What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-27 compared with 2022-02-25 · 164 added, 239 removed, 1027 unchanged (28% of the section changed)

2 unchanged sentences

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.

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.

59 unchanged sentences

(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).

2.1 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).

11 unchanged sentences

(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).

10.1* Change in Control Agreement between George R.

1 unchanged sentence

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).

10.2* Virtus Investment Partners, Inc.

Amended and Restated Omnibus Incentive and Equity Plan (incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K, filed May 17, 2021).

10.3* 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.

7 unchanged sentences

10.7* 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).

Amended and Restated Omnibus Incentive and Equity Plan.

10.8* 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).

Amended and Restated Omnibus Incentive and Equity Plan.

10.9* 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).

10.10* Form of Indemnity Agreement.

10.11* Offer Letter from the Registrant to Barry M.

87 unchanged sentences

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.

During the year, the Company acquired Stone Harbor Investment Partners, LLC ("Stone Harbor") which was accounted for as a business combination.

Management estimated the fair value of the assets acquired using (1) an excess earnings method for the investment management agreements, (2) a royalty savings method for the trade name, and (3) both a royalty savings method and a replacement cost method for the software.

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.

2 unchanged sentences

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:

Our audit procedures related to the valuation of assets acquired for Stone Harbor 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.

3 unchanged sentences

– 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 evaluated 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.

3 unchanged sentences

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

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.

The Company periodically enters into contingent payment arrangements in connection with its business combinations or asset acquisitions.

Contingent payment obligations related to business combinations are recorded at fair value upon acquisition and are remeasured at fair value each reporting date.

During the year, the contingent payment obligations associated with the 2022 acquisition of Stone Harbor and the 2021 acquisitions of NFJ Investment Group (“NFJ”) and Westchester Capital Management (“Westchester”) were valued to reflect remeasurement and payments made, if applicable, and changes were recorded in the

current period as a gain or loss.

Management uses simulation models 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.

Contingent payment obligations related to asset acquisitions, if estimable and probable of payment, are initially recorded at their estimated value and reviewed every reporting period for changes.

During the year, the contingent payment obligations associated with the 2021 asset acquisition as part of the strategic partnership with Allianz Global Investors (“AllianzGI”) was valued to reflect remeasurement and payments made, if applicable, and changes were recorded in the current period as updates to the initial acquisition cost.

The valuations of the AllianzGI, NFJ, Westchester, and Stone Harbor contingent payment obligations use 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 auditor 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 related 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:

Our audit procedures related to the valuation of the contingent consideration liability for the AllianzGI, NFJ, Westchester, and Stone Harbor acquisitions included the following, among others:

• We tested the design and operating effectiveness of controls over management’s valuation of the contingent consideration liability.

2 unchanged sentences

• 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:

• With the assistance of our internal fair value specialists, we performed the below procedures related to the NFJ, Westchester, and Stone Harbor contingent consideration liability:

– We evaluated the valuation methodology used by management to determine whether they were consistent with generally accepted valuation practices.

9 unchanged sentences

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

holds a controlling financial interest in the investment product.

For each investment product that is considered a VIE, management performs a primary beneficiary analysis to determine if it 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.

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.

34 unchanged sentences

Dividends payable 15,812 14,824

Contingent consideration 162,564 —

Contingent consideration (Note 4) 128,400 162,564

Debt 255,025 266,346

35 unchanged sentences

Change in fair value of contingent consideration 8,020 12,400 —

Restructuring and severance — 1,155 2,302

Restructuring expense 4,015 — 1,155

Depreciation expense 3,923 3,900 4,660

17 unchanged sentences

Noncontrolling interests 10,913 ( 54,704 ) ( 40,006 )

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.

12 unchanged sentences

Foreign currency translation adjustment, net of tax of $ 135 , $ 3 and $( 7 ) for the years ended December 31, 2022, 2021 and 2020, respectively

( 378 ) ( 9 ) 20

Other comprehensive income (loss) ( 378 ) ( 9 ) 20

1 unchanged sentence

Comprehensive (income) loss attributable to noncontrolling interests 10,913 ( 54,704 ) ( 40,006 )

Comprehensive income (loss) attributable to stockholders $ 208,122 $ 79,977 $ 95,663

Comprehensive income (loss) attributable to Virtus Investment Partners, Inc.

$ 117,163 $ 208,122 $ 79,977

The accompanying notes are an integral part of these consolidated financial statements.

7 unchanged sentences

Income (Loss) Treasury Stock Total

Shareholders Non-

To Virtus Investment Partners, Inc.

Interests Total

3 unchanged sentences

Net income (loss) — — — — — 79,957 — — — 79,957 1,298 81,255 38,708

Foreign currency translation adjustment — — — — — — 14 — — 14 — 14 —

Foreign currency translation adjustments — — — — — — 20 — — 20 — 20 —

Net subscriptions (redemptions) and other — — — — ( 167 ) — — — — ( 167 ) ( 2,057 ) ( 2,224 ) 12,960

Reclassification from other comprehensive (income) loss — — — — — — 726 — — 726 — 726 —

Cash dividends declared ($ 7.25 per preferred share)

— — — — ( 8,337 ) — — — — ( 8,337 ) — ( 8,337 ) —

Conversion of preferred stock 912,806 9 ( 1,150,000 ) ( 110,843 ) 110,834 — — — — — — — —

Cash dividends declared ($ 2.98 per common share)

6 unchanged sentences

Net income (loss) — — — — — 208,131 — — — 208,131 817 208,948 53,887

Foreign currency translation adjustment — — — — — — 20 — — 20 — 20 —

Foreign currency translation adjustments — — — — — — ( 9 ) — — ( 9 ) — ( 9 ) —

Net subscriptions (redemptions) and other — — — — — — — — — ( 2,266 ) ( 2,266 ) ( 30,435 )

Conversion of preferred stock 912,806 9 ( 1,150,000 ) ( 110,843 ) 110,834 — — — — — — — —

Cash dividends declared ($ 4.64 per common share)

6 unchanged sentences

Net income (loss) — — — — — 117,541 — — — 117,541 ( 765 ) 116,776 ( 10,148 )

Foreign currency translation adjustment — — — — — — ( 9 ) — — ( 9 ) — ( 9 ) —

Foreign currency translation adjustments — — — — — — ( 378 ) — — ( 378 ) — ( 378 ) —

Net subscriptions (redemptions) and other — — — — 2,035 — — — 2,035 ( 1,668 ) 367 ( 15,099 )

25 unchanged sentences

Deferred taxes, net ( 1,960 ) ( 9,664 ) 6,332

Right of use asset 3,222 — —

Changes in operating assets and liabilities:

12 unchanged sentences

Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net ( 308 ) ( 13,559 ) 9,724

Acquisition of business, net of cash acquired of $ 1,197

Acquisition of business, net of cash acquired of $ 8,443 and $ 1,197 for the years ended December 31, 2022 and 2021, respectively

( 20,577 ) ( 155,636 ) —

Sale of available-for-sale securities — — 2,023

Net cash provided by (used in) investing activities ( 27,467 ) ( 175,033 ) 8,681

Years Ended December 31,

(in thousands) 2022 2021 2020

Cash Flows from Financing Activities:

1 unchanged sentence

Payment of long-term debt ( 12,750 ) ( 12,513 ) ( 79,086 )

Payment of contingent consideration ( 33,036 ) — —

Payment of deferred financing costs — ( 7,039 ) —

2 unchanged sentences

Common stock dividends paid ( 47,254 ) ( 31,411 ) ( 22,800 )

Proceeds from exercise of stock options 66 163 726

Taxes paid related to net share settlement of restricted stock units ( 16,830 ) ( 19,443 ) ( 6,445 )

Affiliate equity sales (purchases) ( 11,089 ) — —

Net contributions from (distributions to) noncontrolling interests ( 5,527 ) ( 3,270 ) ( 7,263 )

Years Ended December 31,

2020 2019 2018

Financing activities of CIP

2 unchanged sentences

Net cash provided by (used in) financing activities ( 102,057 ) ( 244,400 ) 235,332

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 112 ) — —

Net increase (decrease) in cash and cash equivalents 3,034 246,296 17,910

5 unchanged sentences

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 11,850 11,261 6,218

Contingent consideration 1,200 150,164 —

Consolidation (Deconsolidation) of CIP, net ( 30,550 ) 17,137 ( 13,926 )

Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net ( 338 ) ( 30,550 ) 17,137

(in thousands) 2022 2021

11 unchanged sentences

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.

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 ("U.S.

retail funds" or "variable insurance funds");

Undertaking for Collective Investment in Transferable Securities and Qualifying Investor Funds (collectively, "global funds" and collectively with U.S.

retail funds, variable insurance funds, exchange traded funds ("ETFs"), the "open-end funds");

closed-end funds (collectively, with open-end funds, 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.

2 unchanged sentences

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 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.

36 unchanged sentences

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").

Investment securities - fair value consist of investments in the Company's sponsored funds and separately managed accounts 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.

14 unchanged sentences

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

18 unchanged sentences

The Company's 2022 and 2021 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 comprised of certain fund investment advisory contracts, trade names, non-competition agreements and software.

These assets are amortized on a straight-line basis over the estimated useful lives of such assets, which range from 4 to 16 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.

5 unchanged sentences

The Company's 2022 and 2021 annual indefinite-lived intangible assets impairment analysis did not result in any impairment charges.

Notes to Consolidated Financial Statements—(Continued)

Contingent Consideration

5 unchanged sentences

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.

Gains and losses resulting from

Notes to Consolidated Financial Statements—(Continued)

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.

9 unchanged sentences

Investment Management Fees

The Company provides investment management services pursuant to investment management agreements through its affiliated investment advisers (each an "Adviser").

The Company provides investment management services pursuant to investment management agreements through its investment advisers (each an "Adviser").

Investment management services represent a series of distinct daily services that are performed over time.

8 unchanged sentences

Distribution and Service Fees

Distribution and service fees are sales- and asset-based fees earned from open-end funds, for marketing and distribution

Notes to Consolidated Financial Statements—(Continued)

Distribution and service fees are sales- and asset-based fees earned from open-end funds, for marketing and distribution 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.

4 unchanged sentences

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.

These unaffiliated financial intermediaries provide distribution and shareholder service

Notes to Consolidated Financial Statements—(Continued)

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.

1 unchanged sentence

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.

The Company provides administrative fund services to its U.S.

retail 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.

The Company earns fees for these services, which are calculated and paid monthly, based on each fund's average daily or weekly net assets.

Administrative fund services include:

12 unchanged sentences

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

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.

2 unchanged sentences

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.

Notes to Consolidated Financial Statements—(Continued)

Comprehensive Income

6 unchanged sentences

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.

ASC 820, Fair Value Measurement, 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.

11 unchanged sentences

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

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.

Revenue Disaggregated by Source

Investment Management Fees by Source

The following table summarizes investment management fees by source:

6 unchanged sentences

Institutional accounts 157,404 148,213 113,543

Structured products 4,726 4,012 6,381

Other products 1,479 2,511 3,832

Total investment management fees $ 728,339 $ 781,585 $ 505,338

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.

Notes to Consolidated Financial Statements—(Continued)

Stone Harbor Investment Partners

On January 1, 2022, the Company acquired Stone Harbor Investment Partners, LLC ("Stone Harbor"), which was accounted for in accordance with ASC 805, Business Combinations ("ASC 805").

Transaction consideration consisted of $ 28.9 million paid in cash and $ 1.2 million in contingent consideration recorded at fair value, which represents future potential earn-out payments based on pre-established performance metrics related to revenue retention and revenue growth rates.

Future contingent consideration will be paid, if earned, in 2023, 2026 and 2027.

The transaction consideration of $ 30.1 million was allocated to the assets acquired and liabilities assumed, based upon their estimated fair values at the date of the acquisition, as well as goodwill of $ 10.3 million and definite-lived intangible assets of $ 10.8 million.

The Company expects $ 21.1 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

The revenues and operating income of Stone Harbor were not material to the Company's results of operations for the year ended December 31, 2022.

The following table summarizes the identified acquired assets and liabilities assumed as of the Stone Harbor acquisition date:

January 1, 2022

(in thousands)

1 unchanged sentence

Intangible assets

Goodwill 23,040

Other assets 4,997

Total Assets 173,634

Accounts payable and accrued liabilities 4,300

Accounts payable, accrued and other liabilities

Total liabilities

Total Net Assets Acquired

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

The Company identified and recorded the following intangible assets as a result of the Stone Harbor acquisition:

January 1, 2022

Approximate Fair Value

4 unchanged sentences

Trade names 1,000 6.0

Software 3,800 4.0

Total definite-lived intangible assets $ 10,800

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.

The fair value of investment management agreements was estimated using a multi-period excess earnings method, the fair value of the trade names was estimated using a royalty savings method, and the fair value of the software was estimated using a royalty savings method and replacement cost approach.

The fair value estimates were prepared with the assistance of an independent valuation firm.

Westchester Capital Management

On October 1, 2021, the Company acquired Westchester Capital Management, LLC ("Westchester"), which was accounted for in accordance with ASC 805.

Transaction consideration consisted of $ 156.8 million in cash and contingent consideration representing future potential earn-out payments based on pre-established performance metrics related to revenue growth rates, that was recorded as a liability on the Company's Consolidated Balance sheet.

Future contingent consideration

Notes to Consolidated Financial Statements—(Continued)

payments will be made, if earned, in 2025 and 2026.

As of December 31, 2022, the contingent consideration balance was $ 19.9 million.

The total transaction consideration 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.

Fund Adoption and NFJ Investment Group

On February 1, 2021, the Company executed an agreement with Allianz Global Investors U.S.

LLC ("AGI"), pursuant to which the Company became the investment adviser, distributor and/or administrator of certain of AGI'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").

Additionally, as part of the transaction, AGI’s 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.

Assets acquired primarily consisted of definite-lived intangible assets representing 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.

1 unchanged sentence

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

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

Contingent payment obligations related to NFJ, which were accounted for in accordance with ASC 805, are remeasured at fair value as of each reporting period-end, with the change in fair value recorded within the Consolidated Statements of Operations.

An estimate of these future payments has been recorded as a liability and included as contingent consideration on the Company's Consolidated Balance Sheets.

A payment of $ 33.0 million was made in the first quarter of 2022.

The estimated value of the total future revenue participation payments at December 31, 2022 was $ 108.5 million.

Notes to Consolidated Financial Statements—(Continued)

independent valuation firm and approved by management.

Goodwill and Other Intangible Assets

3 unchanged sentences

Balances of December 31, 2020 $ 489,570 $ ( 252,822 ) $ 236,748 $ 43,516 $ 280,264

Additions — — — — —

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

Additions/Transfers 266,006 — 266,006 ( 1,218 ) 264,788

Additions 10,800 — 10,800 — 10,800

Adjustments ( 10,348 ) — ( 10,348 ) — ( 10,348 )

Intangible amortization — ( 58,504 ) ( 58,504 ) — ( 58,504 )

12 unchanged sentences

At December 31, 2022, the weighted average estimated remaining amortization period for definite-lived intangible assets was 8.5 years.

Investments consist primarily of investments in the Company's sponsored products.

The Company's investments,

Notes to Consolidated Financial Statements—(Continued)

excluding the assets of CIP discussed in Note 20, at December 31, 2021 and 2020 were as follows:

Investments consist primarily of investments in the Company's sponsored products.

The Company's investments, excluding the assets of CIP discussed in Note 21, at December 31, 2022 and 2021 were as follows:

(in thousands) 2022 2021

6 unchanged sentences

Investment Securities - Fair Value

Investment securities - fair value consist of investments in the Company's sponsored funds, separately managed accounts and trading debt securities.

Investment securities - fair value consist of investments in the Company's sponsored funds and separately managed accounts.

The composition of the Company's investment securities - fair value was as follows:

5 unchanged sentences

Equity securities 13,440 14,255 10,659 14,009

Debt securities — — 7 3

Total investment securities - fair value $ 80,912 $ 76,999 $ 73,749 $ 80,335

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.

For the years ended December 31, 2022, 2021 and 2020, the Company recognized a net realized loss of $ 1.4 million, and gains of $ 5.0 million and $ 4.7 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.

The Company's equity method investments primarily consist of a minority investment in an affiliated manager and an investment in a limited partnership.

For the years ended December 31, 2022, 2021 and 2020, distributions from equity method investments were $ 2.2 million, $ 3.7 million and $ 1.2 million, respectively.

The remaining capital commitment for one of the Company's equity method investments at December 31, 2021 is $ 0.1 million.

The remaining capital commitment for one of the Company's equity method investments at December 31, 2022 was $ 0.2 million.

Nonqualified Retirement Plan Assets

25 unchanged sentences

Equity securities 14,009 — — 14,009

Debt securities — 3 — 3

Nonqualified retirement plan assets 13,321 — — 13,321

Total assets measured at fair value $ 400,933 $ — $ — $ 400,933

Contingent consideration $ — $ — $ 88,400 $ 88,400

Total liabilities measured at fair value $ — $ — $ 88,400 $ 88,400

The following is a discussion of the valuation methodologies used for the Company's assets and liabilities measured at fair value.

3 unchanged sentences

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.

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 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.

Nonqualified retirement plan assets represent mutual funds within the Company's nonqualified retirement plan whose fair value is determined based on their published net asset value and are categorized as Level 1.

Notes to Consolidated Financial Statements—(Continued)

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

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.

The estimated fair values are measured using a simulation model using unobservable market data inputs prepared with the assistance of an independent valuation firm.

These liabilities are categorized as Level 3.

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:

3 unchanged sentences

Reduction of liability for payments made ( 19,520 ) ( 20,000 )

Increase (reduction) of liability related to re-measurement of fair value 12,400

Increase (reduction) of liability related to re-measurement of fair value, net 8,020 12,400

Contingent consideration, end of year $ 78,100 $ 88,400

19 unchanged sentences

(in thousands)

2023 $ 15,383

Thereafter 14,792

37 unchanged sentences

Capital losses 2,197 1,083

Other 595 984

Gross deferred tax assets 77,067 60,863

10 unchanged sentences

The Company maintained a valuation allowance in the amount of $ 19.5 million and $ 7.3 million at December 31, 2022 and 2021, 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.

As of December 31, 2022, the Company had net operating loss carry-forwards for federal income tax purposes represented by a $ 7.0 million deferred tax asset.

The related federal net operating loss carry-forwards are scheduled to begin to expire in the year 2031.

19 unchanged sentences

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.

The Company's credit agreement, as amended (the "Credit Agreement"), comprises (i) a $ 275.0 million seven-year term loan (the "Term Loan") expiring in September 2028 and (ii) a $ 175.0 million revolving credit facility with a five-year term expiring in September 2026.

During the year ended December 31, 2022, the Company repaid $ 12.8 million outstanding under its Term Loan.

At December 31, 2022, $ 261.6 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 $ 6.6 million as of December 31, 2022.

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.

4 unchanged sentences

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.

The Term Loan amortizes 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;

7 unchanged sentences

(in thousands)

2027 and thereafter 260,563

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 is involved from time to time in litigation and arbitration, as well as examinations, inquiries and investigations by various regulatory bodies, 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.

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.

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 legal matter will reflect the ultimate outcome, and an adverse outcome in certain matters could have a material adverse effect on the Company's results of operations or cash flows in particular quarterly or annual periods.

Equity Transactions

3 unchanged sentences

At December 31, 2022, $ 15.8 million was included as dividends payable in liabilities on the Consolidated Balance Sheet representing the fourth quarter dividends to be paid on February 15, 2023 for common stock shareholders of record as of January 31, 2023.

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.

During the year ended December 31, 2022, the Company repurchased 451,097 common shares at a weighted average price of $ 199.48 per share, for a total cost, including fees and expenses, of $ 90.0 million under its share repurchase program.

In May 2022, the Company's Board of Directors authorized an additional 750,000 shares under the share repurchase program.

As of December 31, 2022, 828,352 shares remain available for repurchase.

1 unchanged sentence

The program, which has no specified term, may be suspended or terminated at any time.

Notes to Consolidated Financial Statements—(Continued)

Accumulated Other Comprehensive Income (Loss)

4 unchanged sentences

Balance at December 31, 2021 $ 20

Foreign currency translation adjustments, net of tax of $ 3

Net current-period other comprehensive income (loss) (1) ( 378 )

4 unchanged sentences

Balance at December 31, 2020 $ 29

Foreign currency translation adjustments, net of tax of $( 7 )

Net current-period other comprehensive income (loss) (1) ( 9 )

Balance at December 31, 2021 $ 20

(1) Consists of foreign currency translation adjustments, net of tax of $ 135 and $ 3 for the years ended December 31, 2022 and 2021, respectively.

Retirement Savings Plan

4 unchanged sentences

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.

Equity-based awards, including restricted stock units ("RSUs"), performance stock units ("PSUs"), stock options and unrestricted shares of common stock may be granted to officers, employees and directors of the Company pursuant to the Company's Omnibus Incentive and Equity Plan (the "Omnibus Plan").

At December 31, 2022, 655,343 shares of common stock remain available for issuance of the 3,370,000 shares that are authorized for issuance under the Omnibus Plan.

3 unchanged sentences

Stock-based compensation expense $ 24,042 $ 26,225 $ 21,481

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.

RSUs may be time-vested or performance-contingent PSUs that convert into RSUs after performance measurement is complete and generally vest in one to three years .

Shares that are issued upon vesting are newly issued shares from the Omnibus Plan and are not issued from treasury stock.

Notes to Consolidated Financial Statements—(Continued)

RSU activity, inclusive of PSUs, for the year ended December 31, 2022 is summarized as follows:

14 unchanged sentences

During the years ended December 31, 2022 and 2021, the Company granted 30,516 and 26,425 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 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, Compensation - Stock Compensation ("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.

2 unchanged sentences

The Company did no t capitalize any stock-based compensation expenses during the years ended December 31, 2022, 2021 and 2020.

Notes to Consolidated Financial Statements—(Continued)

Stock Options

Stock option activity for the year ended December 31, 2021 is summarized as follows:

of shares Weighted

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

2 unchanged sentences

The Company does not reserve shares for this plan or discount the purchase price of the shares.

Restructuring Expense

During the year ended December 31, 2022, the Company incurred $ 4.0 million in in restructuring costs, primarily related to the write-down of right-of-use assets for a lease in conjunction with the consolidation of certain office space.

Notes to Consolidated Financial Statements—(Continued)

Earnings (Loss) Per Share

4 unchanged sentences

Noncontrolling interests 10,913 ( 54,704 ) ( 40,006 )

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.

11 unchanged sentences

Total anti-dilutive securities 33 3 1

Notes to Consolidated Financial Statements—(Continued)

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:

The following Company clients or sponsored funds provided 10 percent or more of the Company's investment management, administration and shareholder service fee revenues:

2022 2021 2020

8 unchanged sentences

Total net income (loss) attributable to noncontrolling interests ( 1,197 ) ( 8,951 ) ( 10,148 )

Affiliate equity sales (purchases) — ( 11,089 ) ( 11,089 )

Net subscriptions (redemptions) and other 7,049 ( 11,059 ) ( 4,010 )

3 unchanged sentences

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.

VOEs are consolidated when the Company is considered to have a controlling financial interest, which is

Notes to Consolidated Financial Statements—(Continued)

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.

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:

(i) the power through voting or similar rights to direct the activities that most significantly impact the entity's economic performance, (ii) the obligation to absorb expected losses or the right to receive expected residual returns of the entity, or (iii) 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.

In the normal course of its 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 consist of CLOs and certain global and private funds 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 Virtus Investment Partners, Inc.

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

Notes to Consolidated Financial Statements—(Continued)

Balance Sheets as of December 31, 2021 and 2020:

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Consolidated Balance Sheets as of December 31, 2022 and 2021:

As of December 31,

10 unchanged sentences

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.

At December 31, 2022, the Company consolidated seven 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 their 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.

6 unchanged sentences

At December 31, 2022, there were no material collateral assets in default.

Notes to Consolidated Financial Statements—(Continued)

Notes Payable of CLOs

9 unchanged sentences

Total Beneficial Interests $ 80,388

The following table represents income and expenses of the consolidated CLOs included on the Company's Consolidated

Notes to Consolidated Financial Statements—(Continued)

Statements of Operations for the period indicated:

The following table represents income and expenses of the consolidated CLOs included on the Company's Consolidated Statements of Operations for the period indicated:

December 31, 2022

14 unchanged sentences

Total Economic Interests $ ( 6,772 )

Notes to Consolidated Financial Statements—(Continued)

Fair Value Measurements of CIP

9 unchanged sentences

Total liabilities measured at fair value $ 414 $ 2,083,314 $ — $ 2,083,728

Notes to Consolidated Financial Statements—(Continued)

As of December 31, 2021

3 unchanged sentences

Equity investments 26,111 2,961 462 29,534

Derivatives 858 1,227 — 2,085

Total assets measured at fair value $ 231,576 $ 2,110,697 $ 3,157 $ 2,345,430

Notes payable $ — $ 2,033,617 $ — $ 2,033,617

Derivatives 714 757 — 1,471

Short sales 515 — — 515

13 unchanged sentences

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.

The fair value of the beneficial interests held by the Company is based on third-party pricing information without

Notes to Consolidated Financial Statements—(Continued)

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.

Notes to Consolidated Financial Statements—(Continued)

The securities purchased payable at December 31, 2022 and 2021 approximated fair value due to the short term nature of the instruments.

13 unchanged sentences

(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.

Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable/unobservable 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 serves as the collateral manager for other CLOs that are not consolidated.

The assets and liabilities of these CLOs reside in bankruptcy remote, special purpose entities in which the Company has no ownership of, nor holds any notes issued by, the CLOs, and provides neither recourse nor guarantees.

The Company has determined that the investment management fees it receives for serving as collateral manager for these CLOs 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 CLOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CLOs' expected losses or receive more than an insignificant amount of the CLOs' 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.

1 unchanged sentence

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

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures