88,400 December 31, 2020 (in thousands) Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 207,101 $ — $ — $ 207,101 Investment securities - fair value Sponsored funds 25,909 — — 25,909 Equity securities 14,078 — — 14,078 Debt securities — 3 — 3 Nonqualified retirement plan assets 10,612 — — 10,612 Total assets measured at fair value $ 257,700 $ 3 $ — $ 257,703 The following is a discussion of the valuation methodologies used for the Company's assets and liabilities measured at fair value. Cash equivalents represent investments in money market funds. Cash investments in money market funds are valued using published net asset values and are classified as Level 1. Sponsored funds represent investments in open-end funds, closed-end funds and ETFs for which the Company acts as the investment manager. The fair value of open-end funds is determined based on their published net asset values and are categorized as Level 1. The fair value of closed-end funds and ETFs is determined based on the official closing price on the exchange on which they are traded on and are categorized as Level 1. Equity securities represent securities traded on active markets, are valued at the official closing price (typically the last sale or bid) on the exchange on which the securities are primarily traded and are categorized as Level 1. Debt securities represent investments in senior secured bank loans and are based on evaluated quotations received from independent pricing services and are categorized as Level 2. Nonqualified retirement plan assets represent mutual funds within a nonqualified retirement plan whose fair value is determined based on their published net asset value and are categorized as Level 1. Contingent consideration represents liabilities associated with the Company's business combinations. See Note 4 for a discussion of the transactions. The estimated fair values are measured using a simulation model using unobservable market data F-22 Table of Contents Notes to Consolidated Financial Statements—(Continued) inputs prepared with the assistance of an independent valuation firm and approved by management. These liabilities are included in Level 3 of the valuation hierarchy. Cash, accounts receivable, accounts payable and accrued liabilities equal or approximate fair value based on the short-term nature of these instruments. Transfers into and out of levels are reflected when significant inputs used for the fair value measurement, including market inputs or performance attributes, become observable or unobservable or when the Company determines it has the ability, or no longer has the ability, to redeem, in the near term, certain investments that the Company values using a net asset value, or if the book value no longer represents fair value. The following table presents a reconciliation of beginning and ending balances of recurring fair value measurements classified as Level 3: 2021 (in thousands) Contingent consideration, beginning of year $ — Additions for acquisitions 96,000 Reduction of liability for payments made ( 20,000 ) Increase (reduction) of liability related to re-measurement of fair value 12,400 Contingent consideration, end of year $ 88,400 8. Furniture, Equipment and Leasehold Improvements, Net Furniture, equipment and leasehold improvements, net were as follows: December 31, (in thousands) 2021 2020 Leasehold improvements $ 19,659 $ 20,110 Furniture and office equipment 11,516 11,743 Computer equipment and software 5,142 5,593 Subtotal 36,317 37,446 Accumulated depreciation and amortization ( 23,775 ) ( 22,958 ) Furniture, equipment and leasehold improvements, net $ 12,542 $ 14,488 9. Leases All of the Company's leases qualify as operating leases and consist primarily of leases for office facilities, which have remaining initial lease terms ranging from 0.2 to 8.3 years and a weighted average remaining lease term of 6.1 years. The Company has options to renew some of its leases for periods ranging from 3.0 to 10.0 years, depending on the lease. None of the Company's renewal options were considered reasonably assured of being exercised and, therefore, were excluded from the initial lease term used to determine the Company's right-of-use asset and lease liability. The Company's right-of-use asset, recorded in other assets , and lease liability, recorded in other liabilities on the Consolidated Balance Sheets, at December 31, 2021 were $ 37.3 million and $ 46.3 million, respectively. The weighted average discount rate used to measure the Company's lease liability was 3.74 % at December 31, 2021. Lease expense totaled $ 5.6 million, $ 5.1 million and $ 5.1 million for fiscal years 2021, 2020 and 2019, respectively. Cash payments relating to operating leases during 2021 were $ 5.9 million. F-23 Table of Contents Notes to Consolidated Financial Statements—(Continued) Lease liability maturities as of December 31, 2021 were as follows: Fiscal Year Amount (in thousands) 2022 $ 7,410 2023 9,254 2024 8,724 2025 8,112 2026 6,399 Thereafter 12,395 Total lease payments 52,294 Less: Imputed interest 6,013 Present value of lease liabilities $ 46,281 10. Income Taxes The components of the provision for income taxes were as follows: Years Ended December 31, (in thousands) 2021 2020 2019 Current Federal $ 75,525 $ 27,852 $ 23,066 State 24,974 9,751 6,129 Total current tax expense (benefit) 100,499 37,603 29,195 Deferred Federal ( 6,241 ) 3,899 3,535 State ( 3,423 ) 2,433 2,447 Total deferred tax expense (benefit) ( 9,664 ) 6,332 5,982 Total expense (benefit) for income taxes $ 90,835 $ 43,935 $ 35,177 The following presents a reconciliation of the provision (benefit) for income taxes computed at the federal statutory rate to the provision (benefit) for income taxes recognized on the Consolidated Statements of Operations for the years indicated: Years Ended December 31, (in thousands) 2021 2020 2019 Tax at statutory rate $ 74,271 21 % $ 34,419 21 % $ 29,544 21 % State taxes, net of federal benefit 17,283 5 9,775 6 6,859 5 Excess tax benefits related to share-based compensation ( 4,095 ) ( 1 ) 239 — ( 1,298 ) ( 1 ) Nondeductible compensation 3,461 1 2,686 2 2,080 2 Effect of net (income) loss attributable to noncontrolling interests ( 2,637 ) ( 1 ) ( 1,939 ) ( 1 ) ( 968 ) ( 1 ) Change in valuation allowance 1,941 1 ( 1,383 ) ( 1 ) ( 1,330 ) ( 1 ) Other, net 611 — 138 — 290 — Income tax expense (benefit) $ 90,835 26 % $ 43,935 27 % $ 35,177 25 % The provision for income taxes reflects U.S. federal, state and local taxes at an effective tax rate of 26 %, 27 % and 25 % for the years ended December 31, 2021, 2020 and 2019, respectively. The Company's tax position for the years ended December 31, 2021, 2020 and 2019 was impacted by changes in the valuation allowance related to the unrealized and realized gains and losses on the Company's investments. Deferred taxes resulted from temporary differences between the amounts reported on the consolidated financial statements and the tax basis of assets and liabilities. The tax effects of temporary differences were as follows: F-24 Table of Contents Notes to Consolidated Financial Statements—(Continued) December 31, (in thousands) 2021 2020 Deferred tax assets: Intangible assets $ 11,216 $ 3,237 Net operating losses 12,743 13,490 Compensation accruals 17,034 12,971 Lease liability 11,857 5,835 Investments 6,335 3,758 Capital losses 1,083 1,255 Other 595 984 Gross deferred tax assets 60,863 41,530 Valuation allowance ( 7,296 ) ( 6,107 ) Gross deferred tax assets after valuation allowance 53,567 35,423 Deferred tax liabilities: Intangible assets ( 21,297 ) ( 18,170 ) Right of use asset ( 9,830 ) ( 4,328 ) Fixed assets ( 1,661 ) ( 1,900 ) Other investments ( 1,575 ) ( 1,487 ) Gross deferred tax liabilities ( 34,363 ) ( 25,885 ) Deferred tax assets, net $ 19,204 $ 9,538 At each reporting date, the Company evaluates the positive and negative evidence used to determine the likelihood of realization of its deferred tax assets. The Company maintained a valuation allowance in the amount of $ 7.3 million and $ 6.1 million at December 31, 2021 and 2020, respectively, relating to deferred tax assets on items of a capital nature as well as certain state deferred tax assets. As of December 31, 2021, the Company had net operating loss carry-forwards for federal income tax purposes represented by an $ 7.9 million deferred tax asset. The related federal net operating loss carry-forwards are scheduled to begin to expire in the year 2031. As of December 31, 2021, the Company had state net operating loss carry-forwards, varying by subsidiary and jurisdiction, represented by a $ 4.9 million deferred tax asset. Certain state net operating loss carry-forwards are scheduled to begin to expire in 2022. Internal Revenue Code Section 382 ("Section 382") limits tax deductions for net operating losses, capital losses and net unrealized built-in losses after there is a substantial change in ownership in a corporation's stock involving a 50 -percentage point increase in ownership by 5 % or larger stockholders. At December 31, 2021, the Company had pre-change losses represented by deferred tax assets totaling $ 8.7 million that are subject to Section 382 limits. The utilization of these assets is subject to an annual limitation of $ 1.1 million. Activity in unrecognized tax benefits were as follows: Years Ended December 31, (in thousands) 2021 2020 2019 Balance, beginning of year $ 1,021 $ 1,172 $ — Decrease related to tax positions taken in prior years — ( 365 ) — Increase related to positions taken in the current year 214 214 1,172 Balance, end of year $ 1,235 $ 1,021 $ 1,172 If recognized, $ 1.0 million of the $ 1.2 million gross unrecognized tax benefit balance at December 31, 2021 would favorably impact the Company's effective income tax rate. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next 12 months. F-25 Table of Contents Notes to Consolidated Financial Statements—(Continued) The Company recognizes interest and penalties related to income tax matters within income tax expense. The Company recorded no interest or penalties related to unrecognized tax benefits at December 31, 2021, 2020 and 2019. The earliest federal tax year that remains open for examination is 2018. The earliest open years in the Company's major state tax jurisdictions are 2010 for Connecticut and 2018 for all of the Company's remaining state tax jurisdictions. 11. Debt Credit Agreement On September 28, 2021, the Company refinanced its credit agreement through an amended and restated credit agreement (the "Credit Agreement"). The Credit Agreement provides for (i) a $ 275.0 million seven-year term loan (the "Term Loan") and (ii) a $ 175.0 million revolving credit facility with a five-year term. The $ 194.0 million outstanding under the previous term loan was retired using proceeds from the Term Loan. At December 31, 2021, $ 274.3 million was outstanding under the Term Loan, and there were no outstanding borrowings under the revolving credit facility. In accordance with ASC 835, Interest , the amounts outstanding under the Company's Term Loan are presented on the Consolidated Balance Sheet net of related debt issuance costs, which were $ 8.0 million as of December 31, 2021. Because the debt instruments are not substantially different, the refinancing was treated as a debt modification for accounting purposes. Amounts outstanding under the Credit Agreement bear interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves) for interest periods of one, three or six months (or, solely in the case of the revolving credit facility, if agreed to by each relevant Lender, 12 months) or an alternate base rate, in either case plus an applicable margin. The applicable margins are 2.25 %, in the case of LIBOR-based loans, and 1.25 %, in the case of alternate base rate loans. Interest is payable quarterly in arrears with respect to alternate base rate loans and on the last day of each interest period with respect to LIBOR-based loans (but, in the case of any LIBOR-based loan with an interest period of more than three months, at three-month intervals). The Credit Agreement contains LIBOR and other subsequent benchmark successor provisions. The terms of the Credit Agreement require the Company to pay a quarterly commitment fee on the average unused amount of the revolving credit facility. The fee is initially set at 0.50 % and following the first delivery of certain financial reports, will range from 0.375 % to 0.50 %, based on the secured net leverage ratio of the Company as of the last day of the preceding fiscal quarter, as reflected in such financial reports. The Term Loan will amortize at the rate of 1.00 % per annum payable in equal quarterly installments on the last day of each calendar quarter, commencing on December 31, 2021. In addition, the Credit Agreement requires that the Term Loan be mandatorily prepaid with (i) 50 % of the Company’s excess cash flow on an annual basis, stepping down to 25 % if the Company’s secured net leverage ratio declines to 2 :1 or below and stepping down to 0 % if the Company’s secured net leverage ratio declines below 1.5 :1; (ii) 50 % of the net proceeds of certain asset sales, casualty or condemnation events, subject to customary reinvestment rights; and (iii) 100 % of the proceeds of any indebtedness incurred to refinance the term loans or other refinancing indebtedness as well as indebtedness incurred other than indebtedness permitted to be incurred by the Credit Agreement. At any time, upon timely notice, the Company may terminate the Credit Agreement in full, reduce the commitment under the facility in minimum specified increments or prepay loans in whole or in part, subject to the payment of breakage fees with respect to LIBOR-based loans and, in the case of any term loans that are prepaid in connection with a “repricing transaction” occurring within the six-month period following the closing date of the Credit Agreement, a 1.00 % premium. The Credit Agreement contains customary affirmative and negative covenants, including covenants that affect, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, create liens, merge or dissolve, make investments, dispose of assets, engage in sale and leaseback transactions, make distributions and dividends and prepayments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year and modify its organizational documents, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains a financial performance covenant that is only applicable when greater than 35 % of the revolving credit facility is outstanding, requiring a maximum leverage ratio, as of the last day of each of the four fiscal quarter periods, of no greater than the levels set forth in the Credit Agreement. F-26 Table of Contents Notes to Consolidated Financial Statements—(Continued) Future minimum Term Loan payments (exclusive of any mandatory excess cash flow repayments) as of December 31, 2021 were as follows: Fiscal Year Amount (in thousands) 2022 $ 2,750 2023 2,750 2024 2,750 2025 2,750 2026 2,750 2027 and thereafter 260,563 $ 274,313 12. Commitments and Contingencies Legal Matters The Company is involved from time to time in litigation and arbitration, as well as examinations, inquiries and investigations by various regulatory bodies, including the SEC, involving its compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting its products and other activities. Legal and regulatory matters of this nature involve or may involve but are not limited to the Company's activities as an employer, issuer of securities, investor, investment adviser, broker-dealer or taxpayer. In addition, in the normal course of business, the Company discusses matters with its regulators raised during regulatory examinations or is otherwise subject to their inquiry. These matters could result in censures, fines, penalties or other sanctions. The Company records a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. In addition, in the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosures related to such matter as appropriate and in compliance with ASC 450, Contingencies. The disclosures, accruals or estimates, if any, resulting from the foregoing analysis are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. Based on information currently available, available insurance coverage, indemnities and established reserves, the Company believes that the outcomes of its legal and regulatory proceedings are not likely, either individually or in the aggregate, to have a material adverse effect on the Company's results of operations, cash flows or its consolidated financial condition. However, in the event of unexpected subsequent developments and given the inherent unpredictability of these legal and regulatory matters, the Company can provide no assurance that its assessment of any claim, dispute, regulatory examination or investigation or other legal matter will reflect the ultimate outcome, and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's results of operations or cash flows in particular quarterly or annual periods. 13. Equity Transactions Dividends During the first and second quarters of the year ended December 31, 2021, the Board of Directors declared quarterly cash dividends on the Company's common stock of $ 0.82 each. During the third and fourth quarters of the year ended December 31, 2021, the Board of Directors declared quarterly cash dividends on the Company's common stock of $ 1.50 each. Total dividends declared on the Company's common stock were $ 37.2 million for the year ended December 31, 2021. At December 31, 2021, $ 14.8 million was included as dividends payable in liabilities on the Consolidated Balance Sheet representing the fourth quarter dividends to be paid on February 11, 2022 for common stock shareholders of record as of January 28, 2022. F-27 Table of Contents Notes to Consolidated Financial Statements—(Continued) Common Stock Repurchases During the year ended December 31, 2021, the Company repurchased a total of 193,193 common shares at a weighted average price of $ 297.60 per share, for a total cost, including fees and expenses, of $ 57.5 million under its share repurchase program. As of December 31, 2021, 529,449 shares remain available for repurchase. Under the terms of the program, the Company may repurchase shares of its common stock from time to time at its discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price and prevailing market and business conditions. The program, which has no specified term, may be suspended or terminated at any time. 14. Accumulated Other Comprehensive Income (Loss) The changes in accumulated other comprehensive income (loss), by component, were as follows: Foreign Currency Translation Adjustments (in thousands) Balance at December 31, 2020 $ 29 Foreign currency translation adjustments, net of tax of $ 3 ( 9 ) Net current-period other comprehensive income (loss) ( 9 ) Balance at December 31, 2021 $ 20 Foreign Currency Translation Adjustments (in thousands) Balance at December 31, 2019 $ 9 Foreign currency translation adjustments, net of tax of $( 7 ) 20 Net current-period other comprehensive income (loss) 20 Balance at December 31, 2020 $ 29 15. Retirement Savings Plan The Company sponsors a defined contribution 401(k) retirement plan (the "401(k) Plan") covering all employees who meet certain age and service requirements. Employees may contribute a percentage of their eligible compensation into the 401(k) Plan, subject to certain limitations imposed by the Internal Revenue Code. The Company matches employees' contributions at a rate of 100 % of employees' contributions up to the first 5.0 % of the employees' compensation contributed to the 401(k) Plan. The Company's matching contributions were $ 5.9 million, $ 5.3 million and $ 5.1 million in 2021, 2020 and 2019, respectively. 16. Stock-Based Compensation Pursuant to the Company's Omnibus Incentive and Equity Plan (the "Omnibus Plan"), officers, employees and directors may be granted equity-based awards, including restricted stock units ("RSUs"), performance stock units ("PSUs"), stock options and unrestricted shares of common stock. At December 31, 2021, 807,671 shares of common stock remain available for issuance of the 3,370,000 shares that are authorized for issuance under the Omnibus Plan. Stock-based compensation expense is summarized as follows: Years Ended December 31, (in thousands) 2021 2020 2019 Stock-based compensation expense $ 26,225 $ 21,481 $ 22,232 F-28 Table of Contents Notes to Consolidated Financial Statements—(Continued) Restricted Stock Units Each RSU entitles the holder to one share of common stock when the restriction expires. RSUs may be time-vested or performance-contingent PSUs that convert into RSUs after performance measurement is complete. Shares that are issued upon vesting, generally one to three years after grant, are newly issued shares from the Omnibus Plan and are not issued from treasury stock. RSU activity, inclusive of PSUs, for the year ended December 31, 2021 is summarized as follows: Number of shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2020 533,185 $ 106.19 Granted 107,367 $ 268.65 Forfeited ( 24,699 ) $ 129.96 Settled ( 185,123 ) $ 123.19 Outstanding at December 31, 2021 430,730 $ 138.01 The grant-date intrinsic value of RSUs granted during the year ended December 31, 2021 was $ 28.8 million. Years Ended December 31, (in millions, except per share values) 2021 2020 2019 Weighted-average grant-date fair value per share $ 268.65 $ 86.73 $ 108.42 Fair value of RSUs vested $ 22.8 $ 21.8 $ 17.8 For the years ended December 31, 2021, 2020 and 2019, a total of 73,069 , 68,625 and 66,441 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations. The Company paid $ 19.5 million, $ 6.5 million and $ 6.9 million for the years ended December 31, 2021, 2020 and 2019, respectively, in minimum employee tax withholding obligations related to RSUs withheld for net share settlements. These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued as a result of the vesting. During the years ended December 31, 2021 and 2020, the Company granted 26,425 and 68,371 PSUs, respectively, that contain performance-based metrics in addition to a service condition. Compensation expense for PSUs is generally recognized over a three-year service period based upon the value determined using a combination of (i) the intrinsic value method, for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718, and (ii) the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric under ASC 718. Compensation expense for PSU awards that contain a market condition is fixed at the date of grant and will not be adjusted in future periods based upon the achievement of the market condition. Compensation expense for PSU awards with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the end of the performance period. As of December 31, 2021 and 2020, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 24.9 million and $ 22.3 million, respectively, with a weighted average remaining contractual life of 1.0 years and 1.2 years, respectively. The Company did no t capitalize any stock-based compensation expenses during the years ended December 31, 2021, 2020 and 2019. F-29 Table of Contents Notes to Consolidated Financial Statements—(Continued) Stock Options Stock option activity for the year ended December 31, 2021 is summarized as follows: Number of shares Weighted Average Exercise Price Outstanding at December 31, 2020 1,193 $ 55.18 Exercised ( 1,193 ) $ 55.18 Outstanding at December 31, 2021 — $ — Vested and exercisable at December 31, 2021 — $ — The total intrinsic value of stock options exercised for the years ended December 31, 2021, 2020 and 2019 was $ 0.2 million, $ 0.4 million and $ 6.4 million, respectively. Cash received from stock option exercises was $ 0.1 million, $ 0.2 million and $ 0.7 million for 2021, 2020 and 2019, respectively. Employee Stock Purchase Plan The Company offers an employee stock purchase plan that allows employees to purchase shares of common stock on the open market at market price through after-tax payroll deductions. The initial transaction fees are paid for by the Company and shares of common stock are purchased on a quarterly basis. The Company does not reserve shares for this plan or discount the purchase price of the shares. 17. Earnings (Loss) Per Share The computation of basic and diluted EPS is as follows: Years Ended December 31, (in thousands, except per share amounts) 2021 2020 2019 Net Income (Loss) $ 262,835 $ 119,963 $ 105,508 Noncontrolling interests ( 54,704 ) ( 40,006 ) ( 9,859 ) Net Income (Loss) Attributable to Stockholders 208,131 79,957 95,649 Preferred stock dividends — — ( 8,337 ) Net Income (Loss) Attributable to Virtus Investment Partners, Inc. $ 208,131 $ 79,957 $ 87,312 Shares (in thousands): Basic: Weighted-average number of shares outstanding 7,672 7,620 6,963 Plus: Incremental shares from assumed conversion of dilutive instruments 331 356 1,186 Diluted: Weighted-average number of shares outstanding 8,003 7,976 8,149 Earnings (Loss) per Share—Basic $ 27.13 $ 10.49 $ 12.54 Earnings (Loss) per Share—Diluted $ 26.01 $ 10.02 $ 11.74 The following table details the securities that have been excluded from the above computation of weighted-average number of shares for diluted EPS, because the effect would be anti-dilutive. Years Ended Years Ended December 31, (in thousands) 2021 2020 2019 Restricted stock units and stock options 3 1 22 Total anti-dilutive securities 3 1 22 F-30 Table of Contents Notes to Consolidated Financial Statements—(Continued) 18. Concentration of Credit Risk The following client including the Company's sponsored funds provided 10 percent or more of the Company's investment management, administration and shareholder service fee revenues: 2021 2020 2019 Virtus KAR Small Cap Growth Fund * 10 % * * Less than 10 percent of total revenues of the Company 19. Redeemable Noncontrolling Interests Redeemable noncontrolling interests for the year ended December 31, 2021 included the following amounts: (in thousands) CIP Affiliate Noncontrolling Interests Total Balance at December 31, 2020 $ 28,061 $ 87,452 $ 115,513 Net income (loss) attributable to noncontrolling interests 1,277 8,899 10,176 Changes in redemption value (1) — 43,711 43,711 Total net income (loss) attributable to noncontrolling interests 1,277 52,610 53,887 Net subscriptions (redemptions) and other ( 16,922 ) ( 13,513 ) ( 30,435 ) Balance at December 31, 2021 $ 12,416 $ 126,549 $ 138,965 (1) Relates to noncontrolling interests redeemable at other than fair value. 20. Consolidation The consolidated financial statements include the accounts of the Company, its subsidiaries and investment products that are consolidated. VOEs are consolidated when the Company is considered to have a controlling financial interest, which is typically present when the Company owns a majority of the voting interest in an entity or otherwise has the power to govern the financial and operating policies of the entity. The Company evaluates any VIEs in which the Company has a variable interest for consolidation. A VIE is an entity in which either (i) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (ii) where as a group, the holders of the equity investment at risk do not possess (x) the power through voting or similar rights to direct the activities that most significantly impact the entity's economic performance; (y) the obligation to absorb expected losses or the right to receive expected residual returns of the entity; or (z) proportionate voting and economic interests and where substantially all of the entity's activities either involve or are conducted on behalf of an investor with disproportionately fewer voting rights. If an entity has any of these characteristics, it is considered a VIE and is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that has both the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. In the normal course of business, the Company sponsors various investment products, some of which are consolidated by the Company. CIP includes both VOEs, made up primarily of open-end funds in which the Company holds a controlling financial interest, and VIEs, which primarily consist of CLOs of which the Company is considered the primary beneficiary. The consolidation and deconsolidation of these investment products have no impact on net income (loss) attributable to stockholders. The Company's risk with respect to these investment products is limited to its beneficial interests in these products. The Company has no right to the benefits from, and does not bear the risks associated with, these investment products beyond the Company's investments in, and fees generated from, these products. The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Consolidated F-31 Table of Contents Notes to Consolidated Financial Statements—(Continued) Balance Sheets as of December 31, 2021 and 2020: As of December 31, 2021 2020 VOEs VIEs VOEs VIEs (in thousands) CLOs Other CLOs Other Cash and cash equivalents $ 787 $ 205,192 $ 1,245 $ 9,837 $ 82,295 $ 1,206 Investments 21,544 2,055,107 63,587 57,256 2,217,055 58,966 Other assets 64 43,327 819 1,989 10,484 957 Notes payable — ( 2,033,617 ) — — ( 2,190,445 ) — Securities purchased payable and other liabilities ( 558 ) ( 184,214 ) ( 296 ) ( 2,566 ) ( 42,940 ) ( 323 ) Noncontrolling interests ( 4,935 ) ( 8,350 ) ( 7,481 ) ( 24,707 ) ( 9,799 ) $ ( 3,354 ) Net interests in CIP $ 16,902 $ 77,445 $ 57,874 $ 41,809 $ 66,650 $ 57,452 Consolidated CLOs The majority of the Company's CIP that are VIEs are CLOs. At December 31, 2021, the Company consolidated six CLOs. The financial information of certain CLOs is included on the Company's consolidated financial statements on a one-month lag based upon the availability of the fund's financial information. A majority-owned consolidated private fund, whose primary purpose is to invest in CLOs for which the Company serves as the collateral manager, is also included. Investments of CLOs The CLOs held investments of $ 2.1 billion at December 31, 2021 consisting of bank loan investments, which comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across a variety of industries. These bank loan investments mature at various dates between 2022 and 2029 and pay interest at LIBOR plus a spread of up to 10.0 %. The CLOs may elect to reinvest any prepayments received on bank loan investments up until the periods between October 2019 and October 2026, depending on the CLO. Generally, subsequent prepayments received after the reinvestment period must be used to pay down the note obligations. At December 31, 2021, the fair value of the senior bank loans was less than the unpaid principal balance by $ 41.4 million. At December 31, 2021, there were no material collateral assets in default. Notes Payable of CLOs The CLOs held notes payable with a total value, at par, of $ 2.2 billion at December 31, 2021, consisting of senior secured floating rate notes payable with a par value of $ 2.0 billion and subordinated notes with a par value of $ 233.7 million. These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 0.8 % to 8.9 %. The principal amounts outstanding of these note obligations mature on dates ranging from October 2027 to October 2034. The Company's beneficial interests and maximum exposure to loss related to these consolidated CLOs is limited to (i) ownership in the subordinated notes and (ii) accrued management fees. The secured notes of the consolidated CLOs have contractual recourse only to the related assets of the CLO and are classified as financial liabilities. Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative prescribed by ASU 2014-13, Consolidation (Topic 810) ("ASU 2014-13") results in the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by the Company at December 31, 2021, as shown in the table below: (in thousands) Subordinated notes $ 76,232 Accrued investment management fees 1,213 Total Beneficial Interests $ 77,445 The following table represents income and expenses of the consolidated CLOs included on the Company's Consolidated F-32 Table of Contents Notes to Consolidated Financial Statements—(Continued) Statements of Operations for the period indicated: Year Ended December 31, 2021 (in thousands) Income: Realized and unrealized gain (loss), net $ ( 4,472 ) Interest income 86,152 Total Income $ 81,680 Expenses: Other operating expenses $ 2,795 Interest expense 60,398 Total Expense 63,193 Noncontrolling interests ( 817 ) Net Income (loss) attributable to CIP $ 17,670 As summarized in the table below, the application of the measurement alternative as prescribed by ASU 2014-13 results in the consolidated net income summarized above to be equivalent to the Company's own economic interests in the consolidated CLOs, which are eliminated upon consolidation: Year Ended December 31, 2021 (in thousands) Distributions received and unrealized gains (losses) on the subordinated notes held by the Company $ 8,616 Investment management fees 9,054 Total Economic Interests $ 17,670 Fair Value Measurements of CIP The assets and liabilities of CIP measured at fair value on a recurring basis as of December 31, 2021 and 2020 by fair value hierarchy level were as follows: As of December 31, 2021 (in thousands) Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 205,192 $ — $ — $ 205,192 Debt investments 273 2,107,736 2,695 2,110,704 Equity investments 26,111 2,961 462 29,534 Total assets measured at fair value $ 231,576 $ 2,110,697 $ 3,157 $ 2,345,430 Liabilities Notes payable $ — $ 2,033,617 $ — $ 2,033,617 Short sales 515 — — 515 Total liabilities measured at fair value $ 515 $ 2,033,617 $ — $ 2,034,132 F-33 Table of Contents Notes to Consolidated Financial Statements—(Continued) As of December 31, 2020 (in thousands) Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 82,295 $ — $ — $ 82,295 Debt investments 16,859 2,219,199 53,368 2,289,426 Equity investments 38,468 3,856 814 43,138 Derivatives 858 1,227 — 2,085 Total assets measured at fair value $ 138,480 $ 2,224,282 $ 54,182 $ 2,416,944 Liabilities Notes payable $ — $ 2,190,445 $ — $ 2,190,445 Derivatives 714 757 — 1,471 Short sales 520 — — 520 Total liabilities measured at fair value $ 1,234 $ 2,191,202 $ — $ 2,192,436 The following is a discussion of the valuation methodologies used for the assets and liabilities of the Company's CIP measured at fair value. Cash equivalents represent investments in money market funds. Cash investments in money market funds are valued using published net asset values and are classified as Level 1. Debt and equity investments represent the underlying debt, equity and other securities held in CIP. Equity investments are valued at the official closing price on the exchange on which the securities are traded and are generally categorized within Level 1. Level 2 investments represent most debt securities, including bank loans and certain equity securities (including non-U.S. securities), for which closing prices are not readily available or are deemed to not reflect readily available market prices, and are valued using an independent pricing service. Debt investments are valued based on quotations received from independent pricing services or from dealers who make markets in such securities. Bank loan investments, which are included as debt investments, are generally priced at the average mid-point of bid and ask quotations obtained from a third-party pricing service. Fair value may also be based upon valuations obtained from independent third-party brokers or dealers utilizing matrix pricing models that consider information regarding securities with similar characteristics. In certain instances, fair value has been determined utilizing discounted cash flow analyses or single broker non-binding quotes. Depending on the nature of the inputs, these assets are classified as Level 1, 2 or 3 within the fair value measurement hierarchy. Level 3 investments include debt and equity securities that are not widely traded, are illiquid or are priced by dealers based on pricing models used by market makers in the security. Derivative assets and liabilities represent futures contracts, swaps contracts, option contracts and forward contracts held in CIP. Derivative instruments in an asset position are classified as other assets of CIP on the Consolidated Balance Sheets. Derivative instruments in a liability position are classified as liabilities of CIP on the Consolidated Balance Sheets. The change in fair value of such derivatives is recorded in realized and unrealized gain (loss) on investments of CIP, net, on the Consolidated Statements of Operations. Depending on the nature of the inputs, these derivative assets and liabilities are classified as Level 1, 2 or 3 within the fair value measurement hierarchy. In connection with entering into these derivative contracts, these CIP may be required to pledge an amount of cash equal to the appropriate "initial margin" requirements. The cash pledged or on deposit is recorded on the Consolidated Balance Sheets of the Company as cash pledged or on deposit of CIP. The fair value of such derivatives at December 31, 2020 was immaterial. Notes payable represent notes issued by CIP CLOs and are measured using the measurement alternative in ASU 2014-13. Accordingly, the fair value of CLO liabilities was measured as the fair value of CLO assets less the sum of (i) the fair value of the beneficial interests held by the Company and (ii) the carrying value of any beneficial interests that represent compensation for services. The fair value of the beneficial interests held by the Company is based on third-party pricing information without adjustment. Short sales are transactions in which a security is sold that is not owned or is owned but there is no intention to deliver, in anticipation that the price of the security will decline. Short sales are recorded on the Consolidated Balance Sheets within other liabilities of CIP and are classified as Level 1 based on the underlying equity security. F-34 Table of Contents Notes to Consolidated Financial Statements—(Continued) The securities purchased payable at December 31, 2021 and 2020 approximated fair value due to the short term nature of the instruments. The following table is a reconciliation of assets of CIP for Level 3 investments for which significant unobservable inputs were used to determine fair value. Year Ended December 31, (in thousands) 2021 2020 Level 3 Investments of CIP (1) Balance at beginning of period $ 54,182 $ 40,422 Purchases 10,708 2,197 Sales ( 41,362 ) ( 1,843 ) Amortization 98 31 Change in unrealized gains (losses), net 2,203 ( 1,245 ) Realized gains (loss), net ( 301 ) 20 Transfers to Level 2 ( 85,551 ) ( 61,335 ) Transfers from Level 2 63,180 75,935 Balance at end of period $ 3,157 $ 54,182 (1) The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment. Transfers between Level 2 and Level 3 were due to trading activities at period end. Nonconsolidated VIEs The Company serves as the collateral manager for other collateralized loan and collateralized bond obligations (collectively, "CDOs") that are not consolidated. The assets and liabilities of these CDOs reside in bankruptcy remote, special purpose entities in which the Company has no ownership of, nor holds any notes issued by, the CDOs, and provides neither recourse nor guarantees. The Company has determined that the investment management fees it receives for serving as collateral manager for these CDOs did not represent a variable interest since (i) the fees the Company earns are compensation for services provided and are commensurate with the level of effort required to provide the investment management services, (ii) the Company does not hold other interests in the CDOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CDOs' expected losses or receive more than an insignificant amount of the CDOs' expected residual return, and (iii) the investment management arrangement only includes terms, conditions and amounts that are customarily present in arrangements for similar services negotiated at arm's length. The Company has interests in certain other VIEs that the Company does not consolidate as it is not the primary beneficiary since its interest in these entities does not provide the Company with the power to direct the activities that most significantly impact the entities' economic performance. At December 31, 2021, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 31.7 million. 21. Subsequent Events Acquisition of Stone Harbor Investment Partners, LLC ("Stone Harbor") On January 1, 2022, the Company completed its acquisition of Stone Harbor, a premier manager of emerging markets debt, multi-asset credit, global corporate, and other strategies with $ 14.7 billion of assets under management at December 31, 2021. Dividends Declared On February 23, 2022, the Company declared a quarterly cash dividend of $ 1.50 per common share to be paid on May 13, 2022 to shareholders of record at the close of business on April 29, 2022. F-35