VIRTUS INVESTMENT PARTNERS, INC. (Form: 10-K, Received: 02/27/2018 06:05:49)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-10994

VIRTUS INVESTMENT PARTNERS, INC.

(Exact name of registrant as specified in its charter)



Delaware		26-3962811
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 Pearl St., Hartford, CT 06103

(Address of principal executive offices)

Registrant’s telephone number, including area code:

(800) 248-7971

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock, $.01 par value		The NASDAQ Stock Market LLC
(including attached Preferred Share Purchase Rights)

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes x No

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold (based on the closing share price as quoted on the NASDAQ Global Market) as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $774,000,000. For purposes of this calculation, shares of common stock held or controlled by executive officers and directors of the registrant have been treated as shares held by affiliates.

There were 7,171,300 shares of the registrant’s common stock outstanding on February 14, 2018 .

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement which will be filed with the SEC in connection with the 2018 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.

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Virtus Investment Partners, Inc.

Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2017



		Page
PART I

Item 1.	Business	1
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	17

PART II

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	46
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	46
Item 9A.	Controls and Procedures	46
Item 9B.	Other Information	47

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	48
Item 11.	Executive Compensation	48
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	49
Item 13.	Certain Relationships and Related Transactions, and Director Independence	49
Item 14.	Principal Accounting Fees and Services	49

PART IV

Item 15.	Exhibits and Financial Statement Schedules	50
Item 16.	Form 10-K Summary	53

“We,” “us,” “our,” the “Company” and “Virtus,” as used in this Annual Report on Form 10-K (“Annual Report”), refer to Virtus Investment Partners, Inc., a Delaware corporation, and its subsidiaries.

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PART I



Item 1.	Business.

Organization

Virtus Investment Partners, Inc. (the “Company”), a Delaware corporation, commenced operations on November 1, 1995 through a reverse merger of the investment management subsidiary of Phoenix Life Insurance Company ("Phoenix") with Duff & Phelps Corporation. The Company was a majority-owned subsidiary of Phoenix from 1995 to 2001 and a wholly owned subsidiary from 2001 until 2008. On December 31, 2008, Phoenix distributed 100% of Virtus common stock to Phoenix stockholders in a spin-off transaction.

On June 1, 2017, the Company acquired RidgeWorth Investments ("RidgeWorth," the "Acquisition," or the "Acquired Business"), which provided investment management services through its affiliated managers to clients in North America, Europe and Asia. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of the Acquisition.

Our Business

We provide investment management and related services to individuals and institutions. We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers and unaffiliated subadvisers, each having its own distinct investment style, autonomous investment process and individual brand. By offering a broad array of products, we believe we can appeal to a greater number of investors and have offerings across market cycles and through changes in investor preferences.

We offer investment strategies for individual and institutional investors in different product structures and through

multiple distribution channels. Our retail products include retail and variable insurance mutual funds ("retail mutual funds"), Undertakings for Collective Investments in Transferable Securities ("UCITS" and collectively with retail mutual funds the "Open-end funds"), closed-end funds, exchange traded funds ("ETFs") and separate accounts. For certain of our open-end mutual funds and ETFs, we employ unaffiliated subadvisers to provide investment services. We market our retail funds and UCITS through financial intermediaries. Our closed-end funds and ETFs trade on exchanges such as the New York Stock Exchange and NASDAQ. Our variable insurance funds are available as investment options in variable annuities and life insurance products distributed by life insurance companies. Retail separate accounts are available in intermediary programs, sponsored and distributed by unaffiliated brokerage firms, and private client accounts, offered to the high net-worth clients of one of our affiliated managers. Our institutional products include separate accounts for corporations, multi-employer retirement funds, public employee retirement systems, foundations and endowments as well as subadvisory services to unaffiliated mutual funds and collateral manager services for sponsored structured finance products.

Our earnings are primarily driven by asset-based fees charged for services relating to these products including investment management, fund administration, distribution and shareholder services. These fees are based on a percentage of assets under management (“AUM”) and are calculated using daily or weekly average assets, quarter-end assets, or average month-end assets depending on the product.

Our Investment Managers

We provide investment management services through our investment managers who are registered under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”). The investment managers are responsible for portfolio management activities for our retail and institutional products operating under advisory or subadvisory agreements. We provide our affiliated managers with distribution, operational and administrative support, thereby allowing each manager to focus primarily on investment management. We also engage select unaffiliated managers for certain of our retail and exchange traded funds. We monitor our managers’ services by assessing their performance, style, consistency and the discipline with which they apply their investment process.

Our affiliated investment managers and their respective assets under management, styles and strategies are as follows:

Ceredex Value Advisors LLC provides investment management services to mutual funds and institutional investors and specializes in value-oriented strategies in large-, mid-, and small-cap equities. As of December 31, 2017 , Ceredex had $10.1 billion in assets under management.

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Duff & Phelps Investment Management Co. provides investment management services to mutual funds and institutional investors and specializes in equity income strategies investing in global listed infrastructure, U.S. and global real estate, energy, and international equities as well as MLPs. As of December 31, 2017 , Duff & Phelps had $10.3 billion in assets under management.

Kayne Anderson Rudnick Investment Management, LLC provides investment management and wealth advisory solutions to mutual funds, institutional investors, financial intermediaries and high-net-worth individuals specializing in quality-oriented equity strategies across market capitalizations from small to large cap and in global, international and emerging strategies. As of December 31, 2017 , Kayne had $18.8 billion in assets under management.

Newfleet Asset Management, LLC provides fixed income investment management services to mutual funds and institutional investors, specializing in multi-sector, enhanced core strategies and dedicated sector strategies such as bank loans and high yield. As of December 31, 2017 , Newfleet Asset Management had $11.8 billion in assets under management.

Rampart Investment Management Company, LLC provides quantitative and options related portfolio management services to mutual funds, institutional investors and intermediaries. As of December 31, 2017 , Rampart had $1.8 billion in assets under management.

Seix Investment Advisors, LLC provides fixed income portfolio management services to mutual funds, institutional and individual client accounts using high yield, investment grade taxable and tax-exempt, leveraged loans, and multi-sector strategies. As of December 31, 2017 , Seix had $24.9 billion in assets under management.

Silvant Capital Management LLC provides investment management services to mutual funds and institutional investors and specializes in growth equity strategies, including large cap growth, concentrated large cap growth, large cap core growth, and small cap growth. As of December 31, 2017 , Silvant had $1.1 billion in assets under management.

As of December 31, 2017 , $11.0 billion in assets under management were managed by unaffiliated managers.

Our Investment Products

Our assets under management are in open-end funds (U.S. 1940 Act mutual funds and UCITS), closed-end funds, exchange traded funds, retail separate accounts (intermediary sponsored and private client), institutional accounts, and structured products.

Assets Under Management by Product as of

December 31, 2017

($ in billions)



Fund assets
Open-end funds	$	43.1
Closed-end funds	6.7
Exchange traded funds	1.0
Retail separate accounts	13.9
Institutional accounts	20.8
Structured products	3.3
Total Long-Term	88.8
Liquidity (1)	2.1
Total Assets Under Management	$	91.0

(1) Represents assets under management in liquidity strategies, including open-end funds and institutional accounts.

Open-End Funds

As of December 31, 2017 , we managed 88 open-end funds in U.S. 1940 Act mutual funds and UCITS, with total assets of $43.1 billion . Our open-end mutual funds are offered in a variety of asset classes (domestic and international equity, taxable and non-taxable fixed income, and alternative investments), market capitalizations (large, mid and small), styles (growth, blend and value) and investment approaches (fundamental, quantitative and thematic). Our Ireland domiciled UCITS are offered in select investment strategies to non-U.S. investors.

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Summary information about our open-end funds as of December 31, 2017 is as follows:



Fund Type	Number of Funds Offered	Total Assets		Advisory Fee Range (1)
		($ in millions)		(%)
Fixed Income	28	$	18,171.9	1.85-0.21
US Equity	23	11,370.6		1.15-0.40
International/Global Equity	12	11,250.1		1.20-0.65
Alternatives	8	1,393.1		1.30-0.55
Asset Allocation	17	891.9		1.00-0.30
Total Open-End Funds	88	$	43,077.6

(1)

Percentage of average daily net assets of each fund. The percentages listed represent the range of management advisory fees paid by the funds, from the highest to the lowest. The range indicated includes the impact of breakpoints at which management advisory fees for certain of the funds in each fund type decrease as assets in the funds increase. Subadvisory fees paid on funds managed by unaffiliated subadvisers are not reflected in the percentages listed.

Closed-End Funds

We managed the following eight closed-end funds as of December 31, 2017 , each of which is traded on the New York Stock Exchange, with total assets of $6.7 billion :



Fund Type/Name	Assets		Advisory Fee
	($ in millions)		%
Balanced
DNP Select Income Fund Inc.	$	3,824.3	0.60-0.50	(1)
Virtus Global Dividend & Income Fund Inc.	439.2		0.70	(2)
Virtus Total Return Fund	395.7		0.85	(2)
Equity
Duff & Phelps Global Utility Income Fund Inc.	926.9		1.00	(1)
Alternatives
Duff & Phelps Select Energy MLP Fund	237.8		1.00	(2)
Fixed Income
Duff & Phelps Utility and Corporate Bond Trust Inc.	380.0		0.50	(1)
Virtus Global Multi-Sector Income Fund	263.1		0.95	(2)
DTF Tax-Free Income Inc.	199.2		0.50	(1)
Total Closed-End Funds	$	6,666.2


(1)	Percentage of average weekly net assets. A range indicates that the fund has breakpoints at which management advisory fees decrease as assets in the fund increase.


(2)	Percentage of average daily net assets of each fund.

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Exchange Traded Funds

We managed the following 12 exchange traded funds with total assets under management of $1.0 billion at December 31, 2017 :



Fund Name	Assets		Advisory Fee (1)
	($ in millions)		%
Infracap MLP ETF	$	614.6	0.075
Virtus Newfleet Multi-Sector Unconstrained Bond ETF	160.1		0.700
Virtus Newfleet Dynamic Credit ETF	105.0		0.550
Virtus LifeSci Biotech Products ETF	38.5		0.075
Virtus LifeSci Biotech Clinical Trials ETF	31.2		0.075
Virtus Cumberland Municipal Bond ETF	22.9		0.490
InfraCap REIT Preferred ETF	17.9		0.075
Virtus Glovista Emerging Markets ETF	15.0		0.680
iSectors Post-MPT Growth ETF	13.6		0.125
Reaves Utilities ETF	13.0		0.075
Virtus WMC Global Factor Opportunities ETF	5.1		0.550
Virtus Enhanced Short U.S. Equity ETF	2.3		0.490
	$	1,039.2

(1) Percentage of average daily net assets of each fund. Subadvisory fees paid on funds managed by unaffiliated subadvisers are not reflected in the percentages listed.

Retail Separate Accounts

Intermediary-Sold Managed Accounts

Intermediary-sold managed accounts are individual investment accounts that are primarily contracted through intermediaries as part of investment programs offered to retail investors. At December 31, 2017, the Company had $10.3 billion of intermediary-sold managed accounts

High Net Worth Accounts

High net worth accounts are investment accounts offered by our affiliate, Kayne Anderson Rudnick, directly to individual investors. Kayne Anderson Rudnick employs a staff of financial advisors who provide investment advisory services through both affiliated and unaffiliated investment managers. As of December 31, 2017, Kayne Anderson managed $3.7 billion of assets in high net worth accounts.

Institutional Accounts

We offer a variety of equity and fixed income strategies to institutional clients, including corporations, multi-employer retirement funds, public employee retirement systems, foundations and endowments as well as subadvisory services to unaffiliated mutual funds. Our institutional assets under management totaled $20.8 billion as of December 31, 2017 .

Structured Products

We act as collateral manager for structured finance products, that primarily consist of collateralized loan obligations ("CLOs"). As of December 31, 2017 , we managed $3.3 billion in structured finance products.

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Our Investment Management, Administration and Shareholder Services

Our investment management fees, administration fees and shareholder service fees earned in each of the last three years were as follows:



	Years Ended December 31,
	2017		2016		2015
($ in thousands)
Investment management fees
Open-end funds	$	175,260	$	129,542	$	163,243
Closed-end funds	44,687		43,342		46,328
Exchange traded funds	2,315		1,273		423
Retail separate accounts	54,252		40,155		37,296
Institutional accounts	46,600		18,707		16,643
Structured products	6,302		2,211		932
Liquidity products	1,659		—		—
Total investment management fees	331,075		235,230		264,865
Administration fees	34,413		26,997		33,981
Shareholder service fees	14,583		11,264		14,266
Total	$	380,071	$	273,491	$	313,112

Investment Management Fees

We provide investment management services pursuant to investment management agreements through our affiliated investment advisers (each an “Adviser”). With respect to our funds, the Adviser provides overall management services to a fund, subject to supervision by the fund’s board of directors, pursuant to agreements that must be approved annually by each fund’s board of directors and which may be terminated without penalty upon written notice, or automatically, in certain situations, such as a “change in control” of the Adviser. We earn fees based on each fund’s average daily or weekly net assets with most fee schedules providing for rate declines or “breakpoints” as asset levels increase to certain thresholds. For funds managed by subadvisers, the agreement provides that the subadviser manage the day-to-day investment management of the fund’s portfolio and receive a management fee from the Adviser based on the percentage of average daily net assets in the funds they subadvise or a percentage of the Adviser’s management fee. Each fund bears all expenses associated with its operations. In some cases, to the extent total fund expenses exceed a specified percentage of a fund’s average net assets, the Adviser has agreed to reimburse the funds for such excess expenses. For certain of our exchange traded funds managed by unaffiliated subadvisers, the subadviser has agreed to pay the fund’s operating expenses.

For retail separate accounts and institutional accounts, fees are negotiated and based primarily on asset size, portfolio complexity and individual client requests. Fees for structured finance products, for which we act as the collateral manager, consist of senior, subordinated and, in certain instances, incentive management fees. Senior and subordinated management fees are calculated 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 recognized only after certain portfolio criteria are met. Incentive fees on certain of our CLOs are typically 20% of the excess cash flows available to holders of the subordinated notes, above a threshold level internal rate of return.

Administration Fees

We provide various administrative fund services to our open-end funds and certain of our closed-end funds. We earn fees based on each fund’s average daily or weekly net assets. These 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 as well as providing office space, equipment and personnel that may be necessary for managing and administering the business affairs of the funds.

Shareholder Service Fees

We provide shareholder services to our open-end mutual funds. We earn fees based on each fund’s average daily net assets. Shareholder services include maintaining shareholder accounts, processing shareholder transactions, preparing filings and performing necessary reporting, among other things. We engage third-party service providers to perform certain aspects of the shareholder services.

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Our Distribution Services

We distribute our open-end funds and ETFs through financial intermediaries. We have broad access in the retail market, with distribution partners that include national and regional broker-dealers and independent financial advisory firms. Our sales efforts are supported by regional sales professionals, a national account relationship group, and a separate team for retirement and insurance products.

Our retail separate accounts are distributed through financial intermediaries and directly by teams at our affiliated managers. Our institutional services are marketed through relationships with consultants as well as directly to clients. We target key market segments, including foundations and endowments, corporate, public and private pension plans, and offer subadvisory services to unaffiliated mutual funds.

Our Broker-Dealer Services

We operate two broker-dealers that are registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are members of the Financial Industry Regulatory Authority (“FINRA”). They serve as principal underwriters and distributors of our open-end mutual funds and ETFs. Our broker-dealers are subject to the Securities and Exchange Commission’s (“SEC”) net capital rule designed to enforce minimum standards regarding the general financial condition and liquidity of broker-dealers.

Open-end mutual fund shares and UCITS fund shares are distributed by VP Distributors, LLC ("VPD") under sales agreements with unaffiliated financial intermediaries. VPD also markets advisory services to sponsors of retail separate accounts. ETF Distributors, LLC (“ETFD”) serves as the principal underwriter and distributor of our ETFs.

Our Competition

We face significant competition from a wide variety of financial institutions, including other investment management companies, as well as from proprietary products offered by our distribution partners such as banks, broker-dealers and financial planning firms. Competition in our businesses is based on several factors including investment performance, fees charged, access to distribution channels and service to financial advisers and their clients. Our competitors, many of which are larger than us, often offer similar products and use similar distribution sources and may also offer less expensive products, have greater access to key distribution channels, and have greater resources than we do.

Our Regulatory Matters

We are subject to regulation by the SEC, FINRA and other federal and state agencies and self-regulatory organizations. Each affiliated manager and unaffiliated subadviser is registered with the SEC under the Investment Advisers Act. Each open-end mutual fund, closed-end fund and ETF is registered with the SEC under the Investment Company Act of 1940 (the “Investment Company Act”). Our UCITs are subject to regulation by the Central Bank of Ireland (“CBI”), and the funds and each investment manager and sub-investment manager to the UCITs are registered with the CBI.

The financial services industry is highly regulated, and failure to comply with related laws and regulations can result in the revocation of registrations, the imposition of censures or fines, and the suspension or expulsion of a firm and/or its employees from the industry. All of our U.S.-domiciled open-end mutual funds are currently available-for-sale and are qualified in all 50 states, Washington, D.C., Puerto Rico, Guam and the U.S. Virgin Islands. Our Global Funds are sold through financial intermediaries to investors who are not citizens of or residents of the United States. Most aspects of our investment management business, including the business of the unaffiliated subadvisers, are subject to various U.S. federal and state laws and regulations.

Our officers, directors and employees may, from time to time, own securities that are also held by one or more of our funds. Our internal policies with respect to personal investments are established pursuant to the provisions of the Investment Company Act and/or the Investment Advisers Act. Employees, officers and directors who, in the function of their responsibilities to us, meet the requirements of the Investment Company Act, Investment Advisers Act and/or FINRA regulations must disclose personal securities holdings and trading activity. Employees, officers and directors with investment discretion or access to investment decisions are subject to additional restrictions with respect to the pre-clearance of the purchase or sale of securities over which they have investment discretion or beneficial interest. Other restrictions are imposed upon supervised persons with respect to personal transactions in securities that are held, recently sold, or contemplated for purchase by our mutual funds. All supervised persons are required to report holdings and transactions on an annual and quarterly basis pursuant to the provisions of the Investment Company Act and Investment Advisers Act. In addition, certain transactions are restricted so as to avoid the possibility of improper use of information relating to the management of client accounts.

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Our Employees

As of December 31, 2017 , we had 543 full-time equivalent employees. None of our employees are represented by a union.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as proxy statements, are available free of charge on our website located at www.virtus.com as soon as reasonably practicable after they are filed with or furnished to the SEC. You may also read and copy any document we file at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Reports, proxy statements and other information regarding issuers that file electronically with the SEC, including our filings, are also available to the public on the SEC’s website at http://www.sec.gov.

A copy of our Corporate Governance Principles, our Code of Conduct and the charters of our Audit Committee, Compensation Committee, Governance Committee and Risk and Finance Committee are posted under “Corporate Governance” in the Investor Relations section of our website, www.virtus.com, and are available in print to any person who requests copies by contacting Investor Relations by email to: investor.relations@virtus.com or by mail to Virtus Investment Partners, Inc., c/o Investor Relations, 100 Pearl Street, Hartford, CT 06103. Information contained on the website is not incorporated by reference or otherwise considered part of this document.

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Item 1A.	Risk Factors.

This section describes some of the potential risks relating to our business, such as market, liquidity, operational, reputation and regulatory risks. The risks described below are some of the more important factors that could affect our business. You should carefully consider the risks described below, together with all of the other information included in this Annual Report on Form 10-K, in evaluating the Company and our common stock. If any of the risks described below actually occur, our business, revenues, profitability, results of operations, financial condition, cash flows, reputation and stock price could be materially adversely affected.

Risks Relating to Our Business

We earn substantially all of our revenues based on assets under management, which fluctuate based on many factors, and any reduction in assets under management would reduce our revenues and profitability. Assets under management fluctuate based on many factors including market conditions, investment performance and client withdrawals.

The majority of our revenues are generated from asset-based fees from investment management products and services to individuals and institutions. Therefore, if assets under management decline, our fee revenues would decline, reducing profitability as some of our expenses are fixed. Assets under management could decline, due to a variety of factors, including, but not limited to, the following:

•

General domestic and global economic and political conditions can influence assets under management. Changes in interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws, trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts and security operations) and other conditions may impact the equity and credit markets which may influence our assets under management. Capital and credit markets can experience substantial volatility. Employment rates, continued economic weakness and budgetary challenges in parts of the world, the prospective impact of the United Kingdom’s withdrawal from the European Union, regional turmoil in the Middle East, concern over growth prospects in China and emerging markets, growing debt loads for certain countries, and uncertainty about the consequences of governments eventually withdrawing monetary stimulus all indicate that economic and political conditions remain unpredictable. If the security markets decline or experience volatility, our assets under management and our revenues could be negatively impacted. Changes in currency exchange rates such as an increase in the value of the U.S. dollar relative to non-U.S. currencies could result in a decrease in the U.S. dollar value of assets under management that are denominated in non-U.S. currencies. In addition, diminishing investor confidence in the markets and/or adverse market conditions could result in a decrease in investor risk tolerance. Such a decrease could prompt investors to reduce their rate of investment or to fully withdraw from markets, which could lower our overall assets under management and have an adverse effect on our revenues, earnings and growth prospects.

The volatility in the markets in the recent past has highlighted the interconnection of the global markets and demonstrated how the deteriorating financial condition of one institution may materially adversely impact the performance of other institutions. Our assets under management have exposure to many different industries and counterparties and may be exposed to credit, operational or other risk due to the default by a counterparty or client or in the event of a market failure or disruption. In the event of extreme circumstances, including economic, political or business crises, such as a widespread systemic failure in the global financial system or failures of firms that have significant obligations as counterparties, we may suffer significant declines in assets under management and severe liquidity or valuation issues.

•

The value of assets under management can decline due to price declines in specific securities, market segments or geographic areas where those assets are invested. Funds and portfolios that we manage focused on certain geographic markets and industry sectors are particularly vulnerable to political, social and economic events in those markets and sectors. If these markets or industries decline or experience volatility, this could have a negative impact on our assets under management and our revenues. For example, certain non-U.S. markets, particularly emerging markets, are not as developed or as efficient as the U.S. financial markets and, as a result, may be less liquid, less regulated and significantly more volatile than the U.S. financial markets. Liquidity in such markets may be adversely impacted by factors including political or economic events, government policies, expropriation, volume trading limits by foreign investors, and social or civil unrest. These factors may negatively impact the market value of an investment or our ability to dispose of it.

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•

Any real or perceived negative absolute or relative performance could negatively impact the maintenance and growth of assets under management. Sales and redemptions of our investment strategies can be affected by investment performance relative to other competing investment strategies or to established benchmarks. Our investment management strategies are rated, ranked or assessed by independent third-parties, distribution partners, and industry periodicals and services. These assessments often influence the investment decisions of clients. If the performance or assessment of our investment strategies is seen as underperforming relative to peers, it could result in an increase in the withdrawal of assets by existing clients and the inability to attract additional investments from existing and new clients. In addition, certain of our investment strategies have capacity constraints, as there is a limit to the number of securities available for the strategy to operate effectively. In those instances, we may choose to limit access to new or existing investors. In addition, certain mutual funds employ the use of leverage as part of their investment strategies, which will increase or decrease assets under management, and the risk associated with the investment, as the proceeds from the use of leverage are invested in accordance with the funds’ investment strategies.

•

Changes in interest rates can have adverse effects on our assets under management. Increases in interest rates from their historically low levels may adversely affect the net asset values of our assets under management. Furthermore, increases in interest rates may result in reduced prices in equity markets. Conversely, decreases in interest rates could lead to outflows in fixed income assets that we manage as investors seek higher yields. Any of these effects could lower our assets under management and revenues and, if our revenues decline without a commensurate reduction in our expenses, would lead to a reduction in our net income.

Any of these factors could cause our assets under management to decline and have an adverse impact on our results of operations and financial condition. Additionally we may be unable to effect appropriate expense reductions in a timely manner in response to these adverse impacts.

Our investment advisory agreements are subject to withdrawal, renegotiation or termination on short notice which could negatively impact our business.

Our clients include the boards of directors for our sponsored mutual funds, managed account program sponsors, private clients and institutional clients. Our investment management agreements with these clients may be terminated on short notice without penalty. As a result, there would be little impediment to these sponsors or clients terminating our agreements. Our clients may renegotiate their investment contracts or reduce the assets we manage for them due to a number of reasons including but not limited to investment performance, reputational, regulatory or compliance issues, loss of key investment management or other personnel or a change in management of third-party distributors or others with whom we have relationships. The directors of our sponsored funds may deem it to be in the best interests of a fund’s shareholders to make decisions adverse to us, such as reducing the compensation paid to us, requesting that we subsidize fund expenses over certain thresholds, or imposing restrictions on our management of the fund. Under the Investment Company Act, investment advisory agreements automatically terminate in the event of an assignment, which may occur if, among other events, the Company undergoes a change in control, such as any person acquiring 25% voting rights of our common stock. If an assignment were to occur, we cannot be certain that the fund’s board of directors and its stockholders would approve a new investment advisory agreement. In addition, investment advisory agreements for the separate accounts we manage may not be assigned without the consent of the client. If an assignment occurs, we cannot be certain that the Company will be able to obtain the necessary fund approvals or the necessary consents from our clients. The withdrawal, renegotiation or termination of any investment management contract relating to a material portion of assets under management would have an adverse impact on our results of operations and financial condition.

Any damage to our reputation could harm our business and lead to a reduction in our revenues and profitability.

Maintaining a positive reputation with the investment community and other constituencies is critical to our success. Our reputation is vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate even if they are without merit or satisfactorily addressed. Our reputation may be impacted by many factors, including but not limited to: poor performance; litigation; conflicts of interests; regulatory inquiries, investigations or findings; operational failures (including cyber breaches); intentional or unintentional misrepresentation of our products or services; material weaknesses in our internal controls; or employee misconduct or rumors. Any damage to our reputation could impede our ability to attract and retain clients and key personnel, adversely impact relationships with third-party distributors and other business partners, and lead to a reduction in the amount of our assets under management, any of which could adversely affect our results of operations and financial condition.

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We manage client assets under agreements that have investment guidelines or other contractual requirements, and any failure to comply could result in claims, losses or regulatory sanctions, which could negatively impact our revenues and profitability.

The agreements under which we manage client assets often have established investment guidelines or other contractual requirements with which we are required to comply in providing our investment management services. Although we maintain various compliance procedures and other controls to prevent, detect and correct such errors, any failure or allegation of a failure to comply with these guidelines or other requirement could result in client claims, reputational damage, withdrawal of assets, and potential regulatory sanctions, any of which could have an adverse impact on our results of operations and financial condition.

Our indebtedness contains covenants that require annual principal repayments and other provisions that could adversely affect our financial position or results of operations

We incur indebtedness for a variety of business reasons, including in relation to financing acquisitions. The indebtedness we incur can take many forms including but not limited to term loans or revolving lines of credit which customarily contain covenants. For example, under our Credit Agreement, we are required to use a portion of our cash flow to service interest and make required annual principal payments, which will restrict our cash flow available to pursue business growth opportunities. The Credit Agreement also contains covenants that limit our ability to return capital to shareholders. In addition, our indebtedness may make it more difficult for us to withstand or respond to adverse or changing business, regulatory and economic conditions.

At December 31, 2017, the Company had $259.4 million of total debt outstanding, excluding debt of consolidated investment products, and $100.0 million in unused capacity on a credit facility. On February 15, 2018, the Company amended its Credit Agreement, which resulted in the availability of $105.0 million of additional term loan financing and is expected to be drawn at the closing of our acquisition of a majority interest in Sustainable Growth Advisers LLC ("SGA"), although there can be no assurances the SGA transaction will close. The amendment to the Credit Agreement removed the previous financial maintenance covenant on the Term Loan and replaced the existing financial maintenance covenant on our credit facility with a net leverage ratio financial maintenance covenant that applies when $30.0 million or more of debt is outstanding on the credit facility. We cannot provide assurances that at all times in the future we will satisfy all such covenants or obtain any required waiver or amendment, in which event all indebtedness could become immediately due. Any or all of the above factors could materially adversely affect our financial position or results of operations.

Our business relies on the ability to attract and retain key employees, and the loss of such employees could negatively affect our financial performance.

The success of our business is dependent to a large extent on our ability to attract and retain key employees such as senior executives, portfolio managers, securities analysts and sales personnel. Competition in the job market for these professionals is generally intense, and compensation levels in the industry are highly competitive. Our industry is also characterized by the movement of investment managers among different firms.

If we are unable to continue to attract and retain key employees, or if compensation costs required to attract and retain key employees increase, our performance, including our competitive position, could be materially adversely affected. Additionally, we utilize Company equity awards as part of our compensation plans and as a means for recruiting and retaining key employees. Declines in our stock price could result in deterioration of the value of equity awards granted, thus lessening the effectiveness of using stock-based awards to retain key employees.

In certain circumstances, the departure of key employees could cause higher redemption rates in certain strategies or the loss of certain client accounts. Any inability to retain key employees, attract qualified employees, or replace key employees in a timely manner, could lead to a reduction in the amount of our assets under management, which could have a material adverse effect on our revenues and profitability. In addition, there could be additional costs to replace, retain or attract new talent that could result in a decrease in our profitability and have an adverse impact on our results of operations and financial condition.

The highly competitive nature of the asset management industry may require us to reduce our fees, or increase amounts paid to financial intermediaries, any of which could result in a reduction of our revenues and profitability.

We face significant competition from a wide variety of financial institutions, including other investment management companies, as well as from proprietary products offered by our distribution partners such as banks, broker-dealers and financial planning firms. Competition in our businesses is based on several factors including investment performance, fees charged, access to distribution channels, and service to financial advisers. Our competitors, many of which are larger than we are, often offer similar products, use similar distribution sources, offer less expensive products, have greater access to key distribution channels, and have greater resources, geographic footprints and name recognition than we do. Additionally, certain products and asset classes which we do not currently offer, such as passive or index-based products, are becoming increasingly popular

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with investors. Existing clients may withdraw their assets in order to invest in these products, and we may be unable to attract additional investments from existing and new clients, which would lead to a decline in our assets under management and market share.

Our profits are highly dependent on the fee levels for our products and services. In recent years, there has been a trend in certain segments of our markets toward lower fees and lower-fee products, such as passive products. Competition could cause us to reduce the fees that we charge for our products and services. In order to maintain appropriate fee levels in a competitive environment, we must be able to continue to provide clients with investment products and services that are viewed as appropriate in relation to the fees charged. If our clients, including our fund boards, were to view our fees as being high relative to the market or the returns provided by our investment products, we may choose or be required to reduce our fee levels or we may experience significant redemptions in our assets under management, which could have an adverse impact on our results of operations and financial condition.

We are subject to an extensive and complex regulatory environment, and changes in regulations or failure to comply with regulations could adversely affect our revenues and profitability.

The investment management industry in which we operate is subject to extensive and frequently changing regulation. We are regulated by the Securities and Exchange Commission ("SEC") under the Exchange Act, the Investment Company Act and the Investment Advisers Act, and we are subject to regulation by the Commodities Futures Trading Commission under the Commodities Exchange Act. Our Global Funds and advisers are subject to regulation by the CBI. We are also regulated by FINRA, the Department of Labor under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), as well as other federal and state laws and regulations.

The regulatory environment in which we operate changes often and has seen increased focus in recent years. For example, in fiscal 2016 the SEC adopted a new rule addressing liquidity risk management by registered open-end funds, with implementation of the rule expected in 2018. The SEC also recently proposed rules regarding the use of derivatives by registered open- and closed-end funds. If the liquidity risk management rule is implemented in its current form and the use of derivatives rules are adopted substantially as proposed, they could negatively impact the provision of investment services or limit opportunities for certain funds that we manage and increase our management and administration costs, with potential adverse effects on our revenues, expenses and results of operations.

Although we spend extensive time and resources on compliance efforts designed to ensure compliance with all applicable laws and regulations, if we or our affiliates fail to properly modify and update our compliance procedures in a timely manner in this changing and highly complex regulatory environment, we may be subject to various legal proceedings, including civil litigation, governmental investigations and enforcement actions, that could result in fines, penalties, suspensions of individual employees, or limitations on particular business activities, any of which could have an adverse impact on our results of operations and financial condition.

Changes in tax laws and unanticipated tax obligations could have an adverse impact on our financial condition, results of operations and cash flow.

We are subject to federal and state income taxes in the United States. Tax authorities may disagree with certain positions we have taken or implement changes in tax policy, which may result in the assessment of additional taxes. We regularly assess the appropriateness of our tax positions and reporting. We cannot provide assurance, however, that we will accurately predict the outcomes of audits, and the actual outcomes of these audits could be unfavorable. In addition, our ability to use net operating loss carryforwards and other tax attributes available to us will be dependent on our ability to generate taxable income.

We utilize unaffiliated firms in providing investment management services, and any matters that have an adverse impact on their business, or any change in our relationships with them, could lead to a reduction in assets under management, which would adversely affect our revenues and profitability.

We utilize unaffiliated subadvisers as investment managers for certain of our retail products, and we have licensing arrangements with unaffiliated data providers. Because we typically have no ownership interests in these unaffiliated firms, we do not control the business activities of such firms. Problems stemming from the business activities of these unaffiliated firms may negatively impact or disrupt such firms’ operations or expose them to disciplinary action or reputational harm. Furthermore, any such matters at these unaffiliated firms may have an adverse impact on our business or reputation or expose us to regulatory scrutiny, including with respect to our oversight of such firms.

We periodically negotiate provisions and renewals of these relationships, and we cannot provide assurance that such terms will remain acceptable to us or the unaffiliated firms. These relationships can also be terminated upon short notice without penalty. In addition, the departure of key employees at unaffiliated subadvisers or data providers could cause higher redemption rates for certain assets under management or the loss of certain client accounts. An interruption or termination of unaffiliated

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firm relationships could affect our ability to market our products and result in a reduction in assets under management, which could have an adverse impact on our results of operations and financial condition.

We distribute through intermediaries, and changes in key distribution relationships could reduce our revenues, increase our costs and adversely affect our profitability.

Our primary source of distribution for retail products is through intermediaries that include third-party financial institutions, such as: major wire houses; national, regional and independent broker-dealers and financial advisors; banks and financial planners; and registered investment advisors. Our success is highly dependent on access to these various distribution systems. These distributors are generally not contractually required to distribute our products and typically offer their clients various investment products and services, including proprietary products and services, in addition to and in competition with our products and services. While we compensate these intermediaries for selling our products and services pursuant to contractual agreements, we may not be able to retain access to these channels at all or at similar pricing. Increasing competition for these distribution channels could cause our distribution costs to rise, which could have a material adverse effect on our business, revenues and profitability. To the extent that existing or future intermediaries prefer to do business with our competitors, the sales of our products as well as our market share, revenues and profitability could decline.

We and our third-party service providers rely on numerous technology systems, and any temporary business interruption, security breach or system failures could negatively impact our business and profitability.

Our technology systems, and those of third-party service providers are critical to our operations. The ability to consistently and reliably obtain accurate securities pricing information, process client portfolio and fund shareholder transactions, and provide reports and other customer service to fund shareholders and clients in other accounts managed by us is an essential part of our business. Any delays or inaccuracies in obtaining pricing information, processing such transactions or such reports, other breaches and errors, and any inadequacies in other customer service could result in reimbursement obligations or other liabilities or alienate customers and potentially give rise to claims against us. Our customer service capability, as well as our ability to obtain prompt and accurate securities pricing information and to process transactions and reports, is highly dependent on third-party service providers’ information systems. Any failure or interruption of those systems, whether resulting from technology or infrastructure breakdowns, defects or external causes such as fire, natural disaster, computer viruses, acts of terrorism or power disruptions, could result in financial loss, negatively impact our reputation and negatively affect our ability to do business. Although we, and our third-party service providers, have disaster recovery plans in place, we may experience temporary interruptions if a natural or man-made disaster or prolonged power outage were to occur, which could have an adverse impact on our results of operations and financial condition.

In addition, like other companies, our computer systems are regularly subject to, and expected to continue to be the target of, computer viruses or other malicious codes, unauthorized access, cyber-attacks or other computer-related penetrations. Over time, the sophistication of cyber threats continues to increase, and any controls we put in place and preventative actions we take to reduce the risk of cyber incidents and protect our information systems may be insufficient to detect or prevent unauthorized access, cyber-attacks or other security breaches to our computer systems or those of third parties with whom we do business. Breach of our technology systems, or of those of third parties with whom we do business through cyber-attacks, or failure to manage and secure our technology environment could result in interruptions or malfunctions in the operations of our business, loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by a breach, additional costs to mitigate against future incidents, and litigation costs resulting from an incident.

We and certain of our third-party vendors receive and store personal information as well as non-public business information. Although we and our third-party vendors take precautions, we may still be vulnerable to hacking or other unauthorized use. A breach of the systems or hardware could result in an unauthorized access to our proprietary business or client data or release of this type of data, which could subject us to legal liability or regulatory action under data protection and privacy laws, which may result in fines or penalties, the termination of existing client contracts, costly mitigation activities and harm to our reputation. This could have an adverse impact on our results of operations and financial condition.

A relatively large percentage of our common stock is concentrated with a small number of shareholders, which could increase the volatility in our stock trading and affect our share price.

A large percentage of our common stock is held by a limited number of shareholders. If our larger shareholders decide to liquidate their positions, it could cause significant fluctuation in the share price of our common stock. Public companies with a relatively concentrated level of institutional shareholders, such as we have, often have difficulty generating trading volume in their stock, which may increase the volatility in the price of our common stock.

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Civil litigation and government investigations or proceedings could adversely affect our business.

Many aspects of our business involve substantial risks of liability, and there have been substantial incidences of litigation and regulatory investigations in the financial services industry in recent years, including customer claims as well as class action suits seeking substantial damages. From time to time, we and/or our funds may be named as defendants or co-defendants in lawsuits or be involved in disputes that involve the threat of lawsuits seeking substantial damages. We and/or our funds are also involved from time to time in governmental and self-regulatory organization investigations and proceedings. For example, in fiscal 2015, two putative class action complaints were filed against us and certain of our officers and affiliates, alleging violation of certain provisions of federal securities laws. See Item 3. Legal Proceedings for further description of these class action complaints.

Any of these lawsuits, investigations or proceedings could result in reputational damage, loss of clients and assets, settlements, awards, injunctions, fines, penalties, increased costs and expenses in resolving a claim, diversion of employee resources and resultant financial losses. Predicting the outcome of such matters is inherently difficult, particularly where claims are brought on behalf of various classes of claimants or by a large number of claimants, when claimants seek substantial or unspecified damages, or when investigations or legal proceedings are at an early stage. A substantial judgment, settlement, fine or penalty could be material to our operating results or cash flows for a particular period, depending on our results for that period, or could cause us significant reputational harm, which could harm our business prospects.

We depend to a large extent on our business relationships and our reputation to attract and retain clients. As a result, allegations of improper conduct by private litigants, including investors in our funds, or regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our investment activities or the asset management industry in general, whether or not valid, may harm our reputation, which may be more damaging to our business than to other types of businesses. We may incur substantial legal expenses in defending against proceedings commenced by a client, regulatory authority or other private litigant. Substantial legal liability levied on us could cause significant reputational harm and have an adverse impact on our results of operations and financial condition.

We have a significant portion of our assets invested in marketable securities which exposes us to earnings volatility, as the value of these investments fluctuate, as well as risk of capital loss.

We use capital to seed new investment strategies and make new investments to introduce new products or enhance distribution access of existing products. At December 31, 2017, the Company had $118.4 million of seed capital investments, comprising $62.7 million of marketable securities and $55.7 million of net interests in consolidated investment products (“CIPs”), and $108.3 million of investments in CLOs that comprise $85.0 million of net interests in CIPs and $23.3 million of marketable securities. These investments are in a variety of asset classes including alternative, fixed income and equity strategies. Many of these investments employ a long-term investment strategy and entail an optimal investment period spanning several years. Accordingly, during this investment period, the Company’s capital utilized in these investments may not be available for other corporate purposes at all or without significantly diminishing our investment return. We cannot provide assurance that these investments will perform as expected. Moreover, increases or decreases in the value of these investments will increase the volatility of our earnings, and a decline in the value of these investments would result in the loss of capital and have an adverse impact on our results of operations and financial condition.

Our intended quarterly distributions may not be paid as intended or at all .

The declaration, payment and determination of the amount of our quarterly dividends may change at any time. In making decisions regarding our quarterly dividends, we consider general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions (including under the terms of our Credit Agreement and the Mandatory Convertible Preferred Stock that we issued on February 1, 2017) and obligations, legal, tax, regulatory and other restrictions that may have implications on the payment of distributions by us to our shareholders or by our subsidiaries to us, and such other factors as we may deem relevant. Our ability to pay dividends in excess of our current quarterly dividends is subject to restrictions under the terms of our Credit Agreement. We cannot make any assurances that any distributions will be paid.

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We may need to raise additional capital in the future, and resources may not be available to us in sufficient amounts or on acceptable terms, which could have an adverse impact on our business.

Our ability to meet our future cash needs is dependent upon our ability to generate cash. Although we have successfully generated sufficient cash in the past, we may not do so in the future. As of December 31, 2017, we maintained $132.2 million in cash and cash equivalents, $118.4 million in seed capital investments and $108.3 million in other investments and had $100.0 million available under our credit facility. Also at December 31, 2017 we had $259.4 million in debt outstanding excluding the notes payable of our consolidated investment products for which risk of loss to the Company is limited to our $85.0 million investment in such products. See Footnote 18 of our consolidated financial statements for additional information on the notes payable of the consolidated investment products. Our ability to access capital markets efficiently depends on a number of factors, including the state of credit and equity markets, interest rates and credit spreads. We may need to raise capital to fund new business initiatives in the future, and financing may not be available to us in sufficient amounts, on acceptable terms, or at all. If we are unable to access sufficient capital on acceptable terms, our business could be adversely impacted.

Our common stock ranks junior to the Mandatory Convertible Preferred Stock with respect to dividends and amounts payable in the event of our liquidation and ranks junior to our indebtedness which may limit any payment or other distribution of assets to holders of our common stock in the event we are liquidated.

Our common stock ranks junior to the Mandatory Convertible Preferred Stock, with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up. This means that, unless accumulated dividends have been paid or set aside for payment on all outstanding Mandatory Convertible Preferred Stock for all completed dividend periods, no dividends may be declared or paid on our common stock. Likewise, in the event of our voluntary or involuntary liquidation, dissolution or winding-up, no distribution of our assets may be made to holders of our common stock until we have paid to holders of the Mandatory Convertible Preferred Stock a liquidation preference equal to $100.00 per share plus accrued and unpaid dividends (whether or not declared).

Additionally, in the event of our liquidation, dissolution or winding up, our common stock would rank below all debt claims against us. As a result, holders of our common stock will not be entitled to receive any payment or other distribution of assets until after all of our obligations to our debt holders have been satisfied.

We have corporate governance provisions that may make an acquisition of us more difficult.

Certain provisions of our certificate of incorporation and bylaws could discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so. In addition, the provisions of Section 203 of the Delaware General Corporation Law also restrict certain business combinations with interested stockholders.

Our insurance policies may not cover all losses and costs to which we may be exposed.

We carry insurance in amounts and under terms that we believe are appropriate. Our insurance may not cover all liabilities and losses to which we may be exposed. Certain insurance coverage may not be available or may be prohibitively expensive in future periods. As our insurance policies come up for renewal, we may need to assume higher deductibles or pay higher premiums, which could have an adverse impact on our results of operations and financial condition.

We have goodwill and intangible assets on our balance which could become impaired.

Our goodwill and intangible assets are subject to annual impairment reviews. We also have definite-lived intangibles assets on our balance sheet that are subject to impairment testing if indicators of impairment are identified. A variety of factors could cause such book values to become impaired, which would adversely affect our results of operations.

We may engage in significant strategic transactions that may not achieve the expected benefits or could expose us to additional risks.

We regularly review, and from time to time have discussions on and engage in, potential significant transactions, including potential acquisitions, consolidations, joint ventures or similar transactions, some of which may be material. We cannot provide assurance that we will be successful in negotiating the required agreements or successfully close transactions after signing such agreements. In addition, in entering into such transactions, we may expect to achieve certain financial benefits, including such things as cost or revenue synergies, and we may not ultimately be able to realize such benefits.

Any strategic transaction may also involve a number of other risks, including additional demands on our staff, unanticipated problems regarding integration of operating facilities, technologies and new employees, and the existence of liabilities or contingencies not disclosed to, or otherwise unknown by, us prior to closing a transaction. In addition, any business we acquire may underperform relative to expectations or may lose customers or employees.

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On February 1, 2018, for example, the Company entered into an agreement to acquire a majority interest in SGA, an investment manager specializing in U.S. and global growth equity portfolios. We cannot provide assurance that we will be successful in negotiating the required agreements or successfully close transactions after signing such agreements including the SGA acquisition or any other future strategic transactions.

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains statements that are, or may be considered to be, forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” "intent," "plan," “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” “opportunity,” “predict,” “would,” “potential,” “future,” “forecast,” “guarantee,” “assume,” “likely,” “target” or similar statements or variations of such terms.

Our forward-looking statements are based on a series of expectations, assumptions and projections about our Company and the markets in which we operate, are not guarantees of future results or performance and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, net asset inflows and outflows, operating cash flows, business plans and ability to borrow, for all future periods. All of our forward-looking statements contained in this Annual Report on Form 10-K are as of the date of this Annual Report on Form 10-K only.

We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. We do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this Annual Report on Form 10-K, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If there are any future public statements or disclosures by us which modify or impact any of the forward-looking statements contained in or accompanying this Annual Report on Form 10-K, such statements or disclosures will be deemed to modify or supersede such statements in this Annual Report on Form 10-K.

Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K as well as the following risks and uncertainties resulting from: (a) any reduction in our assets under management; (b) the withdrawal, renegotiation or termination of investment advisory agreements; (c) damage to our reputation; (d) failure to comply with investment guidelines or other contractual requirements; (e) inability to satisfy financial covenants and payments related to our indebtedness; (f) the inability to attract and retain key personnel; (g) challenges from the competition we face in our business; (h) adverse regulatory and legal developments; (i) unfavorable changes in tax laws or limitations; (j) adverse developments related to unaffiliated subadvisers; (k) negative implications of changes in key distribution relationships; (l) interruptions in or failure to provide critical technological service by us or third parties; (m) volatility associated with our common and preferred stock; (n) adverse civil litigation and government investigations or proceedings; (o) the risk of loss on our investments; (p) the inability to make quarterly common and preferred stock distributions; (q) the lack of sufficient capital on satisfactory terms; (r) losses or costs not covered by insurance; (u) the risk that our goodwill or intangible assets could become impaired; (v) the inability to achieve expected acquisition-related financial benefits and other risks and uncertainties. Any occurrence of, or any material adverse change in, one or more risk factors or risks and uncertainties referred to in this Annual Report on Form 10-K or our other periodic reports filed with the SEC could materially and adversely affect our operations, financial results, cash flows, prospects and liquidity. You are urged to carefully consider all such factors.



Item 1B.	Unresolved Staff Comments.

None.

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Item 2.	Properties.

We lease our principal offices, which are located at 100 Pearl St., Hartford, CT 06103. In addition, we lease office space in California, Florida, Georgia, Illinois, Massachusetts, New Jersey and New York.



Item 3.	Legal Proceedings.

The Company is regularly involved 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 accrues for 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, Loss 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 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.

In re Virtus Investment Partners, Inc. Securities Litigation; formerly Tom Cummins v. Virtus Investment Partners Inc. et al

On February 20, 2015, a putative class action complaint alleging violations of certain provisions of the federal securities laws was filed by an individual shareholder against the Company and certain of the Company’s current officers (the “defendants”) in the United States District Court for the Southern District of New York (the “Court”). On April 21, 2015, three plaintiffs, including the original plaintiff, filed motions to be appointed lead plaintiff and, on June 9, 2015, the Court appointed Arkansas Teachers Retirement System lead plaintiff. On August 21, 2015, the plaintiffs filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint, which was purportedly filed on behalf of all purchasers of the Company’s common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint alleges that, during the Class Period, the defendants disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds formerly subadvised by F-Squared Investments Inc (“F-Squared”). The Consolidated Complaint alleges claims under Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5. The plaintiffs seek to recover unspecified damages. A motion to dismiss the Consolidated Complaint was filed on behalf of the Company and the other defendants on October 21, 2015. On July 1, 2016, the Court entered an opinion and order granting in part, and denying in part, the motion to dismiss, narrowing plaintiffs' claims under Sections 10(b) and 20(a) of the Exchange Act and dismissing one of the defendants from the suit. The remaining defendants' Answer to the Consolidated Complaint was filed on August 5, 2016. Plaintiffs' motion for class certification was granted on May 15, 2017. Discovery has since been completed. On October 6, 2017, defendants moved for summary judgment. Briefing on the motion for summary judgment was completed on December 22, 2017, and oral argument was held on January 18, 2018, where the Court reserved decision. The Company believes that the suit is without merit, nonetheless, on February 6, 2018, it reached an agreement in principle with the plaintiffs, subject to Court approval, settling all claims in the litigation, in order to avoid the cost, distraction, disruption, and inherent litigation uncertainty. Upon approval by the Court, which the Company believes is likely, the resolution of this matter will not have a material impact on the Company’s results of operations, cash flows or its consolidated financial condition.

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Mark Youngers v. Virtus Investment Partners, Inc. et al

On May 8, 2015, a putative class action complaint alleging violations of certain provisions of the federal securities laws was filed in the United States District Court for the Central District of California (the "District Court") by an individual who alleges he is a former shareholder of one of the Virtus mutual funds formerly subadvised by F-Squared and formerly known as the AlphaSector Funds. The complaint alleges claims against the Company, certain of the Company’s officers and affiliates, and certain other parties (the “defendants”). The complaint was purportedly filed on behalf of purchasers of the AlphaSector Funds between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”). The complaint alleges that, during the Class Period, the defendants disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On June 7, 2015, a group of three individuals, including the original plaintiff, filed a motion to be appointed lead plaintiff, and on July 27, 2015, the District Court appointed movants as lead plaintiff. On October 1, 2015, the plaintiffs filed a First Amended Class Action Complaint which, among other things, added a derivative claim for breach of fiduciary duty on behalf of Virtus Opportunities Trust. On October 19, 2015, the District Court entered an order transferring the action to the Southern District of New York (the "Court"). On January 4, 2016, the plaintiffs filed a Second Amended Complaint. A motion to dismiss was filed on behalf of the Company and affiliated defendants on February 1, 2016. On July 1, 2016, the Court entered an opinion and order granting in part, and denying in part, the motion to dismiss. The Court dismissed four causes of action entirely and a fifth cause of action with respect to a portion of the Class Period. The Court also dismissed all claims against ten defendants named in the Complaint. The Court held that the plaintiffs may pursue certain securities claims under Sections 10(b) and 20(a) of the Exchange Act and Section 12 of the Securities Act of 1933. The remaining defendants filed an Answer to the Second Amended Complaint on August 5, 2016. A Stipulation of Voluntary Dismissal of the claim under Section 12 of the Securities Act was filed on September 15, 2016. The defendants filed a motion to certify an interlocutory appeal of the July 1, 2016 order to the Court of Appeals for the Second Circuit on August 26, 2016. The motion was denied on January 6, 2017. Plaintiffs' motion for class certification was denied on May 15, 2017. On December 4, 2017, the Court denied plaintiffs' motion seeking leave to amend their complaint to address deficiencies identified by the Court in its orders dismissing, in part, plaintiffs' Second Amended Complaint and denying class certification. On December 22, 2017, plaintiffs voluntarily dismissed all remaining claims against the Company with prejudice and waived all rights to appeal.



Item 4.	Mine Safety Disclosures.

Not applicable.

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PART II



Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded on the NASDAQ Global Market under the trading symbol “VRTS.” As of February 14, 2018 , we had 7,171,300 shares of common stock outstanding that were held by approximately 56,512 holders of record. The table below sets forth the quarterly high and low sales prices of our common stock on the NASDAQ Global Market, and the amount of dividends declared, for each quarter in the last two fiscal years.



	Year Ended						Year Ended
	December 31, 2017						December 31, 2016
Quarter Ended	High		Low		Dividends Declared per Common Share		High		Low		Dividends Declared per Common Share
First Quarter	$	126.60	$	99.85	$	0.45	$	120.09	$	73.33	$	0.45
Second Quarter	$	113.50	$	97.60	$	0.45	$	83.57	$	66.12	$	0.45
Third Quarter	$	118.75	$	103.81	$	0.45	$	104.73	$	69.78	$	0.45
Fourth Quarter	$	124.65	$	106.55	$	0.45	$	128.10	$	92.80	$	0.45

On February 14, 2018, our board of directors declared a quarterly cash dividend of $0.45 per common share to be paid on May 15, 2018 to shareholders of record at the close of business on April 30, 2018 and a $1.8125 dividend per share on our mandatory convertible preferred stock, to be paid on May 1, 2018 to shareholders of record at the close of business on April 16, 2017.

There have been no non-cash dividends on our common stock with respect to the periods presented. In making decisions regarding our quarterly dividend, we consider general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, legal, tax, regulatory and other restrictions that may have implications on the payment of distributions by us to our common shareholders or by our subsidiaries to us, and such other factors as we may deem relevant. We cannot provide any assurances that any distributions, whether quarterly or otherwise, will be paid.

Our ability to pay dividends in excess of our current quarterly dividend will be subject to restrictions under the terms of our Credit Agreement. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of the mandatory convertible preferred stock that we issued February 1, 2017 and the Credit Agreement entered into on June 1, 2017, as amended on February 15, 2018.

Issuer Purchases of Equity Securities

As of December 31, 2017 , 4,180,045 shares of our common stock have been authorized to be repurchased under a share repurchase program approved by our Board of Directors, and 883,756 shares remain available for repurchase. Under the terms of the program, we may repurchase shares of our common stock from time to time at our 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.

During the year ended December 31, 2017 , we repurchased a total of 66,244 common shares for approximately $7.5 million . We did not make any repurchases during the fourth quarter of fiscal 2017.

There were no unregistered sales of equity securities during the fourth quarter of fiscal 2017. Shares of our common stock purchased by participants in our Employee Stock Purchase Plan were delivered to participant accounts via open market purchases at fair value by the third-party administrator under the plan. We do not reserve shares for this plan or discount the purchase price of the shares.

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Item 6.	Selected Financial Data.

The following table sets forth our selected consolidated financial and other data at the dates and for the periods indicated. The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K.



($ in thousands, except per share data)	Years Ended December 31,
	2017 (1)(3)		2016 (1)		2015 (1)		2014 (2)		2013 (2)
Results of Operations
Revenues	$	425,607	$	322,554	$	381,977	$	450,598	$	389,215
Operating expenses	367,572		271,740		301,599		319,878		275,711
Operating income	58,035		50,814		80,378		130,720		113,504
Income tax expense (benefit)	40,490		21,044		36,972		39,349		44,778
Net income	39,939		48,763		30,671		96,965		77,130
Net income (loss) attributable to common stockholders	28,676		48,502		35,106		97,700		75,190
Earnings (loss) per share—basic	4.09		6.34		3.99		10.75		9.18
Earnings (loss) per share—diluted	3.96		6.20		3.92		10.51		8.92
Cash dividends declared per preferred share	7.25		—		—		—		—
Cash dividends declared per common share	1.80		1.80		1.80		1.35		—
	As of December 31,
	2017 (1)(3)		2016 (1)		2015 (2)		2014 (2)		2013 (2)
Balance Sheet Data
Cash and cash equivalents	$	132,150	$	64,588	$	87,574	$	202,847	$	271,014
Investments	108,492		89,371		56,738		63,448		37,258
Investments of consolidated investment products	1,597,752		489,042		522,820		236,652		139,054
Goodwill and other intangible assets, net	472,107		45,215		47,588		47,043		49,893
Total assets	2,590,799		824,388		859,729		698,773		644,954
Accrued compensation and benefits	86,658		47,885		49,617		54,815		53,140
Debt	248,320		30,000		—		—		—
Debt of consolidated investment products	—		—		152,597		—		—
Notes payable of consolidated investment product	1,457,435		328,761		—		—		—
Total liabilities	1,981,397		465,449		276,408		112,350		109,900
Redeemable noncontrolling interests	4,178		37,266		73,864		23,071		42,186
Mandatory convertible preferred stock	110,843		—		—		—		—
Total equity	605,224		321,673		509,457		563,352		492,868
	As of December 31,
	2017		2016		2015		2014		2012
($ in millions)
Assets Under Management
Total assets under management	$	90,963	$	45,366	$	47,385	$	56,702	$	57,740
Total long-term assets under management	$	88,835	$	45,366	$	47,385	$	56,702	$	56,152


(1)	Derived from audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.


(2)	Derived from audited consolidated financial statements not included in this Annual Report on Form 10-K.


(3)	On June 1, 2017, we completed the acquisition of RidgeWorth Investments. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of the RidgeWorth acquisition.

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Our Business

We provide investment management and related services to individuals and institutions. We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers, each having its own distinct investment style, autonomous investment process and individual brand. By offering a broad array of products, we believe we can appeal to a greater number of investors and have offerings across market cycles and through changes in investor preferences. Our earnings are primarily driven by asset-based fees charged for services relating to these various products including investment management, fund administration, distribution and shareholder services.

We offer investment strategies for individual and institutional investors in different product structures and through multiple distribution channels. Our investment strategies are available in a diverse range of styles and disciplines, managed by a collection of differentiated investment managers. We have offerings in various asset classes (domestic and international equity, fixed income, and alternative), market capitalizations (large, mid and small), styles (growth, blend and value) and investment approaches (fundamental, quantitative and thematic). Our retail products include open-end funds and ETFs, where we also use unaffiliated managers, as well as closed-end funds and retail separate accounts. Our institutional products include a variety of equity and fixed income strategies for corporations, multi-employer retirement funds, public employee retirement systems, foundations, and endowments. We also offer subadvisory services for unaffiliated mutual funds and collateral manager services for structured finance products.

We distribute our open-end funds and ETFs principally through financial intermediaries. We have broad distribution access in the retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and registered investment advisors, banks and insurance companies. In many of these firms, we have a number of products that are on preferred “recommended” lists and on fee-based advisory programs. Our sales efforts are supported by regional sales professionals, a national account relationship group, and separate teams for ETFs and the retirement and insurance channels. Our retail separate accounts are distributed through financial intermediaries and directly by teams at an affiliated manager.

Our institutional services are marketed through relationships with consultants as well as directly to clients. We target key market segments, including foundations and endowments, corporate, public and private pension plans, and subadvisory relationships.

Acquisition of RidgeWorth

On June 1, 2017, we acquired RidgeWorth Investments (the "Acquisition"), a multi-boutique investment management firm that managed approximately $40.1 billion in assets as of June 1, 2017, including $35.7 billion in long term assets under management and $4.4 billion in liquidity strategies. The Acquisition significantly increased our assets under management, expanded the number of affiliated managers and provided a wider range of strategies for institutional and individual investors and broader distribution and client service resources.

Total consideration for the Acquisition was $547.1 million, comprising $485.2 million for the business and $61.9 million for certain balance sheet investments. At closing, we paid $471.4 million in cash, issued 213,669 shares of our common stock with a value of $21.7 million, and recorded $2.3 million in deferred cash consideration and $51.7 million in contingent consideration, which was paid in the fourth quarter of 2017 after all transaction contingencies were met.

Market Developments

The U.S. and global equity markets increased in value in 2017 , as evidenced by increases in major indices. The MSCI World Index ended the year at 2,103 , up 20.0% from 1,753 at the start of the year. The Dow Jones Industrial Average ended at 24,719 , up 25.1% from 19,763 at the beginning of the year, and the Standard & Poor’s 500 Index ended the year at 2,674 , up 19.4% from 2,239 . The major U.S. bond index, the Barclays U.S. Aggregate Bond Index, increased 3.5% in 2017 ending the year at 2,046 compared to 1,976 at the beginning of the year.

The financial markets have had - and are likely to continue to have - a significant impact on the value of our assets under management and on the level of our sales and flows. The capital and financial markets could experience fluctuation, volatility and declines, as they have in the past, which could impact investment returns and asset flows among investment products as

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well as investor choices and preferences among investment products. The changes in our assets under management may also be affected by the factors discussed in Item 1A of this Annual Report on Form 10-K “Risk Factors.”

Financial Highlights


•	Net income per diluted share was $3.96 in 2017 , down $2.24 or 36.1% from $6.20 per diluted share in 2016 . Net income per diluted share includes $13.1 million of income tax expense related to new tax legislation and $26.3 million of acquisition and integration costs.


•	Total sales (inflows) were $ 15.4 billion in 2017 compared with $ 10.9 billion in 2016 . Net outflows were $0.2 billion in 2017 compared with $4.7 billion in 2016 .


•	Assets under management were $91.0 billion at December 31, 2017 compared with $45.4 billion at December 31, 2016 .

Assets Under Management

At December 31, 2017 , total assets under management were $91.0 billion , representing an increase of $45.6 billion , or 100.5% from December 31, 2016 . The increase was primarily due to the Acquisition, which added $40.1 billion as of June 1, 2017, as well as market appreciation of $9.0 billion , which offset net outflows of $0.2 billion . Long-term assets under management, which exclude liquidity strategies, were $88.8 billion at December 31, 2017, up 95.6% from $45.4 billion at the end of the prior year.

Average long-term assets under management, which exclude assets in liquidity strategies and represent our fee-earning assets, were $72.3 billion for the twelve months ended December 31, 2017 , an increase of $27.0 billion , or 59.5% , from $45.3 billion for the twelve months ended December 31, 2016 . The one-year increase in long-term average assets under management was primarily due to the Acquisition and the cumulative impact of market appreciation.

Certain mutual funds employ the use of leverage as part of their investment strategies. The addition or reduction of leverage will increase or decrease our assets under management, as the proceeds from the use of leverage are invested in accordance with the funds' investment strategies. For the periods ended December 31, 2017, 2016 and 2015, we had assets under management from the use of leverage of $1.9 billion, $1.9 billion and $1.6 billion, respectively, which represented 2.0%, 4.1% and 3.5% of our total assets under management, respectively.

Investment Performance - Open End Funds

The following table presents our open end funds' three-year average return and the corresponding three-year benchmark index return as of December 31, 2017 . Also presented with each fund is its Lipper Peer Group and its three-year ranking within that peer group.

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			Three-Year:	Three-Year
		Benchmark Index	Average Return (1)	Benchmark Index
Fund Type/Name	Assets	Lipper Peer Group	Peer Group Ranking (2)	Return (3)
Retail Funds	($ in millions)		(%)	(%)
Alternatives
Virtus Duff & Phelps Real Estate Securities Fund	$874.3	FTSE NAREIT Equity REITs Index	5.12	5.62
		Real Estate Funds	41
Virtus Duff & Phelps Global Real Estate Securities Fund	202.6	FTSE EPRA NAREIT Developed Rental Index	6.28	4.44
		Global Real Estate Funds	12
Virtus Duff & Phelps Global Infrastructure Fund	118.6	Global Infrastructure Linked Benchmark (4)	5.87	4.79
		Global Infrastructure Funds	35
Virtus Duff & Phelps International Real Estate Securities Fund	26.6	FTSE EPRA/NAREIT Developed Rental ex US Index (net)	7.11	5.38
		International Real Estate Funds	26
Asset Allocation
Virtus Strategic Allocation Fund	477.9	Strategic Allocation Fund Linked Benchmark (5)	4.91	8.34
		Mixed-Asset Target Allocation Moderate Funds	79
Virtus Tactical Allocation Fund	145.7	Tactical Allocation Fund Linked Benchmark (6)	5.1	8.23
		Mixed-Asset Target Allocation Moderate Funds	73
Virtus Rampart Multi-Asset Trend Fund	85.1	Dow Jones Global Moderate Portfolio Index	1.41	6.99
		Flexible Portfolio Funds	91
Virtus Herzfeld Fund	67.7	60% MSCI AC World Index (net) / 40% Bloomberg Barclays U.S. Aggregate	8.75	6.57
		Aggregate	4
Equity
Virtus Ceredex Mid-Cap Value Equity Fund	2,955.3	Russell Midcap Value Index	8.05	9.00
		Multi-Cap Value Funds	54
Virtus Ceredex Large-Cap Value Equity Fund	1,992.1	Russell 1000 Value Index	8.57	8.65
		Large-Cap Value Funds	47
Virtus KAR Small-Cap Growth Fund	1,814.0	Russell 2000 Growth Index	20.04	10.28
		Small-Cap Growth Funds	1
Virtus KAR Small-Cap Core Fund	830.2	Russell 2000 ^(R) Index	16.99	9.96
		Small-Cap Growth Funds	2
Virtus Ceredex Small-Cap Value Equity Fund	814.3	Russell 2000(R) Value Index	10.28	9.55
		Small-Cap Core Funds	29
Virtus Rampart Equity Trend Fund	519.7	S&P 500 ^(R) Index	2.21	11.41
		Large-Cap Core Funds	99
Virtus KAR Capital Growth Fund	495.6	Russell 1000(R) Growth Index	13.31	13.79
		Large-Cap Growth Funds	22
Virtus KAR Small-Cap Value Fund	474.1	Russell 2000 Value Index	13.47	9.55
		Small-Cap Growth Funds	12

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			Three-Year:	Three-Year
		Benchmark Index	Average Return (1)	Benchmark Index
Fund Type/Name	Assets	Lipper Peer Group	Peer Group Ranking (2)	Return (3)
Retail Funds	($ in millions)		(%)	(%)
Equity (continued)
Virtus Rampart Sector Trend Fund	271.0	S&P 500 ^(R) Index	2.73	11.41
		Large-Cap Core Funds	100
Virtus Rampart Enhanced Core Equity Fund	193.5	S&P 500 ^(R) Index	12.19	11.41
		Large-Cap Core Funds	8
Virtus KAR Mid-Cap Core Fund	129.3	Russell Midcap ^(R) Index	12.5	9.58
		Mid-Cap Growth Funds	8
Virtus Silvant Large-Cap Growth Stock Fund	125.2	Russell 1000 ^(R) Growth Index	9.64	13.79
		Large-Cap Growth Funds	87
Virtus KAR Mid-Cap Growth Fund	97.5	Russell Midcap ^(R) Growth Index	11.75	10.30
		Mid-Cap Growth Funds	17
Virtus Horizon Wealth Masters Fund	73.3	S&P 500 ^(R) Index	8.18	9.58
		Mid-Cap Core Funds	58
Virtus Silvant Small-Cap Growth Stock Fund	29.9	Russell 2000(R) Growth Index	6.59	10.28
		Small-Cap Growth Funds	85
Virtus Zevenbergen Innovative Growth Stock Fund	23.1	Russell 3000(R) Growth Index	12.05	13.51
		Multi-Cap Growth Funds	31
Fixed Income
Virtus Newfleet Multi-Sector Short Term Bond Fund	7,333.1	BofA Merrill Lynch 1-3 Year A-BBB Corporate Index	3.21	1.86
		Short-Intermediate Investment Grade Debt Funds	2
Virtus Seix Floating Rate High Income Fund	5,979.7	Credit Suisse Leveraged Loan Index	4.49	4.50
		Loan Participation Funds	22
Virtus Seix Total Return Bond Fund	870.0	Bloomberg Barclays U.S. Aggregate Bond Index	1.97	2.24
		Core Bond Funds	63
Virtus Newfleet Senior Floating Rate Fund	537.1	S&P/LSTA Leveraged Loan Index	3.84	4.44
		Loan Participation Funds	49
Virtus Seix Investment Grade Tax-Exempt Bond Fund	476.9	Bloomberg Barclays Municipal 1-15 Yr Blend (1-17) Index	2.06	2.37
		Intermediate Municipal Debt Funds	53
Virtus Seix High Yield Fund	452.1	ICE BofAML US High Yield BB-B Constrained Index	4.85	6.06
		High Yield Funds	60

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			Three-Year:	Three-Year
		Benchmark Index	Average Return (1)	Benchmark Index
Fund Type/Name	Assets	Lipper Peer Group	Peer Group Ranking (2)	Return (3)
Retail Funds	($ in millions)		(%)	(%)
Fixed Income (continued)
Virtus Seix High Income Fund	441.4	Bloomberg Barclays U.S. Corporate High Yield Bond Index	5.84	6.35
		High Yield Funds	22
Virtus Newfleet Multi-Sector Intermediate Bond Fund	377.5	Bloomberg Barclays U.S. Aggregate Bond Index	5.29	2.24
		Multi-Sector Income Funds	13
Virtus Newfleet Low Duration Income	372.6	Bloomberg Barclays U.S. Intermediate Government/Credit Bond Index	2.15	1.49
		Short Investment Grade Debt Funds	12
Virtus Seix Core Bond Fund	201.1	Bloomberg Barclays U.S. Aggregate Bond Index	2.05	2.24
		Core Bond Funds	58
Virtus Newfleet Tax Exempt Bond Fund	160.8	Virtus Tax-Exempt Bond Fund Linked Benchmark (7)	2.37	2.60
		General & Insured Municipal Debt Funds	69
Virtus Contrarian Value Fund	146.5	Russell Midcap(R) Value Index	2.83	9.00
		Multi-Cap Value Funds	98
Virtus Seix Georgia Tax-Exempt Bond Fund	89.0	Bloomberg Barclays Municipal Bond Index	2.57	2.98
		Other States Municipal Debt Funds	24
Virtus Newfleet Credit Opportunities Fund	87.6	50% Bloomberg Barclays U.S. High-Yield Bond Index/ 50% Credit Suisse Leveraged Loan Index	N/A	N/A
		High Yield Funds	N/A
Virtus Seix High Grade Municipal Bond Fund	83.7	Bloomberg Barclays Municipal Bond Index	3.1	2.98
		General & Insured Municipal Debt Funds	34
Virtus Newfleet Bond Fund	72.4	Bloomberg Barclays U.S. Aggregate Bond Index	3.28	2.40
		Core Plus Bond Funds	20
Virtus Newfleet High Yield Fund	69.4	Bloomberg Barclays U.S. High-Yield 2% Issuer Capped Bond Index	5.27	6.36
		High Yield Funds	42
Virtus Seix Virginia Intermediate Muni-Bond Fund	41.0	Bloomberg Barclays Municipal 1-15 Yr Blend (1-17) Index	2.34	2.37
		Other States Intermediate Muni Debt Funds	8
Virtus Seix Short-Term Municipal Bond Fund	33.0	Bloomberg Barclays Municipal 1-5 Yr Index	0.58	0.96
		Short Municipal Debt Funds	47

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			Three-Year:	Three-Year
		Benchmark Index	Average Return (1)	Benchmark Index
Fund Type/Name	Assets	Lipper Peer Group	Peer Group Ranking (2)	Return (3)
Retail Funds	($ in millions)		(%)	(%)
Fixed Income (continued)
Virtus Newfleet CA Tax-Exempt Bond Fund	27.0	Bloomberg Barclays California Municipal Bond Index	2.94	2.97
		California Municipal Debt Funds	60
Virtus Seix U.S. Mortgage Fund	25.2	Bloomberg Barclays U.S. Mortgage Backed Securities Index	1.73	1.88
		U. S. Mortgage Funds	56
Virtus Seix North Carolina Tax-Exempt Bond Fund	22.4	Bloomberg Barclays Municipal Bond Index	2.5	2.98
		Other States Municipal Debt Funds	26
Virtus Seix Corporate Bond Fund	15.1	Bloomberg Barclays U.S. Corporate Investment Grade Bond Index	4.46	3.90
		Corporate Debt Funds BBB-Rated	19
Virtus Seix Short-Term Bond Fund	11.3	Bloomberg Barclays 1-3 Yr U.S. Government/Credit Bond Index	0.59	0.93
		Short Investment Grade Debt Funds	87
International/Global
Virtus Vontobel Emerging Markets Opportunities Fund	8,785.5	MSCI Emerging Markets Index (net)	7.65	9.10
		Emerging Market Funds	64
Virtus Vontobel Foreign Opportunities Fund	1,524.9	MSCI EAFE ^(R) Index (net)	9.53	7.80
		International Large-Cap Growth	14
Virtus KAR International Small-Cap Fund	318.2	MSCI AC World Ex U.S. Small Cap Index (net)	15.52	11.96
		International Small/Mid-Cap Growth	9
Virtus Vontobel Global Opportunities Fund	234.6	MSCI AC World Index (net)	12.12	9.30
		Global Large-Cap Growth	16
Virtus WCM International Equity Fund	98.2	MSCI EAFE ^(R) Index (net)	10.68	7.83
		International Large-Cap Growth	14
Virtus KAR Global Quality Dividend Fund	55.6	Russell Developed Large Cap Index	6.11	10.78
		Global Equity Income Funds	66
Virtus KAR Emerging Markets Small-Cap Fund	14.1	MSCI Emerging Markets Small Cap Index (net)	8.3	8.44
		Emerging Markets Funds	55
Virtus Rampart Global Equity Trend Fund	13.7	MSCI AC World Index (net)	2.41	9.30
		Global Multi-Cap Growth	99
Virtus Vontobel Greater European Opportunities Fund	11.6	MSCI Europe Index (net)	8.12	6.69
		European Region Funds	29

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			Three-Year:	Three-Year
		Benchmark Index	Average Return (1)	Benchmark Index
Fund Type/Name	Assets	Lipper Peer Group	Peer Group Ranking (2)	Return (3)
Retail Funds	($ in millions)		(%)	(%)
Global Funds
Virtus G.F. Multi-Sector Short Duration Bond Fund	82.6	Bloomberg Barclays U.S. Intermediate Aggregate Bond Index	2.06	1.82
		N/A	43
Virtus G.F. U.S. Small Cap Focus Fund	14.7	Russell 2000(R) Index	16.34	9.96
		N/A	1
Variable Insurance Funds
Virtus KAR Capital Growth Series	224.3	Russell 1000 ^(R) Growth Index	13.8	13.79
		Multi-Cap Growth Funds	9
Virtus Duff & Phelps International Series	183.5	MSCI EAFE ^(R) Index (net)	0.71	7.80
		International Large-Cap Growth	97
Virtus Newfleet Multi-Sector Intermediate Bond Series	131.7	Bloomberg Barclays U.S. Aggregate Bond Index	4.82	2.24
		General Bond Funds	10
Virtus Rampart Enhanced Core Equity Series	111.5	S&P 500 ^(R) Index	7.01	11.41
		Multi-Cap Core Funds	93
Virtus Strategic Allocation Series	96.7	Strategic Allocation Series Linked Benchmark	4.31	8.34
		Mixed-Asset Target Allocation Moderate Funds	92
Virtus KAR Small-Cap Value Series	94.6	Russell 2000 ^(R) Value Index	14.46	9.55
		Small-Cap Growth Funds	7
Virtus KAR Small-Cap Growth Series	81.6	Russell 2000 ^(R) Growth Index	21.34	10.28
		Small-Cap Growth Funds	3
Virtus Duff & Phelps Real Estate Securities Series	77.8	FTSE NAREIT Equity REITs Index	5.04	5.62
		Real Estate Funds	40
Other Funds (8)	159.7
	$43,077.6


(1)	Represents the average annual total return performance of the largest share class as measured by net assets for which performance data is available. Performance shown does not include the effect of applicable sales charges, if any. Had any applicable sales charges been reflected, performance would be lower than shown above.


(2)	Represents the peer ranking of the fund’s average annual total return according to Lipper. Fund returns are reported net of fees.


(3)	Represents the average annual total return of the benchmark index. Benchmark indices are unmanaged, their returns do not reflect any fees, expenses or sales charges, and they are not available for direct investment.


(4)	The Global Infrastructure Linked Benchmark consists of the FTSE Developed Core Infrastructure 50/50 Index (net). The Global Infrastructure Linked Benchmark prior to October 1, 2016 consisted of the MSCI World Infrastructure Sector Capped Index.


(5)	The Strategic Allocation Fund Linked Benchmark consists of 45% Russell 1000 ^(R) Growth Index, 15% MSCI EAFE ^(R) Index and 40% Barclays U.S. Aggregate Bond Index. The Strategic Allocation Fund Linked Benchmark prior to September 7, 2016 consisted of 60% S&P 500 ^(R) Index and 40% Barclays U.S. Aggregate Bond Index.


(6)	The Tactical Allocation Fund Linked Benchmark consists of 45% Russell 1000 ^(R) Growth Index, 15% MSCI EAFE ^(R) Index and 40% Barclays U.S. Aggregate Bond Index. The Tactical Allocation Fund Linked Benchmark prior to September 7, 2016 consisted of 50% S&P 500 ^(R) Index and 50% Barclays U.S. Aggregate Bond Index.


(7)	The Virtus Tax-Exempt Bond Linked Benchmark consists of the Bank of America Merrill Lynch 1-22 Year U.S. Municipal Securities Index, a subset of the Bank of America Merrill Lynch U.S. Municipal Securities Index.

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(8)	Represents all funds that do not yet have a three-year average return based on their inception date, or funds with assets of less than $10.0 million.

Past performance does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

Operating Results

In 2017 , total revenues increased 31.9% or $103.1 million to $425.6 million from $322.6 million in 2016 primarily due to $77.1 million of additional revenues as a result of the Acquisition. Operating income increased by 14.2% or $7.2 million to $58.0 million in 2017 from $50.8 million in 2016 , primarily due to increased revenue from new affiliated managers as a result of the Acquisition and the impact from market appreciation, partially offset by increased amortization of intangible assets and operating expenses of $11.4 million and $26.3 million, respectively, related to acquisition and integration costs.

Assets Under Management by Product

The following table summarizes our assets under management by product:



	As of December 31,						Change
	2017		2016		2015		2017 vs. 2016			%		2016 vs. 2015			%
($ in millions)

Fund assets
Open-End Funds (1)	$	43,077.6	$	23,432.8	$	28,882.1	$	19,644.8		83.8	%	$	(5,449.3	)	(18.9	)%
Closed-End Funds	6,666.2		6,757.4		6,222.3		(91.2		)	(1.3	)%	535.1			8.6	%
Exchange Traded Funds	1,039.2		596.8		340.8		442.4			74.1	%	256.0			75.1	%
Retail Separate Accounts	13,936.8		8,473.5		6,784.4		5,463.3			64.5	%	1,689.1			24.9	%
Institutional Accounts	20,815.9		5,492.7		4,799.7		15,323.2			279.0	%	693.0			14.4	%
Structured Products	3,298.8		613.1		356.0		2,685.7			438.1	%	257.1			72.2	%
Total Long-Term	88,834.5		45,366.3		47,385.3		43,468.2			95.8	%	(2,019.0		)	(4.3	)%
Liquidity (3)	2,128.7		—		—		2,128.7			n/m		—			n/m
Total Assets Under Management	$	90,963.2	$	45,366.3	$	47,385.3	$	45,596.9		100.5	%	$	(2,019.0	)	(4.3	)%
Average Assets Under Management (2)	$	70,212.4	$	45,325.2	$	52,310.5	$	24,887.2		54.9	%	$	(6,985.3	)	(13.4	)%
Average Long-Term Assets Under Management (2)	$	72,286.1	$	45,325.2	$	52,310.5	$	26,960.9		59.5	%	$	(6,985.3	)	(13.4	)%


(1)	Represents assets under management of U.S. 1940 Act mutual funds and UCITS

(2) Averages are calculated as follows:

- Funds - average daily or weekly balances

- Retail Separate Accounts - prior quarter ending balance or average of month-end balances in quarter

- Institutional Accounts - average of month-end balances in quarter

(3) Represents assets under management in liquidity strategies, including open-end funds and institutional accounts

Asset Flows by Product

The following table summarizes asset flows by product:

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Asset Flows by Product

($ in millions)	Years Ended December 31,
	2017			2016			2015
Open-End Funds (1)
Beginning balance	$	23,432.8		$	28,882.1		$	37,514.2
Inflows	9,776.9			7,070.1			10,046.8
Outflows	(10,561.0		)	(13,117.7		)	(17,010.5		)
Net flows	(784.1		)	(6,047.6		)	(6,963.7		)
Market performance	5,107.0			898.7			(1,511.5		)
Other (2)	15,321.9			(300.4		)	(156.9		)
Ending balance	$	43,077.6		$	23,432.8		$	28,882.1
Closed-End Funds
Beginning balance	$	6,757.4		$	6,222.3		$	7,581.4
Inflows	—			—			—
Outflows	(112.8		)	(103.3		)	—
Net flows	(112.8		)	(103.3		)	—
Market performance	444.4			794.9			(811.9		)
Other (2)	(422.8		)	(156.5		)	(547.2		)
Ending balance	$	6,666.2		$	6,757.4		$	6,222.3
Exchange Traded Funds
Beginning balance	$	596.8		$	340.8		$	—
Inflows	732.6			382.8			342.8
Outflows	(152.6		)	(124.8		)	(49.0		)
Net flows	580.0			258.0			293.8
Market performance	21.5			20.3			(27.9		)
Other (2)	(159.1		)	(22.3		)	74.9
Ending balance	$	1,039.2		$	596.8		$	340.8
Retail Separate Accounts
Beginning balance	$	8,473.5		$	6,784.4		$	6,884.8
Inflows	2,730.3			1,825.5			1,291.9
Outflows	(1,746.2		)	(1,156.9		)	(1,428.6		)
Net flows	984.1			668.6			(136.7		)
Market performance	1,996.1			1,023.5			70.7
Other (2)	2,483.1			(3.0		)	(34.4		)
Ending balance	$	13,936.8		$	8,473.5		$	6,784.4
Institutional Accounts
Beginning balance	$	5,492.7		$	4,799.7		$	4,296.5
Inflows	1,684.4			1,345.3			1,008.3
Outflows	(2,698.1		)	(1,039.3		)	(526.1		)
Net flows	(1,013.7		)	306.0			482.2
Market performance	1,339.4			412.6			46.2
Other (2)	14,997.5			(25.6		)	(25.2		)
Ending balance	$	20,815.9		$	5,492.7		$	4,799.7
Structured Products
Beginning balance	$	613.1		$	356.0		$	425.5
Inflows	474.3			316.3			—
Outflows	(345.8		)	(70.3		)	—
Net flows	128.5			246.0			425.5
Market performance	65.7			20.1			—
Other (2)	2,491.5			(9.0		)	(69.5		)
Ending balance	$	3,298.8		$	613.1		$	356.0

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Total Long-Term
Beginning balance	$	45,366.3		$	47,385.3		$	56,702.4
Inflows	15,398.5			10,940.0			12,689.8
Outflows	(15,616.5		)	(15,612.3		)	(19,014.2		)
Net flows	(218.0		)	(4,672.3		)	(6,324.4		)
Market performance	8,974.1			3,170.1			(2,234.4		)
Other (2)	34,712.1			(516.8		)	(758.3		)
Ending balance	$	88,834.5		$	45,366.3		$	47,385.3
Liquidity
Beginning balance	$	—		$	—		$	—
Other (2)	2,128.7			—			—
Ending balance	$	2,128.7		$	—		$	—
Total
Beginning balance	$	45,366.3		$	47,385.3		$	56,702.4
Inflows	15,398.5			10,940.0			12,689.8
Outflows	(15,616.5		)	(15,612.3		)	(19,014.2		)
Net flows	(218.0		)	(4,672.3		)	(6,324.4		)
Market performance	8,974.1			3,170.1			(2,234.4		)
Other (2)	36,840.8			(516.8		)	(758.3		)
Ending balance	$	90,963.2		$	45,366.3		$	47,385.3


(1)	Represents assets under management of U.S. 1940 Act mutual funds and UCITS


(2)	Represents open-end and closed-end mutual fund distributions, net of reinvestments, net flows from non-sales related activities such as asset acquisitions/(dispositions), marketable securities investments/(withdrawals), the impact on assets from the use of leverage and the net change in assets for liquidity strategies

The following table summarizes our assets under management by asset class:



	December 31,						Change
	2017		2016		2015		2017 vs. 2016		%		2016 vs. 2015			%
($ in millions)
Asset Class
Equity	$	45,779.8	$	25,822.3	$	28,314.9	$	19,957.5	77.3	%	$	(2,492.6	)	(8.8	)%
Fixed income	38,740.0		15,523.6		15,115.6		23,216.4		149.6	%	408.0			2.7	%
Alternatives (1)	4,314.7		4,020.4		3,954.8		294.3		7.3	%	65.6			1.7	%
Liquidity (2)	2,128.7		—		—		2,128.7		N/M		—			N/M
Total	$	90,963.2	$	45,366.3	$	47,385.3	$	45,596.9	100.5	%	$	(2,019.0	)	(4.3	)%


(1)	Consists of real estate securities, master-limited partnerships, option strategies and other


(2)	Represents assets under management in liquidity strategies, including open-end funds and institutional accounts

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Average Assets Under Management and Average Fees Earned

The following table summarizes the average management fees earned in basis points and average assets under management:



	December 31,
($ in millions, except average fee earned data which is in basis points)	Average Fee Earned (expressed in basis points)			Average Assets Under Management ($ in millions) (2)
	2017	2016	2015	2017		2016		2015
Products
Open-End Funds (1)	49.7	49.3	48.2	$	34,932.6	$	25,551.7	$	33,290.1
Closed-End Funds	66.0	65.8	66.7	6,770.0		6,583.6		6,946.3
Exchange Traded Funds	25.0	31.4	23.6	890.8		406.3		179.3
Retail Separate Accounts	48.6	54.3	54.1	11,001.2		7,273.9		6,863.8
Institutional Accounts	32.1	37.3	35.9	14,515.0		5,009.4		4,634.6
Structured Products	40.8	44.2	23.5	2,102.8		500.3		396.4
All Long-Term Products	46.9	50.9	50.1	70,212.4		45,325.2		52,310.5
Liquidity (3)	8.0	—	—	2,073.7		—		—
All Products	45.8	50.9	50.1	$	72,286.1	$	45,325.2	$	52,310.5


(1)	Represents assets under management of U.S. 1940 Act mutual funds and UCITS

(2) Averages are calculated as follows:

- Funds - average daily or weekly balances

- Retail Separate Accounts - prior quarter ending balance or average of month-end balances in quarter

- Institutional Accounts - average of month-end balances in quarter

(3) Represents assets under management in liquidity strategies, including open-end funds and institutional accounts

Average fees earned represent investment management fees net of fees paid to third-party service providers for investment management related services and investment management fees earned from consolidated investment products, divided by average net assets. Open-end mutual fund, closed-end fund and exchange traded fund fees are calculated based on average daily or weekly net assets. Retail separate account fees are calculated based on the end of the preceding or current quarter’s asset values or on an average of month-end balances. Institutional account fees are calculated based on an average of month-end balances or current quarter’s asset values. Structured product fees are calculated based on a combination of the underlying cash flows and the principal value of the product. Average fees earned will vary based on several factors, including the asset mix and reimbursements to funds.

Year ended December 31, 2017 compared to year ended December 31, 2016 . The average fee rate earned for 2017 decreased by 5.1 basis points compared to the same period in the prior year, primarily due to the impact of the lower blended fee rate of the assets from the Acquisition. The product categories most impacted were institutional accounts and retail separate accounts, where the additional assets were primarily in fixed income strategies. The 0.4 basis point increase in average fees earned on open-end funds was primarily attributable to market appreciation and positive net flows in higher fee equity products.

Year ended December 31, 2016 compared to year ended December 31, 2015 . The average fee rate earned for 2016 increased 0.8 basis points as compared to the prior year, primarily related to a 1.1 basis point increase in the open-end fund average fee rate. The increase in the open-end fund average fee rate was primarily attributable to a negative $13.3 million variable incentive fee from one mutual fund during 2015. The average fee rate increase in institutional accounts in 2016 compared to 2015 was primarily due to net flows into higher fee products and incentive fees earned in 2016 on a structured product that was redeemed during the second half of 2016. Excluding the variable incentive fee, the open-end fund fee rate would have decreased to 50.0 basis points in 2016 from 52.2 in 2015 primarily due to higher level of fund reimbursements in 2016.

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Results of Operations

Summary Financial Data



	Years Ended December 31,									Change
	2017			2016			2015			2017 vs. 2016			%		2016 vs. 2015			%
($ in thousands)
Investment management fees	$	331,075		$	235,230		$	264,865		$	95,845		40.7	%	$	(29,635	)	(11.2	)%
Other revenue	94,532			87,324			117,112			7,208			8.3	%	(29,788		)	(25.4	)%
Total revenues	425,607			322,554			381,977			103,053			31.9	%	(59,423		)	(15.6	)%
Total operating expenses	367,572			271,740			301,599			95,832			35.3	%	(29,859		)	(9.9	)%
Operating income (loss)	58,035			50,814			80,378			7,221			14.2	%	(29,564		)	(36.8	)%
Other income (expense), net	18,161			8,819			(26,650		)	9,342			105.9	%	35,469			(133.1	)%
Interest income (expense), net	4,233			10,174			13,915			(5,941		)	(58.4	)%	(3,741		)	(26.9	)%
Income (loss) before income taxes	80,429			69,807			67,643			10,622			15.2	%	2,164			3.2	%
Income tax expense (benefit)	40,490			21,044			36,972			19,446			92.4	%	(15,928		)	(43.1	)%
Net income (loss)	39,939			48,763			30,671			(8,824		)	(18.1	)%	18,092			59.0	%
Noncontrolling interests	(2,927		)	(261		)	4,435			(2,666		)	1,021.5	%	(4,696		)	(105.9	)%
Net income (loss) attributable to stockholders	$	37,012		$	48,502		$	35,106		$	(11,490	)	(23.7	)%	$	13,396		38.2	%
Preferred stockholder dividends	(8,336		)	—			—			(8,336		)	N/M		$	—		N/M
Net Income (Loss) Attributable to Common Stockholders	28,676			48,502			35,106			(19,826		)	(40.9	)%	$	13,396		38.2	%
Earnings (loss) per share - diluted	$	3.96		$	6.20		$	3.92		$	(2.24	)	(36.1	)%	$	2.28		58.2	%

Revenues

Revenues by source were as follows:



	Years Ended December 31,						Change
($ in thousands)	2017		2016		2015		2017 vs. 2016			%		2016 vs. 2015			%
Investment management fees
Open-end funds	$	175,260	$	129,542	$	163,243	$	45,718		35.3	%	$	(33,701	)	(20.6	)%
Closed-end funds	44,687		43,342		46,328		1,345			3.1	%	(2,986		)	(6.4	)%
Exchange traded funds	2,315		1,273		423		1,042			81.9	%	850			200.9	%
Retail separate accounts	54,252		40,155		37,296		14,097			35.1	%	2,859			7.7	%
Institutional accounts	46,600		18,707		16,643		27,893			149.1	%	2,064			12.4	%
Structured products	6,302		2,211		932		4,091			185.0	%	1,279			137.2	%
Liquidity products	1,659		—		—		1,659			100.0	%	—			—	%
Total investment management fees	331,075		235,230		264,865		95,845			40.7	%	(29,635		)	(11.2	)%
Distribution and service fees	44,322		48,250		67,066		(3,928		)	(8.1	)%	(18,816		)	(28.1	)%
Administration and shareholder service fees	48,996		38,261		48,247		10,735			28.1	%	(9,986		)	(20.7	)%
Other income and fees	1,214		813		1,799		401			49.3	%	(986		)	(54.8	)%
Total revenues	$	425,607	$	322,554	$	381,977	$	103,053		31.9	%	$	(59,423	)	(15.6	)%

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Investment Management Fees

Investment management fees are earned based on a percentage of assets under management and are paid pursuant to the terms of the respective investment management contracts, which generally require monthly or quarterly payments.

Year ended December 31, 2017 compared to year ended December 31, 2016 . Investment management fees increased by $95.8 million or 40.7% for the year ended December 31, 2017 due to a 59.5% , or $27.0 billion increase in average assets under management, primarily as a result of the Acquisition as well as positive market performance for the year. The year ended December 31, 2017 included approximately $77.1 million of investment management fee revenues from the additional assets from the Acquisition.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Investment management fees decreased by $29.6 million or 11.2% for the year ended December 31, 2016 due to a 13.4% decrease in average assets under management. The decrease in average assets under management for the year ended December 31, 2016 was due primarily to net outflows in our open-end funds partially offset by market appreciation.

Distribution and Service Fees

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

Year ended December 31, 2017 compared to year ended December 31, 2016 . Distribution and service fees decreased by $3.9 million or 8.1% for the year ended December 31, 2017 due to lower average open-end assets under management in share classes that have distribution and service fees.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Distribution and service fees decreased by $18.8 million or 28.1% for the year ended December 31, 2016 due to lower average open-end assets under management in share classes that have distribution and service fees.

Administration and Shareholder Servicing Fees

Administration and shareholder servicing fees represent fees earned for fund administration and shareholder services from our open-end mutual funds and certain of our closed-end funds.

Year ended December 31, 2017 compared to year ended December 31, 2016 . Fund administration and shareholder servicing fees increased $10.7 million or 28.1% for the year ended December 31, 2017 primarily due to $9.8 million in additional administration and transfer agent fees as a result of the additional assets and funds from the Acquisition which more than offset higher fund expense reimbursements included in net investment management fees.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Fund administration and shareholder servicing fees decreased $10.0 million or 20.7% for the year ended December 31, 2016 primarily due to lower average assets under management.

Other Income and Fees

Other income and fees primarily represent contingent sales charges earned from investor redemptions of certain shares sold without a front-end sales charge.

Year ended December 31, 2017 compared to year ended December 31, 2016 . Other income and fees increased $0.4 million or 49.3% primarily due to a $0.5 million increase in other income related to the recovery of costs from a third-party service provider during the first quarter of 2017.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Other income and fees decreased $1.0 million or 54.8% primarily due to a decrease in contingent sales charges paid as a result of lower redemptions in fund share classes subject to those charges.

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Operating Expenses

Operating expenses by category were as follows:



	Years Ended December 31,						Change
	2017		2016		2015		2017 vs. 2016		%		2016 vs. 2015			%
($ in thousands)
Operating expenses
Employment expenses	$	191,394	$	135,641	$	137,095	$	55,753	41.1	%	$	(1,454	)	(1.1	)%
Distribution and other asset-based expenses	71,987		69,049		89,731		2,938		4.3	%	(20,682		)	(23.0	)%
Other operating expenses	77,941		57,227		68,035		20,714		36.2	%	(10,808		)	(15.9	)%
Restructuring and severance	10,580		4,270		—		6,310		147.8	%	4,270			100.0	%
Depreciation and amortization expense	15,670		5,553		6,738		10,117		182.2	%	(1,185		)	(17.6	)%
Total operating expenses	$	367,572	$	271,740	$	301,599	$	95,832	35.3	%	$	(29,859	)	(9.9	)%

Employment Expenses

Employment expenses primarily consist of fixed and variable compensation and related employee benefit costs.

Year ended December 31, 2017 compared to year ended December 31, 2016 . Employment expenses of $191.4 million increased $55.8 million or 41.1% from the prior year ended December 31, 2016 . The increase reflected $30.9 million of employment expenses as a result of the June 1, 2017 addition of employees from the Acquisition, higher sales-based and profit-based compensation, due to a 40.7% increase in total sales and increased profits at our affiliates.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Employment expenses of $135.6 million decreased $1.5 million or 1.1% primarily due to a reduction in variable profit and sales-based compensation.

Distribution and Other Asset-Based Expenses

Distribution and other asset-based expenses consist primarily of payments to third-party distribution partners for providing services to investors in our funds and payments to third-party service providers for investment management-related services. These payments are primarily based on percentages of assets under management or revenues. These expenses also include the amortization of deferred sales commissions related to up-front commissions on shares sold without a front-end sales charge to shareholders. The deferred sales commissions are amortized on a straight line basis over the periods over which commissions are generally recovered from distribution fee revenues and contingent sales charges received from shareholders of the funds upon redemption of their shares.

Year ended December 31, 2017 compared to year ended December 31, 2016 . Distribution and other asset-based expenses increased $2.9 million or 4.3% in the year ended December 31, 2017 primarily due to increased asset-based shareholder service fees to financial intermediaries related to mutual funds from the Acquisition.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Distribution and administrative expenses decreased $20.7 million or 23.0% in the year ended December 31, 2016 primarily due to lower average open-end fund assets under management and a lower percentage of assets under management in share classes where we pay distribution expenses.

Other Operating Expenses

Other operating expenses primarily consist of investment research and technology costs, professional fees, travel and distribution related costs, rent and occupancy expenses, operating expenses of our consolidated investment products and other miscellaneous costs.

Year ended December 31, 2017 compared to year ended December 31, 2016 . Other operating expenses increased $20.7 million or 36.2% to $77.9 million for the year ended December 31, 2017 from the prior year primarily due to $9.7 million of acquisition and integration expenses, primarily from professional fees and other operating expenses relating to the Acquisition. Other operating expenses for the year ended December 31, 2017 also included $1.5 million in higher operating expenses of our

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consolidated investment products, primarily attributable to the addition of four consolidated investment products as a result of the Acquisition.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Other operating expenses decreased $10.8 million , or 15.9% , to $57.2 million for the year ended December 31, 2016 from the prior year primarily due to a $16.5 million loss contingency settled and paid in 2015, partially offset by $3.3 million of expenses incurred in 2016 related to the Acquisition. Other operating expenses of consolidated investment products for the year ended December 31, 2016 increased by $2.8 million over the prior year primarily due to expenses associated with the issuance of a CLO.

Restructuring and Severance

Year ended December 31, 2017 compared to year ended December 31, 2016 . During the year ended December 31, 2017 , we incurred $10.6 million in restructuring and severance costs primarily related to the Acquisition, which resulted in $9.6 million in severance costs related to staff reductions and $1.0 million in restructuring costs related to future lease obligations and leasehold improvement write-offs. We incurred $4.3 million, in restructuring and severance costs for the year ended December 31, 2016. Approximately $3.9 million was related to severance costs associated with staff reductions, primarily in business support areas and $0.4 million related to future lease obligations and leasehold improvements for vacated office space.

Year ended December 31, 2016 compared to year ended December 31, 2015 . We incurred $4.3 million primarily related to severance costs for the year ended December 31, 2016. Approximately $3.9 million was related to severance costs associated with staff reductions, primarily in business support areas and $0.4 million related to future lease obligations and leasehold improvements for vacated office space.

Depreciation and Amortization Expense

Depreciation and amortization expense consists primarily of the straight-line depreciation of furniture, equipment and leasehold improvements as well as the amortization of definite-lived intangible assets, both over their estimated useful lives.

Year ended December 31, 2017 compared to year ended December 31, 2016 . Depreciation and amortization expense increased $10.1 million or 182.2% to $15.7 million for the year ended December 31, 2017 primarily due to an increase in definite lived intangible assets as a result of the Acquisition.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Depreciation and amortization expense decreased $1.2 million or 17.6% to $5.6 million for the year ended December 31, 2016 primarily due to certain intangible assets becoming fully amortized.

Other Income (Expense), net

Other Income (Expense), net by category were as follows:



	Years Ended December 31,							Change
	2017		2016		2015			2017 vs. 2016			%		2016 vs. 2015		%
($ in thousands)
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net	$	2,973	$	4,982	$	(862	)	$	(2,009	)	(40.3	)%	$	5,844	678.0	%
Realized and unrealized gain (loss) on investments of consolidated investment products, net	13,553		2,748		(26,686		)	10,805			393.2	%	29,434		110.3	%
Other income (expense), net	1,635		1,089		898			546			50.1	%	191		21.3	%
Total Other Income (Expense), net	$	18,161	$	8,819	$	(26,650	)	$	9,342		105.9	%	$	35,469	133.1	%

Realized and unrealized gain (loss) on investments, net

Year ended December 31, 2017 compared to year ended December 31, 2016 . Realized and unrealized gain (loss) on investments, net decreased for the year ended December 31, 2017 by $2.0 million from the prior year. The realized and unrealized gains on investments, net during the year ended December 31, 2017 were primarily attributable to unrealized gains on our domestic equity strategies. The realized and unrealized gains on investments, net during the year ended December 31,

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2016 primarily consisted of a realized gain of approximately $2.9 million on the sale of one of our equity method investments and unrealized gains of $1.3 million from small cap and emerging market equity strategies.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Realized and unrealized gain (loss) on investments, net increased for the year ended December 31, 2016 by $5.8 million compared to the prior year primarily due to unrealized gains of $1.3 million from small cap and emerging market equity strategies and a realized gain of approximately $2.9 million on the sale of one of our equity method investments during 2016 as compared to $5.0 million in unrealized losses in the prior year, which was primarily related to our marketable securities in emerging market and international strategies.

Realized and unrealized gain (loss) on investments of consolidated investment products, net

Year ended December 31, 2017 compared to year ended December 31, 2016 . Realized and unrealized gains, net on investments of consolidated investment products increased to $13.6 million for the year ended December 31, 2017 from $2.7 million in the prior year. The increase primarily consisted of $15.3 million in changes on the note payable as a result of applying the measurement alternative of ASU 2014-13, partially offset by unrealized losses of $1.8 million on the investments of our CIPs.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Realized and unrealized gains, net on investments of consolidated investment products were $2.7 million for the year ended December 31, 2016 compared with $26.7 million in the prior year. The realized and unrealized gains for the year ended December 31, 2016 were primarily attributable to unrealized gains related to emerging markets debt and target date retirement strategies and a master limited partnership fund. The realized and unrealized loss for the year ended December 31, 2015 was primarily attributable to unrealized losses on alternative and emerging markets debt strategies.

Interest Income, net

Interest Income, (Expense), net by category were as follows:



	Years Ended December 31,									Change
	2017			2016			2015			2017 vs. 2016			%		2016 vs. 2015			%
($ in thousands)
Interest Income (Expense)
Interest expense	$	(12,007	)	$	(679	)	$	(523	)	$	(11,328	)	1,668.3	%	$	(156	)	(29.8	)%
Interest and dividend income	2,160			1,743			$	1,261		417			23.9	%	482			38.2	%
Interest and dividend income of investments of consolidated investment products	49,323			20,402			$	13,661		28,921			141.8	%	6,741			49.3	%
Interest expense of consolidated investment products	(35,243		)	(11,292		)	(484		)	(23,951		)	212.1	%	(10,808		)	2,233.1	%
Total Interest Income, net	$	4,233		$	10,174		$	13,915		$	(5,941	)	(58.4	)%	$	(3,741	)	(26.9	)%

Interest expense

Year ended December 31, 2017 compared to year ended December 31, 2016 . Interest expense increased $11.3 million for the year ended December 31, 2017 compared to the prior year due to the write-off of $1.1 million in unamortized deferred financing costs as a result of the termination of a prior credit facility and, $1.2 million in delayed draw fees associated with our new credit agreement and a higher average level of debt outstanding compared to the same period in the prior year.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Interest expense increased $0.2 million for the year ended December 31, 2016 compared to the prior year due to a higher average level of debt outstanding.

Interest and dividend income

Interest and dividend income consists of interest and dividend income earned on cash equivalents and our marketable securities.

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Year ended December 31, 2017 compared to year ended December 31, 2016 . Interest and dividend income increased $0.4 million or 23.9% in 2017 compared to the prior year primarily due to a higher concentration of dividend paying marketable securities during 2017 compared to the prior year.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Interest and dividend income increased $0.5 million or 38.2% in 2016 compared to the prior year primarily due to an increase in our marketable securities.

Interest and Dividend Income of Investments of Consolidated Investment Products

Year ended December 31, 2017 compared to year ended December 31, 2016 . Interest and dividend income of consolidated investment products increased $28.9 million or 141.8% compared to the prior year primarily due a higher balance of investments of our consolidated investment products compared to prior year.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Interest and dividend income of consolidated investment products increased $6.7 million or 49.3% compared to the prior year primarily due to the full year of interest on investments of the consolidated investment product compared to a partial year in 2015, and the higher balance of investments of the consolidated investment product in 2016 as the CLO ramped up its portfolio size at issuance.

Interest Expense of Consolidated Investment Products ("CIPs")

Year ended December 31, 2017 compared to year ended December 31, 2016 . Interest expense increased by $24.0 million , or 212.1% compared to the prior year primarily due to higher average debt balances for our CIPs.

Year ended December 31, 2016 compared to year ended December 31, 2015 . Interest expense of CIPs increased by $10.8 million , or 2,233.1% , compared to the prior year primarily due to higher average debt balances for our CIPs.

Income Tax Expense

Year ended December 31, 2017 compared to year ended December 31, 2016 . The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of 50.3% and 30.1% for 2017 and 2016 , respectively. On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was enacted , which among other items reduced the federal corporate tax rate to 21% effective January 1, 2018. T he Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 118, which specifies, among other things, that reasonable estimates of the income tax effects of the Tax Act should be used, if determinable. Accordingly , financial results for 2017 included an increase in income tax expense of $13.1 million resulting primarily from the revaluation of deferred tax assets to reflect the new federal corporate tax rate.

Year ended December 31, 2016 compared to year ended December 31, 2015 . The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of 30.1% and 54.6% for 2016 and 2015, respectively. The decrease in the 2016 effective tax rate as compared to 2015 was primarily attributable to a $5.1 million reduction in the valuation allowance on deferred tax assets related to our investment portfolio.

Effects of Inflation

Inflationary pressures can result in increases to our cost structure, especially to the extent that large expense components such as compensation are impacted. To the degree that these expense increases are not recoverable or cannot be counterbalanced through pricing increases due to the competitive environment, our profitability could be negatively impacted. In addition, the value of the assets that we manage may be negatively impacted if inflationary expectations result in a rising interest rate environment. Declines in the values of these assets under management could lead to reduced revenues as management fees are generally earned as a percent of assets under management.

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Liquidity and Capital Resources

Certain Financial Data

The following tables summarize certain financial data relating to our liquidity and capital resources:



	December 31,						Change
($ in thousands)	2017		2016		2015		2017 vs. 2016			%		2016 vs. 2015			%
Balance Sheet Data
Cash and cash equivalents	$	132,150	$	64,588	$	87,574	$	67,562		104.6	%	$	(22,986	)	(26.2	)%
Investments	108,492		89,371		56,738		19,121			21.4	%	32,633			57.5	%
Deferred taxes, net	32,428		47,535		54,143		(15,107		)	(31.8	)%	(6,608		)	(12.2	)%
Debt	248,320		30,000		—		218,320			727.7	%	30,000			100.0	%
Total equity	605,224		321,673		509,457		283,551			88.1	%	(187,784		)	(36.9	)%



	Years Ended December 31,									Change
($ in thousands)	2017			2016			2015			2017 vs. 2016			%		2016 vs. 2015			%
Cash Flow Data
Provided by (used in)
Operating activities	$	(182,692	)	$	30,522		$	(209,430	)	$	(213,214	)	(698.6	)%	$	239,952		114.6	%
Investing activities	(416,994		)	3,079			(6,438		)	(420,073		)	(13,643.2	)%	9,517			147.8	%
Financing activities	750,464			(48,298		)	109,948			798,762			(1,653.8	)%	(158,246		)	(143.9	)%

Overview

At December 31, 2017 , we had $132.2 million of cash and cash equivalents and $66.4 million of investments in marketable securities compared to $64.6 million of cash and cash equivalents and $74.9 million of investments in marketable securities at December 31, 2016 . At December 31, 2017 , with respect to our credit agreement (“Credit Agreement”), we had $259.4 million outstanding under our seven-year term debt ("Term Loan") and no outstanding borrowings under our $100.0 million revolving credit facility (the "Credit Facility"). On February 15, 2018, we amended our Credit Agreement that resulted in $105.0 million of additional Term Loan commitments to fund, in part, the proposed acquisition of SGA. The $105.0 million will be drawn at the closing of the SGA acquisition and subject to a delayed draw fee. In addition, the amended Credit Agreement removed the financial maintenance covenant on the Term Loan and replaced the existing financial maintenance covenant on the $100.0 million Credit Facility with a net leverage ratio covenant, defined as net debt divided by EBITDA, set at 2.5 to 1, that is in place when $30.0 million or more has been drawn down on the revolving credit facility. As of December 31, 2017 , we had $127.2 million of net debt, which resulted in a net leverage ratio of 0.74:1.0 as of December 31, 2017 .

In February 2017, we issued 1,046,500 shares of common stock and 1,150,000 shares of 7.25% mandatory convertible preferred stock in a public offering, including over-allotments, for net proceeds of $220.5 million, after underwriting discounts, commissions and other offering expenses. We used the net proceeds of these offerings, together with cash on hand, 213,699 shares of our common stock, proceeds from the sale of investments and net borrowings of approximately $244.1 million from the new credit agreement, as described below, to finance the Acquisition and pay related fees and expenses.

Uses of Capital

Our main uses of capital related to operating activities include payments of annual incentive compensation, interest payments on our indebtedness, income tax, and other operating expenses, which primarily consist of investment research and technology costs, professional fees, distribution and occupancy costs. Annual incentive compensation which is one of the largest annual operating cash expenditures, is paid in the first quarter of the year. In the first quarter of 2017 and 2016, we paid approximately $39.7 million and $42.5 million, respectively, in incentive compensation earned during the years ended December 31, 2016 and 2015, respectively.

In addition to operating activities, other uses of cash could or will include (i) integration costs, including severance, related to potential acquisitions, if any; (ii) investments in our organic growth, including our distribution efforts and launches of new products; (iii) seeding or investing in new products, including seeding funds or sponsoring CLO issuances; (iv) principal payments on debt outstanding; (v) dividend payments to preferred and common stockholders; (vi) investments in our

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infrastructure; and (vii) investments in inorganic growth opportunities as they arise. Although we continuously monitor working capital to ensure adequate resources are available for near-term liquidity requirements, our liquidity could be impacted by certain contingencies, including any legal or regulatory matters as described in Note 10 of our consolidated financial statements.

Capital and Reserve Requirements

We operate two broker-dealer subsidiaries registered with the SEC that are subject to certain rules regarding minimum net capital. The broker-dealers are required to maintain a ratio of “aggregate indebtedness” to “net capital,” as defined, which may not exceed 15 to 1, and must also maintain a minimum amount of net capital. Failure to meet these requirements could result in adverse consequences to us including additional reporting requirements, a lower required ratio of aggregate indebtedness to net capital or interruption of our business. At December 31, 2017 and 2016 , the ratio of aggregate indebtedness to net capital of our broker-dealers was below the maximum allowed, and net capital was significantly greater than the required minimum.

Balance Sheet

Cash and cash equivalents consist of cash in banks and money market fund investments. Investments consist primarily

of investments in our affiliated mutual funds. Consolidated investment products primarily represent investment products to which we provide investment management services and where we have either a controlling financial interest or we are considered the primary beneficiary of an investment product that is a considered a variable interest entity.

Operating Cash Flow

Net cash used in operating activities of $182.7 million for 2017 decreased by $213.2 million from net cash provided by operating activities of $30.5 million in 2016. The decrease was primarily due to an increase in net purchases of investments of our consolidated investment products.

Net cash provided by operating activities of $30.5 million for 2016 increased by $240.0 million from net cash used in operating activities of $209.4 million in 2015. The increase in net cash provided by operating activities was primarily due to increased sales, net of purchases, of investments of consolidated sponsored investment products and lower purchases, net of sales, of investments of the consolidated investment product partially offset by higher realized and unrealized gains of consolidated sponsored investment products. Net cash from operating activities includes the operating activities of our consolidated sponsored investment products and the consolidated investment product. These cash flows from the portion of the products we do not own do not directly impact the cash flow related to our shareholders.

Investing Cash Flow

Cash flows from investing activities consist primarily of capital expenditures and other investing activities related to our business operations. Net cash used in investing activities of $417.0 million for 2017 decreased by $420.1 million from net cash provided by investing activities of $3.1 million in 2016 . The primary investing activities for the year ended December 31, 2017 were $393.4 million of net cash used for the Acquisition and $21.4 million for the purchase of available for sale securities.

Net cash provided by investing activities of $3.1 million for 2016 increased by $9.5 million from net cash used in investing activities of $6.4 million in 2015. The primary investing activities in 2016 were cash inflows of $8.6 million related to the sale of an equity method investment, offset by outflows of $2.0 million due to capital expenditures and contributions to equity method investments of $2.5 million.

Financing Cash Flow

Cash flows provided by financing activities consist primarily of the issuance of common and preferred stock, return of capital through repurchases of common shares, dividends, withholding obligations for the net share settlement of employee share transactions, and contributions to noncontrolling interests related to our consolidated investment products. Net cash provided by financing activities increased $798.8 million to $750.5 million in 2017 compared to net cash used in financing activities of $48.3 million in the prior year. The primary reason for the increase was due to cash raised of $220.5 million related to the issuance of preferred stock and common stock, net of issuance costs paid, $244.1 million in term loan borrowings, net of issuance costs paid, and $369.0 million in net borrowings of our consolidated investment products. These financing cash inflows were partially offset by the repayments of $30.0 million on our terminated credit facility.

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Net cash used in financing activities decreased $158.2 million to $48.3 million in 2016 compared to net cash provided by financing activities of $109.9 million in the prior year. The decrease was primarily due to cash outflows related to the repayment of debt of the CLO of $152.6 million and increased share repurchases of $153.8 million, offset by cash inflows of $316.3 million related to the issuance of notes payable by the CLO and borrowings on our Credit Facility of $30.0 million.

Credit Agreement

On June 1, 2017, in a connection with the Acquisition, the Company entered into a new credit agreement ("Credit Agreement") comprising a $260.0 million of seven-year term debt ("Term Loan") and a $100.0 million five-year revolving credit facility ("Credit Facility"). The Company's previous revolving credit facility and debt financing commitment were terminated. As a result, the Company expensed approximately $1.1 million of unamortized deferred financing costs related to the previous senior unsecured revolving credit facility. The Company borrowed the full $260.0 million under the Term Loan on June 1, 2017 to fund a portion of the purchase price of the Acquisition, and at December 31, 2017 , $259.4 million was outstanding.

Amounts outstanding under the Credit Agreement for the Term Loan and the Credit Facility bear interest at an annual rate equal to, at the option of the Company, either (i) LIBOR (adjusted for reserves) for interest periods of one, two, three or six months (or, solely in the case of the Credit Facility, if agreed to by each relevant Lender, twelve months or periods less than one month), subject to a “floor” of 0% for the Credit Facility and 0.75% for the Term Loan; or (ii) an alternate base rate, in either case plus an applicable margin. The applicable margins are set initially at 3.75%, in the case of LIBOR-based loans, and 2.75%, in the case of alternate base rate loans, and will range from 3.50% to 3.75%, in the case of LIBOR-based loans, and 2.50% to 2.75%, in the case of alternate base rate loans, based on the secured net leverage ratio of the Company as of the last day of the preceding fiscal quarter. Interest is payable on the last day of each interest period with respect to LIBOR-based loans, but at least at three-month intervals, and quarterly in arrears with respect to alternate base rate loans (but, in the case of LIBOR-based loans with an interest period of more than three months).

The obligations of the Company under the Credit Agreement are guaranteed by certain of its subsidiaries (the “Guarantors”) and secured by substantially all of the assets of the Company and the Guarantors, subject to customary exceptions. 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, purchase shares of our common stock, make distributions and dividends and pre-payments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year, or modify its organizational documents, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains a financial maintenance covenant requiring a maximum leverage ratio as of the last day of each of the trailing four fiscal quarter periods, of no greater than the levels set forth in the Credit Agreement.

At any time, upon timely notice, the Company may terminate the Credit Agreement in full, reduce the commitment under the Credit Facility in minimum specified increments, or prepay the Term Loan in whole or in part, subject to the payment of breakage fees with respect to LIBOR-based loans.

On February 15, 2018, the Company amended its Credit Agreement to increase the Term Loan by $105.0 million to fund, in part, the proposed acquisition of SGA. The $105.0 million will be drawn at the closing of the SGA acquisition and subject to a delayed draw fee. In addition, the amended Credit Agreement removed the financial maintenance covenant on the Term Loan and replaced the existing financial maintenance covenant on the $100.0 million Credit Facility with a net leverage ratio covenant, defined as net debt divided by EBTIDA, set at 2:5 to 1, that is in place when $30.0 million or more is outstanding on the Credit Facility.

Term Loan

The Term Loan, which was priced on March 2, 2017, had a delayed draw fee of $1.2 million between March 2, 2017 and the closing date of June 1, 2017. The Term Loan amortizes at the rate of 1.00% per annum payable in equal quarterly installments and will be mandatorily repaid with: (i) 50% of the Company’s excess cash flow on an annual basis, beginning with the fiscal year ended December 31, 2018, stepping down to 25% if the Company’s secured net leverage ratio declines below 1.0, and further stepping down to 0% if the Company’s secured net leverage ratio declines below 0.5; (ii) the net proceeds of certain asset sales, casualty or condemnation events, subject to customary reinvestment rights; and (iii) the proceeds of any indebtedness incurred other than indebtedness permitted to be incurred by the Credit Agreement.

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Credit Facility

At December 31, 2017 , no amounts were outstanding under the Credit Facility. The Company has the right, subject to customary conditions specified in the Credit Agreement, to request additional revolving credit facility commitments and additional term loans to be made under the Credit Agreement up to an aggregate amount equal to the sum of $75.0 million and an amount subject to a pro forma secured net leverage ratio of the Company of no greater than 1.75 to 1.00. Under the terms of the Credit Agreement, the Company is required to pay a quarterly commitment fee on the average unused amount of the Credit Facility, which fee is initially set at 0.50% and will, following the first delivery of certain financial reports required under the Credit Agreement, 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.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2017 :



	Payments Due
($ in millions)	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Lease obligations	$	24.4	$	6.8	$	12.3	$	3.2	$	2.1
Term Loan (1)	340.0		13.2		37.7		289.1		—
Credit Facility, including commitment fee (1)	2.2		0.5		1.5		0.2		—
Notes payable of consolidated investment products, including interest (2)	1,975.6		50.5		151.4		101.0		1,672.7
Minimum payments on service contracts (3)	4.4		3.3		1.1		—		—
Total	$	2,346.6	$	74.3	$	204.0	$	393.5	$	1,674.8


(1)	At December 31, 2017 , we had $259.4 million outstanding under our Term Loan and no amount outstanding under our Credit Facility which has a variable interest rate. Payments due are estimated based on the variable interest rate and commitment fee rate in effect on December 31, 2017 .

(2)

At December 31, 2017 , notes payable of $1.5 billion were outstanding related to our CIPs. The CIPs have note obligations that bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 1.0% to 8.75%. The principal amounts outstanding on the note obligations issued by the CIPs mature ranging from April 2018 to January 2029, depending on the CIP. The investors in the CIPs have no recourse to our general assets for the debt issued by the CIPs. Therefore, this debt is not our obligation.


(3)	Service contracts include contractual amounts that will be due to purchase goods and services to be used in our operations and may be canceled at earlier times than those indicated under certain conditions that may include termination fees.

Impact of New Accounting Standards

For a discussion of accounting standards, see Note 2 to our consolidated financial statements.

Off-Balance Sheet Arrangements

We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support nor do we engage in any leasing activities that expose us to any liability that is not reflected in our consolidated financial statements.

Critical Accounting Policies and Estimates

Our consolidated financial statements and the accompanying notes are prepared in accordance with Generally Accepted Accounting Principles, which requires the use of estimates. Actual results may vary from these estimates. Management believes the following critical accounting policies are important to understanding our results of operations and financial position.

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Consolidation

The consolidated financial statements include the Company's accounts, including our subsidiaries and investment products that are consolidated. Voting interest entities ("VOEs") are consolidated when we have a controlling financial interest which is typically present when we own a majority of the voting interest in an entity or otherwise have the power to govern the financial and operating policies of the entity.

We evaluate any variable interest entities ("VIEs") in which we have a variable interest for consolidation. A VIE is an entity in which either (a) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (b) 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.

Consolidated investment products include both VOEs, primarily consisting 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.

Fair Value Measurements and Fair Value of Financial Instruments

The Financial Accounting Standards Board (“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. Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, 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. 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 – 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.

The following is a discussion of the valuation methodologies used for the Company’s assets measured at fair value:

Sponsored funds represent investments in open-end and closed-end funds for which we act 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 is determined based on the official closing price on the exchange on which they are traded and are categorized as Level 1.

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Equity securities include securities traded on active markets and are valued at the official closing price (typically last sale or bid) on the exchange on which the securities are primarily traded and are categorized as Level 1.

Investments in collateralized loan obligations represent investments in CLOs for which the Company provides investment management services. The investments in collateralized loan obligations are measured at fair value based on independent third party valuations and are categorized as Level 2 or Level 3.

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.

Investments of consolidated investment products represent the underlying debt and equity securities held in sponsored products which we consolidate. Equity securities are valued at the official closing price on the exchange on which the securities are traded and are categorized within Level 1. Level 2 investments include certain equity 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, as well as most debt securities which are valued based on quotations received from independent pricing services or from dealers who make markets in such securities. Pricing services do not provide pricing for all securities, and therefore indicative bids from dealers are utilized, which are based on pricing models used by market makers in the security and are also included within Level 2. Level 3 investments include debt securities that are not widely traded, are illiquid and are priced by dealers based on pricing models used by market makers in the security. 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.

Notes payable of consolidated investment product represents notes issued by the CLO 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.

Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities equal or approximate fair value based on the short-term nature of these instruments. Marketable securities are reflected in the consolidated financial statements at fair value based upon publicly quoted market prices.

Goodwill

As of December 31, 2017 , the carrying value of goodwill was $170.2 million . Goodwill represents the excess of the purchase price of acquisitions over the fair value of identified net assets and liabilities acquired. We perform goodwill impairment tests annually, or more frequently should circumstances change, which could reduce the fair value below its carrying value. We have determined that we have only one reporting unit for purposes of assessing the carrying value of goodwill. Goodwill impairment testing is performed whenever events or changes in circumstances indicated that the carrying amount may not be recoverable. If we determine that the carrying value of the reporting unit is less than the fair value, the second step of the goodwill impairment test will be performed to measure the amount of impairment loss, if any. We completed our annual goodwill impairment assessment as of October 31, 2017, and no impairment was identified. For purposes of this assessment, we considered various qualitative factors, including but not limited to certain indicators of fair value (i.e., market capitalization and market multiplies for asset management businesses), and we determined that it was more likely than not that the fair value of our reporting unit was greater than its carrying value. Only a significant decline in the fair value of our reporting unit would indicate that an impairment may exist.

Indefinite-Lived Intangible Assets

As of December 31, 2017 , the carrying value of indefinite-lived intangible assets was $43.5 million . Indefinite-lived intangible assets comprise trade names and acquired closed-end and exchange traded fund investment advisory contracts. We perform indefinite-lived intangible asset impairment tests annually, or more frequently, should circumstances change, which could reduce the fair value of indefinite-lived intangible assets below their carrying value. We completed our annual indefinite-lived intangible asset impairment assessment as of October 31, 2017, and no impairments were identified. For purposes of this assessment, we considered various qualitative factors for the investment advisory contracts related to the indefinite-lived intangible assets, including but not limited to (i) the growth in our assets under management, (ii) the positive operating margins and (iii) the positive cash flows generated, and we determined that it was more likely than not that the fair value of indefinite-lived intangible assets goodwill was greater than their carrying value. Only a significant decline in the fair value of our indefinite-lived intangible assets would indicate that an impairment may exist.

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Definite-Lived Intangible Assets

As of December 31, 2017 , the carrying value of definite-lived intangible assets was $258.4 million . Definite-lived intangible assets comprise acquired investment advisory contracts. We monitor the useful lives of definite-lived intangible assets and revise the useful lives, if necessary, based on the circumstances. Significant judgment is required in estimating the period that these assets will contribute to our cash flows and the pattern over which these assets will be consumed. A change in the remaining useful life of any of these assets could have a significant impact on our amortization expense. All amortization expense is calculated on a straight-line basis. For definite-lived intangible assets, impairment testing is performed whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If we determine the carrying value of the definite-lived intangible assets is less than the sum of the undiscounted cash flows expected to result from the asset, we will quantify the impairment using a discounted cash flow model.

Revenue Recognition

Investment management fees, distribution and service fees and administration and shareholder service fees are recorded as revenues during the period in which services are performed. Investment management fees are earned based upon a percentage of assets under management and are paid pursuant to the terms of the respective investment management contracts, which generally require monthly or quarterly payment. We account for investment management fees in accordance with ASC 605, Revenue Recognition , and have recorded our management fees net of fees paid to unaffiliated subadvisers. We consider the nature of our contractual arrangements in determining whether to recognize revenue based on the gross amount billed or net amount retained. We have evaluated the factors in ASC 605-45 in determining whether to record revenue on a gross or net basis with significant weight placed on: (i) if we are the primary obligor in the arrangement; and (ii) if we have latitude in establishing price. Amounts paid to unaffiliated subadvisers for the years ended December 31, 2017 , 2016 and 2015 were $46.7 million, $47.2 million and $76.4 million, respectively.

Investment management fees are calculated based on our assets under management. We rely on data provided to us by service providers to our funds for the pricing of assets under management. Our funds, and the service providers to the funds, have formal valuation policies and procedures over the valuation of investments. As of December 31, 2017 , our total assets under management by fair value hierarchy level, as defined by ASC 820, Fair Value Measurements and Disclosures, were approximately 56.9% Level 1, 42.7% Level 2 and 0.4% Level 3.

Distribution and service fees are earned based on a percentage of assets under management and are paid monthly pursuant to the terms of the respective distribution and service fee contracts.

Administration and shareholder servicing fees consist of fund administration, shareholder servicing and fiduciary fees. Fund administration fees are earned based on the average daily assets in the funds. Shareholder service fees are earned based on the average daily assets in the funds. Fiduciary fees are recorded monthly based on the number of 401(k) accounts. We utilize outside service providers to perform some of the functions related to fund administration and shareholder services.

Other income and fees consist primarily of redemption income on the early redemption of certain share classes of mutual funds and brokerage commissions and fees earned for the distribution of nonaffiliated products. Commissions earned (and related expenses) are recorded on a trade date basis and are computed based upon contractual agreements.

Accounting for Income Taxes

We account for income taxes in accordance with ASC 740, Income Taxes, which requires recognition of the amount of taxes payable or refundable for the current year, as well as deferred tax liabilities and assets for the future tax consequences of events that have been included in our financial statements or tax returns. Deferred tax liabilities and assets result from differences between the book value and tax basis of our assets, liabilities and carry-forwards, such as net operating losses or tax credits. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We record interest and penalties related to income taxes as a component of income tax expense.

Significant judgment is required in determining the provision for income taxes and, in particular, any valuation allowance that is recorded against our deferred tax assets. Our 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 that gave rise to the deferred tax assets. Our methodology also includes estimates of future taxable

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income from our operations, as well as the expiration dates and amounts of carryforwards 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 we believe to be reasonable and consistent with demonstrated operating results. Changes in future operating results not currently forecasted 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.

Loss Contingencies

The likelihood that a loss contingency exists is evaluated using the criteria of ASC 450, Loss Contingencies, and an accrued liability is recorded if the likelihood of a loss is considered both probable and reasonably estimable at the date of the consolidated financial statements.

We believe that we have considered relevant circumstances that we may be currently subject to, and the consolidated financial statements accurately reflect our reasonable estimate of the results of our operations, financial condition and cash flows for the years presented.

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Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

Substantially all of our revenues are derived from investment management, distribution and service, and administration and shareholder servicing fees, which are based on the market value of assets under management. Accordingly, a decline in the value of securities would cause our revenues and income to decline due to a decrease in the value of the assets under management. In addition, a decline in security prices could cause our clients to withdraw their investments in favor of other investments offering higher returns or lower risk, which would cause our revenues and income to decline.

We are also subject to market risk due to a decline in the market value of our investments, which consist of marketable securities and our net interests in consolidated investment products. The following table summarizes the impact of a 10% increase or decrease in the fair values of these financial instruments:



	December 31, 2017
$ in thousands	Fair Value		10% Change

Marketable Securities - Available for Sale (a)	$	3,765	$	376.5
Marketable Securities - Trading (b)	62,659		6,265.9
Other Investments (b)	23,339		2,333.9
Our net interest in Consolidated Investment Products (c)	142,136		14,213.6
Total Investments subject to Market Risk	$	231,899	$	23,189.9

(a)

Any gains or losses arising from changes in the fair value of available-for-sale investments are recognized in accumulated other comprehensive income, net of tax, until the investment is sold or otherwise disposed of or, if the investment is determined to be other-than-temporarily impaired, at which time the cumulative gain or loss previously reported in equity is included in income. The Company evaluates the carrying value of investments for impairment on a quarterly basis. In its impairment analysis, the Company takes into consideration numerous criteria, including the duration and extent of any decline in fair value and the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value. If the decline in value is determined to be other-than-temporary, the carrying value of the security is generally written down to fair value through the Consolidated Statement of Operations. If such a 10% increase or decrease in fair value were to occur, it would not result in an other-than-temporary impairment charge that would be material to the Company's pre-tax earnings.


(b)	If such a 10% increase or decrease in fair values were to occur, the change of these investments would result in a corresponding increase or decrease in our pre-tax earnings.

(c)

These represent the Company's direct investments in investment products that are consolidated. Upon consolidation, these direct investments are eliminated, and the assets and liabilities of consolidated investment products are consolidated in the Consolidated Balance Sheet, together with a non-controlling interest balance representing the portion of the consolidated investment products owned by third parties. If a 10% increase or decrease in the fair values of the Company's direct investments in consolidated investment products were to occur, it would result in a corresponding increase or decrease in the Company's pre-tax earnings.

Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. At December 31, 2017 , we were exposed to interest rate risk as a result of approximately $189.2 million in investments we have in fixed and floating rate income products in which we have invested and which includes our net interests in consolidated investment products. We considered a hypothetical 100 basis point change in interest rates and determined that the fair value of our fixed income investments could change by an estimated $2.0 million.

At December 31, 2017 , we had $259.4 million outstanding under our Term Loan and no amounts outstanding under our Credit Facility. 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, two, three or six months (or, solely in the case of the Credit Facility, if agreed to by each relevant Lender, twelve months or periods less than one month) (subject to a “floor” of 0% in the case of the Credit Facility and 0.75% in the case of the Term Loan) or an alternate base rate, in either case plus an

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applicable margin. The applicable margins are initially set at 3.75%, in the case of LIBOR-based loans, and 2.75%, in the case of alternate base rate loans and will, following the first delivery of certain financial reports required under the Credit Agreement, range from 3.50% to 3.75%, in the case of LIBOR-based loans, and 2.50% to 2.75%, in the case of alternate base rate loans, 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.

At December 31, 2017 , we had $1.5 billion outstanding of notes payable of our consolidated investment products. The notes bear interest at annual rates equal to the average LIBOR rate for interest periods of three months and six months plus, in each case, an applicable margin, that ranges from 1.00% to 8.75%.



Item 8.	Financial Statements and Supplementary Data.

The audited Consolidated Financial Statements, including the Report of Independent Registered Public Accounting Firm and the required supplementary quarterly information, required by this item are presented under Item 15 beginning on page F-1.



Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.



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 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. Consistent with guidance issued by the Securities and Exchange Commission that an assessment of internal controls over financial reporting of a recently acquired business may be omitted from management's evaluation of disclosure controls and procedures, management is excluding an assessment of such internal controls of RidgeWorth Investments acquired by the Company on June 1, 2017, from its evaluation of the effectiveness of the Company's disclosure controls and procedures. The acquisition represented approximately 18.1% of the Company's consolidated total revenues for the fiscal year ended December 31, 2017 . 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, 2017 , the end of the period covered by this Annual Report on Form 10-K.

Changes in Internal Control 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 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As mentioned above, the Company acquired RidgeWorth Investments on June 1, 2017. The Company is in the process of reviewing its internal control structure as a result of the acquisition and, if necessary, will make appropriate changes to its overall internal control over financial reporting process.

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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, 2017 based upon the Internal Control-Integrated Framework (2013) framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Consistent with guidance issued by the Securities and Exchange Commission that an assessment of a recently acquired business may be omitted from management's report on internal control over financial reporting in the year of acquisition, management excluded an assessment of the effectiveness of the Company's internal control over financial reporting related to RidgeWorth Investments as described above. The acquisition represented approximately 18.1% of the Company's consolidated total revenues for the fiscal year ended December 31, 2017 . 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, 2017 .

The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report, which is included in Item 15 of this Annual Report on Form 10-K.



Item 9B.	Other Information.

None.

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PART III



Item 10.	Directors, Executive Officers and Corporate Governance.

The information concerning the Company’s directors and nominees under the caption “Item 1—Election of Directors,” information concerning the Audit Committee and the “audit committee financial expert” under the caption “Corporate Governance—Audit Committee,” information concerning the Company’s executive officers under the caption “Executive Officers,” and the information under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s Proxy Statement for the Company’s 2018 Annual Meeting of Shareholders, are incorporated herein by reference.

The Company has adopted a Code of Conduct that applies to the Company’s Chief Executive Officer, senior financial officers and all other Company employees, officers and Board members. The Code of Conduct is available in the Corporate Governance section of the Company’s Investor Relations website, http://ir.virtus.com, and is available in print to any person who requests it. Any substantive amendment to the Code of Conduct and any waiver in favor of a Board member or an executive officer may only be granted by the Board of Directors and will be publicly disclosed in the Corporate Governance section of the Company’s Investor Relations website, http://ir.virtus.com.

The information concerning procedures by which shareholders may recommend director nominees set forth under the caption “Corporate Governance—Governance Committee—Director Nomination Process” in the Company’s Proxy Statement for the Company’s 2018 Annual Meeting of Shareholders is incorporated herein by reference.



Item 11.	Executive Compensation.

The information relating to executive compensation and the Company’s policies and practices as they relate to the Company’s risk management is set forth under the captions “Executive Compensation,” “Director Compensation,” “Corporate Governance—Compensation Committee—Risks Related to Compensation Policies and Practices” and “Corporate Governance—Compensation Committee—Compensation Committee Interlocks and Insider Participation” in the Company’s Proxy Statement for the Company’s 2018 Annual Meeting of Shareholders and is incorporated herein by reference. The information included under the caption “Executive Compensation—Report of the Compensation Committee” in the Company’s Proxy Statement for the Company’s 2018 Annual Meeting of Shareholders is incorporated herein by reference but shall be deemed “furnished” (and not “filed”) with this report.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information set forth under the caption “Security Ownership by Certain Beneficial Owners and Management” in the Company’s Proxy Statement for the Company’s 2018 Annual Meeting of Shareholders is incorporated herein by reference.

The following table sets forth information as of December 31, 2017 with respect to compensation plans under which shares of our common stock may be issued:

EQUITY COMPENSATION PLAN INFORMATION



Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b) (1)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders (2)	592,829	$	16.44	481,948
Equity compensation plans not approved by security holders	—	—		—
Total	592,829	$	16.44	481,948


(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 109,808 shares of common stock issuable upon the exercise of stock options and 483,021 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 2,400,000 maximum number of shares of our common stock authorized for issuance under the Omnibus Plan, 94,666 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.

The information set forth under the captions “Corporate Governance—Transactions with Related Persons” and “Corporate Governance—Director Independence” in the Company’s Proxy Statement for the Company’s 2018 Annual Meeting of Shareholders is incorporated herein by reference.



Item 14.	Principal Accounting Fees and Services.

The information regarding auditors fees and services and the Company’s pre-approval policies and procedures for audit and non-audit services to be provided by the Company’s independent registered public accounting firm set forth under the caption “Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for the 2018 Annual Meeting of Shareholders is incorporated herein by reference.

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PART IV



Item 15.	Exhibits, 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
		Consolidated Balance Sheets as of December 31, 2017 and 2016
		Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015
		Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016 and 2015
		Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2017, 2016 and 2015
		Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015
		Notes to Consolidated Financial Statements
	(a)(2)	Financial Statement Schedules:

All financial statement schedules have been omitted because the required information is either presented in the consolidated financial statements or the notes thereto or is not applicable or required.

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	(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.
(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		Specimen 7.25% Series D Mandatory Convertible Preferred Stock Share Certificate (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K, filed on February 1, 2017)
(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).

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*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, effective as of January 1, 2014 (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K, filed May 26, 2016).
*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 Mark S. Flynn dated December 9, 2010 (incorporated by reference to Exhibit 10.31 of the Registrant’s Annual Report on Form 10-K, filed March 1, 2012).
10.15		Stock Purchase Agreement, dated October 27, 2016, between Bank of Montreal Holding Inc. and Virtus Investment Partners, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed October 27, 2016).
10.16		Commitment Letter, dated as of December 16, 2016, among Barclays Bank PLC, Morgan Stanley Senior Funding, Inc. and Virtus Investment Partners, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 22, 2016).
10.17		Credit Agreement, dated as of June 1, 2017, by and among the Registrant, 100 Pearl Street 2, LLC, Lightyear Fund III AIV-2, L.P. and RidgeWorth Holdings LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed June 1, 2017).
10.18		Amendment No. 1 to Credit Agreement with the Registrant, Morgan Stanley Senior Funding, Inc. as administrative agent, and the lenders party thereto (including, without limitation, the Amendment No. 1 Additional Term Lenders (as defined in the Amendment) to the Credit Agreement dated as of June 1, 2017 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed February 22, 2018).
*10.19		Form of Virtus Investment Partners, Inc. Performance Share Units Agreement (Special Integration Award) under the Virtus Investment Partners, Inc. Omnibus Incentive and Equity Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q, filed May 8, 2017).



(21)		Subsidiaries of the Registrant
21.1		Virtus Investment Partners, Inc., Subsidiaries List.

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(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 formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016, (ii) Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015, (v) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2017, 2016 and 2015 and (iv) Notes to Consolidated Financial Statements.



*	Management contract, compensatory plan or arrangement.

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.

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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 26, 2018




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 26, 2018 .



/S/ MARK C. TREANOR		/S/ GEORGE R. AYLWARD
Mark C. Treanor Director and Non-Executive Chairman		George R. Aylward President, Chief Executive Officer and Director (Principal Executive Officer)

/S/ JAMES R. BAIO		/S/ SUSAN S. FLEMING
James R. Baio Director		Susan S. Fleming Director

/S/ TIMOTHY A. HOLT		/S/ SHEILA HOODA
Timothy A. Holt Director		Sheila Hooda Director

/S/ MELODY L. JONES		/S/ STEPHEN T. ZARRILLI
Melody L. Jones Director		Stephen T. Zarrilli Director

/S/ MICHAEL A. ANGERTHAL
Michael A. Angerthal Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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, 2017 and 2016		F-4
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016, and 2015		F-5
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016 and 2015		F-6
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2017, 2016 and 2015		F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015		F-9
Notes to Consolidated Financial Statements		F-11

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Report of Independent Registered Public Accounting Firm

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 its subsidiaries as of December 31, 2017 and 2016, and 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, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2017, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016 , and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 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, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated 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 Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and 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 consolidated 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 consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated 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 consolidated 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.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded RidgeWorth Investments from its assessment of internal control over financial reporting as of December 31, 2017 because it was acquired by the Company in a purchase business combination during 2017. We have also excluded RidgeWorth Investments from our audit of internal control over financial reporting. RidgeWorth Investments is a wholly-owned subsidiary whose total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 18.1% of the related consolidated financial statement amount for the year ended December 31, 2017.

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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to

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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 (iii) 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.

/s/ PricewaterhouseCoopers LLP

Hartford, CT

February 26, 2018

We have served as the Company’s auditor since at least 1995. We have not determined the specific year we began serving as auditor of the Company.

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Virtus Investment Partners, Inc.

Consolidated Balance Sheets



($ in thousands, except per share data)	December 31, 2017			December 31, 2016
Assets:
Cash and cash equivalents	$	132,150		$	64,588
Investments	108,492			89,371
Accounts receivable, net	65,648			35,879
Assets of consolidated investment products ("CIP")
Cash and cash equivalents of CIP	101,315			18,099
Cash pledged or on deposit of CIP	817			984
Investments of CIP	1,597,752			489,042
Other assets of CIP	33,486			9,158
Furniture, equipment, and leasehold improvements, net	10,833			7,728
Intangible assets, net	301,954			38,427
Goodwill	170,153			6,788
Deferred taxes, net	32,428			47,535
Other assets	35,771			16,789
Total assets	$	2,590,799		$	824,388
Liabilities and Equity
Liabilities:
Accrued compensation and benefits	$	86,658		$	47,885
Accounts payable and accrued liabilities	29,607			25,176
Dividends payable	6,528			3,479
Debt	248,320			30,000
Other liabilities	39,895			13,505
Liabilities of CIP
Notes payable of CIP	1,457,435			328,761
Securities purchased payable and other liabilities of CIP	112,954			16,643
Total liabilities	1,981,397			465,449
Commitments and Contingencies (Note 10)
Redeemable noncontrolling interests	4,178			37,266
Equity:
Equity attributable to stockholders:
Series D mandatory convertible preferred stock, $0.01 par value, 1,150,000 shares authorized; 1,150,000 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively	110,843			—
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 10,455,934 shares issued and 7,159,645 shares outstanding at December 31, 2017 and 9,119,058 shares issued and 5,889,013 shares outstanding at December 31, 2016	105			91
Additional paid-in capital	1,216,173			1,090,331
Accumulated deficit	(386,216		)	(424,279		)
Accumulated other comprehensive income (loss)	(600		)	(224		)
Treasury stock, at cost, 3,296,289 and 3,230,045 shares at December 31, 2017 and December 31, 2016, respectively	(351,748		)	(344,246		)
Total equity attributable to stockholders	588,557			321,673
Noncontrolling interests	16,667			—
Total equity	605,224			321,673
Total liabilities and equity	$	2,590,799		$	824,388

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

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Virtus Investment Partners, Inc.

Consolidated Statements of Operations



	Years Ended December 31,
($ in thousands, except per share data)	2017			2016			2015
Revenues
Investment management fees	$	331,075		$	235,230		$	264,865
Distribution and service fees	44,322			48,250			67,066
Administration and shareholder service fees	48,996			38,261			48,247
Other income and fees	1,214			813			1,799
Total revenues	425,607			322,554			381,977
Operating Expenses
Employment expenses	191,394			135,641			137,095
Distribution and other asset-based expenses	71,987			69,049			89,731
Other operating expenses	69,410			50,274			63,901
Other operating expenses of consolidated investment products	8,531			6,953			4,134
Restructuring and severance	10,580			4,270			—
Depreciation and other amortization	3,497			3,092			3,443
Amortization expense	12,173			2,461			3,295
Total operating expenses	367,572			271,740			301,599
Operating Income (Loss)	58,035			50,814			80,378
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net	2,973			4,982			(862		)
Realized and unrealized gain (loss) of consolidated investment products, net	13,553			2,748			(26,686		)
Other income (expense), net	1,635			1,089			898
Total other income (expense), net	18,161			8,819			(26,650		)
Interest Income (Expense)
Interest expense	(12,007		)	(679		)	(523		)
Interest and dividend income	2,160			1,743			1,261
Interest and dividend income of investments of consolidated investment products	49,323			20,402			13,661
Interest expense of consolidated investment products	(35,243		)	(11,292		)	(484		)
Total interest income (expense), net	4,233			10,174			13,915
Income (Loss) Before Income Taxes	80,429			69,807			67,643
Income tax expense (benefit)	40,490			21,044			36,972
Net Income (Loss)	39,939			48,763			30,671
Noncontrolling interests	(2,927		)	(261		)	4,435
Net Income (Loss) Attributable to Stockholders	$	37,012		$	48,502		$	35,106
Preferred stockholder dividends	(8,336		)	$	—		$	—
Net Income (Loss) Attributable to Common Stockholders	$	28,676		$	48,502		$	35,106
Earnings (Loss) per Share-Basic	$	4.09		$	6.34		$	3.99
Earnings (Loss) per Share-Diluted	$	3.96		$	6.20		$	3.92
Cash Dividends Declared per Preferred Share	$	7.25		$	—		$	—
Cash Dividends Declared per Common Share	$	1.80		$	1.80		$	1.80
Weighted Average Shares Outstanding-Basic (in thousands)	7,013			7,648			8,797
Weighted Average Shares Outstanding-Diluted (in thousands)	7,247			7,822			8,960

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

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Virtus Investment Partners, Inc.

Consolidated Statements of Comprehensive Income



	Years Ended December 31,
($ in thousands)	2017			2016			2015

Net Income (Loss)	$	39,939		$	48,763		$	30,671
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of ($4), ($348) and $266 for the years ended December 31, 2017, 2016 and 2015	12			569			(434		)
Unrealized (loss) gain on available-for-sale securities, net of tax of $100, ($32), and $71 for the years ended December 31, 2017, 2016 and 2015, respectively	(388		)	241			(358		)
Other comprehensive income (loss)	(376		)	810			(792		)
Comprehensive income (loss)	39,563			49,573			29,879
Comprehensive (income) loss attributable to noncontrolling interests	(2,927		)	(261		)	4,435
Comprehensive income (loss) attributable to stockholders	$	36,636		$	49,312		$	34,314

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

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Virtus Investment Partners, Inc.

Consolidated Statements of Changes in Stockholders’ Equity



	Common Stock					Preferred Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock				Total Attributed To Shareholders			Non- controlling Interest			Total Equity			Redeemable Non- controlling Interest
($ in thousands)	Shares		Par Value			Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Shares	Amount			Total Attributed To Shareholders			Non- controlling Interest			Total Equity			Redeemable Non- controlling Interest
Balances at December 31, 2014	8,975,833		$	96		—	$	—	$	1,148,908		$	(507,521	)	$	(242	)	575,441	$	(77,699	)	$	563,542		$	(190	)	$	563,352		$	23,071
Net income (loss)	—		—			—	—		—			35,106			—			—	—			35,106			(176		)	34,930			(4,259		)
Net unrealized gain (loss) on securities available-for-sale	—		—			—	—		—			—			(358		)	—	—			(358		)	—			(358		)
Foreign currency translation adjustment	—		—			—	—		—			—			(434		)	—	—			(434		)	—			(434		)	—
Activity of noncontrolling interests, net	—		—			—	—		—			(199		)	—			—	—			(199		)	199			—			55,052
Cash dividends declared ($1.80 per common share)	—		—			—	—		(16,009		)	—			—			—	—			(16,009		)	—			(16,009		)	—
Repurchase of common shares	(638,703	)	—			—	—		—			—			—			638,703	(80,000		)	(80,000		)	—			(80,000		)	—
Issuance of common shares related to employee stock transactions	61,814		—			—	—		842			—			—			—	—			842			—			842			—
Taxes paid on stock-based compensation	—		—			—	—		(5,080		)	—			—			—	—			(5,080		)	—			(5,080		)	—
Stock-based compensation	—		—			—	—		11,116			—			—			—	—			11,116			—			11,116			—
Excess tax benefits from stock-based compensation	—		—			—	—		1,098			—			—			—	—			1,098			—			1,098			—
Balances at December 31, 2015	8,398,944		96			—	—		1,140,875			(472,614		)	(1,034		)	1,214,144	(157,699		)	509,624			(167		)	509,457			73,864
Net income (loss)	—		—			—	—		—			48,502			—			—	—			48,502			—			48,502			261
Net unrealized gain (loss)on securities available-for-sale	—		—			—	—		—			—			241			—	—			241			—			241
Foreign currency translation adjustment	—		—			—	—		—			—			569			—	—			569			—			569			—
Activity of noncontrolling interests, net	—		—			—	—		—			(167		)	—			—	—			(167		)	167			—			(36,859		)
Cash dividends declared ($1.80 per common share)	—		—			—	—		(13,015		)	—			—			—	—			(13,015		)	—			(13,015		)	—
Repurchase of common shares	(2,572,417	)	(6		)	—	—		(47,204		)	—			—			2,015,901	(186,547		)	(233,757		)	—			(233,757		)	—
Issuance of common shares related to employee stock transactions	62,486		1			—	—		1,054			—			—			—	—			1,055			—			1,055			—
Taxes paid on stock-based compensation	—		—			—	—		(1,530		)	—			—			—	—			(1,530		)	—			(1,530		)	—
Stock-based compensation	—		—			—	—		11,449			—			—			—	—			11,449			—			11,449			—
Tax deficiencies from stock-based compensation	—		—			—	—		(1,298		)	—			—			—	—			(1,298		)	—			(1,298		)	—
Balances at December 31, 2016	5,889,013		91			—	—		1,090,331			(424,279		)	(224		)	3,230,045	(344,246		)	321,673			$	—		321,673			37,266

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	Common Stock				Preferred Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock				Total Attributed To Shareholders			Non- controlling Interest		Total Equity			Redeemable Non- controlling Interest
($ in thousands)	Shares		Par Value		Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Shares	Amount			Total Attributed To Shareholders			Non- controlling Interest		Total Equity			Redeemable Non- controlling Interest
Cumulative effect adjustment for adoption of ASU 2016-09	—		—		—	—		—			1,051			—			—	—			1,051			—		1,051			—
Net income (loss)	—		—		—	—		—			37,012			—			—	—			37,012			1,507		38,519			1,420
Net unrealized gain (loss) on securities available-for-sale	—		—		—	—		—			—			(388		)	—	—			(388		)	—		(388		)
Foreign currency translation adjustment	—		—		—	—		—			—			12			—	—			12			—		12			—
Activity of noncontrolling interests, net	—		—		—	—		—			—			—			—	—			—			15,160		15,160			(34,508		)
Issuance of mandatory convertible preferred stock, net of offering costs	—		—		1,150,000	110,843		—			—			—			—	—			110,843			—		110,843			—
Cash dividends declared ($7.25 per preferred share)	—		—		—	—		(8,337		)	—			—			—	—			(8,337		)	—		(8,337		)	—
Issuance of common stock for acquisition of business	213,669		2		—	—		21,738			—			—			—	—			21,740			—		21,740			—
Issuance of common stock, net of offering costs	1,046,500		11		—	—		109,316			—			—			—	—			109,327			—		109,327			—
Cash dividends declared ($1.80 per common share)	—		—		—	—		(13,545		)	—			—			—	—			(13,545		)	—		(13,545		)	—
Repurchase of common shares	(66,244	)	—		—	—		—			—			—			66,244	(7,502		)	(7,502		)	—		(7,502		)	—
Issuance of common shares related to employee stock transactions	76,707		1		—	—		840			—			—			—	—			841			—		841			—
Taxes paid on stock-based compensation	—		—		—	—		(3,499		)	—			—			—	—			(3,499		)	—		(3,499		)	—
Stock-based compensation	—		—		—	—		19,329			—			—			—	—			19,329			—		19,329			—
Balances at December 31, 2017	7,159,645		$	105	1,150,000	$	110,843	$	1,216,173		$	(386,216	)	$	(600	)	3,296,289	$	(351,748	)	$	588,557		$	16,667	$	605,224		$	4,178

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

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Virtus Investment Partners, Inc.

Consolidated Statements of Cash Flow



	Years Ended December 31,
	2017			2016			2015
($ in thousands)
Cash Flows from Operating Activities:
Net income (loss)	$	39,939		$	48,763		$	30,671
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense, intangible asset and other amortization	18,329			5,796			6,967
Stock-based compensation	20,327			11,948			11,863
Excess tax benefit from stock-based compensation	—			(401		)	(1,586		)
Amortization of deferred commissions	2,308			2,413			7,924
Payments of deferred commissions	(2,871		)	(1,887		)	(3,322		)
Equity in earnings of equity method investments	(1,678		)	(1,075		)	(879		)
Realized (gain) loss on sale of equity method investment	—			(2,883		)	—
Realized and unrealized (gains) losses on trading securities, net	(3,237		)	(2,099		)	1,158
Distributions from equity method investments	911			—			—
Sales (purchases) of trading securities, net	20,444			16,828			8,962
(Gain) loss on disposal of fixed assets	345			185			—
Deferred taxes, net	22,835			6,399			6,356
Changes in operating assets and liabilities:
Accounts receivable, net and other assets	(961		)	(1,695		)	10,620
Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities	11,468			50			(14,795		)
Operating activities of consolidated investment products ("CIP"):
Realized and unrealized (gains) losses on investments of CIP, net	(14,051		)	(3,648		)	30,037
Purchases of investments by CIP	(923,519		)	(464,216		)	(653,139		)
Sales of investments by CIP	615,565			400,493			408,416
Net proceeds (purchases) of short term investments by CIP	595			6,139			(54,495		)
(Purchases) sales of securities sold short by CIP, net	256			(4,520		)	(1,747		)
Change in cash pledged or on deposit of CIP	167			9,604			(2,604		)
Change in other assets of CIP	(255		)	(1,491		)	(2,428		)
Change in liabilities of CIP	5,284			2,100			2,591
Amortization of discount on notes payable of CIP	5,107			3,719			—
Net cash provided by (used in) operating activities	(182,692		)	30,522			(209,430		)
Cash Flows from Investing Activities:
Capital expenditures	(1,511		)	(2,023		)	(4,683		)
Proceeds from sale of equity method investment	—			8,621			—
Change in cash and cash equivalents of CIP due to deconsolidation, net	(604		)	(903		)	—
Equity method investment contributions	—			(2,471		)	(1,617		)
Acquisition of business, net of cash acquired	(393,446		)	—			89
Purchases of available-for-sale securities	(21,433		)	(145		)	(227		)
Net cash provided by (used in) investing activities	(416,994		)	3,079			(6,438		)
Cash Flows from Financing Activities:
Issuance of debt	260,000			—			—
Payment of long term debt	(650		)	—			—
Payment of contingent consideration	(51,690		)	—			—
Payment of deferred financing costs	(15,549		)	(1,159		)	(47		)
Borrowings (Repayments) on credit facility and other debt	(30,970		)	30,000			—
Repurchase of common shares	(7,502		)	(233,757		)	(80,000		)
Preferred stock dividends paid	(6,253		)	—			—
Common stock dividends paid	(12,581		)	(13,774		)	(16,047		)
Proceeds from exercise of stock options	111			491			116

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Taxes paid related to net share settlement of restricted stock units	(3,499		)	(1,530		)	(5,080		)
Proceeds from issuance of mandatory convertible preferred stock, net of issuance costs	111,004
Proceeds from issuance of common stock, net of issuance costs	109,487			—			—
Excess tax benefits from stock-based compensation	—			401			1,586
Contributions of noncontrolling interests, net	30,047			10,904			55,700
Financing activities of CIP
Borrowings of proceeds from short sales by CIP	—			—			1,473
(Repayment) Borrowings by CIP	(105,000		)	(156,154		)	152,247
Proceeds from issuance of notes payable by consolidated investment product	474,009			316,280			—
Repayment of notes payable by CIP	(500		)	—			—
Net cash provided by (used in) financing activities	750,464			(48,298		)	109,948
Net increase (decrease) in cash and cash equivalents	150,778			(14,697		)	(105,920		)
Cash and cash equivalents, beginning of year	82,687			97,384			203,304
Cash and cash equivalents, end of year	$	233,465		$	82,687		$	97,384

Supplemental Disclosure of Cash Flow Information
Interest paid	$	8,147		$	420		$	266
Income taxes paid, net	$	12,149		$	16,715		$	31,850
Supplemental Disclosure of Non-Cash Activities
Capital expenditures	$	70		$	134		$	(692	)
Preferred stock dividends payable	$	2,084		$	—		$	—
Common stock dividends payable	$	965		$	2,650		$	4,233
Increase (Decrease) to noncontrolling interest due to consolidation (deconsolidation) of CIP, net	$	(65,576	)	$	(47,763	)	$	(648	)
Stock issued for acquisition of business	$	21,738		$	—		$	—
Accrued stock issuance costs	$	332		$	—		$	—

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

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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 U.S. 1940 Act mutual funds and Undertaking for Collective Investment in Transferable Securities ("UCITS") (collectively, "open-end funds"), closed-end funds, exchange traded funds (“ETFs”) and retail separate accounts. Institutional investment management services are provided to corporations, multi-employer retirement funds, employee retirement systems, foundations, endowments, structured products and as a subadviser to unaffiliated mutual funds.

On June 1, 2017, the Company acquired RidgeWorth Investments ("RidgeWorth"), which provided investment management services through its affiliated managers to clients in North America, Europe and Asia. (See Note 3 for further discussion of the RidgeWorth acquisition.)

2 . Summary of Significant Accounting Policies

The Company’s significant accounting policies, which have been consistently applied, are as follows:

Principles of Consolidation and Basis of Presentation

The Company’s 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. See Note 18 for additional information related to the consolidation of investment products. Intercompany accounts and transactions have been eliminated.

The Company evaluates the appropriateness of consolidation of any variable interest entity ("VIEs") in which the Company has a variable interest. A VIE is an entity in which either (a) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (b) 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.

The Company has reclassified certain amounts in prior-period financial statements to conform to the current period's presentation. Previously, the Company reported consolidated investment products and consolidated sponsored investment products separately. Currently, the Company combines these categories under the caption "consolidated investment products" and has accordingly reclassified prior presentations. The reclassifications were not material to the Consolidated Financial Statements.

Noncontrolling Interest

Noncontrolling interests represent the profit or loss attributed to third-party investors in consolidated investment products and other affiliates. Noncontrolling interests related to certain consolidated investment products are classified as redeemable noncontrolling interests because investors in these funds may request withdrawals at any time.

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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. Business or 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 and assess performance. The Company operates in one business segment, namely as an asset manager providing investment management and related services for individual and institutional clients. The Company’s Chief Executive Officer is the Company’s chief operating decision maker. 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 specific product lines.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and money market fund investments.

Investments

Marketable Securities and collateralized loan obligations

Marketable securities are carried at fair value in accordance with ASC 320 , Investments—Debt and Equity Securities (“ASC 320”). Marketable securities include sponsored open-end funds and other equity securities classified as trading securities and sponsored closed-end funds classified as available-for-sale securities. The Company also has investments in CLOs for which the Company provides investment management services. These investments in collateralized loan obligations are classified as both trading and available-for-sale. Marketable 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. Marketable securities transactions are recorded on a trade date basis. Any unrealized appreciation or depreciation on trading securities is reported as realized and unrealized gain (loss) on investments in the Consolidated Statement of Operations. Any unrealized appreciation or depreciation on available-for-sale securities, net of income taxes, is reported as a component of accumulated other comprehensive income in equity attributable to stockholders in the Consolidated Statement of Comprehensive Income.

On a quarterly basis, the Company conducts a review to assess whether other-than-temporary impairments exist on its available-for-sale marketable securities. Other-than-temporary declines in value may exist if the fair value of a marketable security has been below the carrying value for an extended period of time. If an other-than-temporary decline in value is determined to exist, the unrealized investment loss, net of tax, is recognized in the Consolidated Statements of Operations in the period in which the other-than-temporary decline in value occurs, as well as an accompanying permanent adjustment to accumulated other comprehensive income.

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Notes to Consolidated Financial Statements—(Continued)

Equity Method Investments

The Company’s investment in noncontrolled entities, where the Company does not hold a controlling financial interest but has the ability to significantly influence operating and financial matters, is accounted for under the equity method of accounting 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 in the accompanying 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 trading securities, are included in investments and are carried at fair value in accordance with ASC 820, Fair Value Measurement ; the associated obligations to participants are included in other liabilities in the Company’s Consolidated Balance Sheets and approximate the fair value of the associated assets . See Note 5 Investments for additional information related to the Excess Incentive Plan.

Deferred Commissions

Deferred commissions, which are included in other assets in the Company's 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 one to five years, depending on the fund share class. The deferred costs resulting from the sale of shares are amortized on a straight-line basis over a one to five -year period, depending on the fund share class, or until the underlying shares are redeemed. Deferred commissions are periodically assessed for impairment and additional amortization expense is recorded, as appropriate.

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 currently leases office space and equipment under various leasing arrangements. Leases are classified as either capital leases or operating leases, as appropriate. Most lease agreements are classified as operating leases and contain renewal options, rent escalation clauses or other inducements provided by the lessor. Rent expense under non-cancelable operating leases with scheduled rent increases or rent holidays is accounted for on a straight-line basis over the lease term, beginning on the date of initial possession or the effective date of the lease agreement. The amount of the excess of straight-line rent expense over scheduled payments is recorded as a deferred liability. Build-out allowances and other such lease incentives are recorded as deferred credits and are amortized on a straight-line basis as a reduction of rent expense beginning in the period they are deemed to be earned, which generally coincides with the effective date of the lease.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of acquisitions and mergers over the identified net assets and liabilities acquired. In accordance with ASC 350, Goodwill and Other Intangible Assets, goodwill is not amortized. A single reporting unit has been identified 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 the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2011-08, Testing Goodwill for Impairment, which states that an entity has 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

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Notes to Consolidated Financial Statements—(Continued)

value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines 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 2017 and 2016 annual goodwill impairment analysis did not result in any impairment charges.

Definite-lived intangible assets comprise acquired investment advisory contracts. These assets are amortized on a straight-line basis over the estimated useful lives of such assets, which range from one to sixteen 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 fully 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 impairment is recorded, if the carrying value exceeds the expected future undiscounted cash flows.

Indefinite-lived intangible assets comprise closed-end and exchange traded 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 No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment , which provides entities with an 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 2017 and 2016 annual indefinite-lived intangible assets impairment analysis did not result in any impairment charges.

Treasury Stock

Treasury stock is accounted for under the cost method and is included as a deduction from equity in 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 accounts for investment management fees in accordance with ASC 605, Revenue Recognition , and has recorded its management fees net of fees paid to unaffiliated subadvisers. The Company considers the nature of its contractual arrangements in determining whether to recognize revenue based on the gross amount billed or net amount retained. The Company has evaluated the factors in ASC 605-45 in determining whether to record revenue on a gross or net basis with significant weight placed on: (i) whether the Company is the primary obligor in the arrangement; and (ii) whether the Company has latitude in establishing price. Amounts paid to unaffiliated subadvisers for the years ended December 31, 2017 , 2016 and 2015 were $46.7 million , $47.2 million and $76.4 million , respectively.

Distribution and service fees are earned based on a percentage of assets under management and are paid monthly pursuant to the terms of the respective distribution and service fee contracts. Underwriter fees are sales-based charges on sales of certain class A-share mutual funds.

Administration and shareholder service fees consist of fund administration fees and shareholder service fees. Fund administration and shareholder service fees are earned based on the average daily assets in the funds.

Other income and fees consist primarily of redemption income on the early redemption of certain share classes of mutual funds.

Advertising and Promotion

Advertising and promotional costs include print advertising and promotional items and are expensed as incurred. These costs are classified in other operating expenses in the Consolidated Statements of Operations.

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Notes to Consolidated Financial Statements—(Continued)

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 targets are achieved. The fair value of each RSU award is estimated using the intrinsic value method, which 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. RSUs that contain a market condition are valued using a simulation valuation model. Compensation expense for RSU awards is recognized ratably over the vesting period on a straight-line basis.

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 liabilities and assets for the future tax consequences of events that have been included in the Company’s financial statements or tax returns. Deferred tax liabilities and assets result from temporary differences between the book value and tax basis of the Company’s assets, liabilities and carry-forwards, such as net operating losses or tax credits.

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 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. Changes in future operating results not currently forecasted 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 in the Consolidated Statements of Changes in Stockholders’ Equity and the Consolidated Statements of Comprehensive Income. Comprehensive income includes net income (loss), foreign currency translation adjustments (net of tax) and unrealized gains and losses on investments classified as available-for-sale (net of tax).

Earnings per Share

Earnings per share (“EPS”) is calculated in accordance with ASC 260, Earnings per Share . Basic EPS excludes dilution for potential common stock issuances and is computed by dividing basic net income available to common stockholders by the weighted-average number of common shares outstanding for the period. 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: (1) shares issuable upon the vesting of RSUs and common stock option exercises using the treasury stock method; and (2) shares issuable upon the conversion of the Company's mandatory convertible preferred stock ("MCPS"), 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, Fair Value Measurements and Disclosures, 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 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:

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Notes to Consolidated Financial Statements—(Continued)

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

The Company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), on January 1, 2017. This standard makes several modifications to the accounting for forfeitures and employer tax withholdings on share-based compensation as well as the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation of certain components of share-based awards. Upon adoption, the Company recorded a $1.1 million cumulative effect adjustment to retained earnings for excess tax benefits that were not previously recognized because the related tax deduction had not reduced current taxes payable. The Company elected to adopt all provisions impacting the Consolidated Statements of Operations and Cash Flows prospectively.

The Company adopted ASU 2016-07, Investments - Equity Method and Joint Ventures (Topic 232): Simplifying the Transition to the Equity Method of Accounting, on January 1, 2017. This standard eliminates the requirement that, when an existing cost method investment qualifies for use of the equity method, a reporting entity must restate its historical financial statements, as if the equity method had been used during all previous periods. Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive income/(loss) would be recognized through earnings. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

New Accounting Standards Not Yet Implemented

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 provides guidance on evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard is effective for interim and annual periods beginning after December 15, 2017. The Company will apply the standard prospectively upon adoption. The impact of this standard on the Company’s consolidated financial statements will depend on acquisitions (or disposals) of assets or businesses by the Company in periods following adoption.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Accounting for Goodwill Impairment ("ASU 2017-04"). Under ASU 2017-04, a goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019, with early adoption permitted for impairment tests performed after January 1, 2017. The Company adopted this standard effective January 1, 2018, and will a pply the standard prospectively for all future annual and interim goodwill impairment tests . The impact of the new standard will depend on the outcomes of future goodwill impairment tests.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning and ending cash on the statement of cash flows. This standard is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. A reporting entity is required to

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Notes to Consolidated Financial Statements—(Continued)

apply this standard on a retrospective basis as of the beginning of the fiscal year for which the standard is effective. The Company adopted this standard effective January 1, 2018. T he adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"), which clarifies the treatment of several cash flow activities. ASU 2016-15 also clarifies that when cash receipts and cash payments have aspects of more than one classification of cash flows and cannot be separated, classification will depend on the predominant source or use. This update is effective for annual periods beginning after December 15, 2017 and interim periods within those fiscal years. The Company adopted this standard effective January 1, 2018. T he adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 was originally effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year or for periods beginning after December 15, 2017. Adoption of the standard requires either a retrospective or a modified retrospective approach to adoption, and early adoption is permitted as of the original effective date. The core principle of the model is that revenue is recognized upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration to be received for the goods or services. In March 2016, the FASB issued ASU 2016-08, Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net) , which amends the principal-versus-agent implementation guidance in ASU 2014-09, Revenue from Contracts with Customers, discussed above. The new guidance will impact whether an entity reports revenue on a gross or net basis. These updates are effective for annual periods beginning after December 15, 2017 and interim periods within those fiscal years. The Company's implementation assessment included the identification of revenue within the scope of the guidance, as well as the review of terms and conditions of a sample of revenue contracts covering a broad range of products. The Company adopted ASU 2014-09 effective January 1, 2018, using the modified retrospective approach and has determined that the adoption did not have a material change in the timing of recognition of the Company's revenue. Due to the revised criteria related to whether or not the Company is acting as a principal or agent the Company expects certain costs that are currently presented on a net of revenue basis to be presented on a gross revenue basis under the revised criteria.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02") . The standard replaces current codification Topic 840 with updated guidance on accounting for leases and requires a lessee to recognize assets and liabilities arising from an operating lease on the balance sheet, whereas previous guidance did not require lease assets and liabilities to be recognized for most leases. Furthermore, this standard permits companies to make an accounting policy election to not recognize lease assets and liabilities for leases with a term of 12 months or less. For both finance leases and operating leases, the lease liability should be initially measured at the present value of the lease payments. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will not significantly change under this new guidance. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods therein. Early adoption is permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements but expects to record a right-of-use asset and a related lease obligation in the Company's consolidated balance sheet upon adoption.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), which requires all equity investments (other than those accounted for under the equity method) to be measured at fair value with changes in the fair value recognized through net income. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and interim periods therein. Early adoption is not permitted. The Company has evaluated the impact of this standard on its consolidated financial statements with respect to equity investments that currently report changes in fair value as a component of accumulated other comprehensive income in equity attributable to stockholders. Comprehensive income (loss), net of tax, with respect to these equity investments was $(0.4) million and $0.2 million for the years ended December 31, 2017 and December 31, 2016 , respectively. The Company adopted this standard effective January 1, 2018. T he adoption of this standard did not have a material impact on the Company's consolidated financial statements.

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Notes to Consolidated Financial Statements—(Continued)

3 . Business Combinations

The Company acquired RidgeWorth Investments (the "Acquisition" or the "Acquired Business"), a multi-boutique asset manager with approximately $40.1 billion in assets under management, including $35.7 billion in long term assets under management and $4.4 billion in liquidity strategies on June 1, 2017. The Acquisition significantly increased assets under management, expanded the number of affiliated managers and provided a wider range of strategies for institutional and individual investors and broader distribution and client service resources.

The total purchase price of the Acquisition was $547.1 million , comprising $485.2 million for the business and $61.9 million for certain balance sheet investments. At the closing, the Company paid $471.4 million in cash, issued 213,669 shares of common stock with a value of $21.7 million based on a stock price of $101.76 and recorded $51.7 million in contingent consideration and $2.3 million in deferred cash consideration. The conditions for the $51.7 million of contingent consideration were met and the Company paid this amount during the fourth quarter of 2017.

The Company accounted for the acquisition in accordance with ASC 805, Business Combinations . Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the Acquisition.

Given the timing of this transaction and complexity of the purchase accounting, the Company's estimate of the fair value adjustment specific to the acquired intangible assets and final tax positions is preliminary. The Company intends to finalize the accounting for these items as soon as reasonably possible. The Company may adjust the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the closing date as it obtains more information as to facts and circumstances existing as of the acquisition date. During the seven months ended December 31, 2017, the Company recorded measurement period adjustments of $1.0 million to increase deferred tax assets, with a corresponding reduction to goodwill as a result of the finalization of certain tax analyses, as well other immaterial adjustments to the assets and liabilities and noncontrolling interests of the consolidated investment products which had no impact on goodwill or any intangible assets.

The excess purchase price over the estimated fair values of assets acquired and liabilities and non-controlling interests assumed of $163.4 million was recorded as goodwill, all of which will be deductible for tax purposes over 15 years. In addition, $6.4 million in acquisition costs will be included as goodwill for tax purposes and also deducted over 15 years.

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Notes to Consolidated Financial Statements—(Continued)

The following table summarizes the initial estimate of amounts of identified acquired assets and liabilities assumed as

of the acquisition date:



	June 1, 2017
($ in thousands)
Assets:
Cash and cash equivalents	$	39,343
Investments	5,516
Accounts receivable	20,311
Assets of consolidated investment products ("CIP")
Cash and cash equivalents of CIP	38,261
Investments of CIP	899,274
Other assets of CIP	19,158
Furniture, equipment and leasehold improvements	5,505
Intangible assets	275,700
Goodwill	163,365
Deferred taxes, net	6,590
Other assets	3,003
Total Assets	1,476,026
Liabilities:
Accrued compensation and benefits	18,263
Accounts payable and accrued liabilities	11,858
Other liabilities	2,601
Liabilities of CIP
Notes payable of CIP	770,160
Securities purchased payable and other liabilities of CIP	109,881
Noncontrolling Interests of CIP	16,181
Total Liabilities & Noncontrolling Interests	928,944
Total Net Assets Acquired	$	547,082

Identifiable Intangible Assets Acquired

In connection with the allocation of the purchase price, we identified the following intangible assets:



	June 1, 2017
	Approximate Fair Value		Weighted Average of Useful Life
($ in thousands)
Definite-lived intangible assets:
Mutual fund investment contracts	$	189,200	16.0 years
Institutional and retail separate account investment contracts	77,000		10.4 years
Trademarks/Trade names	800		10.0 years
Total finite-lived intangible assets	267,000
Indefinite-lived intangible assets:
Trade names	8,700		N/A
Total identifiable intangible assets	$	275,700

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Notes to Consolidated Financial Statements—(Continued)

Acquired Business

For the twelve months ended December 31, 2017 , the Company incurred $26.3 million in transaction and integration costs associated with the Acquisition, comprising $10.2 million in severance and restructuring charges, $9.7 million of other operating expenses, and $6.4 million in employment expenses.

Immediately following the acquisition date, the Company commenced the integration of the Acquired Business into the Company's operations. The integration was largely complete as of September 30, 2017; as such, accurate segregated expense information for (and therefore earnings generated by) the Acquired Business for periods subsequent to September 30, 2017 is no longer determinable. Revenues associated with the Acquired Business, which can be separately identified, from the closing date of June 1 through December 31, 2017 were $77.1 million .

The following Unaudited Pro Forma Consolidated Results of Operations are provided for illustrative purposes only and assume that the acquisition occurred on January 1, 2016. The unaudited pro forma information also reflects adjustment for transaction and integration expenses as if the transaction had been consummated on January 1, 2016. The unaudited pro forma financial information does not reflect any adjustment to the timing of any synergies or other costs savings realized. This unaudited information should not be relied upon as being indicative of historical results that would have been obtained if the acquisition had occurred on that date, nor of the results that may be obtained in the future.



	Years Ended December 31,
	2017		2016
($ in thousands, except per share amounts)
Total Revenues	$	489,094	$	466,429
Net Income (Loss) Attributable to Common Stockholders	$	27,523	$	23,511

Basic EPS per Common Share	$	3.92	$	2.99
Diluted EPS per Common Share	$	3.80	$	2.92

4 . Goodwill and Other Intangible Assets

Intangible assets, net are summarized as follows:



	December 31,
	2017			2016
($ in thousands)
Definite-lived intangible assets, net:
Investment contracts	$	425,747		$	158,747
Accumulated amortization	(167,309		)	(155,136		)
Definite-lived intangible assets, net	258,438			3,611
Indefinite-lived intangible assets	43,516			34,816
Total intangible assets, net	$	301,954		$	38,427

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Notes to Consolidated Financial Statements—(Continued)

Activity in goodwill and intangible assets, net is as follows:



	Years Ended December 31,
	2017			2016			2015
($ in thousands)
Intangible assets, net
Balance, beginning of period	$	38,427		$	40,887		$	41,783
Acquisitions (1)	275,700			—			2,400
Amortization expense	(12,173		)	(2,460		)	(3,296		)
Balance, end of period	$	301,954		$	38,427		$	40,887
Goodwill
Balance, beginning of period	$	6,788		$	6,701		$	5,260
Acquisition (1)	163,365			—			1,441
Acquisition related adjustments	—			87			—
Balance, end of period	$	170,153		$	6,788		$	6,701

(1) - See Note 3 for details on the acquired intangible assets.

Definite-lived intangible asset amortization for the next five years is estimated as follows: 2018 — $20.1 million , 2019 — $20.0 million , 2020 — $19.9 million , 2021 — $19.9 million , 2022 — $19.7 million , and thereafter— $158.8 million . At December 31, 2017 , the weighted average estimated remaining amortization period for definite-lived intangible assets is 13.7 years .

5 . Investments

Investments consist primarily of investments in the Company's sponsored products. The Company’s investments, excluding the assets of consolidated investment products discussed in Note 18, at December 31, 2017 and 2016 were as follows:



	December 31,
	2017		2016
($ in thousands)
Marketable securities	$	66,424	$	74,907
Equity method investments	11,098		7,731
Nonqualified retirement plan assets	6,706		5,808
Investments in collateralized loan obligations	23,339		—
Other investments	925		925
Total investments	$	108,492	$	89,371

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Notes to Consolidated Financial Statements—(Continued)

Marketable Securities

The Company’s marketable securities consist of both trading and available-for-sale securities. The composition of the Company’s marketable securities is summarized as follows:



December 31, 2017
	Cost		Unrealized Loss			Unrealized Gain		Fair Value
($ in thousands)
Trading:
Sponsored funds	$	47,084	$	(1,294	)	$	1,059	$	46,849
Equity securities	13,141		(2		)	2,671		15,810
Available-for-sale:
Sponsored closed-end funds	3,761		(302		)	306		3,765
Total marketable securities	$	63,986	$	(1,598	)	$	4,036	$	66,424



December 31, 2016
	Cost		Unrealized Loss			Unrealized Gain		Fair Value
($ in thousands)
Trading:
Sponsored funds	$	61,784	$	(1,942	)	$	177	$	60,019
Equity securities	10,578		—			895		11,473
Available-for-sale:
Sponsored closed-end funds	3,500		(265		)	180		3,415
Total marketable securities	$	75,862	$	(2,207	)	$	1,252	$	74,907

For the year ended December 31, 2017 , the Company recognized a net realized loss of $1.5 million on trading securities. For the year ended December 31, 2016 , the Company recognized a net realized loss of $0.3 million on trading securities. For the year ended December 31, 2015 , the Company recognized a net realized gain of $0.4 million on trading securities.

Equity Method Investments

In 2014, the Company acquired an interest in a limited partnership for approximately $5.0 million which included a future capital commitment for up to $5.0 million , in the event that it was called by the partnership. For the year ended December 31, 2017, distributions from the partnership were $0.9 million . For the year ended December 31, 2016, there were no distributions from the partnership. For the year ended December 31, 2016, the Company made capital contributions of $2.5 million to the partnership, and the remaining capital commitment is $2.3 million .

Nonqualified Retirement Plan Assets

The 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 assets they contribute, 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 in the Company’s Consolidated Balance Sheets .

Investments in collateralized loan obligations

The Company has investments in CLOs for which the Company provides investment management services. These investments in collateralized loan obligations are classified as both trading and available-for-sale.

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Notes to Consolidated Financial Statements—(Continued)

Other Investments

Other investments represent interests in entities not accounted for under the equity method such as the cost method or fair value.

6 . Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of consolidated investment products discussed in Note 18 , as of December 31, 2017 and December 31, 2016 , by fair value hierarchy level were as follows:



December 31, 2017
	Level 1		Level 2		Level 3		Total
($ in thousands)
Assets
Cash equivalents	$	72,993	$	—	$	—	$	72,993
Marketable securities trading:
Sponsored funds	46,849		—		—		46,849
Equity securities	15,810		—		—		15,810
Marketable securities available-for-sale:
Sponsored closed-end funds	3,765		—		—		3,765
Other investments
Investments in collateralized loan obligations	—		18,900		4,439		23,339
Nonqualified retirement plan assets	6,706		—		—		6,706
Total assets measured at fair value	$	146,123	$	18,900	$	4,439	$	169,462



December 31, 2016
	Level 1		Level 2		Level 3		Total
($ in thousands)
Assets
Cash equivalents	$	48,620	$	—	$	—	$	48,620
Marketable securities trading:
Sponsored funds	60,019		—		—		60,019
Equity securities	11,473		—		—		11,473
Marketable securities available-for-sale:
Sponsored closed-end funds	3,415		—		—		3,415
Other investments
Nonqualified retirement plan assets	5,808		—		—		5,808
Total assets measured at fair value	$	129,335	$	—	$	—	$	129,335

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

Cash equivalents represent investments in money market funds. Cash investments in actively traded money market funds are valued using published net asset values and are classified as Level 1.

Sponsored funds represent investments in open-end and closed-end funds 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 is determined based on the official closing price on the exchange they are traded on and are categorized as Level 1.

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Notes to Consolidated Financial Statements—(Continued)

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. There were no transfers between Level 1 and Level 2 during the years ended December 31, 2017 and 2016 .

The following table is a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determine fair value:



	Twelve Months Ended December 31,
($ in thousands)	2017			2016
Level 3 Investments ^(a)
Balance at beginning of period	$	—		$	—
Acquired in business combination	2,916			—
Purchases	2,370			—
Change in unrealized gain (loss), net	(847		)	—
Balance at end of period	$	4,439		$	—


^(a)	The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment.

7 . Furniture, Equipment and Leasehold Improvements, Net

Furniture, equipment and leasehold improvements, net are summarized as follows:



	December 31,
	2017			2016
($ in thousands)
Furniture and office equipment	$	7,564		$	5,933
Computer equipment and software	9,274			7,330
Leasehold improvements	14,132			11,334
	30,970			24,597
Accumulated depreciation and amortization	(20,137		)	(16,869		)
Furniture, equipment and leasehold improvements, net	$	10,833		$	7,728

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Notes to Consolidated Financial Statements—(Continued)

8 . Income Taxes

The components of the provision for income taxes are as follows:



	Years Ended December 31,
	2017		2016		2015
($ in thousands)
Current
Federal	$	15,670	$	12,790	$	28,077
State	1,985		1,855		2,539
Total current tax expense (benefit)	17,655		14,645		30,616
Deferred
Federal	20,895		5,489		4,339
State	1,940		910		2,017
Total deferred tax expense (benefit)	22,835		6,399		6,356
Total expense (benefit) for income taxes	$	40,490	$	21,044	$	36,972

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 in the Consolidated Statements of Operations for the years indicated:



	Years Ended December 31,
	2017					2016					2015
($ in thousands)
Tax at statutory rate	$	28,150		35	%	$	24,432		35	%	$	23,675	35	%
State taxes, net of federal benefit	3,548			4		2,010			3		2,717		4
Effect of U.S. tax reform (the Tax Act)	13,074			16		—			—		—		—
Effect of net income (loss) attributable to noncontrolling interests	(1,017		)	(1	)	(91		)	—		1,492		2
Change in valuation allowance	(2,613		)	(3	)	(5,125		)	(7	)	7,812		12
Other, net	(652		)	(1	)	(182		)	(1	)	1,276		2
Income tax expense (benefit)	$	40,490		50	%	$	21,044		30	%	$	36,972	55	%

The provision for income taxes reflects U.S. federal, state and local taxes at an effective tax rate of 50% , 30% and 55% for the years ended December 31, 2017 , 2016 and 2015 , respectively. The Company's tax position for the years ended December 31, 2017, 2016 and 2015 was impacted by changes in the valuation allowance related to the unrealized and realized gains and losses on the Company’s investments.

On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was enacted which made significant changes to federal income tax law, including reducing the statutory corporate income tax rate to 21 percent from 35 percent. The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 118, which specifies, among other things, that reasonable estimates of the income tax effects of the Tax Act should be used, if determinable. The Company has accounted for the effects of the Tax Act using reasonable estimates based on currently available information and its interpretations thereof. This accounting may change due to, among other things, changes in interpretations the Company has made or the issuance of new tax or accounting guidance. In accordance with ASC 740, the effects of changes in tax rates and laws on deferred tax balances are recognized in the period in which the new legislation is enacted , this was the primary driver of the $13.1 million estimated income tax expense impact recognized in 2017 as a result of this legislation.

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Notes to Consolidated Financial Statements—(Continued)

Deferred taxes resulted from temporary differences between the amounts reported in the consolidated financial statements and the tax basis of assets and liabilities. The tax effects of temporary differences are as follows:



	December 31,
	2017			2016
($ in thousands)
Deferred tax assets:
Intangible assets	$	10,706		$	19,348
Net operating losses	16,769			20,272
Compensation accruals	7,681			8,854
Capitalized transaction costs	5,849			10,022
Unrealized loss/(gain)	1,473			5,291
Capital losses	870			417
Other	1,675			977
Gross deferred tax assets	45,023			65,181
Valuation allowance	(3,088		)	(5,731		)
Gross deferred tax assets after valuation allowance	41,935			59,450
Deferred tax liabilities:
Intangible assets	(9,507		)	(11,915		)
Gross deferred tax liabilities	(9,507		)	(11,915		)
Deferred tax assets, net	$	32,428		$	47,535

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 $3.1 million and $5.7 million at December 31, 2017 and 2016 , respectively, relating to deferred tax assets on items of a capital nature as well as certain state deferred tax assets.

As of December 31, 2017 , the Company had net operating loss carry-forwards for federal income tax purposes represented by a $8.5 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, 2017 , the Company had state net operating loss carry-forwards, varying by subsidiary and jurisdiction, represented by a $8.3 million deferred tax asset. The state net operating loss carry-forwards are scheduled to begin to expire in 2018.

Internal Revenue Code 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. During the year ended December 31, 2009, the Company incurred an ownership change as defined in Section 382. At December 31, 2017 , the Company has pre-change losses represented by deferred tax assets totaling $12.6 million . The utilization of these assets is subject to an annual limitation of $1.1 million .

The Company has had no unrecognized tax benefits activity for the years ended December 31, 2017, 2016 and 2015. The Company’s practice is to classify interest and penalties related to income tax matters in income tax expense. The Company recorded no interest or penalties related to unrecognized tax benefits at December 31, 2017 , 2016 and 2015 .

The earliest federal tax year that remains open for examination is 2010 since net operating loss carry-forwards from 2010 could be denied when claimed in future years. The earliest open years in the Company’s major state tax jurisdictions are 2008 for Connecticut and 2013 for all of the Company's remaining state tax jurisdictions.

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Notes to Consolidated Financial Statements—(Continued)

9 . Debt

Credit Agreement

On June 1, 2017, in connection with the Acquisition, the Company entered into a new credit agreement ("Credit Agreement") comprising (1) $260.0 million of seven -year term debt ("Term Loan") and (2) a $100.0 million five -year revolving credit facility ("Credit Facility"). At December 31, 2017 , $259.4 million was outstanding under the Term Loan. In 2017, the Company's previous revolving credit facility and financing commitment were terminated and as a result $1.1 million of unamortized deferred financing costs were expensed.

Amounts outstanding under the Credit Agreement for the Term Loan and the Credit Facility bear interest at an annual rate equal to, at the option of the Company, either (i) LIBOR (adjusted for reserves) for interest periods of one, two, three or six months (or, solely in the case of the Credit Facility, if agreed to by each relevant Lender, twelve months or periods less than one month), subject to a “floor” of 0% for the Credit Facility and 0.75% for the Term Loan, or (ii) an alternate base rate, in either case plus an applicable margin. The applicable margins are set initially at 3.75% , in the case of LIBOR-based loans, and 2.75% , in the case of alternate base rate loans, and will range from 3.50% to 3.75% , in the case of LIBOR-based loans, and 2.50% to 2.75% , in the case of alternate base rate loans, based on the secured net leverage ratio of the Company as of the last day of the preceding fiscal quarter. Interest is payable on the last day of each interest period with respect to LIBOR-based loans, but at least at three-month intervals, and quarterly in arrears with respect to alternate base rate loans (but, in the case of LIBOR-based loans with an interest period of more than three months).

The obligations of the Company under the Credit Agreement are guaranteed by certain of its subsidiaries (the “Guarantors”) and secured by substantially all of the assets of the Company and the Guarantors, subject to customary exceptions. 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, purchase shares of our common stock, make distributions and dividends and pre-payments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year, or modify its organizational documents, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains a financial maintenance covenant, requiring a maximum leverage ratio, as of the last day of each of the trailing four fiscal quarter periods, of no greater than the levels set forth in the Credit Agreement.

At any time, upon timely notice, the Company may terminate the Credit Agreement in full, reduce the commitment under the Credit Facility in minimum specified increments or prepay the Term Loan 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, a 1.00% premium.

Term Loan

The Term Loan, which was priced on March 2, 2017, had a delayed draw fee of $1.2 million between March 2, 2017

and the closing date of June 1, 2017. The Term Loan amortizes at the rate of 1.00% per annum payable in equal quarterly installments and will be mandatorily repaid with: (a) 50% of the Company’s excess cash flow, as defined in the Credit Agreement, on an annual basis, beginning with the fiscal year ended December 31, 2018, stepping down to 25% if the Company’s secured net leverage ratio declines below 1.0, and further stepping down to 0% if the Company’s secured net leverage ratio declines below 0.5; (b) the net proceeds of certain asset sales, casualty or condemnation events, subject to customary reinvestment rights; and (c) the proceeds of any indebtedness incurred other than indebtedness permitted to be incurred by the Credit Agreement.

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Notes to Consolidated Financial Statements—(Continued)

Future minimum Term Loan payments (exclusive of unamortized debt issuance costs) as of December 31, 2017 are as follows (in thousands):



Year	Amount
2018	$	3,250
2019	2,600
2020	2,600
2021	2,600
2022	1,950
Thereafter	246,350
	$	259,350

Credit Facility

At December 31, 2017 , no amounts were outstanding under the Credit Facility. The Company has the right, subject to customary conditions specified in the Credit Agreement, to request additional revolving credit facility commitments and additional term loans to be made under the Credit Agreement up to an aggregate amount equal to the sum of (x) $75.0 million and (y) an amount subject to a pro forma secured net leverage ratio of the Company of no greater than 1.75 to 1.00. Under the terms of the Credit Agreement, the Company is required to pay a quarterly commitment fee on the average unused amount of the Credit Facility, which fee is initially set at 0.50% and will, following the first delivery of certain financial reports required under the Credit Agreement, 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.

10 . Commitments and Contingencies

Legal Matters

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Notes to Consolidated Financial Statements—(Continued)

In re Virtus Investment Partners, Inc. Securities Litigation; formerly Tom Cummins v. Virtus Investment Partners Inc. et al

Mark Youngers v. Virtus Investment Partners, Inc. et al

Lease Commitments

The Company incurred rental expenses, primarily related to office space, under operating leases of $6.2 million , $4.4 million and $4.3 million in 2017 , 2016 and 2015 , respectively. Minimum aggregate rental payments required under operating

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Notes to Consolidated Financial Statements—(Continued)

leases that have initial or remaining non-cancellable lease terms in excess of one year as of December 31, 2017 are as follows: $6.8 million in 2018 ; $5.1 million in 2019 ; $4.3 million in 2020 ; $2.9 million in 2021 ; $1.8 million in 2022 ; and $3.5 million thereafter.

11 . Equity Transactions

Stock Repurchases

As of December 31, 2017, 4.2 million shares of the Company's common stock have been authorized to be repurchased under the Board of Directors approved share repurchase program and 0.9 million 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.

During the year ended December 31, 2017 , the Company repurchased a total of 66,244 common shares for approximately $7.5 million . As of December 31, 2017 , the Company had repurchased a total of 3,852,805 shares of common stock at a weighted average price of $103.55 per share plus transaction costs for a total cost of $399.0 million .

During the year ended December 31, 2016, the Company repurchased 1,727,746 common shares at a price of $93.50 per share for a total purchase price of $161.5 million from the Bank of Montreal Holdings Inc. pursuant to a Stock Purchase Agreement and repurchased 556,516 shares representing 6.7% of the Company's common stock outstanding, pursuant to a "modified Dutch Auction" tender offer.

Equity Issuances

During the year ended December 31, 2017 , the Company issued 1,260,169 shares of common stock consisting of: (1) 1,046,500 shares of common stock in a public offering, which included the exercise of the underwriters' over-allotment option, for net proceeds of $109.5 million , after underwriting discounts, commissions and other offering expenses; and (2) 213,669 shares of the Company's common stock as part of the consideration for the acquisition of RidgeWorth. (See Note 3 for further discussion of the Acquisition.)

During the year ended December 31, 2017 , the Company issued 1,150,000 shares of 7.25% mandatory convertible preferred stock ("MCPS") in a public offering which included the exercised over-allotment option for net proceeds of $111.0 million , after underwriting discounts, commissions and other offering expenses. The MCPS was issued with a liquidation preference of $100.00 per share. Unless converted earlier, each share of MCPS will convert automatically on February 1, 2020 (the "mandatory conversion date") into between 0.7576 and 0.9091 shares of common stock (a conversion price range between $132 to $110 per share, respectively), subject to customary anti-dilution adjustments. The number of shares of common stock issuable upon conversion will be determined based on the average volume-weighted average price per share of the Company's common stock over the 20 consecutive trading day period beginning on, and including, the 22nd scheduled trading day immediately preceding the mandatory conversion date. Each share of MCPS can be converted prior to the mandatory conversion date at the option of the holder at the minimum conversion rate of 0.7576 or at specified rate, in the event of a fundamental change as defined in the certificate of designations of the MCPS.

Dividends on the MCPS will be payable on a cumulative basis when, as and if declared by the Board of Directors, at an annual rate of 7.25 percent on the liquidation preference of $100.00 per share. If declared, these dividends will be paid in cash, or, subject to certain limitations, in shares of Virtus' common stock (or a combination) on February 1, May 1, August 1, and November 1 of each year, commencing May 1, 2017, and continuing to, and including, February 1, 2020.

Dividends

During each quarter of the year ended December 31, 2017 , the Board of Directors declared quarterly cash dividends on the Company's common stock of $0.45 each. Total dividends declared on the Company's common stock were $13.5 million for the year ended December 31, 2017 .

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Notes to Consolidated Financial Statements—(Continued)

During each quarter of the year ended December 31, 2017 , the Board of Directors declared quarterly cash dividends on the Company's preferred stock of $1.8125 each. Total dividends declared on the Company's preferred stock were $8.3 million for the year ended December 31, 2017 .

At December 31, 2017 , $6.5 million was included as dividends payable in liabilities in the Consolidated Balance Sheet. This balance represents the fourth quarter dividends of $2.1 million to be paid on February 1, 2018 for the Company's preferred stock shareholders of record as of January 15, 2018 and $4.4 million to be paid on February 15, 2018 for the Company's common stock shareholders of record as of January 31, 2018 .

12 . Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss), by component, are as follows:



	Unrealized Gains (Losses) on Securities Available-for-Sale			Foreign Currency Translation Adjustments
($ in thousands)
Balance December 31, 2016	$	(224	)	$	—
Unrealized net gain (loss) on available-for-sale securities, net of tax of $100	(388		)	—
Foreign currency translation adjustments, net of tax of ($4)	—			12
Net current-period other comprehensive income (loss)	(388		)	12
Balance December 31, 2017	$	(612	)	$	12



	Unrealized Gains (Losses) on Securities Available-for-Sale			Foreign Currency Translation Adjustments
($ in thousands)
Balance December 31, 2015	$	(465	)	$	(569	)
Unrealized net gain (loss) on available-for-sale securities, net of tax of ($32)	241			—
Foreign currency translation adjustments, net of tax of ($348)	—			569
Net current-period other comprehensive income (loss)	241			569
Balance December 31, 2016	$	(224	)	$	—

13 . 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. Through December 31, 2017, the Company matched employees’ contributions at a rate of 100% of employees’ contributions up to the first 3.0% and 50.0% of the next 2.0% of the employees’ compensation contributed to the 401(k) Plan. The Company’s matching contributions were $2.8 million , $2.4 million and $2.1 million in 2017 , 2016 and 2015 , respectively.

14 . Stock-Based Compensation

The Company has an Omnibus Incentive and Equity Plan (the “Plan”) under which officers, employees and directors may be granted equity-based awards, including restricted stock units (“RSUs”), stock options and unrestricted shares of common stock. At December 31, 2017 , 481,948 shares of common stock remain available for issuance of the 2,400,000 shares that are authorized for issuance under the Plan.

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Notes to Consolidated Financial Statements—(Continued)

Stock-based compensation expense is summarized as follows:



	Years Ended December 31,
	2017		2016		2015
($ in thousands)
Stock-based compensation expense	$	20,288	$	11,948	$	11,863

Restricted Stock Units

Each RSU entitles the holder to one share of common stock when the restriction expires. RSUs generally have a term of one to three years and may be time-vested or performance-contingent. The fair value of each RSU is estimated using the intrinsic value method, which 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. RSUs that contain a market condition are valued using a simulation valuation model. Shares that are issued upon vesting are newly issued shares from the Plan and are not issued from treasury stock.

RSU activity for the year ended December 31, 2017 is summarized as follows:



	Number of shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016	302,824		$	111.56
Granted	290,630		$	108.32
Forfeited	(30,450	)	$	120.08
Settled	(79,983	)	$	141.24
Outstanding at December 31, 2017	483,021		$	104.16

The grant-date intrinsic value of RSUs granted during the year ended December 31, 2017 was $31.5 million . The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2017 , 2016 and 2015 was $108.32 , $80.33 and $134.37 per share, respectively. The total fair value of RSUs vested during the years ended December 31, 2017 , 2016 and 2015 was $11.3 million , $9.3 million and $11.8 million , respectively. For the years ended December 31, 2017 , 2016 and 2015 , a total of 32,716 , 37,488 and 50,952 RSUs, respectively, were withheld through net share settlement by the Company to settle minimum employee tax withholding obligations. The Company paid $3.5 million , $1.5 million and $5.1 million for the years ended December 31, 2017 , 2016 and 2015 , respectively, in minimum employee tax withholding obligations related to RSUs withheld. These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have been otherwise issued as a result of the vesting.

As of December 31, 2017 and 2016, unamortized stock-based compensation expense for outstanding RSUs was $29.3 million and $16.0 million with a weighted average remaining contractual life of 1.6 years and 1.4 years, respectively. The Company did not capitalize any stock-based compensation expenses during the years ended December 31, 2017 , 2016 and 2015 .

During the years ended December 31, 2017 and 2016 , the Company granted 87,458 and 33,244 RSUs, respectively, each of which contain performance-based metrics in addition to a service condition (Performance Share Units or "PSUs"). Compensation expense for these PSUs is recognized over a three-year service period based upon the value determined using a combination of the intrinsic value method, for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718, and the Monte Carlo simulation valuation model, for awards under the performance metric that represents a "market condition" under ASC 718. Compensation expense for the 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 the 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 the final outcome. For the years ended December 31, 2017 and 2016 , total stock-based compensation expense included $7.3 million and $2.8 million respectively, for these PSUs. As of December 31, 2017 and 2016 , unamortized stock-based compensation expense related to these PSUs was $7.6 million and $3.3 million , respectively.

On June 1, 2017, the Company also granted 35,148 PSUs and 65,561 RSUs to certain RidgeWorth employees in connection with the Acquisition to replace equity incentives that were in place prior to the Acquisition. The PSUs will vest if certain performance measures are met over a five -year period, with the ability for accelerated vesting if those same conditions are met by year four . The RSUs contain only a service condition and will vest over four years beginning with year two. For the

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Table of Contents

Notes to Consolidated Financial Statements—(Continued)

twelve months ended December 31, 2017, total stock-based compensation expense was $1.5 million for these PSUs and RSUs. At December 31, 2017, unamortized stock-based compensation expense related to these PSUs and RSUs was $8.6 million .

Stock Options

Stock option activity for the year ended December 31, 2017 is summarized as follows:



	Number of shares		Weighted Average Exercise Price
Outstanding at December 31, 2016	137,157		$	17.77
Granted	—		$	—
Exercised	(27,349	)	$	23.12
Forfeited	—		$	—
Outstanding at December 31, 2017	109,808		$	16.44
Vested and exercisable at December 31, 2017	109,808		$	16.44

Stock options generally cliff vest after three years and have a contractual life of ten years . Stock options are granted with an exercise price equal to the fair market value of the shares at the date of grant. The weighted-average remaining contractual term for stock options outstanding at December 31, 2017 and December 31, 2016 was 1.2 and 1.9 years, respectively. The weighted-average remaining contractual term for stock options vested and exercisable at December 31, 2017 was 1.2 years. At December 31, 2017 , the aggregate intrinsic value of stock options outstanding and vested and exercisable was $10.8 million . There were no unvested stock options at December 31, 2017 . The total intrinsic value of stock options exercised for the years ended December 31, 2017 , 2016 and 2015 was $2.5 million , $1.3 million and $0.7 million , respectively. Cash received from stock option exercises was $0.1 million , $0.5 million and $0.1 million for 2017 , 2016 and 2015 , 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.

15 . Restructuring and Severance

During the year ended December 31, 2017 , the Company incurred $ 9.6 million in severance costs primarily related to staff reductions in connection with the Acquisition and the Company's outsourcing activities and $ 1.0 million in restructuring costs related to future lease obligations and leasehold improvement write-offs for vacated office space. During the year ended December 31, 2016 , the Company incurred $3.9 million in severance costs related to staff reductions, primarily in business support areas, and $0.4 million in costs related to future lease obligations and leasehold improvement write-offs for vacated office space. Total unpaid severance and related charges as of December 31, 2017 was $5.6 million which the Company expects to pay over the next three years. The Company expects to incur additional severance costs in connection with the Acquisition of approximately $0.2 million related to one-time termination benefits that are being earned over a transition period.

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Notes to Consolidated Financial Statements—(Continued)

16 . Earnings (Loss) Per Share

The computation of basic and diluted earnings (loss) per share is as follows:



	Years Ended December 31,
	2017			2016			2015
($ in thousands, except per share amounts)
Net Income (Loss)	$	39,939		$	48,763		$	30,671
Noncontrolling interests	(2,927		)	(261		)	4,435
Net Income (Loss) Attributable to Stockholders	37,012			48,502			35,106
Preferred stock dividends	(8,336		)	—			—
Net Income (Loss) Attributable to Common Stockholders	$	28,676		$	48,502		$	35,106
Shares (in thousands):
Basic: Weighted-average number of shares outstanding	7,013			7,648			8,797
Plus: Incremental shares from assumed conversion of dilutive instruments	234			174			163
Diluted: Weighted-average number of shares outstanding	7,247			7,822			8,960
Earnings (Loss) per Share—Basic	$	4.09		$	6.34		$	3.99
Earnings (Loss) per Share—Diluted	$	3.96		$	6.20		$	3.92

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 December 31,
(In thousands)	2017	2016	2015
Restricted stock units and stock options	—	8	2
Preferred stock	897	—	—
Total anti-dilutive securities	897	8	2

17 . Concentration of Credit Risk

The concentration of credit risk with respect to advisory fees receivable is generally limited due to the short payment terms extended to clients by the Company. The following funds provided 10 percent or more of the total revenues of the Company:



	Years Ended December 31,
	2017			2016			2015
($ in thousands)
Virtus Emerging Markets Opportunities Fund
Investment management, administration and shareholder service fees	$	48,826		$	49,085		$	62,329
Percent of total revenues	12		%	15		%	16		%
Virtus Multi-Sector Short Term Bond Fund
Investment management, administration and shareholder service fees	$	44,577		$	43,579		$	49,174
Percent of total revenues	11		%	14		%	13		%

18 . Consolidation

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

F-34

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Notes to Consolidated Financial Statements—(Continued)

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 entities ("VIEs") in which the Company has a variable interest for consolidation. A VIE is an entity in which either: (a) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support; or (b) 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 its business, the Company sponsors various investment products, some of which are consolidated by the Company. Consolidated investment products include both VOEs, made up primarily of open-end funds in which the Company holds a controlling financial interest, and VIEs, which primarily consist of collateralized loan obligations ("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 the consolidated investment products that, after intercompany eliminations, are reflected in the Consolidated Balance Sheets as of December 31, 2017 and 2016 :



	As of December 31,
	2017									2016
				VIEs									VIEs
	VOEs			CLOs			Other			VOEs			CLOs			Other
($ in thousands)
Cash and cash equivalents	$	820		$	82,823		$	18,489		$	1,859		$	14,449		$	2,775
Investments	34,623			1,555,879			7,250			99,247			346,967			42,828
Other assets	767			32,671			48			2,211			5,888			1,059
Notes payable	—			(1,457,435		)	—			—			(328,761		)	—
Securities purchased payable and other liabilities	(1,319		)	(110,871		)	(764		)	(2,310		)	(12,534		)	(1,799		)
Noncontrolling interests	(4,178		)	(16,667		)	—			(12,505		)	—			$	(24,761	)
The Company’s net interests in consolidated investment products	$	30,713		$	86,400		$	25,023		$	88,502		$	26,009		$	20,102

Consolidated CLOs

The majority of the Company's consolidated investment products that are VIEs are CLOs. At December 31, 2017 , the Company consolidated four CLOs. The financial information of certain CLOs is included in the Company's consolidated financial statements on a one-month lag based upon the availability of financial information. Majority-owned consolidated private funds, whose primary purpose is to invest in CLOs for which the Company serves as the collateral manager, are also included.

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Notes to Consolidated Financial Statements—(Continued)

Investments of CLOs

The CLOs' investments of $1.6 billion at December 31, 2017 represent 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 2018 and 2026 and pay interest at LIBOR plus a spread of up to 9.5% . At December 31, 2017 , the fair value of the senior bank loans exceeded the unpaid principal balance by approximately $9.7 million . At December 31, 2017 , there were no collateral assets in default.

Notes Payable of CLOs

The CLOs hold notes payable with a total value, at par, of $1.6 billion , consisting of senior secured floating rate notes payable with a par value of $1.5 billion and subordinated notes with a par value of $139.8 million . These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 1.0% to 8.75% . The principal amounts outstanding of the note obligations issued by the CLOs mature on dates ranging from April 2018 to October 2029. The CLOs may elect to reinvest any prepayments received on bank loan investments between October 2019 and October 2021, depending on the CLO. Generally, subsequent prepayments received after the reinvestment period must be used to pay down the note obligations.

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, as adopted on January 1, 2016, prescribed by 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, 2017, as shown in the table below:



($ in thousands)
Subordinated notes	$	85,066
Accrued investment management fees	1,334
Total Beneficial Interests	$	86,400

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



	Year Ended
($ in thousands)	December 31, 2017
Income:
Realized and unrealized gain (loss), net	$	7,270
Interest income	45,526
Other income	1,552
Total income	$	54,348

Expenses:
Other operating expenses	$	6,684
Interest expense	35,243
Total Expense	41,927
Noncontrolling interest	(1,507		)
Net Income (loss) attributable to CIPs	$	10,914

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Notes to Consolidated Financial Statements—(Continued)

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
($ in thousands)	December 31, 2017
Distributions received and unrealized gains on the subordinated notes held by the Company	$	6,830
Investment management fees	4,084
Total Economic Interests	$	10,914

Fair Value Measurements of Consolidated Investment Products

The assets and liabilities of the consolidated investment products measured at fair value on a recurring basis by fair value hierarchy level were as follows:



As of December 31, 2017
	Level 1		Level 2		Level 3		Total
($ in thousands)
Assets
Cash equivalents	$	82,769	$	—	$	—	$	82,769
Debt investments	—		1,527,845		33,887		1,561,732
Equity investments	35,126		—		894		36,020
Total assets measured at fair value	$	117,895	$	1,527,845	$	34,781	$	1,680,521
Liabilities
Notes payable	$	—	$	1,457,435	$	—	$	1,457,435
Derivatives	2		—		—		2
Short sales	719		—		—		719
Total liabilities measured at fair value	$	721	$	1,457,435	$	—	$	1,458,156



As of December 31, 2016
	Level 1		Level 2		Level 3		Total
($ in thousands)
Assets
Cash equivalents	$	14,449	$	—	$	—	$	14,449
Debt investments	—		448,477		87		448,564
Equity investments	40,270		208		—		40,478
Derivatives	4		—		—		4
Total assets measured at fair value	$	54,723	$	448,685	$	87	$	503,495
Liabilities
Notes payable	$	—	$	328,761	$	—	$	328,761
Derivatives	$	3	$	235	$	62	$	300
Short sales	649		—		—		649
Total liabilities measured at fair value	$	652	$	328,996	$	62	$	329,710

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

Cash equivalents represent investments in money market funds. Cash investments in actively traded money market funds are valued using published net asset values and are classified as Level 1.

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Notes to Consolidated Financial Statements—(Continued)

Debt and equity investments represent the underlying debt, equity and other securities held in consolidated investment products. 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-US 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 securities that are not widely traded, are illiquid, or are priced by dealers based on pricing models used by market makers in the security.

For the years ended December 31, 2017 and 2016 , no securities held by consolidated investment products were transferred from Level 2 to Level 1 and no securities held by consolidated investment products were transferred from Level 1 to Level 2.

Notes payable represent notes issued by consolidated investments products that are 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: (a) the fair value of the beneficial interests held by the Company and (b) the carrying value of any beneficial interests that represent compensation for services.

Short Sales are transactions in which a security is sold which 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 in the Consolidated Balance Sheets within other liabilities of CIPs and are classified as level 1 based on the underlying equity security.

The securities purchase payable at December 31, 2017 and 2016 approximated fair value due to the short term nature of the instruments.

The following table is a reconciliation of assets and liabilities of consolidated investment products for Level 3 investments for which significant unobservable inputs were used to determine fair value.



	Year Ended December 31,
	2017			2016
(in thousands)
Level 3 Securities (a)
Balance at beginning of period	$	25		$	1,397
Purchases	3,174			174
Sales	(3,357		)	(1,472		)
Paydowns	—			(5		)
Amortization	9			—
Change in unrealized gains (losses), net	434			348
Realized gains (loss), net	(49		)	(355		)
Acquired in business combination	9,151			—
Transfers to Level 2	(35,258		)	—
Transfers from Level 2	60,652			(62		)
Balance at end of period	$	34,781		$	25


(a)	The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment. All transfers are deemed to occur at the end of period. Transfers between Level 2 and Level 3 were due to a decrease in trading activities at period end.

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Notes to Consolidated Financial Statements—(Continued)

For the years ended December 31, 2017 and December 31, 2016 , respectively, there were no securities held by consolidated investment products that transferred between Level 1 and Level 2.

Short Sales

Certain consolidated sponsored investment products may engage in short sales, which are transactions in which a security is sold, which 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 in the Consolidated Balance Sheets within other liabilities of consolidated sponsored investment products.

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, 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 as: (1) 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; (2) 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 CDO's expected losses or receive more than an insignificant amount of the CDO's expected residual return; and (3) 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 entities that are VIEs that the Company does not consolidate as it is not the primary beneficiary of those entities. The Company is not the primary beneficiary as 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, 2017 , the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $43.2 million .

19 . Subsequent Events

Securities Purchase Agreement

On February 1, 2018, the Company entered into an agreement to acquire (the "Purchase Agreement" or the "Transaction") a majority interest in Sustainable Growth Advisers, LP ("SGA"), an investment manager specializing in U.S. and global growth equity portfolios. The purchase price payable by the Company at the Closing is $129.5 million , subject to certain potential adjustments. The transaction is expected to close in mid-2018, subject to customary closing conditions and client approvals. The Purchase Agreement contains customary termination rights for the Company and SGA, including in the event the Transaction is not consummated on or before September 30, 2018 (the “Termination Date”). The Purchase Agreement also contains customary representations, warranties, covenants and indemnification and escrow provisions.

Credit Agreement

On February 15, 2018, the Company amended its Credit Agreement that resulted in $105.0 million of additional Term Loan commitments to fund its proposed acquisition of SGA. The $105.0 million will be drawn at the closing of the SGA acquisition and is subject to a delayed draw fee. The amended Credit Agreement removed the financial maintenance covenant on the Term Loan and replaced the existing financial maintenance covenant on the $100.0 million Credit Facility with a net leverage ratio covenant, defined as net debt divided by EBITDA, set at 2.5 to 1, that is in place when $30.0 million or more has been drawn down on the revolving credit facility. In addition, the applicable margin in the case of LIBOR-based loans was reduced by 1.25% to 2.50% and will range from 2.25% to 2.50% based on the secured net leverage ratio of the Company.

Dividends Declared

On February 14, 2018, the Company declared a quarterly cash dividend of $0.45 per common share to be paid on May 15, 2018 to shareholders of record at the close of business on April 30, 2018. The Company also declared a quarterly cash

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Notes to Consolidated Financial Statements—(Continued)

dividend of $1.8125 per share on the Company's 7.25% mandatory convertible preferred stock to be paid on May 1, 2018 to shareholders of record at the close of business on April 16, 2018.

20 . Selected Quarterly Data (Unaudited)



	2017
	Fourth Quarter		Third Quarter		Second Quarter			First Quarter
($ in thousands, except share data)
Revenues	$	128,024	$	123,675	$	94,132		$	79,776
Operating Income (Loss)	28,015		16,789		3,184			10,047
Net Income (Loss) Attributable to Common Stockholders	3,414		16,708		(2,389		)	10,943
Earnings (loss) per share—Basic	$	0.48	$	2.32	$	(0.34	)	$	1.67
Earnings (loss) per share—Diluted	$	0.46	$	2.21	$	(0.34	)	$	1.62



	2016
	Fourth Quarter		Third Quarter		Second Quarter		First Quarter
($ in thousands, except share data)
Revenues	$	79,850	$	82,324	$	80,085	$	80,295
Operating Income (Loss)	12,783		16,538		8,743		12,750
Net Income (Loss) Attributable to Common Stockholders	12,426		15,625		8,088		12,363
Earnings (loss) per share—Basic	$	1.94	$	2.04	$	0.99	$	1.48
Earnings (loss) per share—Diluted	$	1.87	$	1.99	$	0.97	$	1.45

F-40

EXECUTION VERSION

SECURITIES PURCHASE AGREEMENT

among

SUSTAINABLE GROWTH ADVISERS, LP, a Delaware limited partnership,

SGIA, LLC, a Delaware limited liability company,

VIRTUS PARTNERS, INC., a Delaware corporation,

ESTANCIA CAPITAL PARTNERS, L.P., a Delaware limited partnership, and

EACH OTHER SELLER NAMED HEREIN

Dated as of February 1, 2018

TABLE OF CONTENTS

Page


Article I DEFINITIONS	1


Section 1.01	Certain Defined Terms 1


Section 1.02	Definitions 12


Section 1.03	Interpretation and Rules of Construction 14


Article II PURCHASE AND SALE	15


Section 2.01	Purchase and Sale of Transferred Units 15


Section 2.02	Closing 16


Section 2.03	Closing Deliveries by the SGA Parties 16


Section 2.04	Closing Deliveries by the Purchaser 17


Section 2.05	Closing Estimates; Closing Statement; and Purchase Price Adjustment 17


Section 2.06	Consenting Client Run Rate True-Up 19


Section 2.07	Seller Representative 20


Section 2.08	Withholding 22


Article III REPRESENTATIONS AND WARRANTIES OF THE SGA COMPANY PARTIES	23


Section 3.01	Existence and Power 23


Section 3.02	Authorization 23


Section 3.03	Capitalization and Ownership; Subsidiaries 24


Section 3.04	No Conflict 25


Section 3.05	Governmental Consents and Approvals 26


Section 3.06	Financial Information 26


Section 3.07	Absence of Undisclosed Material Liabilities 26


Section 3.08	Conduct in the Ordinary Course 27


Section 3.09	Assets Under Management; Advisory Agreements 27


Section 3.10	Litigation 29


Section 3.11	Compliance with Laws; Regulatory Matters 29


Section 3.12	Intellectual Property 31


Section 3.13	Insurance 32


Section 3.14	Properties and Assets 32


Section 3.15	Employee Matters 33


Section 3.16	Taxes 36


Section 3.17	Material Contracts 38


Section 3.18	Accounting Controls 40


Section 3.19	Affiliate Transactions 40


Section 3.20	Brokers 40


Section 3.21	Certain Assets 40


Article IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER	41


Section 4.01	Existence and Power 41


Section 4.02	Authorization 41


Section 4.03	No Conflict 41



	i

TABLE OF CONTENTS
(cont’d)

Page


Section 4.04	Governmental Consents and Approvals 42


Section 4.05	Investment Purpose 42


Section 4.06	Available Funds 42


Section 4.07	Litigation 42


Section 4.08	Statutory Disqualification 42


Section 4.09	Brokers 42


Section 4.10	No Other Representations or Warranties 43


Article V ADDITIONAL AGREEMENTS	43


Section 5.01	Conduct of Business Prior to the Closing 43


Section 5.02	Access to Information 45


Section 5.03	Notice of Certain Events 46


Section 5.04	Confidentiality 46


Section 5.05	Commercially Reasonable Efforts; Further Assurances 46


Section 5.06	Client Consents 47


Section 5.07	Registered Fund Approvals 48


Section 5.08	Transfer of Securities 50


Section 5.09	Tax Covenants 50


Section 5.10	Estancia Covenants 50


Section 5.11	Certain Agreements 51


Article VI TAX MATTERS	51


Section 6.01	Tax Matters 51


Section 6.02	Tax Indemnities. 52


Section 6.03	Tax Cooperation and Exchange of Information 53


Section 6.04	Conveyance Taxes 54


Section 6.05	Purchase Price Allocation 54


Section 6.06	Section 754 Election 54


Section 6.07	Tax Refunds 54


Article VII CONDITIONS TO CLOSING	55


Section 7.01	Conditions to Obligations of the SGA Parties 55


Section 7.02	Conditions to Obligations of the Purchaser 56


Article VIII INDEMNIFICATION	57


Section 8.01	Survival Period 57


Section 8.02	Indemnification by the Sellers 57


Section 8.03	Indemnification by the Purchaser 58


Section 8.04	Limits on Indemnification 58


Section 8.05	Third Party Claims 59


Section 8.06	Exclusive Remedy, etc 60


Section 8.07	Treatment as Purchase Price Adjustment 60


Section 8.08	Additional Matters 61



	ii

TABLE OF CONTENTS
(cont’d)

Page


Article IX TERMINATION	61


Section 9.01	Termination 61


Section 9.02	Effect of Termination 62


Article X GENERAL PROVISIONS	62


Section 10.01	Expenses 62


Section 10.02	Notices 62


Section 10.03	Announcements 64


Section 10.04	Severability 64


Section 10.05	Entire Agreement 64


Section 10.06	Successors and Assigns; Third Party Beneficiaries 64


Section 10.07	Amendment 65


Section 10.08	Waiver 65


Section 10.09	Currency 65


Section 10.10	Governing Law; Jurisdiction 65


Section 10.11	Waiver of Jury Trial 65


Section 10.12	Counterparts 66


Section 10.13	Specific Performance 66

EXHIBITS


Exhibit A-1	SGA LPA


Exhibit A-2	GP LLCA


Exhibit B	Services Agreements


Exhibit C	Form of Transfer Document


Exhibit D	Escrow Agreement


Exhibit E	Tax Certificate

SCHEDULES


Schedule A	Transferred Units and Purchase Price Percentages


Schedule B	Balance Sheet Rules


Schedule C	Current Assets and Liabilities


Schedule D	Unfunded Client Mandates


Schedule E	Purchase Price Allocation Principles



	iii

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated as of February 1, 2018, is made by and among (i) Sustainable Growth Advisers, LP, a Delaware limited partnership, (“ SGA ”), (ii) SGIA, LLC, a Delaware limited liability company and the general partner of SGA (“ SGIA ” and, together with SGA, the “ SGA Company Parties ”), (iii) Estancia Capital Partners, L.P. (“ Estancia ”), (iv) each of the individuals set forth on the signature pages hereto under the heading “Management Sellers” (the “ Management Sellers ” and, together with Estancia, the “ Sellers ” and the Sellers, together with the SGA Company Parties, the “ SGA Parties ”) and (v) Virtus Partners, Inc., a Delaware corporation (the “ Purchaser ” and, together with the SGA Parties, the “ Parties ”).

WHEREAS , the SGA Companies are engaged in the business of providing investment management and investment advisory services to Clients and acting as sponsor to each of the Funds (the “ Business ”);

WHEREAS , each Seller wishes to sell to the Purchaser, and the Purchaser wishes to purchase from each such Seller, at the Closing (as defined below), the number of SGA Units (as defined below) and SGIA Units (as defined below) set forth on Schedule A hereto opposite the name of each such Seller (the “ Transferred Units ”), upon the terms and subject to the conditions set forth herein;

WHEREAS , in connection with the transactions contemplated hereby, concurrently herewith, (i) SGA, SGIA, the Purchaser, and each of the Management Sellers are entering into the Third Amended and Restated Limited Partnership Agreement of SGA set forth on Exhibit A-1 hereto (the “ SGA LPA ”) and (ii) the Purchaser is entering into the Third Amended and Restated Limited Liability Company Agreement of the GP set forth on Exhibit A-2 hereto (the “ GP LLCA ” and, together with the SGA LPA, the “ Operating Agreements ”), each of which will become effective as of (and subject to the occurrence of) the Closing; and

WHEREAS , in connection with the transactions contemplated hereby, concurrently herewith, certain of the Management Sellers are entering into Services Agreements with SGA set forth on Exhibit B hereto (each, a “ Services Agreement ”) which will become effective upon (and subject to the occurrence of) the Closing.

NOW, THEREFORE , in consideration of the promises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, the Parties hereby agree as set forth in this Agreement.



	1

Article I

DEFINITIONS

Section 1.01 Certain Defined Terms . For purposes of this Agreement:

“ Accountant ” means KPMG or, if KPMG is unavailable to serve, such independent accounting firm as is mutually agreed upon by the Purchaser and the Seller Representative (it being agreed that in such event, the Purchaser and the Seller Representative shall act in good faith and use commercially reasonable efforts to promptly agree upon such other accounting firm).

“ Action ” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority.

“ Adjustment Percentage ” means the excess of (i) 95% minus (ii) the Consenting Percentage.

“ Advisers Act ” means the Investment Advisers Act of 1940, as amended.

“ Advisory Agreement ” means any contract entered into by a SGA Related Entity for the purpose of providing (or otherwise providing for the provision of) investment advisory or investment management services, including any sub-advisory services, to another Person.

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

“ Ancillary Agreements ” means, collectively, the (i) Operating Agreements and (ii) Services Agreements.

“ Balance Sheet Rules ” means those accounting principles, methods and practices used in preparing the Audited Balance Sheet, applied on a consistent basis and in accordance with GAAP; provided that those rules set forth on Schedule B shall in any event be applied.

“ Base Date ” means September 30, 2017.

“ Base Revenue Run Rate ” means $32,900,000.

“ Base Purchase Price ” means $129,500,000.

“ Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in New York, NY.



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“ Capital Stock ” means: (a) any shares of capital stock of a corporation; (b) with respect to any Person other than a corporation, membership interests, partnership interests, joint venture interests or similar ownership interests therein; and (c) any warrants, options, convertible or exchangeable securities, subscriptions, rights (including any preemptive or similar rights), calls or other rights to purchase or acquire any of the foregoing.

“ CIT ” means each collective investment trust listed in Section 3.09 of the Disclosure Schedule.

“ Claims ” means any and all administrative, regulatory or judicial actions, suits, petitions, appeals, demands, demand letters, claims, liens, written notices of noncompliance or violation, investigations, proceedings, consent orders or consent agreements.

“ Client ” means any Person to which any SGA Company provides investment management or investment advisory services, including any sub-advisory services.

“ Client Consent ” means:

(i) with respect to a Client (other than a Registered Fund) that is party to an Advisory Agreement requiring (by its terms or under applicable Laws) written, affirmative or “express” consent to the deemed assignment of such Advisory Agreement resulting from the Transactions, that such Client has provided written consent to such deemed assignment of such Advisory Agreement resulting from the Transactions, and such consent remains in effect as of the Closing;

(ii) with respect to a Client set forth on Section 1.01(a) of the Disclosure Schedules, such Client has provided a written consent and waiver with respect to the Transaction, including with respect to any prohibition on a deemed assignment of such Client’s Advisory Agreement resulting from the Transactions;

(iii) with respect to a Client (other than a Registered Fund) that is a party to an Advisory Agreement that permits (in accordance with its terms and under applicable Laws) the use of “negative consent” to the deemed assignment of such Advisory Agreement, that such Client has been sent the written notification and consent letters as contemplated by Section 5.06 of this Agreement, and such Client has not for a period of at least forty-five (45) days (or such other period specified in such Advisory Agreement) following receipt of such first letter (or otherwise prior to the Closing) communicated to a SGA Company or Purchaser objections (or otherwise affirmatively declined to give its consent), to the deemed assignment of such Advisory Agreement resulting from the Transactions, and such consent remains in effect as of the Closing;



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(iv) with respect to a Registered Fund, that a SGA Company shall have (a) entered into a new Advisory Agreement with such Registered Fund on substantially equivalent terms as the Advisory Agreement between SGA and such Registered Fund as of the date of this Agreement, (b) obtained the Fund Board Approval with respect to such new advisory contract, and (c) in the case of any Registered Fund where shareholder approval is required for such new Advisory Agreement by Laws and Regulations, obtained the Fund Shareholder Approval with respect to such new contract;

provided , however , that Client Consent for purposes of clauses (i) and (ii) of this sentence shall not be deemed to have been obtained if the Client under the applicable Advisory Agreement has expressed to a SGA Company, an intention to terminate receiving investment management or investment advisory services from the SGA Companies (or materially reduce the fee rates payable to the SGA Companies under the relevant Advisory Agreement) or has otherwise objected to the consummation of the transactions contemplated hereby, and in each case, has not withdrawn such intention to terminate or such objection.

“ Closing Purchase Price ” means the Base Purchase Price minus the Consent Reduction Amount (if any) minus the amount of the Closing Adjustment Amount (if any) determined pursuant to Section 2.05(b) .

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Consent Reduction Amount ” means (i) in the event that the Consenting Percentage is greater than or equal to 95%, zero, and (ii) in the event that the Consenting Percentage is less than 95%, that dollar amount equal to the product of (A) $129,500,000, multiplied by (B) the Adjustment Percentage multiplied by (C) a fraction, the numerator of which is four and the denominator of which is three.

“ Consenting Client Revenue Run Rate ” means the sum of the Revenue Run Rates with respect to each Client as of the Base Date for which Client Consent has been obtained (and remains in effect) as of the Closing, plus the Net Inflow Revenue Run Rate (if any), and minus the Net Outflow Revenue Run Rate (if any). For the avoidance of doubt, to the extent that any Unfunded Client Mandate has not funded as of the Closing, the Revenue Run Rate with respect to the unfunded portion of such Unfunded Client Mandate shall not be included in the Consenting Client Revenue Run Rate.

“ Consenting Percentage ” means a fraction, the numerator of which is the Consenting Client Revenue Run Rate, and the denominator of which is the Base Revenue Run Rate.

“ control ” (including the terms “ controlled by ” and “ under common control with ”), with respect to the relationship between or among two or more Persons, means the possession,



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directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract, credit arrangement or otherwise.

“ Controlled Affiliate ” means, with respect to a Person, any Affiliate of such Person controlled by such Person.

“ Conveyance Taxes ” means sales, use, value added, transfer, stamp, stock transfer, recordation, real property transfer or gains and similar Taxes.

“ Current Assets ” means, subject to the Balance Sheet Rules, the consolidated current assets of the SGA Companies, which current assets shall include only the line items set forth on Schedule C under the heading “Current Assets” and no other assets.

“ Current Liabilities ” means, subject to the Balance Sheet Rules, the consolidated current liabilities of the SGA Companies, which current liabilities shall include only the line items set forth on Schedule C under the heading “Current Liabilities” and no other liabilities.

“ Disclosure Schedule ” means the Disclosure Schedule, dated as of the date hereof, delivered by the SGA Parties to the Purchaser in connection with this Agreement.

“ Encumbrance ” means any security interest, pledge, hypothecation, mortgage, deed of trust, collateral security arrangement, lien, title imperfection, charge, easement, claim, encumbrance, encroachment or restriction, or other title or interest retention arrangement, reservation, limitation of any kind or nature.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, and the regulations issued thereunder, in each case as amended from time to time.

“ ERISA Affiliate ” means, any person (within the meaning of Section 3(9) of ERISA), that, together with any SGA Company would be deemed a single employer within the meaning of Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code.

“ ERISA Affiliate Liability ” means any obligation, liability or expense of any SGA Company which arises under or relates to any Plan an ERISA Affiliate that is subject to Title IV of ERISA, Section 302 of ERISA, Section 412 of the Code, the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or any other statute or regulation that imposes liability on a “controlled group” basis with reference to any provision of Section 414 of the Code or Section 4001 of ERISA by reason of such SGA Company’s affiliation with any of its ERISA Affiliates other than a SGA Company.



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“ Escrow Account ” means an escrow account established pursuant to the terms and conditions of the Escrow Agreement.

“ Escrow Agent ” means JPMorgan Chase Bank, N.A.

“ Escrow Agreement ” means the escrow agreement by and among the Escrow Agent, the Purchaser and the Seller Representative, substantially in the form of Exhibit D , together with such changes as reasonably agreed by the Seller Representative and the Purchaser prior to the Closing.

“ Escrow Amount ” means an amount equal to 12.5% of the Closing Purchase Price.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Excluded Warranty Breach ” means (i) a SGA Fundamental Warranty Breach, in the case of the Sellers, or (ii) a Purchaser Fundamental Warranty Breach, in the case of the Purchaser.

“ Existing SGIA LLCA ” means the Second Amended and Restated Limited Liability Company Agreement of SGIA, dated as of August 1, 2013.

“ Existing SGA LPA ” means the Second Amended and Restated Limited Partnership Agreement of SGA, dated as of August 1, 2013.

“ Founders ” means Gordon Marchand, George F. Fraise and Robert Rohn.

“ Fund ” means any of the Registered Funds, the UCITS and the CITs.

“ Fund Agreement ” means, with respect to any Fund, the governing or organizational documents for such Fund.

“ GAAP ” means United States generally accepted accounting principles in effect from time to time applied consistently throughout the periods involved.

“ Governmental Authority ” means any federal, national, supranational, state, provincial, local or other government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“ Indebtedness ” means, without duplication, (a) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any



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other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (c) all obligations under financing or other capitalized leases required under GAAP to be classified and accounted for as capital leases, (d) letters of credit and any similar agreements, in each case, to the extent drawn, (e) all foreign currency purchase or swap contracts of any Person to the extent such obligations are required under GAAP to be reflected on the balance sheet of such Person and (f) any guarantee of the foregoing obligations.

“ Indemnified Party ” means (i) a Purchaser Indemnified Party or (ii) a Seller Indemnified Party, as the context requires.

“ Indemnifying Party ” means (i) a Seller pursuant to Section 8.02 or (ii) the Purchaser pursuant to Section 8.03 , as the context requires.

“ Intellectual Property ” means (i) patents and patent applications; (ii) registered and unregistered trademarks, trade names, business names, service marks, trade dress and logos, including all goodwill associated therewith and all applications, registrations and renewals in connection therewith; (iii) works of authorship, including copyrightable works, all copyrights, and all applications, registrations and renewals in connection therewith, computer software and related data and documentation and all moral rights; (iv) trade secrets and other confidential information (including, to the extent the following information constitutes trade secrets or other confidential information, know-how, technical data, client lists and business and marketing plans and proposals); and (v) domain names and uniform resource locators.

“ Investment Company Act ” means the Investment Company Act of 1940, as amended.

“ IRS ” means the Internal Revenue Service of the United States.

“ Knowledge of SGA ” means any event, fact, circumstance, occurrence or other matter that is actually known, or would have actually been known following reasonable inquiry, by any of the Founders, Daniel Callaway or Peter Seuffert.

“ Law ” or “ Laws ” means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

“ Liabilities ” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including those arising under any Law, Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking.



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“ Material Adverse Effect ” means any change, effect, event, circumstance, occurrence, state of facts or development that, individually or together with any one or more changes, effects, events, circumstances, occurrences, states of fact or developments, has had or would reasonably be expected to have a material adverse effect on the assets, properties, business, operations, results of operations or condition (financial or otherwise) of the SGA Companies, taken as a whole; provided , however , that in no event shall any of the following, alone or in combination, be deemed to constitute, nor shall any of the following (or the effect of any of the following) be taken into account in determining whether there has been or there would reasonably expected to be, a “Material Adverse Effect”: (i) any change in the United States or foreign economies, financial, credit or securities markets or political or regulatory conditions; (ii) any change in the asset management industry; (iii) any change, after the date hereof, in Laws applicable to any of the SGA Companies or in GAAP; (iv) conditions arising after the date hereof as a result of hostilities, acts of war, sabotage, terrorism or military actions, or any escalation or worsening of any of the foregoing, or as a result of any natural disaster or similar event; (v) the investment performance or any failure of the SGA Companies or the Funds to meet projections or forecasts, in each case in and of themselves, (it being understood that the underlying cause of such investment performance or any such failure shall not (subject to the other provisions of this definition) be excluded); or (vi) the public announcement of the Transactions, compliance with the terms of this Agreement or the consummation of the Transactions; except to the extent that, in the case of the matters described in clauses (i) through (iv) above, the SGA Companies, taken as a whole, are adversely affected thereby in a material and disproportionate manner relative to similar participants in the industry in which the SGA Companies operate.

“ Net Inflow Revenue Run Rate ” means the aggregate net increase, if any, in the Revenue Run Rates from the Base Date to the Closing Date with respect to each Client for which Client Consent has been obtained (and remains in effect) as of the Closing due to (i) deposits and/or withdrawals of assets under management by such Clients after the Base Date, (ii) the termination of any Advisory Agreement after the Base Date, (iii) any new Advisory Agreements entered into after the Base Date (with the assets under management pursuant thereto being deemed equal to the assets under management upon the funding of such new mandate, plus or minus (as applicable) subsequent deposits or withdrawals by the Client party thereto prior to the Closing) and (iv) any changes in the effective management fee rate in effect for such Client following the Base Date. For the avoidance of doubt, the calculation of Net Inflow Revenue Run Rate shall exclude any changes in the Revenue Run Rate resulting from any increase or decrease in assets under management due to market appreciation or depreciation or currency fluctuations occurring from and after the Base Date.

“ Net Outflow Revenue Run Rate ” means the aggregate net decrease, if any, in the Revenue Run Rates from the Base Date to the Closing Date with respect to each Client for which Client Consent has been obtained (and remains in effect) as of the Closing due to (i) deposits and/



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or withdrawals of assets under management by such Clients after the Base Date, (ii) the termination of any Advisory Agreement after the Base Date, (iii) any new Advisory Agreements entered into after the Base Date (with the assets under management pursuant thereto being deemed equal to the assets under management upon the funding of such new mandate, plus or minus (as applicable) subsequent deposits or withdrawals by the Client party thereto prior to the Closing) and (iv) any changes in the effective management fee rate in effect for such Client following the Base Date. The absolute value of any Net Outflow Revenue Run Rate shall be expressed as a positive number. For the avoidance of doubt, the calculation of Net Outflow Revenue Run Rate shall exclude any changes in the Revenue Run Rate resulting from any increase or decrease in assets under management due to market appreciation or depreciation or currency fluctuations occurring from and after the Base Date.

“ Net Working Capital ” means Current Assets, minus Current Liabilities as determined in accordance with the Balance Sheet Rules, each calculated immediately before, and without giving effect to, the Closing, except as described in the Balance Sheet Rules.

“ Organizational Document ” means, with respect to any Person that is not a natural person, such Person’s charter, certificate or articles of incorporation, limited partnership or formation, bylaws, memorandum and articles of association, operating agreement, limited liability company agreement, partnership agreement, limited partnership agreement, limited liability partnership agreement or other similar constituent or organizational documents of such Person.

“ Parties ” has the meaning set forth in the Preamble.

“ Permitted Encumbrances ” means (a) statutory liens for current Taxes not yet due or delinquent (or which may be paid without interest or penalties) or the validity or amount of which is being contested in good faith by appropriate proceedings, as to which adequate reserves are set forth on the books of the SGA Companies in accordance with the Balance Sheet Rules; (b) mechanics’, carriers’, workers’, repairers’ and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no default on the part of any SGA Company, or the validity or amount of which is being contested in good faith by appropriate proceedings by any SGA Company and as to which adequate reserves are set forth on the books of the SGA Companies, or pledges, deposits or other liens securing the performance of bids, trade contracts, leases or statutory obligations (including workers’ compensation, unemployment insurance or other social security legislation); (c) zoning, entitlement and other land use and environmental regulations by Governmental Authorities which do not materially interfere with the present occupancy or use of the properties subject to the Leases or the present use of the assets of the SGA Companies; (d) covenants, conditions, restrictions, easements, rights of way, imperfections or irregularities of title and similar matters of record set forth in any state, local or municipal franchise of any of the SGA Companies which do not materially interfere with the present occupancy or use



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of the properties subject to the Leases or the present use of the assets of the SGA Companies; (e) licenses of Intellectual Property and; (f) Permitted Securities Encumbrances.

“ Permitted Securities Encumbrances ” means all restrictions on transfers of securities imposed by securities Laws, all restrictions or other limitations arising under this Agreement and the Ancillary Agreements, and all restrictions or other limitations reflected in the provisions of the applicable Organizational Document .

“ Person ” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other legal entity.

“ Plans ” means (i) all material employee benefit plans as defined in Section 3(3) of ERISA, whether or not subject to ERISA, and all material bonus, stock option, stock purchase, restricted stock, phantom stock, profits interest, units or other forms of equity-based compensation, incentive, profit sharing, savings, retirement, pension, deferred compensation, retiree medical or life insurance, supplemental retirement, severance, executive compensation, tax gross up, salary continuation, flexible benefit, vacation, sick leave, disability, death benefit, group insurance, hospitalization, medical, dental, life, welfare, employee loan, educational assistance or fringe benefit or other benefit plans, programs, policies, funds or arrangements, and all employment, termination, severance change-in-control, transaction bonus, retention, deferred compensation, indemnification or other employment- or compensation-related contracts or agreements, whether written or oral, qualified or nonqualified, or funded or unfunded, which are sponsored, maintained or contributed to by any SGA Company or to which any SGA Company is obligated to contribute, or under which any SGA Company has or may have any actual or contingent Liability, including any ERISA Affiliate Liability which benefits any current or former employee, officer, director, consultant or independent contractor of any SGA Company or the beneficiaries or dependents of any such Person and (ii) each employee benefit plan for which any SGA Company may have any actual or contingent Liability under Section 4069 or 4212(c) of ERISA.

“ Purchase Price Percentage ” means, with respect to each Seller, the percentage set forth on Schedule A hereto opposite the name of such Seller.

“ Purchaser Fundamental Representation ” means any representation or warranty set forth in Section 4.01 (Existence and Power), Section 4.02 (Authorization), Section 4.05 (Investment Purpose) or Section 4.09 (Brokers).

“ Purchaser Fundamental Warranty Breach ” means a Purchaser Warranty Breach with respect to a Purchaser Fundamental Representation.

“ Purchaser Warranty Breach ” means the breach of any representation or warranty made by the Purchaser contained in this Agreement or in the certificate delivered pursuant to this



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Agreement (it being understood that each statement contained in such a certificate shall constitute a representation and warranty).

“ Registered Fund ” means each series of a registered investment company under the Investment Company Act listed in Section 3.09(c) of the Disclosure Schedule.

“ Regulatory Documents ” means with respect to a Person, all forms, reports, registration statements, schedules and other documents filed, or required to be filed, by such Person pursuant to the Advisers Act, other applicable securities Laws or other applicable Laws relating to the activities of investment advisors.

“ Related Client ” means any Client that is (a) a director, officer, shareholder, owner or employee of a SGA Company or any Affiliate thereof, (b) an immediate family member of any such director, officer, shareholder, owner or employee or (c) an Affiliate of a SGA Company or of any such director, officer, shareholder, owner, employee or immediate family member.

“ Revenue Run Rate ” means, as of any measurement date with respect to a Client, the annualized management fees (whether based on fixed fee, minimum fee, asset-based or other arrangements, but excluding performance-based fees, and net of any applicable fee waivers, reimbursements or similar offsets) payable by such Client to the applicable SGA Company pursuant to the applicable Advisory Agreement, as in effect as of such measurement date, in each case calculated on a run-rate basis by multiplying (A) the assets under management for such Client as of the Base Date (or, in the case of any deposits of assets under management by a Client following the Base Date, as such date of the funding of such deposit to the SGA Companies) by (B) the effective management fee in effect for such Client as of the Base Date (or, in the case of any new Client after the Base Date, as of the date of the funding with respect to such Client) on an annualized basis. For the avoidance of doubt, the calculation of the Revenue Run Rate as of any date (i) shall not include any Net Inflow Revenue Run Rate or Net Outflow Revenue Run Rate (if any, as applicable) and (ii) shall exclude any changes in the Revenue Run Rate resulting from any increase or decrease in assets under management due to market appreciation or depreciation or currency fluctuations occurring from and after the Base Date.

“ SEC ” means the Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Seller Closing Payment ” means, with respect to each Seller, an amount equal to the product of (a) the excess of (i) the Closing Purchase Price minus (ii) the Escrow Amount multiplied by (b) such Seller’s Purchase Price Percentage.



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“ Seller Debt ” means, with respect to any Seller, as of immediately prior to the Closing, any unpaid principal balance and accrued and unpaid interest with respect to any loan from SGA to such Seller in respect of such Seller’s purchase of SGA Units.

“ Seller Investment Banking Fees ” means the fees payable to Broadhaven Securities, LLC at Closing.

“ Seller Representative ” means, solely in their capacity as Seller Representative and not in any other capacity, each of Estancia and Gordon Marchand, acting together.

“ SGA Companies ” means each of the SGA Company Parties and each of their respective Controlled Affiliates (other than the Funds).

“ SGA Fundamental Representation ” means any representation or warranty set forth in Section 3.01 (Existence and Power), Section 3.02 (Authorization), Section 3.03 (Capitalization and Ownership; Subsidiaries), Section 3.09(a) (Assets Under Management; Advisory Agreements), Section 3.16 (Taxes) (solely to the extent related to representations and warranties of the SGA Company Parties) or Section 3.20 (Brokers).

“ SGA Fundamental Warranty Breach ” means a SGA Warranty Breach with respect to a SGA Fundamental Representation.

“ SGIA Units ” has the meaning ascribed to “Ownership Units” under the Existing SGIA LLCA.

“ SGA Related Entities ” means each of the SGA Companies and each of the Funds.

“ SGA Units ” has the meaning ascribed to “Ownership Units” under the Existing SGA LPA.

“ SGA Warranty Breach ” means the breach of any representation or warranty made by a SGA Company Party contained in this Agreement or in any certificate delivered pursuant to Section 7.02(a) , (d) or (e) of this Agreement (it being understood that each statement contained in such a certificate shall constitute a representation and warranty of the SGA Company Parties hereunder).

“ Subsidiaries ” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions, or otherwise bestowing the power to direct the management of such entity are, at the time, directly or indirectly owned by such Person or any entity for which such Person serves as the managing member or general partner; provided that, with respect



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to any SGA Company, the term Subsidiary shall not include any Client, any Fund, or any investor therein solely due to its status as such.

“ Target Net Working Capital ” means $2,500,000.

“ Tax ” or “ Taxes ” means (i) federal, state, local, or non-U.S. income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, escheat or abandoned property, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated or any similar taxes, charges or fees of any kind (together with any and all interest, penalties and additions to tax imposed with respect thereto) imposed by any Governmental Authority, (ii) any and all liability for the payment of any items described in clause (i) above as a result of being (or ceasing to be) a member of an affiliated, consolidated, combined, unitary or aggregate group (or being included (or being required to be included) in any Tax Return related to such group), and (iii) any and all liability for the payment of any items described in clause (i) or (ii) above as a result of any obligation to indemnify any other person pursuant to contract as a successor or transferee, pursuant to applicable law, or otherwise.

“ Tax Returns ” means any and all returns, reports and forms (including elections, declarations, amendments, schedules, information returns or attachments thereto) required to be filed with a Governmental Authority with respect to Taxes, including any amendment thereof.

“ Transaction Expenses ” means all costs and expenses, including, fees and disbursements of counsel, financial advisors and accountants, incurred by or on behalf of the SGA Companies in connection with this Agreement and the Transactions (including any reimbursable expenses of any Seller in connection herewith or therewith and the Seller Investment Banking Fees).

“ Transactions ” means the transactions contemplated by this Agreement and the Ancillary Agreements.

“ Treasury Regulations ” means the Treasury Regulations (including temporary Treasury Regulations) promulgated by the United States Department of Treasury with respect to the Code.

“ True Up Date ” means the nine (9) month anniversary of the Closing Date.

“ UCITS ” means each Undertakings for Collective Investment in Transferable Securities listed in Section 3.09 of the Disclosure Schedule.



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“ Unfunded Client Mandates ” means each of the Client mandates set forth on Schedule D under the heading “Unfunded Client Mandates”.

“ Units ” means the SGA Units and SGIA Units.

Section 1.02 Definitions . The following terms have the meanings set forth in the Sections set forth below:



Term	Section
Affiliate Contract	Section 3.19
Agreement	Preamble
Allocation Schedule	Section 6.05
Audited Balance Sheet	Section 3.06(a)
Authorized Action	Section 2.07(a)
Bankruptcy Exception	Section 3.02(a)
Business	Recitals
Closing	Section 2.02
Closing Adjustment Amount	Section 2.05(b)
Closing Date	Section 2.02
Closing Net Working Capital	Section 2.05(a)
Closing Net Working Capital Statement	Section 2.05(c)
Company Securities	Section 3.03(c)
Confidentiality Agreement	Section 5.04
ERISA Accounts	Section 3.15(k)
Estancia	Preamble
Estimated Net Working Capital	Section 2.05(a)
Estimated True Up Amount	Section 2.06(a)
Excess Net Working Capital	Section 2.05(b)
Final Adjustment Amount	Section 2.05(h)
Final True Up Amount	Section 2.06(c)
Financial Statements	Section 3.06(a)
Fund Board Approval	Section 5.07(a)
Fund Financial Statement	Section 3.09(h)
Fund Shareholder Approval	Section 5.07(b)
GP LLCA	Recitals
Interim Balance Sheet Date	Section 3.06(a)
Interim Financial Statements	Section 3.06(a)
IP Licenses	Section 3.12(c)
Lease	Section 3.14(b)
Leases	Section 3.14(b)
Licensed Intellectual Property	Section 3.12(a)



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Term	Section
Loss	Section 8.02(a)
Management Sellers	Preamble
Material Contracts	Section 3.17(a)
Notice of Disagreement	Section 2.05(d)
Operating Agreements	Recitals
Owned Intellectual Property	Section 3.12(a)
Permit	Section 3.11(b)
Personal Information	Section 3.12(e)
Potential Contributor	Section 8.04(d)
Privacy Policy	Section 3.12(e)
Proxy Statement	Section 5.07(c)
Purchase Price	Section 2.01(a)
Purchaser	Preamble
Purchaser Indemnified Party	Section 8.02(a)
Seller Debt Amount	Section 2.01(c)
Seller Indemnified Party	Section 8.03
Sellers	Preamble
Services Agreement	Recitals
SGA	Preamble
SGA Company Parties	Preamble
SGA LPA	Recitals
SGA Parties	Recitals
SGIA	Preamble
Shareholder Meeting	Section 5.07(c)
Shortfall Amount	Section 2.06(a)
Similar Law	Section 3.15(k)
Subsidiary Securities	Section 3.03(d)
Termination Date	Section 9.01(a)
Third Party Claim	Section 8.05
Threshold	Section 8.04(b)(i)
Transaction Expense Amount	Section 2.01(d)
Transfer Documents	Section 2.03(a)(i)
Transferred Units	Recitals
True Up Amount	Section 2.06(a)
True Up Statement	Section 2.06(a)
USRPIs	Section 2.03(b)
WARN	Section 3.15(g)

Section 1.03 Interpretation and Rules of Construction .



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(a) In this Agreement, except to the extent otherwise provided or that the context otherwise requires: (i) when a reference is made in this Agreement to an Article, Section, Exhibit, Schedule or Annex, such reference is to an Article or Section of, or an Exhibit, Schedule or Annex to, this Agreement; (ii) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement; (iii) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”; (iv) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement; (v) terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto; (vi) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; (vii) references to a Person are also to its successors and permitted assigns; and (viii) the use of “or” is not intended to be exclusive unless expressly indicated otherwise. References to “law”, “laws” or to a particular statute or law shall be deemed also to include such laws or statutes as such laws or statutes are from time to time amended, modified or supplemented, including by succession of comparable successor Laws.

(b) The Parties have participated jointly in the negotiation and drafting of this Agreement and the other agreements, documents and instruments executed and delivered in connection herewith with counsel sophisticated in investment transactions. In the event an ambiguity or question of intent or interpretation arises, this Agreement and the agreements, documents and instruments executed and delivered in connection herewith shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement and the agreements, documents and instruments executed and delivered in connection herewith.

ARTICLE II

PURCHASE AND SALE

Section 2.01 Purchase and Sale of Transferred Units .

(a) Purchase Price . The aggregate purchase price for the Transferred Units shall equal the Closing Purchase Price as adjusted pursuant to Sections 2.05 through 2.06 (the “ Purchase Price ”).

(b) Sale of Transferred Units . Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, (i) each Seller shall sell, assign, transfer and convey to the Purchaser, free and clear of any Encumbrances (other than Permitted Securities Encumbrances), the Transferred Units set forth on Schedule A hereto opposite the name of such Seller, and (ii) the Purchaser shall (A) pay to each Seller, an amount equal to such Seller’s applicable



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Seller Closing Payment (subject to the next sentence of this Section 2.01(b)), by wire transfer in immediately available funds to a bank account designated by the Seller Representative by written notice to the Purchaser no later than two (2) Business Days prior to the Closing Date (or if not so designated, then by certified or official bank check payable in immediately available funds to the order of such Seller in such amount) and (B) pay to the Escrow Agent the Escrow Amount by wire transfer in immediately available funds to the Escrow Account.

(c) Seller Debt . No later than two (2) Business Days prior to the Closing Date, the Seller Representative shall provide written notice to the Purchaser setting forth (i) the amount of any Seller Debt outstanding as of such date and (ii) the amount of such Seller Debt that will be repaid on behalf of such Seller at the Closing (the “ Seller Debt Amount ”); provided , that no Seller Debt Amount for any Seller may exceed the amount of the Seller Closing Payment payable to such Seller. At the Closing, with respect to each Seller owing Seller Debt, the Purchaser shall deduct the applicable Seller Debt Amount (not to exceed such Seller’s Seller Closing Payment) from such Seller’s Seller Closing Payment and shall pay the aggregate Seller Debt Amount to SGA by wire transfer in immediately available funds to a bank account designated by the Seller Representative by written notice to the Purchaser no later than two (2) Business Days prior to the Closing Date. Upon the receipt of the aggregate Seller Debt Amount by SGA, SGA shall deem the applicable Seller Debt repaid to the extent of the Seller Debt Amount repaid on behalf of the applicable Seller.

(d) Transaction Expenses . No later than two (2) Business Days prior to the Closing Date, the Seller Representative shall provide written notice to the Purchaser setting forth the amount of any Transaction Expenses that will be repaid at the Closing (the “ Transaction Expense Amount ”). At the Closing, the Purchaser shall (i) deduct from each Seller’s Seller Closing Payment an amount equal to the Transaction Expense Amount multiplied by such Seller’s Purchase Price Percentage ( provided , that no such deduction, in the aggregate with any deduction made pursuant to Section 2.01(c) in respect of Seller Debt, for any Seller may exceed the amount of the Seller Closing Payment payable to such Seller) and (ii) pay such Transaction Expenses to the applicable recipients thereof SGA by wire transfer in immediately available funds to a bank account designated by the Seller Representative by written notice to the Purchaser no later than two (2) Business Days prior to the Closing Date. Any Transaction Expenses that are not paid at or prior to Closing shall be included as Current Liabilities as provided in the Balance Sheet Rules.

(e) Distribution of Escrow Amount . The Escrow Amount shall be held and distributed in accordance with the terms of the Escrow Agreement to satisfy (i) any adjustments pursuant to Section 2.05 in favor of the Purchaser and (ii) any and all claims made by the Purchaser or any other Purchaser Indemnified Party against any of the Sellers pursuant to Section 6.02 and Article VIII .



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Section 2.02 Closing . Subject to the terms and conditions of this Agreement, the closing of the sale and purchase of the Transferred Units contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178-0060 on the third Business Day following the satisfaction or waiver of the conditions to the obligations of the Parties set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of all conditions at the Closing) or (c) at such other place or at such other time or on such other date as the Sellers and the Purchaser may mutually agree upon in writing (the date on which Closing occurs is the “ Closing Date ”). The Closing may be conducted in a mutually acceptable manner by the exchange of documents and signature pages via overnight courier, facsimile or pdf attachments to e-mails.

Section 2.03 Closing Deliveries by the SGA Parties .

(a) At the Closing, each SGA Party shall deliver or cause to be delivered to the Purchaser each of the following documents or agreements to which such SGA Party is a party:

(i) written instruments of transfer executed by each Seller, transferring the Transferred Units to be transferred by such Seller pursuant to Section 2.01(b) to the Purchaser, each substantially in the form attached hereto as Exhibit C (the “ Transfer Documents ”);

(ii) the certificates required by Section 7.02 ; and

(iii) a certificate of each Seller that is a U.S. person for U.S. tax purposes in form as provided in Exhibit E in order to satisfy the requirements of Section 1446(f)(2)(A) of the Code.

(b) Each SGA Company Party shall deliver to Purchaser at Closing a statement as described in Treasury Regulations Section 1.1445-11T(d)(2) and in form and substance satisfactory to Purchaser, certifying that either (a) fifty percent (50%) or more of the value of the gross assets of such SGA Company Party does not consist of United States real property interests within the meaning of Section 897 of the Code and the Treasury Regulations thereunder (“ USRPIs ”) or (b) ninety percent (90%) or more of the value of the gross assets of the Partnership does not consist of USRPIs plus cash or cash equivalents.

(c) Each of Estancia and Gordon Marchand, solely in their joint capacity as Seller Representative (as defined in the Escrow Agreement) and not in any other capacity, shall deliver to Purchaser an executed counterpart to the Escrow Agreement.



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Section 2.04 Closing Deliveries by the Purchaser . At the Closing, the Purchaser shall deliver:

(a) the payments described in Section 2.01(b) ;

(b) an executed counterpart to the Escrow Agreement;

(d) the final Allocation Schedule (as approved by the Seller Representative in accordance with Section 6.05); and

(e) the certificate required by Section 7.01 .

Section 2.05 Closing Estimates; Closing Statement; and Purchase Price Adjustment .

(a) No less than three (3) Business Days prior to the Closing Date, the SGA Parties shall deliver to the Purchaser a good faith, reasonable estimate of (x) Net Working Capital as of the close of business on the Closing Date, without reduction for the distribution of any Excess Net Working Capital contemplated by Section 2.05(i) (“ Closing Net Working Capital ” and, as so estimated, “ Estimated Net Working Capital ”) and (y) the amount of any Indebtedness of the SGA Companies outstanding as of the Closing, other than any Indebtedness included as a Current Liability (the “ Closing Debt Amount ” and, as so estimated, the “ Estimated Closing Debt Amount ”)). The Estimated Net Working Capital shall be calculated in accordance with the Balance Sheet Rules and the other requirements of this Section 2.05 (and related definitions) (and otherwise in accordance with GAAP), include reasonable supporting documentation, and be prepared in consultation with the Purchaser.

(b) If the amount of the Closing Net Working Capital based on the Estimated Net Working Capital delivered pursuant to Section 2.05(a) exceeds the Target Net Working Capital (such excess, the “ Excess Net Working Capital ”), the Closing Purchase Price shall not be increased, but any such Excess Net Working Capital shall be subject to Section 2.05(i) . The Closing Purchase Price shall be decreased by an amount in cash equal to the sum of (i) the amount, if any, by which Target Net Working Capital exceeds the Closing Net Working Capital, based on the Estimated Net Working Capital delivered pursuant to Section 2.05(a) , plus (ii) the Estimated Closing Debt Amount. The amount, if any, by which the Closing Purchase Price is decreased pursuant to this Section 2.05(b) is referred to as the “ Closing Adjustment Amount ” and, for the avoidance of doubt, if the Estimated Net Working Capital delivered pursuant to Section 2.05(a) is equal to the Target Net Working Capital and the Estimated Closing Debt Amount is $0, the Closing Adjustment Amount shall be zero and the Closing Purchase Price shall neither be increased nor decreased pursuant to this Section 2.05(b) .

(c) Within sixty (60) days after the Closing Date, the Purchaser shall prepare and deliver to the Seller Representative a statement (the “ Closing Net Working Capital Statement ”) setting forth in reasonable detail the Purchaser’s good faith proposed calculations of (x) Closing Net Working Capital and (y) the Closing Debt Amount. The Closing Net Working Capital Statement shall be calculated in accordance with the Balance Sheet Rules and the other requirements of this Section 2.05 (and related definitions) (and otherwise in accordance with GAAP), and shall include reasonable supporting documentation. For the avoidance of doubt, the Closing Net Working Capital Statement may also agree with the calculation of the Estimated Net Working Capital and the Estimated Closing Debt Amount delivered pursuant to Section 2.05(a) , in which case the Estimated Net Working Capital and the Estimated Closing Debt Amount shall become final and binding upon all parties with respect to all matters that are so agreed.

(d) The Seller Representative may dispute the Closing Net Working Capital Statement by delivering a written notice of dispute (a “ Notice of Disagreement ”) to the Purchaser (with a copy to each of the Sellers), within fifteen (15) days of receiving the Closing Net Working Capital Statement. If the Seller Representative does not deliver a Notice of Disagreement within such fifteen (15) day period (or if the Seller Representative earlier confirms in writing its definitive agreement with the Closing Net Working Capital Statement), then the Closing Net Working Capital Statement shall become final and binding upon all parties. During the fifteen (15) day period following the Seller Representative’s receipt of the Closing Net Working Capital Statement, the Seller Representative and its accountants shall be permitted reasonable access to review the working papers of the Purchaser and the Purchaser’s independent accountant relating to the Closing Net Working Capital Statement; provided , that in order to review such accountant’s working papers the Seller Representative and its accountants shall execute any releases or waivers customarily and reasonably required by independent accountants in connection therewith. A Notice of Disagreement shall set forth in reasonable detail those items in the Closing Net Working Capital Statement that the Seller Representative disputes, and include all reasonable supporting documentation.

(e) The Purchaser and the Seller Representative will attempt to resolve any such dispute during the ten (10) day period commencing on the date the Seller Representative delivers the Notice of Disagreement. If the Purchaser and the Seller Representative do not agree upon a final resolution within such ten (10) day period, then (i) the Purchaser and the Sellers Representative shall jointly retain the Accountant (including by executing a customary agreement with the Accountant in connection with its engagement) and (ii) the items that remain in dispute shall be submitted promptly to the Accountant. The Purchaser and the Seller Representative shall cause the engagement of the Accountant to be on such terms that (A) the Accountant shall be instructed to render a written determination of the applicable dispute within thirty (30) days after referral of the matter to it, (B) such determination must be in writing and must set forth, in reasonable detail, the basis therefor, (C) the Accountant shall determine, based solely on presentations by the Purchaser and the Seller Representative and their respective representatives, and not by independent review, only those items disputed in the Notice of Disagreement that have not subsequently been agreed upon in writing by the parties and (D) in resolving any disputed item, the Accountant shall be bound by the Balance Sheet Rules and the definitions of Net Working Capital and Closing Debt Amount and the other requirements of this Section 2.05 (and related definitions) and shall not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party.

(f) The determination of the Accountant shall be conclusive and binding upon the Purchaser, the SGA Parties and the Seller Representative (absent fraud, bad faith or manifest error) and judgment may be entered upon the determination of the Accountant in any court having jurisdiction over the party against which such determination is to be enforced. Notwithstanding any provisions hereof to the contrary, the Accountant shall be deemed to be acting as an expert and not as an arbitrator.

(g) The fees, costs and expenses of the Accountant (i) shall be paid by the Purchaser in the proportion that the aggregate dollar amount of such disputed items so submitted that are successfully disputed by the Seller Representative (as finally determined by the Accountant) bears to the aggregate dollar amount of such items so submitted and (ii) shall be paid from the Escrow Amount in the proportion that the aggregate dollar amount of such disputed items so submitted that are unsuccessfully disputed by the Seller Representative (as finally determined by the Accountant) bears to the aggregate dollar amount of such items so submitted.

(h) The “ Final Adjustment Amount ” shall be an amount equal to (i) the Closing Net Working Capital as finally determined by this Section 2.05 minus (ii) the Estimated Net Working Capital minus (iii) the amount, if any, by which the Closing Debt Amount, as finally determined by this Section 2.05 , exceeds the Estimated Closing Debt Amount plus (iv) the amount, if any, by which the Estimated Closing Debt Amount exceeds the Closing Debt Amount, as finally determined by this Section 2.05 . Within three (3) Business Days after the determination of the Closing Net Working Capital and Closing Debt Amount, (A) if the Final Adjustment Amount is positive, the Purchaser shall pay (by wire transfer of immediately available funds to the account or accounts designated in writing by the Seller Representative) an amount in cash to each Seller equal to the product of (1) the Final Adjustment Amount multiplied by (2) such Seller’s applicable Purchase Price Percentage, and (B) if the Final Adjustment Amount is negative, the Seller Representative and the Purchaser shall instruct the Escrow Agent to pay a portion of the Escrow Amount equal to the absolute value of the Final Adjustment Amount to the Purchaser. For the avoidance of doubt, if the Final Adjustment Amount is equal to zero, no payment will be required under this Section 2.05 .

(i) Following the Closing Date, the SGA Companies shall make a distribution, dividend or other payment to the holders of Capital Stock of the SGA Companies as of the date immediately prior to the Closing (and not to the Purchaser), as determined by the Sellers Representative, in an aggregate amount not greater than the Excess Net Working Capital.

Section 2.06 Consenting Client Run Rate True-Up .

(a) If the Closing Purchase Price is less than the Base Purchase Price at the Closing due a Consent Reduction Amount (the aggregate amount of any such reduction, a “ Shortfall Amount ”), then within forty-five (45) days after the True Up Date, the Purchaser shall prepare and deliver to the Seller Representative a statement (the “ True Up Statement ”) setting forth in reasonable detail proposed calculations of Closing Purchase Price, as adjusted to give credit for the incremental Revenue Run Rates, if any, with respect to (i) each Unfunded Client Mandate that was not funded as of the Closing to the extent that such Unfunded Client Mandate has been funded (in whole or in part, to the extent of such funding) as of the True Up Date and (ii) any Clients for which the applicable Client Consent was not obtained as of the Closing Date but has since been obtained and remains in effect as of the True Up Date and where a SGA Company is continuing to provide advisory services to such Client under the applicable Advisory Agreement as of the True Up Date, and such incremental Revenue Run Rates, if any, shall be reduced with respect to any withdrawals or terminations or any changes in fee rates with respect to any such Client prior to or on the True Up Date. Any increase in such recalculated Closing Purchase Price pursuant to this Section 2.06 shall be referred to herein as the “ True Up Amount ” and, as so estimated, the “ Estimated True Up Amount ”. The True Up Statement shall be calculated in accordance with the requirements of this Section 2.06 (and related definitions), and shall include reasonable supporting documentation, and, for the avoidance of doubt, the True Up Amount shall not in any event exceed the Shortfall Amount.

(b) The Seller Representative may dispute the True Up Statement and the Estimated True Up Amount, and any such disagreement shall be resolved by the Accountant, in each case, in accordance the procedures set forth in Section 2.05(d) through Section 2.05(g) mutatis mutandis .

(c) The “ Final True Up Amount ” shall be the True Up Amount as finally determined by this Section 2.06 . Within three (3) Business Days after the determination of the Final True Up Amount, if the Final True Up Amount is an amount greater than zero, the Purchaser shall pay (by wire transfer of immediately available funds to the account or accounts designated in writing by the Seller Representative) an amount in cash to each Seller equal to the product of (i) the Final True Up Amount multiplied by (ii) such Seller’s applicable Purchase Price Percentage.

Section 2.07 Seller Representative .

(a) The SGA Parties hereby (i) irrevocably nominate, constitute and appoint the Seller Representative as the agent and true and lawful attorney-in-fact of the SGA Parties in connection with the matters set forth in this Section 2.07 , with full power of substitution, to act in the name place and stead of the Sellers for purposes of executing, delivering, acknowledging, certifying, filing, modifying, or waiving any and all documents and taking any actions that the Seller Representative may, in its reasonable discretion, determine to be necessary, desirable or appropriate in connection with or arising out of this Section 2.07 and its performance of its duties under this Section 2.07 and (ii) grant the Seller Representative such powers and authority as are necessary to carry out the functions assigned to it under this Section 2.07 (each such functions, an “ Authorized Action ”). By its execution hereof, the Seller Representative agrees to serve in such capacity; provided , however , that the Seller Representative shall have no obligation to act on behalf of the Sellers except as expressly provided herein. A SGA Party will be deemed a party or a signatory to any document, instrument, certificate, or agreement that the Seller Representative signs on behalf of such SGA Party in accordance with this Section 2.07 . Each of the SGA Parties acknowledges and agrees that actions of the Seller Representative under this Agreement shall require the vote or consent (as applicable) of each Person constituting the Seller Representative.

(b) Without limiting the generality of Section 2.07(a) , the Seller Representative shall have the full power, authority, and discretion to:

(i) give and receive all notices required or permitted to be given pursuant to or in connection with Section 2.07 , Section 6.01 , Section 6.02 or Article VIII ;

(ii) take or refrain from taking any actions on behalf of the Sellers (whether by negotiation, settlement, litigation or otherwise) to contest, resolve, settle or consent to liability with respect to any indemnification claim pursuant to Article VIII or Section 6.02 ;

(iii) take the actions set forth in Section 6.02

(iv) assist the SGA Parties in performing their obligations under Section 5.05 ;

(v) perform all of the Seller Representative’s duties with respect to the determinations (A) of the Closing Net Working Capital pursuant to Section 2.05 and (B) of the True Up Amount pursuant to Section 2.06 ; and

(vi) take all actions necessary or appropriate for the accomplishment of the foregoing and in each case, execute and deliver any documents, instruments, certificates, or agreements that may be reasonably necessary, appropriate, or advisable in connection therewith.

(i) amend, supplement or waive this Agreement on behalf of any SGA Party; or

(ii) contest, resolve, settle or consent to liability on behalf of any Seller in excess of the limitations set forth in Section 8.04 or other than in accordance with each Seller’s Purchase Price Percentage.

(d) All decisions and actions by the Seller Representative, including any agreement between the Seller Representative and Purchaser relating to the defense or settlement of any claims for which the Sellers may be required to indemnify, or pay to, Purchaser pursuant to Article VIII or Section 6.02 , shall be binding upon all of the Sellers, and no Seller shall have the right to object, dissent, protest, or otherwise contest the same.

(e) The Purchaser agrees that the Seller Representative, acting in its capacity as the Seller Representative, shall have no liability to the Purchaser for any Authorized Action, except that the Seller Representative shall not be relieved of liability to the extent that such Authorized Action is found by a final order of a court of competent jurisdiction to have constituted fraud or gross negligence by the Seller Representative. The Seller Representative, acting in its capacity as the Seller Representative, shall not have any liability to the Purchaser for any breach under this Agreement or any Ancillary Agreement by any Seller.

(f) To the maximum extent permitted by applicable Law, each Seller (on a several and not joint basis and in proportion to each Seller’s Purchase Price Percentage), hereby agrees to indemnify and hold harmless the Seller Representative against all Losses resulting from, arising out of, or incurred by the Seller Representative (in its capacity as such) in connection with any action, suit or proceeding to which the Seller Representative is made a party by reason of the fact it is or was acting as the Seller Representative of any Seller pursuant to the terms of this Agreement. The Seller Representative shall not have, by reason of this Agreement, a fiduciary relationship in respect of any Seller, except in respect of amounts received on behalf of such Seller. The Seller Representative shall not have a fiduciary relationship in respect of the SGA Companies. The Seller Representative shall not be liable to any Seller for any action taken or omitted by it or any agent employed by it hereunder or under any other document entered into in connection herewith, except that the Seller Representative shall not be relieved of any liability imposed by law for fraud or for gross negligence.

(g) The Sellers each agree, in addition to the foregoing, that:

(i) The provisions of this Section 2.07 are independent and severable, are irrevocable and coupled with an interest, and shall be enforceable notwithstanding any rights or remedies that any SGA Party may have in connection with the transactions contemplated by this Agreement.

(ii) The provisions of this Section 2.07 shall be binding upon the successors and assigns, heirs, legatees, personal representatives of each SGA Party, and any references in this Agreement to a SGA Party shall mean and include the successors to the rights of the SGA Party hereunder, whether pursuant to testamentary disposition, the laws of descent and distribution, or otherwise.

Section 2.08 Withholding . Notwithstanding any other provision of this Agreement, and for the avoidance of doubt, (a) each payment made pursuant to this Agreement shall be made net of any Taxes required by applicable Law to be deducted or withheld from such payment and (b) any amounts deducted or withheld from any such payment shall be timely remitted to the applicable Governmental Authority. Any amounts so deducted or withheld shall, when remitted to the applicable Governmental Authority, be treated as having been paid to the Person in respect of which such deduction or withholding was made for all purposes of this Agreement. Without limiting the foregoing, Purchaser acknowledges its expectation that no withholding of Taxes will be required to be made with respect to the payment of the Purchase Price to Sellers under section 1445 of the Code; provided that each SGA Company Party provides a statement described in Section 2.03(b) . Purchaser further acknowledges its expectation that (i) no withholding of Taxes will be required to be made under Section 1446(f) of the Code with respect to Sellers that provide a certificate pursuant to Section 2.03(a)(iii) and (ii) Purchaser expects to be required to withhold Taxes under Section 1446(f) with respect to Sellers that do not provide a certificate pursuant to Section 2.03(a)(iii) . As soon as practicable after any payment of taxes described in clause (b) by Purchaser to a Governmental Authority, the Purchaser shall notify the applicable Seller regarding the fact, basis for, and amount of any such payment and provide evidence of such withholding issued by such Governmental Authority, if any.

ARTICLE III

REPRESENTATIONS AND WARRANTIES
OF THE SGA COMPANY PARTIES

In order to induce the Purchaser to enter into this Agreement and consummate the Transactions, the SGA Company Parties hereby represent and warrant to the Purchaser, both as of the date of this Agreement and as of the Closing Date, the accuracy of each of the factual statements set forth in this Article III . Such representations and warranties are subject to the qualifications and exceptions set forth in the Disclosure Schedule on the date of this Agreement. The section number headings in the Disclosure Schedule correspond to the section numbers in this Agreement and any information disclosed in any section of the Disclosure Schedule on the date of this Agreement shall be deemed to be disclosed and incorporated into any other section of the Disclosure Schedule to the extent that it would be reasonably apparent on the face of such disclosure that such matter is applicable to such other section of the Disclosure Schedule, whether or not there is a cross-reference to such other section. Disclosure of any fact or item in any section of the Disclosure Schedule shall not necessarily mean that such item or fact is material, is an admission of liability or is required to be disclosed.

Section 3.01 Existence and Power .

(a) Each of the SGA Companies is duly incorporated or organized, as applicable, and is validly existing under the Laws of the jurisdiction of its organization.

(b) Each of the SGA Companies is in good standing under the Laws of the jurisdiction of its organization. Each of the SGA Companies has the requisite partnership, limited liability company or corporate, as applicable, power and authority to own, operate and lease its assets and to carry on its business as currently conducted. Each of the SGA Companies is duly qualified to do business and is in good standing in each jurisdiction where the ownership, operation or leasing of its assets or the conduct of its business as currently conducted requires such qualification. True and correct copies of the Organizational Documents of each of the SGA Companies, each as in effect on the date hereof, have been made available to the Purchaser or its representatives.

(c) Each SGA Party has full legal capacity to execute, deliver and perform this Agreement and the Ancillary Agreements to which such SGA Party is or will be a party, to carry out its obligations hereunder and thereunder and to consummate the Transactions.

Section 3.02 Authorization .

(a) Each SGA Company Party has all necessary partnership or limited liability company power and authority (as applicable) to enter into this Agreement and each of the Ancillary Agreements to which it is or will be a party, to carry out its obligations hereunder and thereunder and to consummate the Transactions. The execution and delivery by each SGA Company Party of this Agreement and the Ancillary Agreements to which such SGA Company Party is or will be a party, the performance by such SGA Company Party of its obligations hereunder and thereunder and the consummation by the SGA Company Parties of the Transactions have been duly authorized by all requisite partnership action and by all limited liability company action (as applicable) on the part of the SGA Company Parties. Assuming due authorization, execution and delivery by the other applicable parties, this Agreement constitutes, and each other Ancillary Agreement to which each SGA Company Party is or will be a party will constitute when executed and delivered, a legal, valid and binding agreement of such SGA Company Party, enforceable against such SGA Company Party in accordance with its terms, except as may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar laws of general applicability relating to or affecting the rights of creditors generally (the “ Bankruptcy Exception ”).

(b) Each Seller who is a natural person has the legal capacity, and each Seller who is an entity has all necessary partnership, limited liability company or corporate or similar power and authority, to enter into this Agreement and each of the Ancillary Agreements to which it is or will be a party, to carry out its obligations hereunder and thereunder and to consummate the Transactions. The execution and delivery by each Seller of this Agreement and each of the Ancillary Agreements to which it is or will be a party, the performance by each Seller of its obligations hereunder and thereunder and the consummation by each Seller of the Transactions have been duly authorized by all requisite corporate or similar action on the part of each Seller. This Agreement constitutes, and each other Ancillary Agreement to which any SGA Party is or will be a party will constitute when executed and delivered, a legal, valid and binding agreement of such Seller, enforceable against it in accordance with its terms, except as may be limited by the Bankruptcy Exception.

Section 3.03 Capitalization and Ownership; Subsidiaries .

(a) Upon delivery by the applicable SGA Parties of the Transfer Documents with respect to the Transferred Units to the Purchaser on the Closing Date, the Purchaser will acquire all of the Transferred Units, free and clear of any Encumbrances (other than Permitted Securities Encumbrances).

(b) As of the date hereof and as of immediately prior to the Closing, (i) all of the direct and indirect holders of Capital Stock of the SGA Company Parties are set forth on Section 3.03(b) of the Disclosure Schedule and (ii) all of such Capital Stock is and will be owned by such direct and indirect holders in the amounts set forth on Section 3.03(b) of the Disclosure Schedule, in each case free and clear of any Encumbrances (other than Permitted Securities Encumbrances).

(c) Except as set forth on Section 3.03(b) or Section 3.03(c) of the Disclosure Schedule, there is no outstanding (i) Capital Stock of any SGA Company Party, (ii) securities convertible into or exchangeable or exercisable for Capital Stock of any SGA Company Party, or (iii) options, preemptive rights, stock appreciation, phantom stock or profit participation rights with respect to, or other rights to acquire from any SGA Company Party, or other obligations of any SGA Company Party to issue, any equity interests or other securities or securities convertible into or exchangeable for Capital Stock of the any SGA Company Party (the items in Section 3.03(c)(i) , Section 3.03(c)(ii) and Section 3.03(c)(iii) being referred to collectively as the “ Company Securities ”). Except as set forth on Section 3.03(c) of the Disclosure Schedule, there are no outstanding obligations of any of the SGA Company Parties to repurchase, redeem or otherwise acquire any Company Securities nor shall any such obligation be created by virtue of the consummation of the Transactions (except as expressly set forth in the Ancillary Agreements).

(d) No SGA Company Party has any direct or indirect Subsidiaries except as set forth on Section 3.03(d) of the Disclosure Schedule. Section 3.03(d) of the Disclosure Schedule sets forth all of the Capital Stock of each Subsidiary of each SGA Company Party, the name of each owner of such interest and the percentage ownership of each such owner in such interest. Other than as set forth in Section 3.03(d) of the Disclosure Schedule, there are no (i) securities convertible into or exchangeable or exercisable for Capital Stock of any Subsidiary of a SGA Company Party, or (ii) options, preemptive rights, stock appreciation, phantom stock or profit participation rights with respect to, or other rights to acquire from any SGA Company, or other obligations of any SGA Company to issue, any Capital Stock or securities convertible into or exchangeable for Capital Stock of any of Subsidiary of a SGA Company Party (the items in Sections 3.03(d)(i) and 3.03(d)(ii) being referred to collectively as the “ Subsidiary Securities ”). Except as set forth on Section 3.03(d) of the Disclosure Schedule, there are no outstanding obligations of any of the SGA Companies to repurchase, redeem or otherwise acquire any Subsidiary Securities nor shall any such obligation be created by virtue of the consummation of the Transactions (except as expressly set forth in the Ancillary Agreements).

(e) Except as described in Section 3.03(e) of the Disclosure Schedule, no SGA Company owns beneficially, directly or indirectly, any Capital Stock of any Person, or any interest in a partnership or joint venture of any kind.

(f) Immediately following the Closing after giving effect to the Transactions, (i) the issued and outstanding SGA Units and the holders of such SGA Units will be as set forth in Schedule A of the SGA LPA and the issued and outstanding SGIA Units and the holders of such SGIA Units will be as set forth in Schedule A of the SGIA LLCA and (ii) the Net Working Capital will include no less than $1,500,000 of cash.

Section 3.04 No Conflict .

(a) Assuming that all consents, approvals, authorizations and other actions described in Section 3.05 or provided for in Section 5.06 have been obtained, all filings, notifications, consents, approvals, authorizations, the due execution of this Agreement and the applicable Ancillary Agreements by the other applicable parties hereto and thereto and other actions listed in Section 3.04 of the Disclosure Schedule have been made, the execution, delivery and performance by each SGA Party of this Agreement and the Ancillary Agreements to which such SGA Party is or will be a party, and the consummation of the Transactions, do not and will not (i) violate, conflict with or result in the breach of the Organizational Documents of any SGA Company Party, (ii) conflict with or violate any Law or Governmental Order applicable to any SGA Related Entity, (iii) except as set forth in Section 3.04(iii) of the Disclosure Schedule, conflict with, result in any violation or breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent, approval, authorization or other action by, or notification to, any third party under, or give to others any rights of termination, amendment, withdrawal, first refusal, first offer, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which any SGA Company is a party, except as, individually or in the aggregate, would not reasonably be expected to (A) affect the ability of any SGA Company to carry out its obligations under this Agreement or any Ancillary Agreement to which it is or will be a party, and to consummate the Transactions or (B) otherwise be material to any of the SGA Companies; and

(b) the execution, delivery and performance of this Agreement and each Ancillary Agreement by each SGA party thereto, and the consummation of the Transactions by the SGA Parties, do not and will not require any material consent, approval, authorization or other similar action by any SGA Company which has not been obtained prior to the date of this Agreement.

Section 3.05 Governmental Consents and Approvals . The execution, delivery and performance of this Agreement and each Ancillary Agreement by each SGA Party that is party thereto do not and will not require any material consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority by any SGA Party, except as described in Section 3.05 of the Disclosure Schedule.

Section 3.06 Financial Information .

(a) True, correct and complete copies of (i) the audited consolidated balance sheet of the SGA Companies (the “ Audited Balance Sheet ”) as of December 31, 2014, 2015 and 2016, and the related audited consolidated statements of operations, changes in stockholders’ equity, and cash flows of the SGA Companies for the fiscal years then ended (collectively, the “ Financial Statements ”) and (ii) the unaudited balance sheet of the SGA Companies as of December 31, 2017 (the “ Interim Balance Sheet Date ”) and the related unaudited statement of operations of the SGA Companies for the quarterly and year-to-date periods then ended have been made available by SGA to the Purchaser or its representatives (the “ Interim Financial Statements ”).

(b) The Financial Statements and the Interim Financial Statements (i) were prepared in accordance with the books of account and other financial records of the SGA Companies (except as may be indicated in the notes thereto), (ii) present fairly in all material respects the financial condition and results of operations of the SGA Company to which it relates as of the dates thereof or for the periods covered thereby, and (iii) were prepared in accordance with GAAP applied on a basis consistent with the past practices of the SGA Companies, being subject, in the case of the Interim Financial Statements, to normal year-end adjustments and the absence of notes, the effects of which are not expected to be, individually or in the aggregate, material.

Section 3.07 Absence of Undisclosed Material Liabilities . There are no material Liabilities of any SGA Company of any nature, other than Liabilities (a) reflected on or reserved against the Financial Statements or the Interim Financial Statements including the notes thereto (in each case to the extent so reflected or reserved therein), (b) Liabilities that are not required under GAAP to be reflected on or reserved against the Financial Statements, the Interim Financial Statements or the notes thereto, (c) set forth in Section 3.07 of the Disclosure Schedule, or (d) incurred since the Interim Balance Sheet Date in the ordinary course of business that would not in the aggregate be material to the SGA Companies.

Section 3.08 Conduct in the Ordinary Course . Since the Interim Balance Sheet Date, other than as permitted under Section 5.01 between the date hereof and the Closing Date, each SGA Related Entity has conducted its business in the ordinary course, consistent with past practice of such SGA Related Entity and there has been no Material Adverse Effect.

Section 3.09 Assets Under Management; Advisory Agreements .

(a) Section 3.09(a)(i) of the Disclosure Schedule sets forth a true and correct calculation of the Revenue Run Rate as of the Base Date, which equals the sum of the Revenue Run Rates with respect to each Client of the SGA Companies (including each Client that is a Fund) calculated as of the Base Date, and assuming that each of the Unfunded Client Mandates have fully funded as of the Base Date as set forth on Schedule D . As of the Closing, the certificate delivered pursuant to Section 7.02(e) shall include a true and correct calculation of the Consenting Percentage, the Consenting Client Revenue Run Rate, and the Consent Reduction Amount (if any). Section 3.09(a)(ii) of the Disclosure Schedule sets forth the amount, as of the date of this Agreement, of any outstanding redemption requests or withdrawal notices which have been validly delivered with respect to any Client since the Base Date and represent at least $5 million in assets under management with respect to such Client.

(b) Section 3.09(b) of the Disclosure Schedule sets forth true, correct and complete lists containing the name of each Client as of the Base Date, and for each such Client listed: (i) the applicable inception date for such relationship; (ii) the assets under management as of the Base Date; (iii) the effective fee schedule or rate payable to the applicable SGA Company under such Advisory Agreements as of the Base Date, including any waivers of, or reductions in, any such stated fees effective as of the Base Date; (iv) the terms of any special withdrawal or redemption rights, in each case to the extent not set forth in the applicable Advisory Agreement; and (v) the terms of any expense reimbursement (or assumption) arrangements or unreimbursed payments being made by such SGA Company to brokers, dealers or other Persons with respect to services provided to such Client, in each case (with respect to this clause (v)) to the extent not set forth in any placement agent agreement set forth on Section 3.17 of the Disclosure Schedule or the applicable Advisory Agreement.

(c) No SGA Company is party to any revenue sharing or subadvisory agreements in respect of the Funds except as set forth on Section 3.17 of the Disclosure Schedule. Except for the Funds, there are no collective investment vehicles (whether organized as a general or limited partnership, limited liability company, trust, company or commingled fund) organized in any jurisdiction (a) sponsored or promoted by any SGA Company any Management Seller or (b) for which any SGA Company or any Management Seller acts as a general partner, trustee or managing member (or in a similar capacity), principal underwriter or distributor. Section 3.09(c) of the Disclosure Schedule sets forth a true, correct and complete list, as of the Base Date, of the name of each Fund, and for each Fund listed, as of the Base Date: (i) the date of the Fund’s Advisory Agreement; (ii) the net asset value of such Fund as of the Base Date, as applicable, calculated as required by the applicable Fund Agreement; (iii) the stated management or similar fee schedule or rate payable to the applicable SGA Company under the terms of the applicable Advisory Agreement or Fund Agreement, including any waivers of, or reductions in, any such management or similar fees effective as of the Base Date; (iv) the terms of any reduction in management fee rate or change in management fee base scheduled to occur within the twelve (12) months following the Base Date in accordance with the terms of the applicable Advisory Agreement or Fund Agreement (as each such applicable agreement is in effect as of the date hereof); and (v) the terms of any expense reimbursement (or assumption) arrangements or unreimbursed payments being made by such SGA Company to brokers, dealers or other Persons with respect to the distribution of, or services provided to investors in, such Fund, in each case (with respect to this clause (v)) to the extent not set forth in the applicable Fund Agreement or Advisory Agreement.

(d) Except as set forth on Section 3.09(b) or Section 3.09(c) of the Disclosure Schedule, none of the SGA Companies or Management Seller acts as an investment advisor, investment manager or otherwise provides investment advisory or sub-advisory services to any Person as of the Base Date. Except for the Advisory Agreements, no Fund is party to any Advisory Agreement with any SGA Company in each case as of the Base Date. There are no Advisory Agreements in effect as of the Base Date other than the Advisory Agreements disclosed in Section 3.09(d) of the Disclosure Schedule.

(e) Each Fund has been duly organized, is validly existing and, with respect to entities in jurisdictions that recognize the concept of “good standing,” is in good standing under the Laws of the jurisdiction of its organization and has the requisite corporate, trust, company or partnership power and authority to own its properties and to carry on its business as currently conducted, and is qualified to do business in each jurisdiction where it is required to be so qualified under applicable Law, except for such jurisdiction where the failure to be so qualified would not be material to the SGA Companies, taken as a whole.

(f) All of the outstanding Capital Stock of each Fund (as applicable) is validly issued, and during the past four (4) years none of such Capital Stock have been issued in material violation of any applicable Laws, Fund Agreement or the private placement memorandum or other offering documents related to such Fund. The books and records of each Fund accurately indicate, in all material respects, the capital account or net asset value of each record holder of such Fund. The SGA Companies have made available to the Purchaser true and correct copies of each Fund Agreement as in effect as of the date hereof.

(g) Except with respect to Taxes (which shall be governed by Section 3.16 ), during the past four (4) years, each Fund has been, and its Fund Agreements have been, operated in compliance in all material respects with applicable Law and its respective investment objectives, policies and restrictions, as set forth in the applicable private placement memorandum or other offering documents for such Fund. During the past four (4) years, all material notifications to Governmental Authorities and other bodies required by applicable Laws have been made to permit such activities as are carried out by the Funds and all material authorizations, licenses, consents and approvals required by applicable Laws have been obtained in relation to the Funds.

(h) The SGA Companies have made available to Purchaser, with respect to the Funds listed in Section 3.09(j) of the Disclosure Schedule, true and complete copies of the audited financial statements (including, as applicable, statements of assets, liabilities and partners’ capital, including the schedule of investments in limited partnerships and direct investments, and the related statement of operations, of cash flows and of changes in partners’ capital and cash flows) (any such audited statement of any Fund, including the Funds so listed, referred to as a “ Fund Financial Statement ”), in each case for the fiscal period(s) for each such Fund listed in Section 3.09(h) of the Disclosure Schedule. The Fund Financial Statements with respect to all Funds (including those listed in Section 3.09(h) of the Disclosure Schedule) for the last three (3) fiscal years completed prior to the date hereof (or for lesser number of such completed fiscal years as any particular Fund has been in existence) present fairly in all material respects the financial position of the related Fund in accordance with GAAP applied on a consistent basis (except as otherwise noted therein) at the respective date of such Fund Financial Statement and the statement of operations, of cash flows and of changes in partners’ capital and cash flows for the respective periods indicated.

(i) As to each Client, there has been in full force and effect an Advisory Agreement at all times pursuant to which a SGA Company was performing investment management services for such Client, and each such Advisory Agreement pursuant to which a SGA Company has received compensation respecting its activities in connection with any of the Funds was duly approved by the SGA Related Entities party to such agreement in accordance with applicable Laws.

(j) Section 3.09(j) of the Disclosure Schedule sets forth for each SGA Related Entity, all Persons entitled to receive management fees, subadvisory fees, incentive fees, performance fees, performance allocations, a profit share, a revenue share, carried interest, incentive allocations or other similar payment or payments, whether or not such payments are paid or payable and whether or not such payments arise as a result of ownership of a membership interest, partnership interest or other equity interest of such SGA Related Entity, are due and payable in connection with an employment or consulting agreement or arrangement, or are otherwise due and payable pursuant to a contract with any SGA Related Entity.

(k) During the past four (4) years, none of the Funds has been enjoined, indicted or convicted or made the subject of any disciplinary proceedings, consents, decrees, Governmental Orders or other administrative orders on account of any violation of the Securities Act, the Exchange Act, the Investment Company Act, or other applicable Laws, including ERISA or banking laws and, to the Knowledge of SGA, there is no reasonable basis for any such action.

Section 3.10 Litigation . Except with respect to Taxes (which shall be governed by Section 3.16 ), no material Action is, or during the last four (4) years has been, pending against, or to the Knowledge of SGA, threatened against any SGA Related Entity or any Seller in connection with the Business.

Section 3.11 Compliance with Laws; Regulatory Matters .

(a) Except (i) except with respect to employee and ERISA matters (which shall be governed by Section 3.15 ) and Taxes (which shall be governed by Section 3.16 ) and (ii) as set forth on Section 3.11 of the Disclosure Schedule, each SGA Related Entity is, and at all times during the past four (4) years has been, in material compliance with all applicable Laws. To the Knowledge of SGA, none of the SGA Related Entities is, or during the past four (4) years has been, under material investigation with respect to, or has been threatened in writing to be charged with or received written notice of any material violation of, any applicable Law.

(b) Each SGA Related Entity owns, holds, possesses or lawfully uses all material licenses, permits, authorizations and approvals issued by any Governmental Authority which are necessary for it to conduct its business as currently conducted (each, a “ Permit ”) or for the ownership and use of its assets, free and clear of all Encumbrances (other than Permitted Encumbrances) and all such Permits are in full force and effect and no SGA Related Entity has received any written notice regarding any suspension, cancellation or revocation of any such Permit, except, in each case, as would not have a Material Adverse Effect.

(c) No SGA Party is a party to or subject to any material Governmental Order relating directly to the Business or the Funds. No SGA Related Entity is a party to or subject to any material Governmental Order relating directly to the Business or the Funds.

(d) SGA is, and at all times when required under Law has been, duly registered as an investment adviser under the Advisers Act (and no other SGA Company is required to be so registered). SGA is duly registered, licensed or qualified as an investment adviser or has submitted a notice filing in each state or any other domestic or foreign jurisdiction except where the failure to do so would not be material to the SGA Companies, taken as a whole. Each SGA Company has timely filed all material Regulatory Documents that were required to be filed in the last four (4) years with any Governmental Authority. As of their respective filing dates, such Regulatory Documents complied in all material respects with applicable Laws as in effect at the time such Regulatory Documents were filed.

(e) No SGA Company is ineligible pursuant to Section 203 of the Advisers Act to serve as a registered investment adviser and, to the Knowledge of SGA, no “person associated with” (as defined in the Advisers Act) any SGA Company is ineligible pursuant to Section 203 of the Advisers Act to serve as a person associated with a registered investment adviser.

(f) A copy of the Form ADV Part 1, as amended to date, as filed with the SEC, and the Form ADV Part 2 (or any brochure in lieu thereof), as amended to date, of SGA has been made available to the Purchaser or its representatives and the information contained in such forms was true and correct in all material respects at the time of filing or amendment (as applicable).

(g) Except as set forth on Section 3.11(g) of the Disclosure Schedule, during the past four (4) years each SGA Company has complied in all material respects with the International Money Laundering Abatement and Anti-Terrorism Financing Act of 2001, which comprises Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 and the regulations promulgated thereunder, and the rules and regulations administered by the United States Department of Treasury’s Office of Foreign Assets Control, in each case to the extent such Laws are applicable to them.

Section 3.12 Intellectual Property .

(a) All material Intellectual Property used in the operation of the business of the SGA Companies, including all names used by the SGA Companies in the conduct of the Business, is either owned by a SGA Company (the “ Owned Intellectual Property ”) or is used by a SGA Company pursuant to an existing license or other provision granted in a contract (the “ Licensed Intellectual Property ”).

(b) Section 3.12(b) of the Disclosure Schedule sets forth a true, correct and complete list of all Owned Intellectual Property that is registered, issued or the subject of a pending application with any Governmental Authority. All of the registrations, issuances and applications set forth on Section 3.12(b) of the Disclosure Schedule are in full force and effect and have not expired or been cancelled, abandoned or otherwise terminated, and payment of all renewal and maintenance fees, costs and expenses in respect thereof having a deadline (including any extensions thereof that have been duly granted) have been duly made on or prior to such deadline. The SGA Companies own and possess all right, title and interest in and to the Owned Intellectual Property free and clear of all Encumbrances (other than Permitted Encumbrances).

(c) Section 3.12(c) of the Disclosure Schedule sets forth a true, correct and complete list of all material contracts (i) pursuant to which any SGA Company use any material Licensed Intellectual Property (other than licenses to use commercially available software granted pursuant to the licensor’s standard form agreement, even if negotiated) or (ii) pursuant to which any SGA Company has granted to a third party any right in or to any Owned Intellectual Property (collectively, the “ IP Licenses ”).

(d) To the Knowledge of SGA, the conduct of the Business as currently conducted does not infringe or otherwise violate any Intellectual Property of any other Person, and as of the date of this Agreement there is no Action pending or, to the Knowledge of SGA, threatened in writing alleging any such infringement or violation of any Intellectual Property of any other Person or challenging any of the SGA Companies’ ownership rights in or to any Owned Intellectual Property. To the Knowledge of SGA, as of the date of this Agreement, no Person is infringing or otherwise violating any Owned Intellectual Property or any rights of the SGA Companies in any Licensed Intellectual Property, in a manner which would be material to the SGA Companies, taken as a whole.

(e) The SGA Companies have a privacy policy (the “ Privacy Policy ”) regarding the collection and use of sensitive, non-public personally identifiable information collected and maintained by the SGA Companies (“ Personal Information ”), a true, correct and complete copy of which has been made available to the Purchaser prior to the date hereof. Each of the SGA Companies is in material compliance with all applicable Laws regarding the collection, use and protection of Personal Information and with the SGA Companies’ Privacy Policy, and, to the Knowledge of SGA, in the last three (3) years, no Person has gained unauthorized access to or made any unauthorized use of any such material Personal Information maintained by the SGA Companies. The SGA Companies have implemented reasonable security measures designed to protect Personal Information stored in their computer systems from unlawful use by any third party. As of the date of this Agreement, no Actions are pending or, to the Knowledge of SGA, threatened in writing against any of the SGA Companies relating to the collection or use of Personal Information.

Section 3.13 Insurance . Section 3.13 of the Disclosure Schedule sets forth each material insurance policy and bond covering any SGA Company or its assets, properties or employees. Such policies and bonds are in full force and effect (except for insurance policies that have expired under their terms in the ordinary course), all premiums due and payable thereon have been paid and no SGA Company has received written notice from any insurer or agent of any intent to cancel any such insurance policy or bond and no such insurance policy is occurrence-based. Except in the ordinary course and at the end of the applicable policy term, no SGA Company has received any written notice of cancellation or non-renewal of any such policies or bonds nor, to the Knowledge of SGA, has the termination of any such policies or bonds been threatened in writing. There is no material Action pending under any of such policies or bonds as to which coverage has been denied or disputed by the underwriters of such policies or bonds. The fidelity insurance policies and all other insurance coverage of the SGA Companies have been maintained in accordance with applicable Law in all material respects. Except as set forth on Section 3.13 of the Disclosure Schedule, following the consummation of the Transactions, each material insurance policy to which any SGA Company is a party will continue to provide coverage with respect to acts, omissions and events occurring prior to the Closing with respect to the business of the SGA Companies in accordance with its terms as if the Transactions had not occurred.

Section 3.14 Properties and Assets .

(a) Except as set forth on Section 3.14(a) of the Disclosure Schedule, or for assets disposed of in the ordinary course of business consistent with past practice since the Interim Balance Sheet Date, the SGA Companies have valid title to, or hold pursuant to valid and enforceable leases, all of the material personal property shown to be owned or leased by it on the balance sheet included in the Interim Financial Statements, in each case free and clear of all Encumbrances, except for Permitted Encumbrances.

(b) Section 3.14(b) of the Disclosure Schedule sets forth a true, correct and complete list of all leasing, sublease, license or other occupancy agreement under which any of the SGA Companies leases, uses or occupies real property, along with all amendments, modifications and supplements thereto (each, a “ Lease ” and collectively, the “ Leases ”). A SGA Company has a valid and enforceable leasehold interest under each of the Leases to which it is a party and each of such Leases is in full force and effect. No SGA Company or, to the Knowledge of SGA, any other Party thereto, is in default or breach in any material respect under the terms of any such Lease nor has any event occurred that, with notice or lapse of time or both, would constitute a material breach of any Lease by any SGA Company. True and correct copies of each Lease (including all amendments and supplements thereto) as in effect as of the date hereof have been made available to the Purchaser or its representatives.

(c) Except as set forth in Section 3.14(c) of the Disclosure Schedule, no SGA Company has leased or otherwise granted to any Person the right to use or occupy any properties subject to the Leases or any portion of such property.

(d) No SGA Company owns any real property.

Section 3.15 Employee Matters .

(a) Plans and Documents . Section 3.15(a) of the Disclosure Schedule lists all Plans. With respect to each Plan, the SGA Companies have made available to the Purchaser or its representatives a complete and accurate copy of (i) each Plan document and all amendments thereto, or a written description of any Plan that is not set forth in a written plan document; (ii) each trust agreement, insurance contract or other documents relating to the funding of benefits under any Plan; (iii) the most recent summary plan description and summary of material modifications thereto; (iv) for the recent three (3) years, the annual reports on Form 5500, together with all required schedules and financial statements thereto; (v) the most recently received IRS determination, advisory or opinion letter, applicable; and (vi) the most recent actuarial report and financial statement, as applicable.

(b) Compliance . Each Plan, including any associated trust or fund, has been established, operated and administered in all material respects in compliance with its terms and the requirements of all applicable Laws and governmental orders, including ERISA and the Code. No Action is pending or, to the Knowledge of SGA, threatened with respect to any Plan (other than claims for benefits in the ordinary course) or any fiduciaries thereof. Except as would not, individually or in the aggregate, be material to the SGA Companies, taken as whole, all required contributions, premiums and other payments required by applicable Law or by the terms of any Plan have been made on or before their due dates or, if applicable, accrued or reserved for on the balance sheet of the SGA Companies in accordance with normal accounting practices and there are no material unfunded liabilities thereunder. With respect to each Plan, all reports, returns, notices and other documentation that are required to have been filed with or furnished to the IRS, the United States Department of Labor or any other Governmental Authority, or to the participants or beneficiaries of such Plan, have been filed or furnished on a timely basis. No Plan is or, since January 1, 2015, has been the subject of an examination or audit by a Governmental Authority.

(c) Qualification of Certain Plans . Each Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and has received a favorable determination letter or favorable opinion letter from the IRS to that effect, or is a prototype plan that is entitled to rely on an opinion letter issued by the IRS to the prototype plan sponsor regarding qualification of the form of such prototype plan, and to the Knowledge of SGA, no facts or circumstances exist that would reasonably be expected to cause the IRS to revoke such determination, or which could reasonably be expected to require action under the compliance resolution programs of the IRS to preserve the qualified status of such Plan. Each trust established in connection with any Plan is exempt from federal income taxation under Section 501(a) of the Code and, to the Knowledge of SGA, no fact or event has occurred which would reasonably be expected to adversely affect the exempt status of any such trust.

(d) Absence of Certain Types of Plans . No SGA Company has ever maintained, sponsored, contributed to, participated in or had any obligation to fund any of the following Plans or arrangements: (i) an employee benefit plan subject to Title IV of ERISA or Section 412 of the Code (e.g., defined benefit pension plans); (ii) a multiemployer plan as defined under Section 3(37) or 4001(a)(31) of ERISA or Section 414(f) of the Code; (iii) a multiple employer plan within the meaning of Section 413(c) of the Code or Sections 4063, 4064 or 4066 of ERISA; (iv) a multiple employer welfare arrangement within the meaning of Section 3(40)(A) of the Code; (v) a voluntary employees beneficiary association within the meaning of Code Section 501(c)(9) or (vi) a plan described in Section 401(a)(1) of ERISA. No Plan provides for life, health, medical or other welfare benefits to former employees or beneficiaries or dependents thereof, except for health continuation coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA.

(e) Absence of Certain Liabilities and Events . No SGA Company has incurred any material liability under Sections 4971 through 4980H of the Code or Sections 502(i) or 502(l) of ERISA, and no condition or event exists or has occurred with respect to any Plan that would reasonably be expected to subject any SGA Company to a Tax or penalty imposed by either Sections 4971 through 4980H of the Code or Sections 502(i) or 502(l) of ERISA in an amount which would be material.

(f) Acceleration and Vesting . Neither the execution and delivery of this Agreement nor the consummation of the Transactions will (i) result in any payment or benefit becoming due or payable to any current or former employee, director or individual independent contractor of any SGA Company; (ii) materially increase the amount or value of any benefit or compensation due to any such current or former employee, director or independent contractor under any Plan; (iii) result in the acceleration of the time of payment, vesting or funding of any such benefit or compensation under any Plan, (iv) require any SGA Company to make any payment that would constitute or result in, separately or in the aggregate, an “excess parachute payment” for purposes of Sections 280G and 4999 of the Code, or (v) require a “gross-up” as compensation for any Tax liability to any “disqualified individual” within the meaning of Section 280G of the Code.

(g) Labor Matters . No SGA Company is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by any SGA Company, and, to the Knowledge of SGA, there are no (and, in the past six (6) years, there have been no) organizational campaigns, petitions or other unionization activities seeking recognition of a collective bargaining unit that would reasonably be expected to materially affect the SGA Companies. There are no unfair labor practices or employment discrimination complaints pending against or involving any SGA Company before the National Labor Relations Board or any other Governmental Authority. Each SGA Company is currently in material compliance with all Laws relating to the employment of labor, including those related to wages, hours and collective bargaining. Each SGA Company has complied with the Worker Adjustment and Retraining Notification Act of 1988 (and the regulations promulgated thereunder) and any applicable or similar state or local equivalent (“ WARN ”) with respect to any and all “employment losses” as defined in WARN that have taken place during the six (6) years prior to the date of this Agreement.

(h) Employee and Director Information . The SGA Companies have made available to the Purchaser on or prior to the date hereof a schedule setting forth a true and complete list of all current members of the board of managers, board of directors or similar body and all partners, officers and professional employees of each SGA Company, as of the date hereof, in each case including such Person’s current job title and total compensation (including annual bonus) for the twelve (12) months ended December 31, 2016.

(i) Independent Contractors/Immigration/No Termination . Each Person engaged by any SGA Company as a consultant or independent contractor, rather than as an employee, has been properly classified, is not entitled to any compensation or benefits to which employees are or were at the relevant time entitled (whether under applicable Law or otherwise), was and has been engaged in accordance with all applicable Laws, and has been treated accordingly and appropriately for all Tax purposes. At all times during the last four (4) years, the SGA Companies have complied in all material respects with the Immigration and Nationality Act for all of their respective employees. As of the date of this Agreement, no Management Seller has given written notice to any SGA Party that such Management Seller intends to terminate his or her employment with a SGA Company.

(j) Section 409A . Each Plan that constitutes in any part a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) has been maintained in compliance in all material respects with Section 409A of the Code. There are no contracts, agreements or arrangements in place that would entitle a participant to reimbursement for any additional tax under Section 409A of the Code.

(k) ERISA Accounts .

(i) Each SGA Company has, in the marketing, distribution and provision of services to any Fund and ERISA Account in the past four (4) years, complied with the applicable requirements of ERISA, Section 4975 of the Code and any other law applicable to any state, local or non-United States employee benefit plan that is substantially similar to ERISA or Section 4975 of the Code (“ Similar Law ”). Each SGA Company is a qualified professional asset manager as such term is used in Prohibited Transaction Class Exemption 84-14, as amended, with respect to each Fund and ERISA Account as to which such SGA Company is an “investment manager” within the meaning of Section 3(38) of ERISA and which is deemed to hold “plan assets” within the meaning of 29 CFR 2510.3-101, as and to the extent required to be modified by Section 3(42) of ERISA or Similar Law. “ ERISA Account ” means any investment account other than a Fund in which a plan subject to ERISA or a Similar Law invests.

(ii) Each SGA Company has completed, obtained or performed (and, when required, will complete, obtain or perform) all registrations, filings, approvals, authorizations, consents or examinations required by ERISA, Similar Law or other applicable law (or any government or governmental authority) for the performance of the acts necessary to carry out its services to the Funds and ERISA Accounts.

(iii) Each SGA Company and, to the Knowledge of SGA, each officer, director, partner, and employee of a SGA Company is not disqualified from serving as an ERISA fiduciary by reason of Section 411 of ERISA.

(iv) No SGA Company or, to the Knowledge of SGA, any officers, directors, partners, or employees of a SGA Company has, during the prior six (6) years, (i) had an insurance or bonding company deny, pay out on or revoke a fidelity bond or fiduciary liability insurance policy; (ii) filed a bankruptcy or insolvency petition (or been declared bankrupt) or had a trustee appointed under the Securities Investor Protection Act of 1970; or (iii) had its registration revoked or its activities restricted and, to the Knowledge of SGA, there is no claim, proceeding or litigation with respect to the foregoing presently pending.

Section 3.16 Taxes .

(a) Each SGA Company Party has, for all taxable periods of its existence, properly been treated as a partnership or an entity disregarded from its owner, and not as an association taxable as a corporation or a “publicly-traded partnership” within the meaning of Section 7704 of the Code, in each case for U.S. federal income Tax purposes and for applicable state and local income Tax purposes;

(b) each of the SGA Company Parties (i) has timely filed all federal, state and applicable local and non-U.S. net income and payroll Tax Returns and all other material Tax Returns required to be filed by or with respect to any of them (taking into account valid applicable extensions) and all such Tax Returns were, when filed, and continue to be, true, correct and complete in all material respects and were prepared in material compliance with applicable Law, and (ii) have fully and timely paid all federal, state and applicable local and non-U.S. net income and payroll Taxes and all other material Taxes required to be paid by or with respect to any of them (whether or not shown on any Tax Return);

(c) each of the SGA Company Parties has properly withheld and timely paid to the appropriate Governmental Authority all Taxes required to have been withheld and paid in connection with amounts due or owing to any employee, independent contractor, creditor, or any other third party;

(d) there are no Tax liens on any of the assets of any of the SGA Company Parties other than Permitted Encumbrances;

(e) no action suit, inquiry, claim investigation, Governmental Authority proceeding, or audit, for which, in each case, written notice has been given, with respect to any material Tax is now in progress, pending or threatened against or with respect to any SGA Company Party and to the Knowledge of SGA, no action, suit, inquiry, claim investigation, Governmental Authority proceeding, or audit, for which, in each case, no written notice has been given with respect to any material Tax is now in progress, pending or threatened against or with respect to any SGA Company Party. No deficiency or adjustment, for which, in each case, written notice has been given, in respect of Taxes has been proposed, asserted or assessed by any Taxing Authority against any SGA Company Party and to the Knowledge of SGA, no deficiency or adjustment in respect of material Taxes for which, in each case, no written notice has been given, has been proposed, asserted or assessed by any Taxing Authority against any SGA Company Party. No power of attorney currently in force has been granted with respect to any Taxes of any SGA Company Party;

(f) no Claim has ever been made in writing by a Governmental Authority in any jurisdiction where any of the SGA Company Parties does not file Tax Returns that any of the SGA Company Parties is or may be subject to taxation by such jurisdiction nor, to the Knowledge of SGA, has any Governmental Authority threatened to make such an assertion. To the Knowledge of SGA, no SGA Company Party is required to file a Tax Return in any jurisdiction in which it is not currently filing Tax Returns;

(g) there has been no waiver of any statute of limitations in respect of Taxes of the SGA Company Parties or any agreement to any extension of time with respect to a Tax assessment or deficiency, which waiver or extension is currently in effect (other than extensions of the time to file Tax Returns obtained in the ordinary course) and no request for any such waiver or extension is currently pending or threatened;

(h) none of the SGA Company Parties is a party to or are otherwise bound by any agreement relating to the sharing, allocation or indemnification of Taxes (collectively, “ Tax Sharing Agreements ”) that will survive the Closing, and no SGA Company Party will have any liability under any such agreement after the Closing;

(i) No SGA Company Party has been engaged in any transaction that gives rise to a disclosure obligation as a “listed transaction” under Treasury Regulations Section 1.6011-4(b)(2) or any substantially similar obligation under any applicable Law, in each case, excluding any notional principal contracts or other transaction which the SGA Company Parties reasonably believed, was not such a “listed transaction”, notwithstanding any filing of a “protective” IRS Form 8886 with respect thereto upon the advice of its accountants or other tax advisors.

(j) each of the SGA Company Parties has made available to Purchaser true, correct and complete copies of all Tax Returns for such SGA Company for the shorter of (i) each of the three (3) Taxable years ending immediately prior to the date hereof and (ii) the duration that such SGA Company Party has been in existence;

(k) any adjustment of material Taxes or material taxable income of any of the SGA Company Parties made by the IRS during the last six years, which adjustment is required to be reported to the appropriate state, local or foreign Governmental Authorities, has been so reported;

(l) no SGA Company Party has ever been a member of any affiliated group of corporations (as defined in Section 1504(a) of the Code or any analogous provision of any applicable Law) or filed or been included in a combined, consolidated or unitary Tax Return; no SGA Company is presently liable, and none has any potential liability, for the Taxes of another Person (i) as transferee or successor, (ii) by contract indemnity (other than in the ordinary course of business pursuant to a contract or other agreement the principal object of which is not the sharing taxes, (iii) by the application of Law or (iv) otherwise;

(m) none of the SGA Companies will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (1) change in method of accounting, or use of an impermissible method of accounting, for a taxable period ending on or before the Closing Date; or (2) “closing agreement” as described in section 7121 of the Code or other agreement with a Governmental Authority (or any similar provision of any applicable law) executed on or before the Closing Date;

(n) for all taxable years since its first third-party investor until Closing, each Registered Fund has qualified as a regulated investment company taxable under Subchapter M of Chapter 1 of the Code. Each Fund has timely filed (or caused to be timely filed) all federal income and other material Tax Returns required to be filed by it (taking into account any applicable extensions or waivers) with any Governmental Authority and has timely paid (or caused to be paid) all material Taxes shown on such Tax Returns. There is no currently pending or proposed in writing audit of such Tax Returns. There are no outstanding waivers or comparable consents given by any Fund regarding the application of the statute of limitations with respect to material Taxes.

Notwithstanding anything to the contrary in this Agreement, the representations and warranties contained in Sections 3.15(e) , (f) , (i) and (j) and this Section 3.16 are the sole and exclusive representations and warranties relating to Tax matters and no other representation or warranty in this Agreement will be made or deemed to be made by any SGA Company Party relating to Tax matters.

Section 3.17 Material Contracts .

(a) Section 3.17(a) of the Disclosure Schedule lists each of the following contracts and agreements of the SGA Companies (such contracts and agreements, together with the Advisory Agreements and Fund Agreements, collectively, the “ Material Contracts ”) as of the date hereof:

(i) any agreement (other than agreements listed in Section 3.09(d) of the Disclosure Schedule) pursuant to which any SGA Company is obligated to pay, or is entitled to receive, whether individually or in the aggregate, an aggregate amount in excess of $100,000 per annum (whether on a fixed and/or contingent basis);

(ii) any partnership, joint venture or similar agreement or arrangement to which any SGA Company is a party;

(iii) any agreement relating to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise);

(iv) each Lease;

(v) any agreement relating to Indebtedness, except any such agreements with an aggregate outstanding principal amount (taking all such agreements together) not exceeding $100,000 and which may be prepaid on not more than thirty (30) days’ notice without the payment of any penalty;

(vi) each IP License;

(vii) any agency, dealer, sales representative, distribution, marketing or other similar agreement with respect to the distribution or sale of shares, units or interests of a Fund;

(viii) any agreement that materially limits (or purports to materially limit) the ability of any SGA Company from engaging or competing in any line of business or with any Person (including any such agreement that requires or purports to require any SGA Company to conduct any type of business exclusively with another Person or group of Persons), or from soliciting for employment or hiring any Person, in any geographic area or during any period of time;

(ix) any agreement with any Governmental Authority, other than any Advisory Agreement or agreement relating to any Governmental Authority’s investment in any Fund;

(x) any Affiliate Contract, including any Advisory Agreement, Fund Agreement or Affiliate Contract to which any Related Client (other than any SGA Related Entity) is a party;

(xi) any custody, transfer agent, shareholder service, administrative, accounting and other similar agreements to which a Fund is a party, other than any Advisory Agreement;

(xii) any contract requiring any SGA Company (A) to co-invest with any other Person, (B) to provide seed capital or similar investment or (C) to invest in any investment product (including any contract requiring any additional or “follow-on” capital contributions to any Fund);

(xiii) any contract that contains (A) a “clawback” or similar undertaking requiring the contribution, reimbursement or refund by a SGA Related Entity or SGA Seller of any prior distribution, return of capital or fees (whether performance based or otherwise) paid to any such Person or (B) a “most favored nation” or similar provision;

(xiv) any contract (other than any Fund Agreement) that contains (A) key person provisions pertaining to employees of any SGA Related Entity or (B) any of the following rights provided to an investor with respect to a Client advised by a SGA Company: (1) special withdrawal or redemption rights, (2) designation rights regarding advisory boards or similar provisions or (3) special anti-dilution rights;

(xv) any placement agent agreement, or any other contract for the distribution or sale of shares, units or interests of a Fund;

(xvi) any side letter with any other Client; and

(xvii) any other agreement, commitment, arrangement or plan not made in the ordinary course of business that is material to the SGA Related Entities.

(b) As of the date hereof, (i) each Material Contract is valid and binding on the SGA Company that is party thereto and is in full force and effect, except as would not, individually or in the aggregate, be material to the SGA Companies, taken as a whole and (ii) no SGA Company or, to the Knowledge of SGA, any other party thereto, is in default or breach in any material respect under the terms of any such Material Contract, nor to the Knowledge of SGA, has any event occurred that, with notice or lapse of time or both, would constitute a material breach of any Material Contract by any SGA Company that is party thereto. As of the Closing Date, after giving effect to the Transactions, and subject to receipt of any required consent and satisfaction of any notice requirement with respect to each Material Contract set forth on Section 3.04 and Section 3.05 of the Disclosure Schedule, and receipt of the applicable Client Consent applicable to such Material Contract: (i) each Material Contract will be valid and binding on the SGA Company that is party thereto and will be in full force and effect and (ii) no SGA Company or, to the Knowledge of SGA, any other party thereto, will be in default or breach in any material respect under the terms of any such Material Contract, nor, to the Knowledge of SGA, will any event have occurred that, with notice or lapse of time or both, would constitute a material breach of any Material Contract by any SGA Company party thereto.

Section 3.18 Accounting Controls . The SGA Companies maintain internal controls over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP, giving due regard to the SGA Companies’ size and industry and the fact that they are privately owned.

Section 3.19 Affiliate Transactions . Except as set forth in Section 3.19 of the Disclosure Schedule, none of the SGA Parties or any Affiliate thereof (other than any SGA Related Entity), any officer, director or, to the Knowledge of SGA, any immediate family member of any of the foregoing Persons is a party to or the beneficiary of (i) any material contract with any SGA Related Entity or has any material interest in any material property used by any SGA Related Entity or (ii) any agreement providing for payment of any cash or issuances of equity of any SGA Company to any investment professional employed by any of the SGA Companies, except in each case as contemplated by any employment or similar agreement, any Plan, the Existing SGA LPA or the Operating Agreements (the material contracts referred to in this Section 3.19 , collectively, an “ Affiliate Contract ”).

Section 3.20 Brokers . Except for the Seller Investment Banking Fees, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of any of the SGA Parties.

Section 3.21 Certain Assets . No Person or entity has a right to 50% of the profits or 50% of the assets upon dissolution of any SGA Company Party and each SGA Company Party has less than $16,200,000 in total assets on its most recent regularly prepared balance sheet. even if unaudited, as of Closing.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER

In order to induce the SGA Parties to enter into this Agreement and consummate the Transactions, the Purchaser hereby represents and warrants to the SGA Parties, both as of the date of this Agreement and as of the Closing Date, the accuracy of each of the factual statements set forth in this Article IV .

Section 4.01 Existence and Power . The Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all necessary limited liability company power and authority to enter into this Agreement and the Ancillary Agreements to which it is or will be a party, to carry out its obligations hereunder and thereunder and to consummate the Transactions. The Purchaser is duly licensed or qualified to do business and is in good standing in each jurisdiction that the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except to the extent that the failure to be so licensed, qualified or in good standing would not materially adversely affect the ability of the Purchaser to carry out its obligations under, and to consummate, the Transactions.

Section 4.02 Authorization . The Purchaser has all necessary power and authority to enter into this Agreement and the Ancillary Agreements to which it is or will be a party, to carry out its obligations hereunder and thereunder and to consummate the Transactions. The execution and delivery by the Purchaser of this Agreement and the Ancillary Agreements to which it is or will be a party, the performance by the Purchaser of its obligations hereunder and thereunder and the consummation by the Purchaser of the Transactions have been duly authorized by all requisite action on the part of the Purchaser. Assuming due authorization, execution and delivery by the other applicable parties thereto, this Agreement constitutes, and each other Ancillary Agreement to which the Purchaser is or will be a party will constitute when executed and delivered, a legal, valid and binding agreement of the Purchaser enforceable in accordance with its terms, except as may be limited by the Bankruptcy Exception.

Section 4.03 No Conflict . Assuming the making and obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 4.04 , the execution, delivery and performance by the Purchaser of this Agreement and the Ancillary Agreements to which it is or will be a party do not and will not (a) violate, conflict with or result in the breach of any provision of the Organizational Documents of the Purchaser, (b) conflict with or violate any Law or Governmental Order applicable to the Purchaser or any of its assets, properties or businesses, or (c) conflict with, result in any violation or breach of, constitute a default (or event which, with the giving of notice or lapse of time, or both, would become a default) under, require any consent approval, authorization or other action by, or notification to, any third party under, or give to others any rights of termination, amendment, withdrawal, first refusal, first offer, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Purchaser is a party, except in the case of clauses (b) and (c), as would not prevent, materially delay or otherwise materially and adversely affect the ability of the Purchaser to carry out its obligations under this Agreement or any Ancillary Agreement to which it is or will be a party, and to consummate the Transactions.

Section 4.04 Governmental Consents and Approvals . The execution, delivery and performance by the Purchaser of this Agreement and each Ancillary Agreement to which it is or will be a party do not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to, any Governmental Authority, except (a) as described in Section 4.04 of the Disclosure Schedule or (b) where failure to obtain such consent, approval, authorization or action, or to make such filing or notification would not prevent, materially delay or otherwise materially and adversely affect the consummation by the Purchaser of the Transactions.

Section 4.05 Investment Purpose . The Purchaser is acquiring the Transferred Units solely for the purpose of investment for its own account and not with a view to, or for offer or sale in connection with, any distribution thereof. The Purchaser (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Transferred Units and is capable of bearing the economic risks of such investment. The Purchaser is an “accredited investor” as defined in the Securities Act, and the rules and regulations promulgated thereunder.

Section 4.06 Available Funds . The Purchaser has, and at the Closing the Purchaser will have, sufficient immediately available funds to pay in cash and will have the unrestricted right to use such immediately available funds to pay in cash, the Closing Purchase Price and all other amounts payable pursuant to this Agreement and the Ancillary Agreements or otherwise necessary to consummate the Transactions.

Section 4.07 Litigation . As of the date hereof, there is no Action pending, or to the knowledge of the Purchaser, threatened that challenges the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation by the Purchaser of the Transactions or that would, individually or in the aggregate, reasonably be expected to be material to the Purchaser.

Section 4.08 Statutory Disqualification .

(a) Neither the Purchaser nor any of its Affiliates (which shall not, for the avoidance of doubt, be deemed to include any Person in which a fund or other collective investment vehicle sponsored by a Controlled Affiliate of the Purchaser holds ownership interests) is ineligible pursuant to Section 203 of the Advisers Act to serve as a registered investment advisor.

(b) No “person associated with” (as defined in the Advisers Act) Purchaser or any other Person covered by clause (a) is ineligible pursuant to Section 203 of the Advisers Act to serve as a person associated with a registered investment advisor.

Section 4.09 Brokers . Except for Sandler O’Neill + Partners, L.P., all of whose fees will be borne by the Purchaser, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Purchaser.

Section 4.10 No Other Representations or Warranties . Except to the extent of the representations and warranties expressly made by the other Parties and contained in this Agreement, any certificate delivered in connection herewith or any Ancillary Agreement, the Purchaser acknowledges and agrees that (i) none of the Sellers, the SGA Companies or any other Person makes any express or implied representation or warranty with respect to the SGA Companies, the Transferred Units, the Transactions Agreement or otherwise and (ii) the Purchaser has not executed or authorized the execution of this Agreement or the consummation of the transactions contemplated by this Agreement in reliance upon any promise, representation or warranty not expressly set forth in this Agreement.

ARTICLE V

ADDITIONAL AGREEMENTS

Section 5.01 Conduct of Business Prior to the Closing . The SGA Parties agree that, except as described in Section 5.01 of the Disclosure Schedule and except as provided for in this Agreement, between the date hereof and the Closing, the SGA Parties shall cause each SGA Related Entity to conduct its business in the ordinary course in all material respects, and shall use commercially reasonable efforts to: (i) preserve intact in all material respects the SGA Companies’ current business organization; (ii) keep available the services of each SGA Related Entity’s current senior officers and management employees (which efforts shall not require any SGA Related Entity to increase the compensation or benefits of any such officer or employee); and (iii) maintain the goodwill associated with the Business in all material respects, including but not limited to preserving relationships with customers, vendors, lenders and others having material business relationships with it. Except as set forth in Section 5.01 of the Disclosure Schedule and except as provided for in this Agreement, the SGA Parties, between the date hereof and the Closing, shall not permit any SGA Related Entity to (in each case, without the prior written consent of the Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed):

(a) (i) enter into any new material line of business or (ii) commit to any capital expenditure, except, in respect of clause (ii), in the ordinary course of business consistent with past practice not to exceed $100,000;

(b) enter into any lease for real property or amend any Lease;

(c) (i) issue, authorize or propose the issuance of any limited liability company, partnership or other ownership interests, or other securities or any security convertible into or exchangeable or exercisable for any such ownership interest or other security, (ii) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such liquidation or a dissolution, merger, consolidation, restructuring, recapitalization or other reorganization, or (iii) repurchase, redeem or otherwise acquire any limited liability company, partnership or other ownership interests or any securities convertible into or exercisable or exchangeable for any ownership interests or other security, in each case other than any Fund acting in the ordinary course of business consistent with past practice;

(d) amend or propose to amend its Organizational Documents;

(e) except as required by the terms of any Plan or to comply with applicable Law, (i) enter into, adopt, materially amend, terminate, freeze, materially increase benefits under or agree to or make any award or grant under any material Plan (or any plan that would be a Plan if in effect on the date hereof), (ii) take any action to accelerate any rights or benefits under any Plan, (iii) except for reasonable and customary increases in individual base salary made in the ordinary course, make or announce any material increase in salaries, bonuses or other compensation or fringe benefits payable or to become payable, or grant, announce, or increase any termination or severance, retention, change-of-control or similar payments, to any present or former employee, officer, director, agent or independent contractor of any SGA Company, (iv) enter into, establish, adopt or amend any (A) collective bargaining agreement or other agreement with a labor union or labor organization or (B) other agreement, contract or enforceable understanding of any kind covering, involving or entered into with any employee or independent contractor of any SGA Company providing for annual cash compensation to such employee or independent contractor in excess of $50,000, in all cases except where (x) required by Law, (y) to maintain compliance with applicable Tax-related requirements relating to any Plans or (z) required to satisfy contractual commitments in existence as of the date hereof and set forth in the Disclosure Schedules;

(f) enter into any contract that, if such contract had been in effect on the date hereof, would have been a Material Contract, amend or terminate any Material Contract or waive or cancel any material right thereunder, in each case other than in the ordinary course of business consistent with past practice;

(g) sell, lease or otherwise transfer, or create or incur any Encumbrance (with the exception of Permitted Encumbrances) on, such SGA Company’s material assets, securities, property, interests or businesses;

(h) voluntarily divest itself of management of any Fund;

(i) accelerate the billing or other realizations of advisory or performance fees payable by Funds to any SGA Company or delay the payment of any material Liabilities beyond the ordinary course of business consistent with past practice;

(j) create, incur, assume, suffer to exist or otherwise be liable with respect to any Indebtedness having an aggregate principal amount (together with all other indebtedness for borrowed money of the SGA Companies) outstanding at any time greater than $100,000 or that cannot be repaid in full prior to Closing,, in each case in the ordinary course of business consistent with past practice;

(k) change any method of accounting or accounting practice or policy used by any SGA Company, other than such changes required by GAAP or applicable Law;

(l) fail to exercise any rights of renewal with respect to any material Lease that by its terms would otherwise expire; provided that this clause shall not require any SGA Company to increase the amounts payable under any Lease or otherwise agree to terms less favorable than those in effect as of the date hereof in connection with any such renewal;

(m) settle or compromise any material claims of any SGA Related Entity involving (i) any liability for money damages or (ii) any restrictions upon the Business;

(n) acquire any business or Person, by merger, consolidation or otherwise, in a single transaction or a series of related transactions;

(o) make any change with respect to its senior administrative, marketing, portfolio management and supervisory personnel, or hire or terminate any such Person or any Management Seller, other than terminations for cause;

(p) fail to maintain at all times all insurance of the kind, in the amount and with the insurers set forth in Section 3.13 of the Disclosure Schedule or substantially equivalent insurance with any substitute insurers approved in writing by the Purchaser, which approval shall not be unreasonably withheld, conditioned or delayed;

(q) pay any dividends or make any distributions to any equity holder, except as would not reasonably be expected to cause (i) the Estimated Net Working Capital to be less than the Target Net Working Capital or (ii) less than $1,500,000 of cash to be included in the Net Working Capital;

(r) make any new, or change any existing, material Tax election, settle or compromise any material Tax liability, prepare any Tax Returns in a manner which is inconsistent with the past practices of the relevant SGA Company Party with respect to the treatment of items on such Tax Returns, incur any material liability for Taxes, or file an amended Tax Return or a claim for refund of Taxes, or surrender any such claim for refund, with respect to the income, operations or property of the applicable SGA Company Party, in each case other than as required in the ordinary course of business; or

(s) agree to take any of the actions specified in Section 5.01(a) - Section 5.01(s) , except as contemplated by this Agreement and the Ancillary Agreements.

Section 5.02 Access to Information . From the date hereof until the Closing, upon reasonable notice, the SGA Company Parties shall and shall cause each other SGA Company and each of their respective officers, directors and employees, and shall use commercially reasonable efforts to cause the agents, representatives, accountants and counsel of the SGA Companies to: (i) afford the Purchaser and its authorized representatives reasonable access to the offices, properties, employees, and the books and records of the SGA Company Parties; and (ii) furnish to the officers, employees, and authorized agents and representatives of the Purchaser such additional financial and operating data and other information regarding the Business (or copies thereof) as the Purchaser may from time to time reasonably request; provided , however , that any such access or furnishing of information shall be conducted at the Purchaser’s expense, during normal business hours, and in such a manner as not to unreasonably interfere with the normal operations of the Business and upon reasonable advance written notice. All requests for access and information made pursuant to this ‎ Section 5.02 shall be in writing and directed to the Seller Representative or such Person or Persons as may be designated by the Seller Representative. Notwithstanding the foregoing, no SGA Company will be required to provide access to or to disclose information where such access or disclosure could result in the breach of the Privacy Policy, could cause significant competitive harm to such SGA Company if the Transactions are not consummated, jeopardize the attorney-client or work product privilege of such SGA Related Entity or contravene applicable Law, any fiduciary duty or any binding agreement existing as of the date hereof or entered into after the date hereof in the ordinary course of business (it being understood that the SGA Company Parties shall use commercially reasonable efforts to permit the sharing of any information so withheld by reason of attorney-client privilege, applicable Law, fiduciary duty, Privacy Policy or binding agreements in a manner consistent with the maintenance of such privilege, the obligations of such Law, duty, Privacy Policy or agreement or the preservation of such privilege). The Purchaser shall hold any information obtained pursuant to this Section 5.02 pursuant to the Confidentiality Agreement and Section 5.04 .

Section 5.03 Notice of Certain Events . From the date hereof until the Closing, the SGA Company Parties, on the one hand, and the Purchaser, on the other hand, shall promptly notify the other Party in writing upon acquiring knowledge of any event, circumstance, occurrence or fact that would cause any of the conditions set forth in Section 7.01(a) (in the case where the Purchaser is the advising Party), and Section 7.02(a) (in the case where any SGA Company Party is the advising Party), not to be satisfied on or prior to the Termination Date. No such notice shall be deemed to amend or modify any representation or warranty of the Party disclosing such information or affect any rights or remedies available to the Party receiving such information in connection with any breach of any representation or warranty; provided , however , that a breach of this Section 5.03 shall not be considered for purposes of determining the satisfaction of the closing conditions set forth in Article VII or give rise to a right of termination under Article IX if the underlying breach or breaches with respect to which the other Party failed to give notice would not result in the failure of the closing conditions set forth in Article VII nor result in the right of such non-breaching Party to terminate this Agreement under Article IX , as the case may be. Notwithstanding anything to the contrary contained herein, for purposes of Article VIII , a breach by a SGA Company Party of this Section 5.03 shall be deemed a breach of a representation or warranty of such SGA Company Party and shall not be deemed to be a breach of a covenant.

Section 5.04 Confidentiality . The terms of the letter agreement, dated as of June 6, 2017, between SGA and the Purchaser (the “ Confidentiality Agreement ”), are hereby incorporated herein by reference and shall continue in full force and effect until the Closing, at which time such Confidentiality Agreement and the obligations of the Parties under this Section 5.04 shall terminate. If this Agreement is, for any reason, terminated prior to the Closing, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms. For the avoidance of doubt, the Confidentiality Agreement shall not be interpreted to prohibit communications required or expressly permitted by this Agreement or that are otherwise reasonably necessary for the Parties to perform their obligations hereunder.

Section 5.05 Commercially Reasonable Efforts; Further Assurances .

(a) Subject to the terms and conditions of this Agreement, prior to the Closing, the Purchaser and the SGA Parties shall use, and shall cause their Controlled Affiliates to use, commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable Law to consummate the Transactions, including: (i) preparing and filing as promptly as practicable with any Governmental Authority or other third party all documentation to effect all material filings, notices, petitions, statements, registrations, submissions of information, applications and other documents necessary to consummate the Transactions and (ii) obtaining and maintaining all material approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other third party that are necessary to consummate the Transactions; provided , however , that the Parties understand and agree that commercially reasonable efforts of any Party hereto or Affiliate thereof shall not be deemed to include (x) entering into a settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the Transactions, (y) divesting or otherwise holding separate (including by establishing a trust or otherwise), taking any other action (or otherwise agreeing to do any of the foregoing) with respect to any of its or any SGA Company’s or any of their respective Affiliates’ businesses, assets or properties or (z) requiring any Party to make financial concessions (e.g., fee reductions) to third parties or agreeing to any other structural or conduct relief or to litigate.

(b) The SGA Parties and the Purchaser shall cooperate reasonably with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any Material Contracts, in connection with the consummation of the Transactions and (ii) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.

(c) As promptly as practicable (and in any event no later than the time required under applicable Law) following the Closing Date, SGA shall file with the SEC amendments to the Form ADV of SGA, in form and substance reasonably acceptable to the Purchaser (and SGA shall give the Purchaser a reasonable opportunity to comment on a draft thereof and to have its reasonable comments reflected therein) and in compliance with all applicable Laws. With respect to any new Client after the date of this Agreement and prior to the date of such Form ADV amendment, SGA will provide each such new Client with the applicable Client Consent notification under Section 5.06 no later than the time that SGA provides its then-current Form ADV to such clients.

Section 5.06 Client Consents .

(a) The SGA Parties shall cause the SGA Companies to use commercially reasonable efforts to obtain each applicable Client Consent; provided , that none of the SGA Companies or any of the SGA Related Entities will amend or revise any Advisory Agreement or Fund Agreement or reduce or waive any fee payable under any Advisory Agreement or Fund Agreement or offer or promise to any Client or any limited partner or other investor in any Fund any reduced fee or other amendment, in connection with obtaining such Client Consents or otherwise in connection with the Transactions, in each case without the prior written consent of the Purchaser. To the extent reasonably and specifically requested by the SGA Parties in connection with obtaining Client Consents, the Purchaser shall use good faith efforts to cooperate with and support the SGA Parties and the SGA Companies’ efforts to obtain such Client Consents in connection with such a request.

(b) Without limitation of Section 5.06(a) above, except with respect to Registered Funds (which are addressed in Section 5.07 below) with respect to each Advisory Agreement for which the consent of a Client to the deemed assignment of such Advisory Agreement as a result of the Transactions is required by applicable Law and/or by the terms of such Advisory Agreement, (i) as promptly as practicable following the date hereof, SGA shall send a written notice informing such Clients of the Transactions and requesting written consent to the deemed assignment of such Client’s Advisory Agreement (or providing for approval of such deemed assignment by way of “negative consent” to the extent permitted by applicable Law and by the terms of such Advisory Agreement) and (ii) to the extent written consent is not received by a SGA Company from any such Client within thirty (30) days after delivery of the notice with respect thereto, SGA shall send a second notice to such Client again requesting written consent to the deemed assignment of such Client’s Advisory Agreement (or again providing for approval of such deemed assignment by way of “negative consent” to the extent permitted by applicable Law and by the terms of such Advisory Agreement). The SGA Parties shall cause the Purchaser to be provided a reasonable opportunity to review and comment upon all disclosure, notice or consent materials to be provided by any SGA Related Entity to any Client, limited partner or other investor in any Fund in connection with the Transactions and all such disclosure, notice or consent materials shall be in form and substance reasonably satisfactory to Purchaser. The SGA Company Parties shall cause the SGA Related Entities to promptly upon their receipt provide the Purchaser with copies of any and all correspondence (other than any non-material correspondence, informal inquires or similar communications) between such parties and the Clients, limited partner or other investors in any Fund or members or representatives or counsel of any of the foregoing relating to the Transactions, and shall otherwise keep the Purchaser reasonably informed in a timely manner of any material developments involving the obtaining of Client Consents. For the avoidance of doubt, “assignment” for purposes of this Section 5.06 shall have the same definition as such term under Section 202(a)(1) of the Advisers Act.

Section 5.07 Registered Fund Approvals .

(a) For each Registered Fund, SGA shall use commercially reasonable efforts to obtain in accordance with Section 15 of the Investment Company Act, the due consideration and approval by the board of directors or trustees (including the disinterested directors or trustees), as applicable, of each Registered Fund (“ Fund Board Approval ”) of an advisory or sub-advisory agreement on terms that, taken as a whole, that are substantially similar to, and economic terms that are no less favorable to the SGA Companies in the aggregate than, the terms of the existing Advisory Agreement with such Registered Fund (with the exception of its effective and termination dates). In the event that Fund Shareholder Approval will not be obtained with respect to any Registered Fund prior to the Closing, if mutually agreed by the Purchaser and the Seller Representative, subject to Fund Board Approval thereof, SGA shall enter into an interim Advisory Agreement in accordance with Rule 15a-4 under the Investment Company Act on terms that, taken as a whole, are substantially similar to, and economic terms that are no less favorable to the SGA Companies in the aggregate than, the terms of the existing Advisory Agreement with such Registered Fund (with the exception of its effective and termination dates) that has a duration of not less than 150 days following the Closing Date.

(b) To the extent the Fund Board Approval is obtained for a Registered Fund, SGA shall use commercially reasonable efforts, in coordination with all necessary Persons (including the sponsor of such Registered Fund), to obtain the approval of shareholders of such Registered Fund (“ Fund Shareholder Approval ”) of such new advisory or sub-advisory agreement with the Registered Fund, including with respect to the preparation and review of all proxy solicitation materials describing the transactions contemplated hereby and the new advisory or sub-advisory agreement, and by requesting the sponsor of such Registered Fund to hold the shareholder meeting as promptly as practicable (provided that the requirements of this sentence shall not be applicable to any Registered Fund that has obtained exemptive relief from the SEC permitting its new advisory or sub-advisory agreement to be entered into with SGA without shareholder approval).

(c) The Purchaser shall, after the date of this Agreement and before each meeting of shareholders of the relevant Registered Fund for the purpose of considering and taking action upon a new advisory or sub-advisory agreement for the relevant Registered Fund (“ Shareholder Meeting ”), reasonably cooperate and coordinate with SGA in all commercially reasonable respects in connection with (i) the preparation, review and presentation of materials and information necessary in order to obtain Fund Board Approvals (pursuant to Section 15(c) of the Investment Company Act) and (ii) the preparation and review of proxy solicitation materials (including proxy statement) (collectively with any amendments and supplements thereto and any other required disclosure materials, “ Proxy Statement ”) to be used to obtain Fund Shareholder Approval of a new advisory or sub-advisory. agreement at a Shareholder Meeting (including by providing to SGA all information relating to the Purchaser and its Affiliates necessary in connection with the foregoing, which information the Purchaser agrees shall be accurate and complete at the time it is provided and at the time it is used in connection with the foregoing). SGA agrees that it shall use commercially reasonable efforts to make all necessary presentations to the board of directors or trustees, as applicable (including the independent directors or trustees, as applicable), of each relevant Registered Fund as promptly as practicable, provided that the Purchaser provides such information reasonably requested by SGA in a timely manner.

(d) SGA shall reasonably cooperate and coordinate with the Purchaser and other necessary Persons in connection with the preparation, review and filing with the SEC of any Proxy Statement by the Registered Funds relating to any Shareholder Meeting of the applicable Registered Fund which is required to approve the relevant advisory or sub-advisory agreement.

(e) Each of SGA and the Purchaser and their respective counsel and other necessary Persons (including counsel to the Registered Funds and counsel to the independent directors or trustees, as applicable) shall be given a reasonable opportunity to review each Proxy Statement before it is filed with the SEC, and SGA shall use commercially reasonable efforts to cause the relevant Registered Fund to give due consideration to the reasonable additions, deletions or changes suggested thereto by the Purchaser and its counsel.

(f) SGA, on the one hand, and the Purchaser, on the other hand, shall promptly notify counsel to the Registered Funds of, and shall use commercially reasonable efforts to correct, any information provided by it for use in each relevant Proxy Statement, to the extent that, to the actual knowledge of such Party, such information shall have become false or misleading in any material respect.

Section 5.08 Transfer of Securities . Except for the Transactions and except as set forth on Section 5.08 of the Disclosure Schedule, from the date hereof until the Closing, each SGA Party agrees that it or he, as applicable, shall not transfer beneficial or record ownership of any Unit issued to it or him, as applicable, to any Person, or permit any Unit issued to it or him, as applicable, to become subject to any Encumbrance other than Permitted Securities Encumbrances other than under the terms of the Operating Agreements, without the written consent of the Purchaser.

Section 5.09 Tax Covenants . Except as described in Section 5.09 of the Disclosure Schedule, between the date hereof and the Closing, each of the SGA Company Parties shall:

(a) prepare, in the ordinary course of business and consistent with past practice (except as otherwise required by a change in applicable Law), and timely file all Tax Returns required to be filed by it on or before the Closing Date;

(b) fully and timely pay all federal, state and applicable local and non-U.S. net income and payroll Taxes and all other material Taxes due and payable by it on or before the Closing Date, except if such Taxes are being contested in good faith by appropriate proceedings and reserves for such Taxes have been established in accordance with the Balance Sheet Rules; and

(c) promptly notify the Purchaser of any Action pending or threatened against or with respect to each SGA Company Party by any Governmental Authority in respect of any Tax matter, including Tax liabilities and refund claims.

Section 5.10 Estancia Covenants .

(a) From and after the Closing until the third (3rd) anniversary of the Closing, without the prior consent of Purchaser, Estancia shall not, and shall cause its controlled Affiliates not to, employ or solicit for employment any Management Seller; provided , that this Section 5.10(a) shall not prohibit general solicitation for employment not targeted at the Management Sellers.

(b) From and after the Closing, Estancia shall, and shall cause its Controlled Affiliates to keep confidential any confidential and proprietary information of the SGA Companies regarding the Business or the Funds (including confidential records, client and customer lists, computer software, data, documents, operational methods, pricing and investment policies and trade know-how and secrets) compiled by, created by, obtained by, or furnished to, Estancia or its Controlled Affiliates prior to the Closing; provided , that this Section 5.10(b) shall not apply to the extent any information (A) is or becomes publicly available other than a breach of this Section 5.10 , (B) is required to be disclosed pursuant to applicable law, regulation or legal, regulatory or judicial process.

Section 5.11 Certain Agreements . Each SGA Party, as applicable, hereby (a) waives all rights arising under the agreements listed in Section 3.03(c) of the Disclosure Schedule in connection with the entry by some or all SGA Parties into this Agreement and the Ancillary Agreements and the consummation of the Transactions, including all tag-along rights, rights of first refusal and related consent and notice rights and (b) grants all necessary consents and approvals as may be required under the agreements listed in Section 3.03(c) of the Disclosure Schedule in connection with the entry by such SGA Party into this Agreement and any Ancillary Agreement, as applicable to such SGA Party, and the consummation of the Transactions. Each SGA Party acknowledges and agrees that with respect to each waiver pursuant to Section 5.11(a) and each consent and approval pursuant to Section 5.11(b), such party is hereby acting solely in their applicable capacity as a General Partner, Limited Partner, Board member and Member (each as defined in the relevant document). Further, each of the Founders and Estancia hereby agree to withdraw as members of SGIA effective upon the Closing (but subject to the occurrence thereof) without any further action required of SGIA, the Founders or Estancia.

ARTICLE VI

TAX MATTERS

Section 6.01 Tax Matters .

(a)

(i) (A) All Tax Returns relating to the SGA Companies (or the operations thereof) with respect to taxable periods ending on or before the Closing Date and required to be filed (taking into account valid applicable extensions) after the Closing Date shall be prepared by the Seller Representative. Such Tax Returns shall, to the extent relating to a taxable period ending on or before the Closing Date, be prepared in a manner consistent with the past practices of the SGA Companies in filing their Tax Returns unless otherwise required by applicable Law. The Seller Representative shall deliver a draft of each such Tax Return to the Purchaser for review and comment at least thirty (30) days prior to the filing date of such Tax Return and the Seller Representative shall consider in good faith such changes to such Tax Returns as the Purchaser reasonably requests provided such changes are reasonable, consistent with applicable Law and would not materially increase the amount of Taxes owed by the Sellers, all as reasonably determined by the Seller Representative in consultation with the Purchaser, and no such Tax Return shall be filed without the prior written consent of the Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.

(B) All Tax Returns relating to the SGA Companies (or the operations thereof) in respect of a Straddle Period shall be prepared by the Purchasers. Such Tax Returns shall, to the extent relating to the portion of such Straddle Period ending on or before the Closing Date, be prepared in a manner consistent with the past practices of the SGA Companies in filing their Tax Returns unless otherwise required by applicable Law. The Purchaser shall deliver a draft of each such Tax Return to the Seller Representative for review and comment at least thirty (30) days prior to the filing date of such Tax Return (taking into account valid applicable extensions) and the Purchaser shall consider in good faith such changes to such Tax Returns as the Seller Representative reasonably requests provided such changes are reasonable, consistent with applicable Law and would not materially increase the amount of Taxes owed by the SGA Companies or the Purchaser, all as reasonably determined by the Purchaser in consultation with the Seller Representative, and no such Tax Return shall be filed without the prior written consent of the Seller Representative, which consent shall not be unreasonably withheld, conditioned or delayed.

(ii) Subject to the following sentence, within five (5) days prior to the filing date for any Tax Return described in subparagraph (a)(i)(A) (taking into account valid applicable extensions), Sellers shall timely pay (or cause to be paid) all Taxes shown as due on all Tax Returns described in subparagraph (a)(i)(A). In the case of a Tax Return in respect of a Straddle Period, Sellers shall pay the portion of Taxes shown as due on each such Tax Return allocable to any taxable period (or portion thereof) ending on (and including) the Closing Date (determined under the principles of Section 6.02(b) , and Purchaser or the SGA Companies shall pay any other Taxes shown as due thereon

(b) With respect to any Action in respect of Taxes relating to the SGA Companies (or the operations thereof) for any taxable period ending on or before the Closing Date or the portion of any Straddle Period ending on the Closing Date and with respect to which the full amount of any resulting Tax liability will be borne by the Sellers (including by way of any indemnification under this Agreement) and the other SGA Parties (and not the Purchaser or the SGA Companies), the Seller Representative shall have the right to control, with counsel of its choosing and at its own expense, the conduct of such audit, examination or proceeding; provided , however , that the Purchaser shall be permitted to participate in any such audit, examination or proceeding at its own cost and expense and the Seller Representative shall keep Purchaser reasonably informed of any significant developments in such matter, and, provided , further , that the Seller Representative shall not settle any such audit, examination or proceeding for a Straddle Period without the prior written consent of the Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.

Section 6.02 Tax Indemnities .

(a) From and after the Closing Date, each Seller shall without duplication (severally and not jointly in proportion to each Seller’s Purchase Price Percentage) indemnify the Purchaser Indemnified Parties against and hold harmless from any and all Losses with respect to Taxes (each a “ Tax Loss ” and collectively, the “ Tax Losses ”) arising out of (i) other than as reflected as a liability in the financial statements and taken into account in determining the Closing Adjustment Amount, any Taxes which become payable by or with respect to the SGA Company Parties for taxable periods or portions thereof ending on or before the Closing Date (the “ Pre-Closing Tax Period ”), whether directly, or that are imposed on a SGA Company Party by reason of transferee or successor liability, by contract, the operation of law, or otherwise, in each case determined under the principles of Section 6.02(b) ; and (ii) Taxes imposed on a Purchaser Indemnified Party as a result of, and proximately caused by, (x) a SGA Fundamental Warranty Breach with respect to a representation or warranty set forth in Section 3.16 or (y) the breach of any covenant or agreement set forth in Section 5.09 or this Article VI ; provided , that the calculation of any Tax Losses pursuant to this Section 6.02(a)(ii) shall be determined without giving effect to any Material Adverse Effect, materiality or similar qualifiers.

(b) For purposes of this Article VI , any Taxes for, and any income in respect of, a “ Straddle Period ” (a Tax period that includes, but does not end on, the Closing Date) shall be apportioned between the Pre-Closing Tax Period, on the one hand, and the taxable periods or portions thereof beginning after the Closing Date (the “ Post-Closing Tax Period ”), on the other hand. The income and gain of the SGA Companies shall be allocated between the Purchaser and the Sellers in respect of a Straddle Period based on a closing of the books of the relevant SGA Company effective as of the Closing Date. The amount of any Taxes based on or measured by income, gain or receipts of the SGA Companies shall be allocated between the Pre-Closing Tax Period and the Post-Closing Tax Period on a closing-of-the-books basis. The amount of other Taxes shall be allocated between the Pre-Closing Tax Period and the Post-Closing Tax Period in the following manner: (A) in the case of a real or personal property Tax imposed on property (excluding, for the avoidance of doubt, any income Tax) and that applies ratably to a Straddle Period, the amount of Tax allocable to a portion of the Straddle Period shall be the total amount of such Tax for the period in question multiplied by a fraction, the numerator of which is the total number of days in such portion of such Straddle Period and the denominator of which is the total number of days in such Straddle Period, and (B) in the case of sales, value-added, withholding and similar transaction-based Taxes (other than Conveyance Taxes allocated under Section 6.04 ), such Taxes shall be allocated to the portion of the Straddle Period in which the relevant transaction occurred.

(c) After the Closing, a Purchaser Indemnified Party shall promptly notify the Indemnifying Party in writing of any demand, claim or notice of the commencement of an audit received by such party from any Governmental Authority or any other Person with respect to Taxes for which such other Party is liable pursuant to this Section 6.02 ; provided , however , that a failure to give such notice will not affect such other party’s rights to indemnification under this Article VI , except to the extent that such Party is actually and materially prejudiced thereby. Such notice shall contain factual information (to the extent known) describing the asserted Tax liability and shall include copies of the relevant portion of any notice or other document received from any Governmental Authority or any other Person in respect of any such asserted Tax liability.

Section 6.03 Tax Cooperation and Exchange of Information . The Sellers and the Purchaser shall provide each other with such reasonable cooperation and information as either of them reasonably may request of the other (and shall cause the SGA Companies to provide such cooperation and information) in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to a refund of Taxes or participating in or conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with related work papers and documents (to the extent in the relevant Party’s possession) relating to rulings or other determinations by Taxing Authorities and executing or causing the execution of appropriate power(s) of attorney to allow the Sellers to control Tax-related audits, examinations or other proceedings as contemplated hereby. The Sellers and the Purchaser shall make themselves (and their respective employees) reasonably available on a mutually convenient basis to provide explanations of any documents or information provided under this Section 6.03 . Each of the Sellers and the Purchaser shall retain all Tax Returns, work papers and all material records or other documents in its possession (or in the possession of its Affiliates) relating to Tax matters of the SGA Companies for any taxable period that includes the date of the Closing and for all prior taxable periods until six (6) years following the due date (without extension) for filing such Tax Returns. Any information obtained under this Section 6.03 shall be kept confidential, except as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or in conducting an audit or other proceeding.

Section 6.04 Conveyance Taxes . Any Conveyance Taxes that may be imposed upon, or payable or collectible or incurred in connection with, this Agreement and the Transactions will be borne 50% by the Sellers (pro rata based on each Seller’s Purchase Price Percentage) and 50% by Purchaser. The Purchaser and the Sellers agree to cooperate in the execution and delivery of all instruments and certificates with respect to the preparation and filing of Conveyance Taxes.

Section 6.05 Purchase Price Allocation . The Purchaser shall prepare an allocation of (a) the Purchase Price for Tax purposes (a) among the Transferred Units and (b) the Purchase Price for Tax purposes among the assets of each SGA Company Party as required by the Code, including Sections 754, 755 and 743 thereof, and the Treasury Regulations thereunder (and any similar provision of state, local, or non-U.S. law, as appropriate) consistently with the principles set forth on Schedule E hereto (such allocation, the “ Allocation Schedule ”). The Purchaser shall deliver a draft of the Allocation Schedule to the Seller Representative within thirty (30) days after the date of this Agreement for review and comment. The Purchaser and the Seller Representative shall negotiate in good faith to resolve any disputes regarding the draft Allocation Schedule. No allocation of the Purchase Price may be finalized without the consent of the Seller Representative (such consent not to be unreasonably withheld, conditioned or delayed). Except as otherwise required pursuant to a final determination (within the meaning of Section 1313 of the Code, or any analogous provision of applicable state, local or non-U.S. Law) by a Taxing Authority, each Party (including each SGA Company Party) shall file all Tax Returns (including, but not limited to Internal Revenue Service Form 8594, as applicable) in all respects and for all purposes in a manner that is consistent with the Allocation Schedule as finally determined, and shall take no position (whether in audits, tax returns, or otherwise) that is inconsistent with such Allocation Schedule unless required to do so by applicable Law.

Section 6.06 Section 754 Election . The Parties shall cause an election or elections under Section 754 of the Code to be made by or in effect for SGA and each SGA Company Party taxed as a partnership for U.S. federal income Tax purposes, for each taxable year that includes or ends on the Closing Date.

Section 6.07 Tax Refunds . Any Tax refunds that are received in cash (or that are immediately creditable against otherwise currently payable Taxes) by the Purchaser, any of the SGA Companies or any of their respective Affiliates following the Closing Date, and that in either such case arise from Taxes of any of the SGA Companies for a period (or portion thereof) prior to the Closing Date, determined under the principles of Section 6.02(b) , other than as reflected as an asset in the financial statements and taken into account in determining the Closing Adjustment Amount, shall be for the account of the Sellers, and the Parties shall (or shall cause the relevant Affiliate to) pay over to the Sellers (pro rata based on each Seller’s Purchase Price Percentage) any such refund or the amount of any such credit within ten (10) Business Days after such refund or credit is received or applied. The Sellers, upon the request of Purchaser, shall repay to Purchaser, the SGA Companies or any of their respective Affiliates the amount paid over pursuant to the preceding sentence (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that Purchaser, the SGA Companies or any of their respective Affiliates is required to repay such refund.

ARTICLE VII

CONDITIONS TO CLOSING

Section 7.01 Conditions to Obligations of the SGA Parties . The obligation of the SGA Parties to consummate the Transactions shall be subject to the fulfillment as of the Closing, or the waiver in writing by SGA, on or before the Closing, of each of the conditions set forth in this Section 7.01 .

(a) Representations, Warranties and Covenants . (i) The Purchaser shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing, (ii) (A) except for the representations and warranties of the Purchaser set forth in Section 4.01 and Section 4.02 , the representations and warranties of the Purchaser contained in this Agreement (other than those representations and warranties of the Purchaser that are qualified by “material” or “material adverse effect” or any other materiality qualifications contained therein, which shall be true and correct in all respects) shall be true and correct in all respects as of the Closing Date as if made at and as of the Closing Date (except with respect to representations and warranties which speak to an earlier date, in which case, as of such earlier date) except for any failure to be so true and correct that, individually or in the aggregate, would not have a material adverse effect on the Purchaser, and (B) the representations and warranties of the Purchaser set forth in Section 4.01 and Section 4.02 shall be true and correct in all respects as of the date hereof and as of the Closing Date (except with respect to representations and warranties which speak to an earlier date, in which case as of such earlier date), and (iii) the SGA Parties shall have received a certificate signed by an officer of the Purchaser to the foregoing effect.

(b) Closing Deliveries . The Purchaser shall have delivered to the SGA Parties, as applicable, the deliverables identified in Section 2.03 .

(c) No Order . No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Governmental Order (whether temporary, preliminary or permanent) that has the effect of making any of the Transactions illegal or otherwise restraining or prohibiting the consummation of any of the Transactions.

(d) Client Consents . The Consenting Percentage shall be at least 80.00%.

Section 7.02 Conditions to Obligations of the Purchaser . The obligation of the Purchaser to consummate the Transactions shall be subject to the fulfillment as of the Closing, or the waiver in writing by the Purchaser on or before the Closing, of each of the conditions set forth in this Section 7.02 .

(a) Representations, Warranties and Covenants . (i) The SGA Parties shall have performed in all material respects all of their respective obligations hereunder required to be performed by them at or prior to the Closing, (ii) (A) except for the representations and warranties of the SGA Company Parties set forth in Section 3.01 , Section 3.02 and Section 3.03 , the representations and warranties of the SGA Company Parties contained in this Agreement (other than those representations and warranties of the SGA Company Parties that are qualified by “material,” “material and adverse effect,” “Material Adverse Effect” or any other materiality qualifications contained therein, which shall be true and correct in all respects) shall be true and correct in all respects as of the Closing Date (except with respect to representations and warranties which speak to an earlier date, in which case, as of such earlier date) except for any failure to be so true and correct that, individually or in the aggregate, would not have a Material Adverse Effect, and (B) the representations and warranties of the SGA Company Parties set forth in Section 3.01 , Section 3.02 and Section 3.03 shall be true and correct in all respects as of the date hereof and as of the Closing Date (except with respect to representations and warranties which speak to an earlier date, in which case, as of such earlier date), (iii) since the date of this Agreement, there shall not have occurred any Material Adverse Effect and (iv) the Purchaser shall have received a certificate signed by an officer of SGA to the foregoing effect and that each Seller has received such Seller’s applicable Seller Closing Payment payable pursuant to Section 2.01(b) .

(b) Closing Deliveries . The SGA Parties shall have delivered to the Purchaser the deliverables identified in Section 2.04 .

(d) Services Agreements . (i) Each of the Services Agreements with the Founders shall be in full force and effect in all material respects, and (ii) each of the Founders shall be providing services to the SGA Companies as of the Closing on a full-time basis. The Purchaser shall have received a certificate signed by an officer of SGA certifying the foregoing clause (ii).

(e) Client Consents . (i) The Consenting Percentage shall be at least 80.00%, (ii) the SGA Company Parties shall have made available to the Purchaser reasonable evidence of the Client Consents required by the foregoing clause (i), and (iii) at least two (2) Business Days prior to the Closing the SGA Company Parties shall have delivered to the Purchaser a certificate of an officer of the SGA Company Parties setting forth in reasonable detail the calculation, as of such date, of the Consenting Percentage, the Consenting Client Revenue Run Rate, and the Consent Reduction Amount (if any) and certifying that such calculations have been made in accordance with this Agreement.

(f) Third Party Consents . The SGA Parties shall have obtained the third party consents set forth on Section 7.02(f) of the Disclosure Schedule and shall have provided Purchaser with reasonable evidence thereof.

ARTICLE VIII

INDEMNIFICATION

Section 8.01 Survival Period . The representations and warranties of the Parties contained in this Agreement or in any certificate delivered pursuant hereto shall survive the Closing for a period of eighteen (18) months after the Closing (the last date of such period, the “ Expiration Date ”); provided , however , that (a) the representations warranties contained in Section 3.15 (Employee Matters) shall survive the Closing for a period ending on the earlier of (i) six (6) years after the Closing or (ii) six (6) months following the expiration of any applicable statute of limitations (including any extension thereof) and (b) the SGA Fundamental Representations and the Purchaser Fundamental Representations, and the obligations of the Parties under Article VI shall survive the Closing for a period of six (6) months following the expiration of any applicable statute of limitations (including any extension thereof). All covenants and agreements contained herein shall survive until fully performed (except to the extent such covenants or agreements are by their terms to be performed solely prior to the Closing and performance thereof is expressly waived in writing by the Purchaser at or prior to the Closing). Notwithstanding the foregoing, any good faith claim made with reasonable specificity by the Party seeking to be indemnified within the time periods set forth in this Section 8.01 shall survive until such claim is finally and fully resolved.

Section 8.02 Indemnification by the Sellers .

(a) From and after the Closing, the Purchaser, its Affiliates, and its and their respective officers, directors, employees, agents, successors and assigns (excluding for this purpose the officers, directors and employees of the SGA Companies) (each, a “ Purchaser Indemnified Party ”) shall be indemnified and held harmless by each Seller (on a several and not joint basis and in proportion to each Seller’s Purchase Price Percentage), against all losses, damages (including diminution in value), claims, costs and expenses, interest, awards, judgments and penalties (including costs of investigation and reasonable attorneys’ fees and expenses) (hereinafter, a “ Loss ”) resulting from, arising out of, or incurred by such Purchaser Indemnified Party in connection with, or otherwise with respect to (i) a SGA Warranty Breach as of the date hereof or as of the Closing (other than a SGA Fundamental Warranty Breach with respect to a representation or warranty set forth in Section 3.16 , which is addressed in Section 6.02 ), or (ii) the breach of any covenant or agreement by a Seller or, prior to Closing, by a SGA Company Party contained in this Agreement (other than a breach of Section 5.09 , which is addressed in Section 6.02 ).

(b) Calculations of Losses arising out of or resulting from any breach described in Section 8.02(a) (but, for the avoidance of doubt, not any determination of whether there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement has occurred in the first instance) shall in each case be determined without giving effect to any Material Adverse Effect, materiality or similar qualifiers set forth in the applicable representation and warranty or covenant (as applicable) except for (i) any such qualifier contained in Section 3.08 and (ii) the reference to “material” contained in Section 3.17(a)(xvii) .

Section 8.03 Indemnification by the Purchaser . From and after the Closing, the SGA Parties, and their respective Affiliates, agents, successors and assigns, heirs, legatees, personal representatives and permitted assigns (each, a “ Seller Indemnified Party ”) shall be indemnified and held harmless by the Purchaser against all Losses resulting from, arising out of, or incurred by such Seller Indemnified Party in connection with, or otherwise with respect to (i) a Purchaser Warranty Breach, or (ii) the breach of any covenant or agreement by the Purchaser contained in this Agreement. Calculations of Losses arising out of or resulting from any breach described in clause (i) or (ii) of the immediately preceding sentence (but, for the avoidance of doubt, not any determination of whether a Purchaser Warranty Breach or other breach has occurred in the first instance), shall in each case be determined without giving effect to any Material Adverse Effect, materiality or similar qualifiers set forth in the applicable representation and warranty or covenant (as applicable).

Section 8.04 Limits on Indemnification .

(a) No claim may be asserted nor may any Action be commenced against any Party pursuant to this Article VIII , unless written notice of such claim or action is received by such Party describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or Action on or prior to the date on which the representation, warranty, covenant or agreement on which such claim or Action is based ceases to survive as set forth in Section 8.01 , irrespective of whether the subject matter of such claim or action shall have occurred before or after such date.

(b) Notwithstanding anything to the contrary contained in this Agreement:

(i) an Indemnifying Party shall not be liable for any claim for indemnification pursuant to a SGA Warranty Breach (other than an Excluded Warranty Breach), or a Purchaser Warranty Breach (other than an Excluded Warranty Breach) in respect of any Loss incurred or suffered by an Indemnified Party unless and until the aggregate amount of indemnifiable Losses which may be recovered from the Indemnifying Parties equals or exceeds 1.5% of the Closing Purchase Price (the “ Threshold ”), after which the Indemnifying Parties shall be liable for all Losses (including those incurred in reaching the Threshold );

(ii) the maximum aggregate amount of indemnifiable Losses which may be recovered from the Indemnifying Parties arising out of or resulting from all SGA Warranty Breaches (other than Excluded Warranty Breaches or, without duplication, Tax Losses under Section 6.02), or all Purchaser Warranty Breaches (other than Excluded Warranty Breaches), shall, with respect to the indemnification obligations of the Purchaser, be an amount equal to (A) 12.5% of the Closing Purchase Price and (B) with respect to the indemnification obligations of any Seller, be an amount equal to 12.5% of such Seller’s Purchase Price Percentage of the Closing Purchase Price;

(iii) in no event shall (A) the aggregate liability under this Article VIII or Section 6.02 , of the Purchaser, on the one hand, or the Sellers or the SGA Companies, on the other hand, exceed an amount equal to the Purchase Price and (B) the aggregate liability of any Seller exceed an amount equal such Seller’s Purchase Price Percentage times the Purchase Price; and

(iv) neither the Purchaser nor the Sellers shall have any liability under any provision of this Agreement for (A) any punitive or exemplary damages relating to the breach or alleged breach of this Agreement, except to the extent such damages are awarded to a third party in respect of a Third Party Claim (and such amounts are actually paid by the applicable Indemnified Party to such third party) or (B) Losses or Tax Losses taken into account in the final calculation of the Final Adjustment Amount.

(c) Losses and Tax Losses shall not be subject to indemnification under this Article VIII or Section 6.02 to the extent of any insurance or other third party recoveries actually received by an Indemnified Party from an unaffiliated third party in respect of such Losses, net of the cost of recovery of such amounts (including increases in insurance premiums to the extent relating to such Losses) realized by such Indemnified Party.

(d) If an Indemnified Party receives any payment from an Indemnifying Party in respect of any Losses or Tax Loss pursuant to this Article VIII or Section 6.02 and the Indemnified Party could have recovered all or a part of such Losses or Tax Loss from a third party (a “ Potential Contributor ”) based on the underlying claim giving rise to the payment of such Losses or Tax Loss, the Indemnified Party shall, to the extent the Indemnified Party has the legal right to do so, assign such of its rights to proceed against the Potential Contributor as are necessary to permit the Indemnifying Party to recover from the Potential Contributor the amount of such payment.

(e) Losses and Tax Losses shall be reduced by any net Tax benefit which is actually realized by the Indemnified Party in cash or as a credit against otherwise immediately payable tax, as determined in each case by the Indemnified Party in its sole discretion, by virtue of, or with respect to, the payment of the loss or expense resulting in such Loss or Tax Loss.

Section 8.05 Third Party Claims . If an Indemnified Party shall receive written notice of any Action by an unaffiliated third party (each, a “ Third Party Claim ”) against it which would reasonably be expected to give rise to a claim for Loss under this Article VIII , within ten (10) days of the receipt of such notice, the Indemnified Party shall give the Indemnifying Party notice of such Third Party Claim; provided , that, the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article VIII except to the extent that such failure shall have materially and adversely prejudiced the Indemnifying Party. The Indemnifying Party shall be entitled to assume and control the defense of such Third Party Claim at its expense and through counsel of its choice if it gives notice of its intention to do so to the Indemnified Party within twenty (20) days of the receipt of such notice from the Indemnified Party; provided , that the Indemnifying Party shall not be entitled to assume or continue control of the defense of any Third Party Claim if (i) the Third Party Claim relates to or arises in connection with any criminal Action, (ii) the Third Party Claim seeks an injunction, specific performance or similar equitable relief against any Indemnified Party, (iii) the Third Party Claim has or would reasonably be expected to result in Losses in excess of the amounts available for indemnification pursuant to Section 8.04 , or (iv) the Indemnifying Party has failed or is failing to defend in good faith the Third Party Claim. If the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party may participate in such defense at its own expense; provided , that the fees, costs and expenses of such counsel shall be at the expense of the Indemnifying Party if the Indemnifying Party and the Indemnified Party are both named parties to the proceedings and the Indemnified Party shall have reasonably concluded based on advice from legal counsel that representation of both parties by the same counsel would be inappropriate due to actual or potential conflict of interest between them; provided , further , that the Indemnifying Party shall not be required to pay for more than one such counsel for all Indemnified Parties in connection with any Third Party Claim. If the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnifying Party shall defend such Third Party Claim in good faith and the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party’s expense, all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. If the Indemnifying Party assumes the defense of a Third Party Claim, it shall not settle the Third Party Claim without the Indemnified Party’s written consent unless (A) the settlement does not entail any admission of liability on the part of any Indemnified Party, and (B) the settlement includes an unconditional release of each Purchaser Indemnified Party or Seller Indemnified Party, as applicable, reasonably satisfactory to such Indemnified Party, from all Losses with respect to such Third Party Claim. The Indemnified Party shall not settle any Third Party Claim if the Indemnifying Party shall have any obligation as a result of such settlement (whether monetary or otherwise) unless such settlement is consented to in writing by the Indemnifying Party, such consent not to be unreasonably withheld or delayed. The provisions of this Section 8.05 shall be subject to, and overridden by where inconsistent with, the provisions of Section 6.01 and Section 6.02 . For the avoidance of doubt, the right to undertake the defense of such Third Party Claim shall be exercised by such Sellers as a group through the Seller Representative.

Section 8.06 Exclusive Remedy, etc. The Parties acknowledge and agree that following the Closing, except in cases of fraud in connection with the Transactions, as provided in Section 10.13 or claims for equitable relief, this Article VIII and Section 6.02 will provide the exclusive remedy for any claim arising out of breaches by any Party of any representations, warranties, covenants or agreements set forth in this Agreement or in any certificate delivered pursuant to Article VII . For the avoidance of doubt, this Section 8.06 shall only apply to claims arising out of any breach of this Agreement and not to claims arising out of any breach of any Ancillary Agreement or of any other agreement entered into in connection with the Transactions.

Section 8.07 Treatment as Purchase Price Adjustment . The Sellers and the Purchaser agree that any indemnification payment made pursuant to this Article VIII or Article VI shall be treated as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by a final determination within the meaning of Section 1313 of the Code or any analogous provision of applicable state, local or non-U.S. Law.

Section 8.08 Additional Matters . The right to indemnification for breaches of any representations, warranties, covenants or agreements set forth in this Agreement or in any certificate delivered pursuant to Article VII will not be affected by any investigation conducted with respect to, or any knowledge or information acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or agreement (other than disclosures made in this Agreement, the Disclosure Schedules or the other Schedules and Exhibits hereto). Except as set forth in Section 5.03 , the waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or agreement, will not affect the right to indemnification for breaches of any representations, warranties, covenants or agreements.

ARTICLE IX

TERMINATION

Section 9.01 Termination . This Agreement may be terminated at any time prior to the Closing:

(a) by either the Seller Representative or the Purchaser if the Closing shall not have occurred by September 30, 2018 (the “ Termination Date ”); provided , however , that the right to terminate this Agreement under this Section 9.01(a) shall not be available (i) to Purchaser if Purchaser’s failure to fulfill any of its obligation under this Agreement shall have been a cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date or (ii) to the Seller Representative if any SGA Party’s failure to fulfill any obligation under this Agreement shall have been a cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;

(b) by either the Purchaser or the Seller Representative in the event that any Governmental Order restraining, enjoining or otherwise prohibiting any of the Transactions shall have become final and non-appealable;

(c) by the Seller Representative ( provided , that none of the SGA Parties is then in material breach of any representation, warranty, covenant or other agreement contained herein such that the Purchaser would be entitled to terminate this Agreement pursuant to Section 9.01(d) ) if the Purchaser shall have breached any of its representations, warranties, covenants or agreements contained in this Agreement which, either individually or in the aggregate, would give rise to or result in, if occurring or continuing on the Closing Date, the failure of a condition set forth in Section 7.01 , which breach cannot be or has not been cured within thirty (30) days after the giving of written notice by the Seller Representative to the Purchaser specifying such breach;

(d) by the Purchaser ( provided , that the Purchaser is not then in material breach of any representation, warranty, covenant or other agreement contained herein such that the Sellers would be entitled to terminate this Agreement pursuant to Section 9.01(c) ) if the SGA Parties shall have breached any of their representations, warranties, covenants or agreements contained in this Agreement which, either individually or in the aggregate, would give rise to or result in, if occurring or continuing on the Closing Date, the failure of a condition set forth in Section 7.02 , which breach cannot be or has not been cured within thirty (30) days after the giving of written notice by the Purchaser to the Seller Representative specifying such breach; or

(e) by the mutual written consent of the Seller Representative and the Purchaser.

Section 9.02 Effect of Termination . In the event of termination of this Agreement as provided in Section 9.01 , this Agreement shall forthwith become void and there shall be no liability on the part of any Party hereto; except that (a) Section 5.04 , this Section 9.02 and Article X shall survive any termination of this Agreement and (b) nothing herein shall relieve any Party from liability for any intentional misrepresentation or willful breach of any covenant or agreement contained in this Agreement occurring prior to such termination.

ARTICLE X

GENERAL PROVISIONS

Section 10.01 Expenses . Except as otherwise specified in this Agreement, all costs and expenses, including, fees and disbursements of counsel, financial advisors and accountants, incurred by the Purchaser in connection with this Agreement and the Transactions shall be borne by the Purchaser, and all such costs and expenses of each of the SGA Parties and SGA Companies, shall be borne by the SGA Parties; provided , that any costs and expenses incurred by the Registered Funds in connection with the transactions contemplated hereby (e.g., proxy solicitation costs), to the extent that such Registered Funds are required to be reimbursed for such costs and expenses by any SGA Company shall be borne 50% by the Purchaser, on the one hand, and 50% by the Sellers, on the other; and provided , further , that, to the extent not paid prior to the Closing, all such costs and expenses of the SGA Companies (including any reimbursable expenses of any Seller) shall be fully accrued and included as a Current Liability (whether or not invoiced) as provided on Schedule B hereto).

Section 10.02 Notices . All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given) when delivered in person or when transmitted by electronic facsimile transfer, or one (1) Business Day after having been dispatched by a nationally recognized overnight courier service to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.02 ):

(a) if to Estancia:

20865 N 90th Place, Suite 200
Scottsdale, AZ 85255
Attention: Danny Kang
Facsimile No.: (480) 998-7103

(b) if any SGA Company Party or any Management Seller, to each such party:

c/o Sustainable Growth Advisers
301 Tresser Blvd
Suite 1310
Stamford, CT 06901
Facsimile No.: (203) 348-4732

with a copy (which shall not constitute notice) to:

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention:        Rick Presutti
        Ronald Richman
Facsimile No.:    212-593-5955

Virtus Partners, Inc.

100 Pearl Street, 9 ^th Floor

Hartford, CT 06103

Attention: Chief Executive Officer

General Counsel

with a copy (which shall not constitute notice) to:

Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178-0060

Attention: Robert D. Goldbaum
Nathan R. Pusey

Facsimile No.: 212-309-6001

(d) if to the Seller Representative:

c/o Sustainable Growth Advisers
301 Tresser Blvd
Suite 1310
Stamford, CT 06901
Attention: Gordon Marchand
Facsimile No.: (203) 348-4732

Estancia Capital Partners, L.P.
20865 N 90th Place, Suite 200
Scottsdale, AZ 85255
Attention: Danny Kang
Facsimile No.: (480) 998-7103

with a copy (which shall not constitute notice) to:

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention:    Rick Presutti
        Ronald Richman
Facsimile No.:    212-593-5955

Section 10.03 Announcements . No Party will issue or cause the publication of (or will permit any of its respective Affiliates to issue or cause the publication of) any press release or other external announcement with respect to this Agreement or the Transactions unless the Parties have mutually agreed as to the form, content and timing of such press release or announcement; provided , however , that nothing herein will prohibit any Party from issuing or causing publication of any such press release or public announcement to the extent that such Party determines such action to be required by Law or the rules of any exchange or self-regulatory organization applicable to it or its Affiliates, in which event the Party making such determination will, if practicable in the circumstances, use reasonable efforts to allow the other Party reasonable time to comment on such release or announcement in advance of the issuance.

Section 10.04 Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to the Parties. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.

Section 10.05 Entire Agreement . This Agreement, the Ancillary Agreements and the Confidentiality Agreement constitute the entire agreement of the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, by and among the Parties with respect to the subject matter hereof and thereof.

Section 10.06 Successors and Assigns; Third Party Beneficiaries . This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors, permitted assigns, heirs, legatees and personal representatives, and nothing herein is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever other than as provided in Section 10.13 or, in the case of Article VIII and Section 6.02 , an Indemnified Party. This Agreement will not be assignable or delegable by any of the SGA Parties, on the one hand, or the Purchaser, on the other hand, without the prior written consent of the Purchaser (in the case of an assignment by a SGA Party) or the SGA Company Parties (in the case of an assignment by the Purchaser); provided , however , that the Purchaser may assign its rights hereunder to any Affiliate without the consent of any other Party hereto; provided , further , that no such assignment shall relieve the Purchaser of its obligations under this Agreement. It is expressly acknowledged, understood, and agreed that nothing herein is intended to or does or shall constitute an amendment to or establishment of any Plan.

Section 10.07 Amendment . This Agreement may not be amended or supplemented except (a) by an instrument in writing signed by, or on behalf of, each Party or (b) by a waiver in accordance with Section 10.08 .

Section 10.08 Waiver . The Purchaser and the SGA Parties may (a) extend the time for the performance of any of the obligations or other acts of the other Party, (b) waive any inaccuracies in the representations and warranties of the other Party contained herein or in any document delivered by the other Party pursuant hereto, or (c) waive compliance with any of the agreements of the other Party or conditions to such Party’s obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by, or on behalf of, the Party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of a Party to assert any of its rights hereunder shall not constitute a waiver of any of such rights.

Section 10.09 Currency . Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars and all payments hereunder shall be made in United States dollars.

Section 10.10 Governing Law; Jurisdiction . This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction. The Parties agree that all Actions arising out of or relating to this Agreement or the transactions contemplated hereby, shall be brought and maintained only in the federal or state courts located in the State of New York. Consistent with the preceding sentence, the Parties hereby (a) irrevocably submit to the exclusive jurisdiction and venue of such courts (and of the appropriate appellate courts therefrom) in any such Action and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or should be stayed by reason of the pendency of some other proceeding in any other court other than one of the above named courts, or that this Agreement or the transactions contemplated by this Agreement or the subject matter hereof or thereof may not be enforced in or by any of the above named courts. Notwithstanding the immediately preceding sentences, a Party may commence any action in a court other than the above-mentioned courts solely for the purpose of enforcing an order or judgment issued by one of the above named courts.

Section 10.11 Waiver of Jury Trial . EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

Section 10.12 Counterparts . This Agreement may be executed and delivered (including by facsimile transmission or as a pdf attachment to an email) in one or more counterparts, and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

Section 10.13 Specific Performance . The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof, that money damages or other legal remedies would not be an adequate remedy for any such harm and that the parties shall be entitled, without posting bond or any similar undertaking, to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in the federal or state courts located in the State of New York, in addition to any other remedy to which they are entitled at Law or in equity.

[remainder of page intentionally left blank]



	19

IN WITNESS WHEREOF , the Parties have caused this Agreement to be executed as of the date first written above.

[signature pages circulated separately – to be attached to the final PDF].

EXHIBIT A-1

SGA LPA

[See attached.]

EXHIBIT A-2

SG GP LLCA

[See attached.]

EXHIBIT B

Services Agreements

[See attached.]

EXHIBIT C

Form of Transfer Document

[ Name of Transferor ] (the “ Transferor ”), for value received, does hereby transfer to [ Name of Purchaser ] (the “ Transferee ”) [---] Ownership Units (the “ Transferred Units ”) in [SGA or SGA GP, as applicable] , a Delaware [limited liability company]/[limited partnership] (the “ Company ”), to hold the same unto the Transferee. This instrument is intended to give effect to the transactions contemplated by that certain Securities Purchase Agreement, dated as of [_____], 2018, among the Transferee, the Transferor and the other SGA Parties (as defined therein) named therein (the “ Agreement ”), and is subject to the terms thereof.



	TRANSFEROR:

	[NAME OF TRANSFEROR]



	By:
		Name:
		Title:



	TRANSFEREE:

	[NAME OF PURCHASER]



	By:
		Name:
		Title:

This instrument shall be governed by and construed in accordance with the laws of the State of Delaware.

EXHIBIT D

Form of Escrow Agreement

[See attached.]

EXHIBIT E

Form of Tax Certificate

CERTIFICATE OF NON-FOREIGN STATUS

UNDER SECTION 1446(F)(2)(A)

Section 1446(f) of the Internal Revenue Code of 1986, as amended (the “Code”), provides that if any portion of the gain (if any) on any disposition of an interest in a partnership would be treated under section 864(c)(8) of the Code as effectively connected with the conduct of a trade or business within the United States, the transferee shall be required to deduct and withhold a tax equal to 10 percent of the amount realized on the disposition unless the transferor provides an affidavit stating that the transferor is not a foreign person and providing such person’s taxpayer identification number.

To inform Virtus Partners, Inc., a Delaware corporation (the “ Transferee ”), that withholding of tax is not required in connection with the disposition by _______________ (the ” Transferor ”) of his/her interests in [Sustainable Growth Advisers LP, a Delaware limited partnership,][SGIA, LLC, a Delaware limited liability company], in connection with the Securities Purchase Agreement dated as of ___________, 2018, the Transferor hereby certifies the following:

1. The Transferor is not a foreign person (as such term is defined for purposes of Section 1446(f)(2)(A) of the Code); and

2. The Transferor’s U.S. taxpayer identification number is: _________________.

The Transferor understands that this certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment or both.

Under penalties of perjury, I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete.

________________________________

Date: [ ], 2018

Schedule A

Transferred Units and Purchase Price Percentages



	Owned Units		Transferred Units
Seller	SGA	SGIA	SGA Units	SGIA Units	Purchase Price Percentage
Estancia Capital Partners L.P.	27,225.660	0.000	27,225.660	0.000	32.7347%
George P. Fraise	17,520.000	20.000	12,235.920	20.000	14.7359%
Gordon Marchand	17,520.000	20.000	12,235.920	20.000	14.7359%
Robert L. Rohn	17,520.000	20.000	12,235.920	20.000	14.7359%
Kishore Rao	7,363.546	—	3,681.773	—	4.4268%
Alexandra Lee	6,793.546	—	3,396.773	—	4.0841%
M. Tucker Brown	6,793.546	—	3,396.773	—	4.0841%
Hrishikesh (HK) Gupta	4,552.800	—	2,276.400	—	2.7370%
Peter Seuffert	2,275.200	—	1,137.600	—	1.3678%
Stephen Skatrud	2,275.200	—	1,137.600	—	1.3678%
Joseph Kolanko	1,297.728	—	648.864	—	0.7802%
Patrick Holway	1,297.728	—	648.864	—	0.7802%
Piotr Madej	1,297.728	—	648.864	—	0.7802%
Christopher Ingrassia	1,186.470	—	593.235	—	0.7133%
David Oh	1,187.000	—	593.500	—	0.7136%
Daniel Callaway	950.000	—	475.000	—	0.5711%
Chi Wong	648.864	—	324.432	—	0.3901%
Peter Knudsen	434.990	—	217.495	—	0.2615%
Total:	118,733.706	60.000	83,110.593	60.000	100.00%

Schedule B

Balance Sheet Rules

(i)

The consolidated current assets of the SGA Companies shall include only the line items set forth on Schedule C under the heading “Current Assets” and no other assets, as determined in accordance with those accounting principles, methods and practices used in preparing the Audited Balance Sheet, applied on a consistent basis and in accordance with GAAP; provided that the rules set forth in this Schedule B , except as provided in subsections (iii) and (vii) below, shall in any event be applied, each calculated immediately before, and without giving effect to, the Closing.

(ii)

The consolidated current liabilities of the SGA Companies shall include only the line items set forth on Schedule C under the heading “Current Liabilities” and no other liabilities, except as provided in this Schedule B , as determined in accordance with those accounting principles, methods and practices used in preparing the Audited Balance Sheet, applied on a consistent basis and in accordance with GAAP; provided that the rules set forth in this Schedule B , except as provided in subsection (vii) below, shall in any event be applied, each calculated immediately before, and without giving effect to, the Closing.

(iii)

Current Assets shall not include (A) any categories of assets other than those in Schedule C , except as provided in this Schedule B, (B) any accounts receivable that are over 90 days old as of the Closing Date and remain uncollected 45 days after the Closing Date or (C) any receivables due from any partner, officer or employee of any SGA Company, except to the extent such receivables are repaid to SGA in cash at the Closing (including as provided in the Agreement with respect to the repayment of Seller Debt), (D) Client receivables shall only include amounts due from clients based on the amounts agreed and reconciled between the client and MIDAS, to the extent such receivables are estimated to facilitate Closing, they will be trued up pursuant to Section 2.05 or (E) regardless of historical interim accounting practices, prepaid assets will be updated to reflect such asset as of the balance sheet date. For the avoidance of doubt, the amount of any receivables due from any partner, officer or employee of any SGA Company that are to be repaid to SGA in cash at the Closing shall also be included for the purposes of determining satisfaction of the $1,500,000 cash requirement per Section 3.03(f) of the Agreement.

(iv)

Current Liabilities shall not include any categories of liabilities other than those in Schedule C except as provided in this Schedule B . Regardless of historical interim accounting practices, all Current Liabilities will be updated to reflect such liabilities as of the balance sheet date and shall include but not be limited to pension liability, bonuses payable, commission liability corresponding to sales recorded on the income statement, expense reimbursements to funds/clients and fund expenses associated with UCITs.


(v)	“Investments” shall include only liquid investments and shall be valued at fair market value.


(vi)	With respect to each partner of each SGA Company, Current Liabilities shall include no accrual for the Performance Shares Plan (and Purchaser shall not be required to pay such individuals any compensation in respect of such plan for that portion of calendar 2018 preceding the Closing Date); and

(vii)

Except as otherwise specified in the Agreement, to the extent not paid prior to or concurrent with the Closing, all costs and expenses, including, fees and disbursements of counsel, financial advisors and accountants, incurred by or on behalf of the SGA Companies in connection with this Agreement and the Transactions (including any reimbursable expenses of any Seller) shall be fully accrued and included as a Current Liability (whether or not invoiced, whether or not due upon the Closing); provided , that any costs and expenses incurred by the Registered Funds in connection with the transactions contemplated by the Agreement (e.g., proxy solicitation costs), to the extent that such Registered Funds are required to be reimbursed for such costs and expenses by any SGA Company shall be borne 50% by the Purchaser, on the one hand, and 50% by the Sellers, on the other.

******

Schedule C

Current Assets and Current Liabilities



Current Assets
Cash and cash equivalents
Partner notes receivable to be repaid in cash concurrent with transaction
Total Cash and Cash Equivalents
Investments
Client receivables (net of doubtful accounts)
Other current receivables
Prepaid expenses
Total Current Assets					$

Current Liabilities
Accounts payable
Accrued pension liability
Accrued commissions payable
Accrued fund servicing & custody fees
Total Current Liabilities

Current Assets
Less: Current Liabilities
Net Working Capital

Schedule D

Unfunded Client Mandates



Unfunded Client Mandates
Coca-Cola Canada (Global ADR portfolio)	$100,000,000
Malta Insurance	$100,000,000
RBS Retirement Plan	$625,000,000

Schedule E

Allocation Principles


A.	Purchase Price for SGIA Units being sold _______%



Capital Account balance in SGA	Book Value thereof as of the Closing Date
Goodwill and Going Concern Value	Remainder of amounts allocable to purchase price for SGIA interest.


B.	Purchase Price for SGA Units being sold _______%



(i) Value of the assets on the balance sheet and (ii) value of other identifiable intangibles	Book Value thereof as of the Closing Date , if reflected on the Audited Balance Sheet, or the amounts agreed on by Purchaser and Seller Representative, if not reflected on the Audited Balance Sheet.
Goodwill and Going Concern Value	Remainder of amounts allocable to purchase price for SGA interest

EXHIBIT B – Page 1

Exhibit 21.1

Virtus Investment Partners, Inc. Subsidiary List




Name		Jurisdiction

Ceredex Value Advisors LLC		Delaware

Duff & Phelps Investment Management Co.		Illinois

ETF Distributors LLC		Delaware

ETFis Holdings LLC		Delaware

Kayne Anderson Rudnick Investment Management, LLC		California

Newfleet Asset Management, LLC		Delaware

Rampart Investment Management Company, LLC		Delaware

Seix Investment Advisors LLC		Delaware

Silvant Capital Management LLC		Delaware

Virtus Alternative Investment Advisers, Inc.		Connecticut

Virtus ETF Advisers LLC		Delaware

Virtus ETF Solutions LLC		Delaware

Virtus Fund Advisors, LLC		Delaware

Virtus Fund Services, LLC		Delaware

Virtus Intermediate Holdings LLC		Delaware

Virtus Investment Advisers, Inc.		Massachusetts

Virtus Investment Partners International Ltd.		United Kingdom

Virtus Partners, Inc.		Delaware

Virtus Retirement Investment Advisers, LLC		Delaware

Virtus Shared Services, LLC		Delaware

VP Distributors, LLC		Delaware

Zweig Advisers LLC		Delaware

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S‑3 (No. 333-215278) and S‑8 (No. 333-212050) of Virtus Investment Partners, Inc. of our report dated February 26, 2018 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10‑K.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut

February 26, 2018

Exhibit 31.1

CERTIFICATION UNDER SECTION 302

I, George R. Aylward, certify that:

1. I have reviewed this annual report on Form 10-K of Virtus Investment Partners, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2018

/ S / G EORGE R. A YLWARD

George R. Aylward

President, Chief Executive Officer and Director

(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION UNDER SECTION 302

I, Michael A. Angerthal, certify that:

1. I have reviewed this annual report on Form 10-K of Virtus Investment Partners, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2018

/ S / M ICHAEL A. A NGERTHAL

Michael A. Angerthal

Executive Vice President, Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

Exhibit 32.1

CERTIFICATIONS OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Annual Report on Form 10-K of Virtus Investment Partners, Inc. (the “Company”) for the fiscal year ended December 31, 2017 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:


(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 26, 2018

/ S / G EORGE R. A YLWARD

George R. Aylward

President, Chief Executive Officer and Director

(Principal Executive Officer)

/ S / M ICHAEL A. A NGERTHAL

Michael A. Angerthal

Executive Vice President, Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)