UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2021~~MARCH 31, 2022


OR
☐			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: 001-35826

Artisan Partners Asset Management Inc.

(Exact name of registrant as specified in its charter)


Delaware		45-0969585
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

875 E. Wisconsin Avenue, Suite 800
Milwaukee,	WI	53202
(Address of principal executive offices)		(Zip Code)

(414) 390-6100

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A common stock, par value $0.01 per share	APAM	New York Stock Exchange

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. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 Exchange Act). Yes ☐ No ☑

The number of outstanding shares of the registrant’s Class A common stock, par value $0.01 per share, Class B common stock, par value $0.01 per share, and Class C common stock, par value $0.01 per share, as of ~~July 30, 2021~~April 26, 2022 were ~~64,839,462, 3,647,533~~67,398,678, 3,111,745 and ~~10,555,009,~~9,126,617, respectively.

Table of Contents

TABLE OF CONTENTS


		Page
Part I	Financial Information
Item 1.	Unaudited Consolidated Financial Statements
	Unaudited Condensed Consolidated Statements of Financial Condition as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	1
	Unaudited Consolidated Statements of Operations for the three ~~andsix~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020~~2021	2
	Unaudited Consolidated Statements of Comprehensive Income for the three ~~andsix~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020~~2021	3
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the three ~~andsix~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020~~2021	4
	Unaudited Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020~~2021	65
	Notes to Unaudited Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4138
Item 4.	Controls and Procedures	4239
Part II	Other Information
Item 1.	Legal Proceedings	4340
Item 1A.	Risk Factors	4340
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4340
Item 3.	Defaults Upon Senior Securities	4340
Item 4.	Mine Safety Disclosures	4340
Item 5.	Other Information	4340
Item 6.	Exhibits	4340
	Signatures	4441

Except where the context requires otherwise, in this report, references to the “Company”, “Artisan”, “we”, “us” or “our” refer to Artisan Partners Asset Management Inc. (“APAM”) and its direct and indirect subsidiaries, including Artisan Partners Holdings LP (“Artisan Partners Holdings” or “Holdings”). On March 12, 2013, APAM closed its initial public offering and related corporate reorganization. Prior to that date, APAM was a subsidiary of Artisan Partners Holdings.

Forward-Looking Statements

This report contains, and from time to time our management may make, forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements regarding future events and our future performance, as well as management’s current expectations, beliefs, plans, estimates, or projections relating to the future, are forward-looking statements within the meaning of these laws. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue”, the negative of these terms and other comparable terminology. Forward-looking statements are only predictions based on current expectations and projections about future events. Forward-looking statements are subject to a number of risks and uncertainties, and there are important factors that could cause actual results, level of activity, performance, actions or achievements to differ materially from the results, level of activity, performance, actions or achievements expressed or implied by the forward-looking statements. These factors include: the loss of key investment professionals or senior management, adverse market or economic conditions, poor performance of our investment strategies, change in the legislative and regulatory environment in which we operate, operational or technical errors or other damage to our reputation, the long-term impact of the COVID-19 pandemic and other factors disclosed in the Company’s filings with the Securities and Exchange Commission, including those factors listed under the caption entitled “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, filed with the SEC on February ~~23, 2021,~~22, 2022, as such factors may be updated from time to time. Our periodic and current reports are accessible on the SEC’s website at www.sec.gov. We undertake no obligation to publicly update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this report, except as required by law.

Table of Contents

Forward-looking statements include, but are not limited to, statements about:

•our anticipated future results of operations;

•our potential operating performance and efficiency, including our ability to operate under different and unique circumstances;

•our expectations with respect to future business initiatives;

•our expectations with respect to the performance of our investment strategies;

•our expectations with respect to future levels of assets under management, including the capacity of our strategies and client cash inflows and outflows;

•our expectations with respect to industry trends and how those trends may impact our business;

•our financing plans, cash needs and liquidity position;

•our intention to pay dividends and our expectations about the amount of those dividends;

•our expected levels of compensation of our employees, including equity- and cash-based long-term incentive compensation;

•our expectations with respect to future expenses and the level of future expenses;

•our expected tax rate, and our expectations with respect to deferred tax assets; and

•our estimates of future amounts payable pursuant to our tax receivable agreements.

Table of Contents

Part I — Financial Information

Item 1. Unaudited Consolidated Financial Statements

ARTISAN PARTNERS ASSET MANAGEMENT INC.

Unaudited Condensed Consolidated Statements of Financial Condition

(U.S. dollars in thousands, except per share amounts)


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021

ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	228,738	$	154,987	Cash and cash equivalents	$	187,511	$	189,226
Accounts receivable	Accounts receivable	121,654		99,888		Accounts receivable	122,494		115,850
Investment securities	Investment securities	49,890		3,656		Investment securities	105,675		47,878
Property and equipment, net	Property and equipment, net	37,367		35,874		Property and equipment, net	37,620		35,313
Deferred tax assets	Deferred tax assets	483,688		482,061		Deferred tax assets	490,244		497,902
Restricted cash	Restricted cash	629		629		Restricted cash	629		629
Prepaid expenses and other assets	Prepaid expenses and other assets	18,564		17,762		Prepaid expenses and other assets	17,143		20,282
Operating lease assets	Operating lease assets	75,869		79,304		Operating lease assets	101,004		88,642
Assets of consolidated investment products	Assets of consolidated investment products					Assets of consolidated investment products
Cash and cash equivalents	Cash and cash equivalents	12,455		43,834		Cash and cash equivalents	15,530		10,916
Accounts receivable and other	Accounts receivable and other	2,933		3,587		Accounts receivable and other	2,286		6,408
Investment assets, at fair value	Investment assets, at fair value	188,027		230,380		Investment assets, at fair value	177,090		195,001
Total assets	Total assets	$	1,219,814	$	1,151,962	Total assets	$	1,257,226	$	1,208,047

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND STOCKHOLDERS’ EQUITY	LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND STOCKHOLDERS’ EQUITY					LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND STOCKHOLDERS’ EQUITY
Accounts payable, accrued expenses, and other	Accounts payable, accrued expenses, and other	$	27,023	$	24,727	Accounts payable, accrued expenses, and other	$	29,848	$	28,992
Accrued incentive compensation	Accrued incentive compensation	109,835		12,924		Accrued incentive compensation	97,200		7,521
Borrowings	Borrowings	199,375		199,284		Borrowings	199,511		199,444
Operating lease liabilities	Operating lease liabilities	88,822		92,671		Operating lease liabilities	112,934		100,303
Amounts payable under tax receivable agreements	Amounts payable under tax receivable agreements	406,365		412,468		Amounts payable under tax receivable agreements	425,867		425,427
Liabilities of consolidated investment products	Liabilities of consolidated investment products					Liabilities of consolidated investment products
Accounts payable, accrued expenses, and other	Accounts payable, accrued expenses, and other	47,365		109,362		Accounts payable, accrued expenses, and other	11,545		20,185
Investment liabilities, at fair value	Investment liabilities, at fair value	10,107		15,731		Investment liabilities, at fair value	21,308		19,179
Total liabilities	Total liabilities	888,892		867,167		Total liabilities	898,213		801,051
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Redeemable noncontrolling interests	Redeemable noncontrolling interests	90,458		93,753		Redeemable noncontrolling interests	107,139		111,035
Common stock	Common stock					Common stock
Class A common stock ($0.01 par value per share, 500,000,000 shares authorized, 64,839,462 and 63,131,007 shares outstanding at June 30, 2021 and December 31, 2020, respectively)		648		631
Class B common stock ($0.01 par value per share, 200,000,000 shares authorized, 3,647,533 and 4,457,958 shares outstanding at June 30, 2021 and December 31, 2020, respectively)		36		45
Class C common stock ($0.01 par value per share, 400,000,000 shares authorized, 10,555,009 and 10,983,145 shares outstanding at June 30, 2021 and December 31, 2020, respectively)		106		110
Class A common stock ($0.01 par value per share, 500,000,000 shares authorized, 67,398,678 and 66,699,872 shares outstanding at March 31, 2022 and December 31, 2021, respectively)						Class A common stock ($0.01 par value per share, 500,000,000 shares authorized, 67,398,678 and 66,699,872 shares outstanding at March 31, 2022 and December 31, 2021, respectively)	674		667
Class B common stock ($0.01 par value per share, 200,000,000 shares authorized, 3,111,745 and 3,206,580 shares outstanding at March 31, 2022 and December 31, 2021, respectively)						Class B common stock ($0.01 par value per share, 200,000,000 shares authorized, 3,111,745 and 3,206,580 shares outstanding at March 31, 2022 and December 31, 2021, respectively)	31		32
Class C common stock ($0.01 par value per share, 400,000,000 shares authorized, 9,126,617 and 9,128,617 shares outstanding at March 31, 2022 and December 31, 2021, respectively)						Class C common stock ($0.01 par value per share, 400,000,000 shares authorized, 9,126,617 and 9,128,617 shares outstanding at March 31, 2022 and December 31, 2021, respectively)	91		91
Additional paid-in capital	Additional paid-in capital	119,855		107,738		Additional paid-in capital	146,002		141,835
Retained earnings	Retained earnings	100,429		72,944		Retained earnings	82,768		134,889
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(817)		(991)		Accumulated other comprehensive income (loss)	(1,782)		(1,310)
Total Artisan Partners Asset Management Inc. stockholders’ equity	Total Artisan Partners Asset Management Inc. stockholders’ equity	220,257		180,477		Total Artisan Partners Asset Management Inc. stockholders’ equity	227,784		276,204
Noncontrolling interests - Artisan Partners Holdings	Noncontrolling interests - Artisan Partners Holdings	20,207		10,565		Noncontrolling interests - Artisan Partners Holdings	24,090		19,757
Total stockholders’ equity	Total stockholders’ equity	$	240,464	$	191,042	Total stockholders’ equity	$	251,874	$	295,961
Total liabilities, redeemable noncontrolling interests, and stockholders’ equity	Total liabilities, redeemable noncontrolling interests, and stockholders’ equity	$	1,219,814	$	1,151,962	Total liabilities, redeemable noncontrolling interests, and stockholders’ equity	$	1,257,226	$	1,208,047

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

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ARTISAN PARTNERS ASSET MANAGEMENT INC.

Unaudited Consolidated Statements of Operations

(U.S. dollars in thousands, except per share amounts)


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Revenues	Revenues									Revenues
Management fees	Management fees	$	300,870	$	194,927	$	584,835	$	394,831	Management fees	$	281,406	$	283,965
Performance fees	Performance fees	4,079		8,015		10,791		10,947		Performance fees	192		6,712
Total revenues	Total revenues	$	304,949	$	202,942	$	595,626	$	405,778	Total revenues	$	281,598	$	290,677
Operating Expenses	Operating Expenses									Operating Expenses

Compensation and benefits	Compensation and benefits	138,013		102,204		277,478		206,921		Compensation and benefits	139,932		139,465
Distribution, servicing and marketing	Distribution, servicing and marketing	7,996		5,355		15,576		10,903		Distribution, servicing and marketing	7,061		7,580
Occupancy	Occupancy	5,508		5,213		10,700		10,402		Occupancy	6,582		5,192
Communication and technology	Communication and technology	10,421		9,682		20,277		18,887		Communication and technology	11,758		9,856
General and administrative	General and administrative	5,208		3,861		11,983		11,078		General and administrative	9,274		6,775
Total operating expenses	Total operating expenses	167,146		126,315		336,014		258,191		Total operating expenses	174,607		168,868
Total operating income	Total operating income	137,803		76,627		259,612		147,587		Total operating income	106,991		121,809
Non-operating income (expense)	Non-operating income (expense)									Non-operating income (expense)
Interest expense	Interest expense	(2,720)		(2,715)		(5,405)		(5,400)		Interest expense	(2,686)		(2,685)
Net gain (loss) on the tax receivable agreements										Net gain (loss) on the tax receivable agreements	482		—
Net investment gain (loss) of consolidated investment products	Net investment gain (loss) of consolidated investment products	8,328		12,877		15,244		(47)		Net investment gain (loss) of consolidated investment products	1,188		6,916
Other net investment gain (loss)	Other net investment gain (loss)	3,935		1,174		4,131		(1,083)		Other net investment gain (loss)	(4,752)		196

Total non-operating income (expense)	Total non-operating income (expense)	9,543		11,336		13,970		(6,530)		Total non-operating income (expense)	(5,768)		4,427
Income before income taxes	Income before income taxes	147,346		87,963		273,582		141,057		Income before income taxes	101,223		126,236
Provision for income taxes	Provision for income taxes	28,465		16,256		50,083		25,707		Provision for income taxes	18,786		21,618
Net income before noncontrolling interests	Net income before noncontrolling interests	118,881		71,707		223,499		115,350		Net income before noncontrolling interests	82,437		104,618
Less: Net income attributable to noncontrolling interests - Artisan Partners Holdings	Less: Net income attributable to noncontrolling interests - Artisan Partners Holdings	25,627		18,132		49,268		34,244		Less: Net income attributable to noncontrolling interests - Artisan Partners Holdings	15,615		23,641
Less: Net income (loss) attributable to noncontrolling interests - consolidated investment products	Less: Net income (loss) attributable to noncontrolling interests - consolidated investment products	5,047		7,424		8,746		130		Less: Net income (loss) attributable to noncontrolling interests - consolidated investment products	1,389		3,699
Net income attributable to Artisan Partners Asset Management Inc.	Net income attributable to Artisan Partners Asset Management Inc.	$	88,207	$	46,151	$	165,485	$	80,976	Net income attributable to Artisan Partners Asset Management Inc.	$	65,433	$	77,278

Basic earnings per share	Basic earnings per share	$	1.33	$	0.72	$	2.54	$	1.26	Basic earnings per share	$	0.90	$	1.19
Diluted earnings per share	Diluted earnings per share	$	1.33	$	0.72	$	2.54	$	1.26	Diluted earnings per share	$	0.90	$	1.19
Basic weighted average number of common shares outstanding	Basic weighted average number of common shares outstanding	59,821,804		55,884,366		59,292,982		54,574,923		Basic weighted average number of common shares outstanding	62,039,038		58,758,284
Diluted weighted average number of common shares outstanding	Diluted weighted average number of common shares outstanding	59,838,374		55,884,366		59,308,759		54,574,923		Diluted weighted average number of common shares outstanding	62,070,360		58,773,269
Dividends declared per Class A common share	Dividends declared per Class A common share	$	0.88	$	0.61	$	2.16	$	1.89	Dividends declared per Class A common share	$	1.75	$	1.28

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

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ARTISAN PARTNERS ASSET MANAGEMENT INC.

Unaudited Consolidated Statements of Comprehensive Income

(U.S. dollars in thousands)


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net income before noncontrolling interests	Net income before noncontrolling interests	$	118,881	$	71,707	$	223,499	$	115,350	Net income before noncontrolling interests	$	82,437	$	104,618
Other comprehensive income (loss)	Other comprehensive income (loss)									Other comprehensive income (loss)

Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	64		(44)		237		(1,286)		Foreign currency translation gain (loss)	(553)		173
Total other comprehensive income (loss)	Total other comprehensive income (loss)	64		(44)		237		(1,286)		Total other comprehensive income (loss)	(553)		173
Comprehensive income	Comprehensive income	118,945		71,663		223,736		114,064		Comprehensive income	81,884		104,791
Comprehensive income attributable to noncontrolling interests - Artisan Partners Holdings	Comprehensive income attributable to noncontrolling interests - Artisan Partners Holdings	25,640		18,152		49,331		34,072		Comprehensive income attributable to noncontrolling interests - Artisan Partners Holdings	15,533		23,691
Comprehensive income (loss) attributable to noncontrolling interests - consolidated investment products	Comprehensive income (loss) attributable to noncontrolling interests - consolidated investment products	5,047		7,424		8,746		130		Comprehensive income (loss) attributable to noncontrolling interests - consolidated investment products	1,389		3,699
Comprehensive income attributable to Artisan Partners Asset Management Inc.	Comprehensive income attributable to Artisan Partners Asset Management Inc.	$	88,258	$	46,087	$	165,659	$	79,862	Comprehensive income attributable to Artisan Partners Asset Management Inc.	$	64,962	$	77,401

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

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ARTISAN PARTNERS ASSET MANAGEMENT INC.

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

(U.S. dollars in thousands)


Three months ended June 30, 2021		Class A Common stock		Class B Common stock		Class C Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Non-controlling interests - Artisan Partners Holdings		Total stockholders’ equity		Redeemable non-controlling interests
Three months ended March 31, 2022																				Three months ended March 31, 2022	Class A Common Stock		Class B Common Stock		Class C Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests - Artisan Partners Holdings		Total Stockholders’ Equity		Redeemable Noncontrolling Interests

Balance at April 1, 2021		$	648	$	38	$	106	$	114,757	$	68,960	$	(868)	$	21,434	$	205,075	$	124,915
Balance at January 1, 2022																				Balance at January 1, 2022	$	667	$	32	$	91	$	141,835	$	134,889	$	(1,310)	$	19,757	$	295,961	$	111,035
Net income	Net income	—		—		—		—		88,207		—		25,627		113,834		5,047		Net income	—		—		—		—		65,433		—		15,615		81,048		1,389
Other comprehensive income - foreign currency translation	Other comprehensive income - foreign currency translation	—		—		—		—		—		51		13		64		—		Other comprehensive income - foreign currency translation	—		—		—		—		—		(468)		(85)		(553)		—
Cumulative impact of changes in ownership of Artisan Partners Holdings LP	Cumulative impact of changes in ownership of Artisan Partners Holdings LP	—		—		—		(2,099)		—		0		2,099		0		—		Cumulative impact of changes in ownership of Artisan Partners Holdings LP	—		—		—		373		—		(4)		(369)		—		—
Amortization of equity-based compensation	Amortization of equity-based compensation	—		—		—		7,862		—		—		1,692		9,554		—		Amortization of equity-based compensation	—		—		—		9,775		—		—		1,564		11,339		—
Deferred tax assets, net of amounts payable under tax receivable agreements	Deferred tax assets, net of amounts payable under tax receivable agreements	—		—		—		395		—		—		—		395		—		Deferred tax assets, net of amounts payable under tax receivable agreements	—		—		—		264		—		—		—		264		—
Issuance of Class A common stock, net of issuance costs	Issuance of Class A common stock, net of issuance costs	0		—		—		(2)		—		—		—		(2)		—		Issuance of Class A common stock, net of issuance costs	—		—		—		(1)		—		—		—		(1)		—
Forfeitures and employee/partner terminations	Forfeitures and employee/partner terminations	(1)		—		—		1		—		—		—		0		—		Forfeitures and employee/partner terminations	—		—		—		—		—		—		—		—		—

Issuance of restricted stock awards																				Issuance of restricted stock awards	8		—		—		(8)		—		—		—		—		—
Employee net share settlement	Employee net share settlement	(1)		—		—		(1,059)		—		—		(232)		(1,292)		—		Employee net share settlement	(2)		—		—		(6,236)		(25)		—		(1,157)		(7,420)		—
Exchange of subsidiary equity	Exchange of subsidiary equity	2		(2)		0		—		—		—		—		0		—		Exchange of subsidiary equity	1		(1)		—		—		—		—		—		—		—

Capital contributions, net	Capital contributions, net	—		—		—		—		—		—		—		—		6,845		Capital contributions, net	—		—		—		—		—		—		—		—		3,989
Impact of deconsolidation of CIPs	Impact of deconsolidation of CIPs	—		—		—		—		—		—		—		0		(46,349)		Impact of deconsolidation of CIPs	—		—		—		—		—		—		—		—		(9,274)
Distributions	Distributions	—		—		—		—		—		—		(30,387)		(30,387)		—		Distributions	—		—		—		—		—		—		(11,168)		(11,168)		—
Dividends	Dividends	—		—		—		0		(56,738)		—		(39)		(56,777)		—		Dividends	—		—		—		—		(117,529)		—		(67)		(117,596)		—
Balance at June 30, 2021		$	648	$	36	$	106	$	119,855	$	100,429	$	(817)	$	20,207	$	240,464	$	90,458
Balance at March 31, 2022																				Balance at March 31, 2022	$	674	$	31	$	91	$	146,002	$	82,768	$	(1,782)	$	24,090	$	251,874	$	107,139

Three months ended June 30, 2020 Class A Common stock Class B Common stock Class C Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests - Artisan Partners Holdings Total stockholders’ equity Redeemable non-controlling interests
Balance at April 1, 2020 $ 606 $ 60 $ 120 $ 86,224 $ 21,294 $ (2,475) $ 4,919 $ 110,748 $ 37,223
Net income — — — — 46,151 — 18,132 64,283 7,424
Other comprehensive income - foreign currency translation — — — — — (35) (9) (44) —
Cumulative impact of changes in ownership of Artisan Partners Holdings LP — — — (2,089) — (29) 2,118 0 —
Amortization of equity-based compensation — — — 6,989 — — 2,000 8,989 —
Deferred tax assets, net of amounts payable under tax receivable agreements — — — 1,415 — — — 1,415 —
Issuance of Class A common stock, net of issuance costs 0 — — (86) — — — (86) —
Forfeitures and employee/partner terminations — — — — — — — 0 —
Exchange of subsidiary equity 8 (4) (4) — — — — 0 —
Capital contributions, net — — — — — — — — 1,380
Distributions — — — — — — (22,246) (22,246) —
Dividends — — — (4,355) (32,883) — (15) (37,253) —
Balance at June 30, 2020 $ 614 $ 56 $ 116 $ 88,098 $ 34,562 $ (2,539) $ 4,899 $ 125,806 $ 46,027
The accompanying notes are an integral part of the consolidated financial statements.



Three months ended March 31, 2021	Class A Common Stock		Class B Common Stock		Class C Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests - Artisan Partners Holdings		Total Stockholders’ Equity		Redeemable Noncontrolling Interests
















Balance at January 1, 2021	$	631	$	45	$	110	$	107,738	$	72,944	$	(991)	$	10,565	$	191,042	$	93,753
Net income	—		—		—		—		77,278		—		23,641		100,919		3,699
Other comprehensive income - foreign currency translation	—		—		—		—		—		136		37		173		—

Cumulative impact of changes in ownership of Artisan Partners Holdings LP	—		—		—		1,254		—		(13)		(1,241)		—		—
Amortization of equity-based compensation	—		—		—		8,907		—		—		1,893		10,800		—
Deferred tax assets, net of amounts payable under tax receivable agreements	—		—		—		3,444		—		—		—		3,444		—
Issuance of Class A common stock, net of issuance costs	10		—		—		46,658		—		—		—		46,668		—

Issuance of restricted stock awards	7		—		—		(7)		—		—		—		—		—
Employee net share settlement	(1)		—		—		(6,319)		—		—		(1,546)		(7,866)		—
Exchange of subsidiary equity	1		—		(1)		—		—		—		—		—		—
Purchase of equity and subsidiary equity	—		(7)		(3)		(46,918)		—		—		—		(46,928)		—
Capital contributions, net	—		—		—		—		—		—		—		—		48,197
Impact of deconsolidation of CIPs	—		—		—		—		—		—		—		—		(20,734)
Distributions	—		—		—		—		—		—		(11,873)		(11,873)		—
Dividends	—		—		—		—		(81,262)		—		(42)		(81,304)		—
Balance at March 31, 2021	$	648	$	38	$	106	$	114,757	$	68,960	$	(868)	$	21,434	$	205,075	$	124,915


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

~~Table of Contents~~

~~ARTISAN PARTNERS ASSET MANAGEMENT INC.~~

~~Unaudited Consolidated Statements of Changes in Stockholders~~’ ~~Equity~~

~~(U.S. dollars in thousands)~~

Six months ended June 30, 2021 Class A Common stock Class B Common stock Class C Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests - Artisan Partners Holdings Total stockholders’ equity Redeemable non-controlling interests
Balance at January 1, 2021 $ 631 $ 45 $ 110 $ 107,738 $ 72,944 $ (991) $ 10,565 $ 191,042 $ 93,753
Net income — — — — 165,485 — 49,268 214,753 8,746
Other comprehensive income - foreign currency translation — — — — — 187 50 237 —
Cumulative impact of changes in ownership of Artisan Partners Holdings LP — — — (845) — (13) 858 0 —
Amortization of equity-based compensation — — — 16,769 — — 3,585 20,354 —
Deferred tax assets, net of amounts payable under tax receivable agreements — — — 3,839 — — — 3,839 —
Issuance of Class A common stock, net of issuance costs 10 — — 46,656 — — — 46,666 —
Forfeitures and employee/partner terminations (1) — — 1 — — — 0 —
Issuance of restricted stock awards 7 — — (7) — — — 0 —
Employee net share settlement (2) — — (7,378) — — (1,778) (9,158) —
Exchange of subsidiary equity 3 (2) (1) — — — — 0 —
Purchase of equity and subsidiary equity — (7) (3) (46,918) — — — (46,928) —
Capital contributions, net — — — — — — — — 55,042
Impact of deconsolidation of CIPs — — — — — — — — (67,083)
Distributions — — — — — — (42,260) (42,260) —
Dividends — — — 0 (138,000) — (81) (138,081) —
Balance at June 30, 2021 $ 648 $ 36 $ 106 $ 119,855 $ 100,429 $ (817) $ 20,207 $ 240,464 $ 90,458

Six months ended June 30, 2020 Class A Common stock Class B Common stock Class C Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interests - Artisan Partners Holdings Total stockholders’ equity Redeemable non-controlling interests
Balance at January 1, 2020 $ 564 $ 78 $ 136 $ 89,149 $ 44,455 $ (1,425) $ 5,544 $ 138,501 $ 43,110
Net income — — — — 80,976 — 34,244 115,220 130
Other comprehensive income - foreign currency translation — — — — — (965) (321) (1,286) —
Cumulative impact of changes in ownership of Artisan Partners Holdings LP — — — (1,568) — (149) 1,717 0 —
Amortization of equity-based compensation — — — 14,380 — — 4,304 18,684 —
Deferred tax assets, net of amounts payable under tax receivable agreements — — — 8,519 — — — 8,519 —
Issuance of Class A common stock, net of issuance costs 18 — — 62,721 — — — 62,739 —
Issuance of restricted stock awards 9 — — (9) — — — 0 —
Employee net share settlement (1) — — (3,314) — — (1,215) (4,530) —
Exchange of subsidiary equity 24 (4) (20) — — — — 0 —
Purchase of equity and subsidiary equity — (18) — (63,009) — — — (63,027) —
Capital contributions, net — — — — — — — — 5,228
Impact of deconsolidation of CIPs — — — — — — — 0 (2,441)
Distributions — — — — — — (39,322) (39,322) —
Dividends — — — (18,771) (90,869) — (52) (109,692) —
Balance at June 30, 2020 $ 614 $ 56 $ 116 $ 88,098 $ 34,562 $ (2,539) $ 4,899 $ 125,806 $ 46,027
The accompanying notes are an integral part of the consolidated financial statements.

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ARTISAN PARTNERS ASSET MANAGEMENT INC.

Unaudited Consolidated Statements of Cash Flows

(U.S. dollars in thousands)


		For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020			2022		2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income before noncontrolling interests	Net income before noncontrolling interests	$	223,499	$	115,350	Net income before noncontrolling interests	$	82,437	$	104,618
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	3,248		3,262		Depreciation and amortization	1,710		1,554
Deferred income taxes	Deferred income taxes	19,945		15,878		Deferred income taxes	8,846		9,777

Noncash lease expense	Noncash lease expense	(945)		(885)		Noncash lease expense	(150)		(272)
Net investment (gain) loss on nonconsolidated seed investment securities		(4,328)		1,215
Net investment (gain) loss on nonconsolidated investment securities						Net investment (gain) loss on nonconsolidated investment securities	4,599		(372)
Net (gain) loss on the tax receivable agreements						Net (gain) loss on the tax receivable agreements	(482)		—

(Gain) loss on disposal of property and equipment		0		(4)
Amortization of debt issuance costs	Amortization of debt issuance costs	236		236		Amortization of debt issuance costs	118		118
Share-based compensation	Share-based compensation	20,354		18,684		Share-based compensation	11,339		10,800
Net investment (gain) loss of consolidated investment products	Net investment (gain) loss of consolidated investment products	(15,244)		47		Net investment (gain) loss of consolidated investment products	(1,188)		(6,916)
Purchase of investments by consolidated investment products	Purchase of investments by consolidated investment products	(143,799)		(67,156)		Purchase of investments by consolidated investment products	(37,902)		(90,733)
Proceeds from sale of investments by consolidated investment products	Proceeds from sale of investments by consolidated investment products	73,923		72,073		Proceeds from sale of investments by consolidated investment products	34,765		37,395

Change in assets and liabilities resulting in an increase (decrease) in cash:	Change in assets and liabilities resulting in an increase (decrease) in cash:					Change in assets and liabilities resulting in an increase (decrease) in cash:
Accounts receivable	Accounts receivable	(21,766)		(12,238)		Accounts receivable	(6,644)		(15,151)
Prepaid expenses and other assets	Prepaid expenses and other assets	(643)		(754)		Prepaid expenses and other assets	2,871		(8,948)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	97,681		71,902		Accounts payable and accrued expenses	90,574		89,328
Net change in operating assets and liabilities of consolidated investment products	Net change in operating assets and liabilities of consolidated investment products	7,346		(13,672)		Net change in operating assets and liabilities of consolidated investment products	604		61,578
Net cash provided by operating activities	Net cash provided by operating activities	259,507		203,938		Net cash provided by operating activities	191,497		192,776
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Acquisition of property and equipment	Acquisition of property and equipment	(1,343)		(942)		Acquisition of property and equipment	(1,084)		(408)
Leasehold improvements	Leasehold improvements	(2,722)		(218)		Leasehold improvements	(2,893)		(1,314)

Proceeds from sale of investment securities	Proceeds from sale of investment securities	12,813		19,365		Proceeds from sale of investment securities	3,972		12,813
Purchase of investment securities	Purchase of investment securities	(33,820)		(1,260)		Purchase of investment securities	(56,398)		(33,820)

Net cash provided by (used in) investing activities		(25,072)		16,945
Net cash used in investing activities						Net cash used in investing activities	(56,403)		(22,729)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Partnership distributions	Partnership distributions	(42,260)		(39,322)		Partnership distributions	(11,168)		(11,873)
Dividends paid	Dividends paid	(138,081)		(109,692)		Dividends paid	(117,596)		(81,304)

Payment under the tax receivable agreements		(23,836)		(20,318)

Net proceeds from issuance of common stock	Net proceeds from issuance of common stock	46,928		63,027		Net proceeds from issuance of common stock	—		46,928
Payment of costs directly associated with the issuance of Class A common stock	Payment of costs directly associated with the issuance of Class A common stock	(239)		(220)		Payment of costs directly associated with the issuance of Class A common stock	—		(102)
Purchase of equity and subsidiary equity	Purchase of equity and subsidiary equity	(46,928)		(63,027)		Purchase of equity and subsidiary equity	—		(46,928)
Taxes paid related to employee net share settlement	Taxes paid related to employee net share settlement	(7,866)		(4,530)		Taxes paid related to employee net share settlement	(7,420)		(7,866)

Capital contributions to consolidated investment products, net	Capital contributions to consolidated investment products, net	55,042		5,228		Capital contributions to consolidated investment products, net	3,989		48,197
Net cash used in financing activities	Net cash used in financing activities	(157,240)		(168,854)		Net cash used in financing activities	(132,195)		(52,948)
Net increase (decrease) in cash, cash equivalents, and restricted cash		77,195		52,029
Net increase in cash, cash equivalents, and restricted cash						Net increase in cash, cash equivalents, and restricted cash	2,899		117,099
Net cash impact of deconsolidation of CIPs	Net cash impact of deconsolidation of CIPs	(34,823)		0		Net cash impact of deconsolidation of CIPs	—		(34,823)
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash					Cash, cash equivalents and restricted cash
Beginning of period	Beginning of period	199,450		144,255		Beginning of period	200,771		199,450
End of period	End of period	$	241,822	$	196,284	End of period	$	203,670	$	281,726

Cash, cash equivalents and restricted cash as of the end of the period	Cash, cash equivalents and restricted cash as of the end of the period					Cash, cash equivalents and restricted cash as of the end of the period
Cash and cash equivalents	Cash and cash equivalents	$	228,738	$	190,855	Cash and cash equivalents	$	187,511	$	215,752
Restricted cash	Restricted cash	629		629		Restricted cash	629		629
Cash and cash equivalents of consolidated investment products	Cash and cash equivalents of consolidated investment products	12,455		4,800		Cash and cash equivalents of consolidated investment products	15,530		65,345
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	241,822	$	196,284	Cash, cash equivalents and restricted cash	$	203,670	$	281,726

Supplementary information	Supplementary information					Supplementary information
Noncash activity:	Noncash activity:					Noncash activity:
Establishment of deferred tax assets	Establishment of deferred tax assets	$	21,572	$	45,629	Establishment of deferred tax assets	$	1,195	$	19,246
Establishment of amounts payable under tax receivable agreements	Establishment of amounts payable under tax receivable agreements	17,733		37,110		Establishment of amounts payable under tax receivable agreements	440		15,802
Increase in investment securities due to deconsolidation of CIPs	Increase in investment securities due to deconsolidation of CIPs	20,900		1,469		Increase in investment securities due to deconsolidation of CIPs	9,970		11,200
Operating lease assets obtained in exchange for operating lease liabilities	Operating lease assets obtained in exchange for operating lease liabilities	2,434		0		Operating lease assets obtained in exchange for operating lease liabilities	15,874		2,434

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

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ARTISAN PARTNERS ASSET MANAGEMENT INC.

Notes to Unaudited Consolidated Financial Statements

(U.S. currencies in thousands, except share and per share amounts and as otherwise indicated)

Note 1. Nature of Business and Organization

Nature of Business

Artisan Partners Asset Management Inc. (“APAM”), through its subsidiaries, is an investment management firm focused on providing high-value added, active investment strategies to sophisticated clients globally. APAM and its subsidiaries are hereafter referred to collectively as “Artisan” or the ~~“Company”.~~“Company.”

Artisan’s autonomous investment teams manage a broad range of U.S., non-U.S. and global investment strategies that are diversified by asset class, market cap and investment style. Strategies are offered through multiple investment vehicles to accommodate a broad range of client mandates. Artisan offers its investment management services primarily to institutions and through intermediaries that operate with institutional-like decision-making processes and have long-term investment horizons.

Organization

On March 12, 2013, APAM completed its initial public offering (the “IPO”). APAM was formed for the purpose of becoming the general partner of Artisan Partners Holdings LP (“Artisan Partners Holdings” or “Holdings”) in connection with the IPO. Holdings is a holding company for the investment management business conducted under the name “Artisan ~~Partners”.~~Partners.” The reorganization (“IPO Reorganization”) established the necessary corporate structure to complete the IPO while at the same time preserving the ability of the firm to conduct operations through Holdings and its subsidiaries.

As ~~the~~its sole general partner, APAM controls the business and affairs of Holdings. As a result, APAM consolidates Holdings’ financial statements and records a noncontrolling interest for the equity interests in Holdings held by the limited partners of Holdings. At ~~June 30, 2021,~~March 31, 2022, APAM held approximately ~~82%~~85% of the equity ownership interest in Holdings.

Holdings, together with its wholly owned subsidiary, Artisan Investments GP LLC, controls a 100% interest in Artisan Partners Limited Partnership (“APLP”), a multi-product investment management firm that is the principal operating subsidiary of Artisan Partners Holdings. APLP is registered as an investment adviser with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. APLP provides investment advisory services to traditional separate accounts and pooled investment vehicles, including Artisan Partners Funds, Inc. (“Artisan Funds”), Artisan Partners Global Funds plc (“Artisan Global Funds”), and Artisan sponsored private funds (“Artisan Private Funds”). Artisan Funds are a series of open-end mutual funds registered under the Investment Company Act of 1940, as amended. Artisan Global Funds is a family of Ireland-domiciled UCITS funds. Artisan Private Funds consist of a number of Artisan-sponsored unregistered pooled investment vehicles.

Note 2. Summary of Significant Accounting Policies

Basis of presentation

The accompanying financial statements are unaudited. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of such consolidated financial statements have been included. Such interim results are not necessarily indicative of full year results.

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting and accordingly they do not include all of the information and footnotes required in the annual consolidated financial statements and accompanying footnotes.

The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. As a result, the interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in APAM’s latest annual report on Form 10-K.

The accompanying financial statements were prepared in accordance with U.S. GAAP and related rules and regulations of the SEC. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates or assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates or assumptions.

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Principles of consolidation

Artisan’s policy is to consolidate all subsidiaries or other entities in which it has a controlling financial interest. The consolidation guidance requires an analysis to determine if an entity should be evaluated for consolidation using the voting interest entity (“VOE”) model or the variable interest entity (“VIE”) model. Under the VOE model, controlling financial interest is generally defined as a majority ownership of voting interests. Under the VIE model, controlling financial interest is defined as (i) the power to direct activities that most significantly impact the economic performance of the entity and (ii) the right to receive potentially significant benefits or the obligation to absorb potentially significant losses.

~~Table of Contents~~

Artisan generally consolidates VIEs in which it meets the power criteria and holds an equity ownership interest of greater than 10%. The consolidated financial statements include the accounts of APAM and all subsidiaries or other entities in which APAM has a direct or indirect controlling financial interest. All material intercompany balances have been eliminated in consolidation.

Artisan serves as the investment adviser to Artisan Funds, Artisan Global Funds and Artisan Private Funds. Artisan Funds and Artisan Global Funds are corporate entities the business and affairs of which are managed by their respective boards of directors. The shareholders of the funds retain voting rights, including rights to elect and reelect members of their respective boards of directors. Each series of Artisan Funds is a VOE and is separately evaluated for consolidation under the VOE model. The shareholders of Artisan Global Funds lack simple majority liquidation rights, and as a result, each sub-fund of Artisan Global Funds is evaluated for consolidation under the VIE model. Artisan Private Funds are also evaluated for consolidation under the VIE model because third-party equity holders of the funds generally lack the ability to divest Artisan of its control of the funds.

From time to time, the Company makes investments in Artisan Funds, Artisan Global Funds, and Artisan Private Funds. If the investment results in a controlling financial interest, APAM consolidates the fund, and the underlying activity of the entire fund is included in Artisan’s ~~Unaudited Consolidated Financial Statements.~~unaudited consolidated financial statements. As of ~~June 30, 2021,~~March 31, 2022, Artisan had a controlling financial interest in 3 sub-funds of Artisan Global Funds and 2 Artisan Private Funds and, as a result, these funds are included in Artisan’s ~~Unaudited Consolidated Financial Statements.~~unaudited consolidated financial statements. Because these consolidated investment products meet the definition of investment companies under U.S. GAAP, Artisan has retained the specialized industry accounting principles for investment companies in the consolidated financial statements. See Note 6, “Variable Interest Entities and Consolidated Investment Products” for additional details.

Recent accounting pronouncements

None.

Note 3. Investment Securities

The disclosures below include details of Artisan’s investments, excluding money market funds and consolidated investment products. Investments held by consolidated investment products are described in Note 6, ~~“Variable~~Variable Interest Entities and Consolidated Investment ~~Products”.~~Products.”


		As of June 30, 2021		As of December 31, 2020			As of March 31, 2022		As of December 31, 2021
Investments in equity securities	Investments in equity securities	$	37,083	$	2,807	Investments in equity securities	$	95,557	$	37,179
Investments in equity securities accounted for under the equity method	Investments in equity securities accounted for under the equity method	12,807		849		Investments in equity securities accounted for under the equity method	10,118		10,699
Total investment securities	Total investment securities	$	49,890	$	3,656	Total investment securities	$	105,675	$	47,878

Artisan’s investments in equity securities consist of investments in shares of Artisan Funds, Artisan Global Funds and Artisan Private Funds. As of ~~June 30, 2021, $36.3~~March 31, 2022, $74.0 million of Artisan's investment securities were related to funded long-term incentive compensation plans. Unrealized gains (losses) related to investment securities held at the end of the periods ~~identified~~indicated below were as follows:

For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Unrealized gain (loss) on investment securities held at the end of the period $ 3,988 $ 1,148 $ 4,007 $ 246


	For the Three Months Ended March 31,
	2022		2021
Unrealized gain (loss) on investment securities held at the end of the period	$	(3,928)	$	19

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Other net investment gain (loss) is presented within the non-operating income (expense) section of the Consolidated Statements of Operations. The components of other net investment gain (loss) are as follows:


	For the Three Months Ended March 31,
	2022		2021
Net investment gain (loss) on seed investments	$	(1,638)	$	477
Net investment gain (loss) on franchise capital investments	$	(2,961)	$	(105)
Other	$	(153)	$	(176)
Other net investment gain (loss)	$	(4,752)	$	196

Note 4. Fair Value Measurements

The table below presents information about Artisan’s assets and liabilities that are measured at fair value and the valuation techniques Artisan utilized to determine such fair value. The financial instruments held by consolidated investment products are excluded from the table below and are presented in Note 6, ~~“Variable~~Variable Interest Entities and Consolidated Investment ~~Products”.~~Products.”

In accordance with ASC 820, fair value is defined as the price that Artisan would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. The following three-tier fair value hierarchy prioritizes the inputs used in measuring fair value:

•Level 1 – Observable inputs such as quoted (unadjusted) market prices in active markets for identical securities.

•Level 2 – Other significant observable inputs (including but not limited to quoted prices for similar instruments, interest rates, prepayment speeds, credit risk, etc.).

•Level 3 – Significant unobservable inputs (including Artisan’s own assumptions in determining fair value).

~~Table of Contents~~

The following provides the hierarchy of inputs used to derive fair value of Artisan’s assets and liabilities that are financial instruments as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		Assets and Liabilities at Fair Value											Assets and Liabilities at Fair Value
		Total		NAV Practical Expedient (No Fair Value Level)		Level 1		Level 2		Level 3			Total		NAV Practical Expedient (No Fair Value Level)		Level 1		Level 2		Level 3
June 30, 2021
March 31, 2022												March 31, 2022
Assets	Assets											Assets
Money market funds	Money market funds	$	67,858	$	0	$	67,858	$	0	$	0	Money market funds	$	37,862	$	—	$	37,862	$	—	$	—
Equity securities	Equity securities	49,890		11,963		37,927		0		0		Equity securities	105,675		9,533		96,142		—		—

December 31, 2020
December 31, 2021												December 31, 2021
Assets	Assets											Assets
Money market funds	Money market funds	$	25,855	$	0	$	25,855	$	0	$	0	Money market funds	$	37,861	$	—	$	37,861	$	—	$	—
Equity securities	Equity securities	3,656		57		3,599		0		0		Equity securities	47,878		9,975		37,903		—		—

Fair values determined based on Level 1 inputs utilize quoted market prices for identical assets. Level 1 assets generally consist of money market funds, open-end mutual funds and UCITS funds. Equity securities without a fair value level consist of the Company’s investments in Artisan Private Funds, which are measured at the underlying fund’s net asset value (“NAV”), using the ASC 820 practical expedient. The NAV is provided by the fund and is derived from the fair values of the underlying investments as of the reporting date. Cash maintained in demand deposit accounts is excluded from the table above.

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Note 5. Borrowings

Artisan’s borrowings consist of the following as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		Maturity	Outstanding Balance		Interest Rate Per Annum			Maturity	Outstanding Balance		Interest Rate Per Annum
Revolving credit agreement	Revolving credit agreement	August 2022	$	0	NA		Revolving credit agreement	August 2022	$	—	NA
Senior notes	Senior notes						Senior notes

Series C	Series C	August 2022	90,000		5.82	%	Series C	August 2022	90,000		5.82	%
Series D	Series D	August 2025	60,000		4.29	%	Series D	August 2025	60,000		4.29	%
Series E	Series E	August 2027	50,000		4.53	%	Series E	August 2027	50,000		4.53	%
Total borrowings	Total borrowings		$	200,000			Total borrowings		$	200,000

The fair value of borrowings was approximately ~~$204.9~~$202.8 million as of ~~June 30, 2021.~~March 31, 2022. Fair value was determined based on future cash flows, discounted to present value using current market interest rates. The inputs are categorized as Level 2 in the fair value hierarchy, as defined in Note 4, ~~“Fair~~Fair Value ~~Measurements”.~~Measurements.”

Senior notes - On December 7, 2021, Holdings entered into a Note Purchase Agreement to issue $90.0 million of Series F senior notes in a private placement transaction on August 16, 2022, subject to the satisfaction of certain customary closing conditions. The Company will use the proceeds from the Series F senior notes to repay the $90.0 million of Series C senior notes that mature on August 16, 2022. The Series F senior notes will bear interest at a rate of 3.10% and will mature on August 16, 2032.

The fixed interest rate on each series of unsecured notes is subject to a one percentage point increase in the event Holdings receives a below-investment grade rating and any such increase will continue to apply until an investment grade rating is received.

Interest expense incurred on the unsecured notes and revolving credit agreement was ~~$2.5~~$2.6 million for the three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020, and $5.1 million for the six months ended June 30, 2021 and 2020.~~2021.

As of ~~June 30, 2021,~~March 31, 2022, the aggregate maturities of debt obligations, based on their contractual terms, are as follows:


2021		$	0
2022	2022	90,000		2022	$	90,000
2023	2023	0		2023	—
2024	2024	0		2024	—
2025	2025	60,000		2025	60,000
2026				2026	—
Thereafter	Thereafter	50,000		Thereafter	50,000
Total	Total	$	200,000	Total	$	200,000

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Note 6. Variable Interest Entities and Consolidated Investment Products

Artisan serves as the investment adviser for various types of investment products, consisting of both VIEs and VOEs. Artisan consolidates an investment product if it has a controlling financial interest in the entity. See Note 2, ”Summary of Significant Accounting Policies.” Any such entities are collectively referred to herein as consolidated investment products or CIPs.

As of ~~June 30, 2021,~~March 31, 2022, Artisan is considered to have a controlling financial interest in 3 sub-funds of Artisan Global Funds and 2 Artisan Private Funds, with an aggregate direct equity investment in the consolidated investment products of ~~$55.5~~$54.9 million.

Artisan’s maximum exposure to loss in connection with the assets and liabilities of CIPs is limited to its direct equity investment, while the potential benefit is limited to the management and performance fees received and the return on its equity investment. With the exception of Artisan’s direct equity investment, the assets of CIPs are not available to Artisan’s creditors, nor are they available to Artisan for general corporate purposes. In addition, third-party investors in the CIPs have no recourse to the general credit of the Company.

Management and performance fees earned from CIPs are eliminated from revenue upon consolidation. See Note ~~14,~~15, “Related Party Transactions” for additional information on management and performance fees earned from CIPs.

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Third-party investors’ ownership interest in CIPs is presented as redeemable noncontrolling interests in the ~~Unaudited Condensed Consolidated Statements~~unaudited condensed consolidated statements of ~~Financial Condition~~financial condition as third-party investors have the right to withdraw their capital, subject to certain conditions. Net income attributable to third-party investors is reported as net income (loss) attributable to noncontrolling interests - consolidated investment products in the ~~Unaudited Consolidated Statements~~unaudited consolidated statements of ~~Operations.~~operations.

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company determined that it no longer had a controlling financial interest in one series fund of Artisan ~~Private Fund upon the redemption~~Funds as a result of ~~the Company's seed investment.~~third party capital contributions. Upon loss of control, the ~~VIE~~fund was deconsolidated and the ~~following~~related assets, liabilities, and equity of the fund were derecognized from the Company’s ~~Unaudited Condensed Consolidated Statements~~unaudited condensed consolidated statements of ~~Financial Condition:~~


	~~As of January 1, 2021~~
~~Assets of consolidated investment products~~
~~Cash and cash equivalents~~	$	~~34,823~~
~~Accounts receivable and other~~	~~1,769~~
~~Investment assets, at fair value~~	~~72,868~~
~~Less: Amounts reclassified to investment securities~~	~~(11,200)~~
~~Total assets~~	$	~~98,260~~
~~Liabilities of consolidated investment products~~
~~Accounts payable, accrued expenses, and other~~	$	~~76,960~~
~~Investment liabilities, at fair value~~	~~566~~
~~Total liabilities~~	$	~~77,526~~
~~Redeemable noncontrolling interests~~	$	~~20,734~~
~~Total liabilities and equity~~	$	~~98,260~~

~~One Artisan Private Fund~~financial condition. There was no net impact to the unaudited consolidated ~~during~~statements of operations for the three months ended March 31, 2021 and deconsolidated during the three months ended June 30, 2021 as a result of third party capital contributions to the fund. Upon the loss of control, the VIE was deconsolidated and the Company's remaining direct equity investment of $10.9 million was reclassified to investment securities in the Unaudited Consolidated Statement of Financial Condition.

~~There was 0 net impact to the Unaudited Consolidated Statements of Operations for the six months ended June 30, 2021.~~2022. Artisan generally does not recognize a gain or loss upon deconsolidation of investment products ~~because~~as the assets and liabilities of CIPs are carried at fair value. Artisan’s $10.0 million direct equity investment was reclassified from investment assets of consolidated investment products to investment securities.

As of ~~June 30, 2021,~~March 31, 2022, Artisan held direct equity investments of ~~$12.8~~$10.1 million in VIEs for which the Company does not hold a controlling financial interest. These direct equity investments consisted of seed investments in sub-funds of Artisan Global Funds and Artisan Private Funds, both of which are accounted for under the equity method of accounting because Artisan has significant influence over the funds.

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Fair Value Measurements - Consolidated Investment Products

Investments held by CIPs are reflected at fair value. Short and long positions on equity securities are valued based upon closing prices of the security on the exchange or market designated by the accounting agent or pricing vendor as the principal exchange. The closing price may represent last sale price, official closing price, a closing auction or other information depending on market convention. Short and long positions on fixed income instruments are valued at market value. Market values are generally evaluations based on the judgment of pricing vendors, which may consider, among other factors, the prices at which securities actually trade, broker-dealer quotations, pricing formulas, estimates of market values obtained from yield data relating to investments or securities with similar characteristics and/or discounted cash flow models that might be applicable. Derivative assets and liabilities are generally comprised of put and call options on securities and indices. Put and call options are valued at the mid price (average of bid price and ask price) as provided by the pricing vendor at the close of trading on the contract's principal exchange. The following tables present the fair value hierarchy levels of assets and liabilities held by CIPs measured at fair value as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		Assets and Liabilities at Fair Value									Assets and Liabilities at Fair Value
		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
June 30, 2021
March 31, 2022										March 31, 2022
Assets	Assets									Assets
Money market funds	Money market funds	$	12,444	$	12,444	$	0	$	0	Money market funds	$	12,499	$	12,499	$	—	$	—
Equity securities - long position	Equity securities - long position	29,612		29,049		563		0		Equity securities - long position	33,672		31,581		2,091		—
Fixed income instruments - long position	Fixed income instruments - long position	158,415		0		158,415		0		Fixed income instruments - long position	143,105		—		138,168		4,937

Derivative assets										Derivative assets	313		59		254		—

Liabilities	Liabilities									Liabilities
Equity securities - short position	Equity securities - short position	$	454	$	454	$	0	$	0	Equity securities - short position	$	3,633	$	3,633	$	—	$	—
Fixed income instruments - short position	Fixed income instruments - short position	9,409		0		9,409		0		Fixed income instruments - short position	17,542		—		17,542		—
Derivative liabilities	Derivative liabilities	244		61		183		0		Derivative liabilities	133		—		133		—

Assets and Liabilities at Fair Value
Total Level 1 Level 2 Level 3
December 31, 2020
Assets
Money market funds $ 7,822 $ 7,822 $ 0 $ 0
Equity securities - long position 83,960 83,027 933 0
Fixed income instruments - long position 133,518 0 133,518 0
Derivative assets 12,902 12,902 0 0
Liabilities
Fixed income instruments - short position $ 14,978 $ 0 $ 14,978 $ 0
Derivative liabilities 753 566 187 0

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	Assets and Liabilities at Fair Value
	Total		Level 1		Level 2		Level 3
December 31, 2021
Assets
Money market funds	$	7,908	$	7,908	$	—	$	—
Equity securities - long position	33,583		31,838		1,745		—
Fixed income instruments - long position	161,177		—		156,240		4,937
Derivative assets	241		—		241		—

Liabilities
Equity securities - short position	$	3,427	$	3,427	$	—	$	—
Fixed income instruments - short position	$	15,570	$	—	$	15,570	$	—
Derivative liabilities	182		4		178		—

CIP balances included in the Company’s ~~Unaudited Condensed Consolidated Statements~~unaudited condensed consolidated statements of ~~Financial Condition~~financial condition were as follows:
As of June 30, 2021 As of December 31, 2020
Net CIP assets included in the table above $ 190,364 $ 222,471
Net CIP assets/(liabilities) not included in the table above (44,421) (69,763)
Total Net CIP assets 145,943 152,708
Less: redeemable noncontrolling interests 90,458 93,753
Artisan’s direct equity investment in CIPs $ 55,485 $ 58,955


	As of March 31, 2022		As of December 31, 2021
Net CIP assets included in the table above	$	168,281	$	183,730
Net CIP assets/(liabilities) not included in the table above	(6,228)		(10,769)
Total Net CIP assets	162,053		172,961
Less: redeemable noncontrolling interests	107,139		111,035
Artisan’s direct equity investment in CIPs	$	54,914	$	61,926

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Note 7. Noncontrolling Interests - Holdings

Net income attributable to noncontrolling interests - Artisan Partners Holdings in the ~~Unaudited Consolidated Statements~~unaudited consolidated statements of ~~Operations~~operations represents the portion of earnings or loss attributable to the equity ownership interests in Holdings held by the limited partners of Holdings. As of ~~June 30, 2021,~~March 31, 2022, APAM held approximately ~~82%~~85% of the equity ownership interests in Holdings.

Limited partners of Artisan Partners Holdings are entitled to exchange partnership units (along with a corresponding number of shares of Class B or C common stock of APAM) for shares of Class A common stock from time to time (the “Holdings Common Unit Exchanges”). The Holdings Common Unit Exchanges increase APAM’s equity ownership interest in Holdings and result in an increase to deferred tax assets and amounts payable under the tax receivable agreements. See Note 11, ~~“Income~~Income Taxes and Related ~~Payments”.~~Payments.”

In order to maintain the one-to-one correspondence of the number of Holdings partnership units and APAM common shares, Holdings will issue one general partner (“GP”) unit to APAM for each share of Class A common stock issued by APAM. For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, APAM’s equity ownership interest in Holdings increased as a result of the following transactions:


		Holdings GP Units	Limited Partnership Units	Total	APAM Ownership %			Holdings GP Units	Limited Partnership Units	Total	APAM Ownership %
Balance at December 31, 2020		63,131,007	15,441,103	78,572,110	80	%
2021 Follow-On Offering		963,614	(963,614)	0	1	%
Balance at December 31, 2021							Balance at December 31, 2021	66,699,872	12,335,197	79,035,069	84	%

Holdings Common Unit Exchanges(1)	Holdings Common Unit Exchanges(1)	274,947	(274,947)	0	0	%	Holdings Common Unit Exchanges (1)	96,835	(96,835)	—	—	%
Issuance of APAM Restricted Shares	Issuance of APAM Restricted Shares	740,249	0	740,249	1	%	Issuance of APAM Restricted Shares	787,372	—	787,372	1	%
Delivery of Shares Underlying RSUs (1)	Delivery of Shares Underlying RSUs (1)	1,074	0	1,074	0	%	Delivery of Shares Underlying RSUs (1)	1,060	—	1,060	—	%
Restricted Share Award Net Share Settlement (1)	Restricted Share Award Net Share Settlement (1)	(176,194)	0	(176,194)	0	%	Restricted Share Award Net Share Settlement (1)	(185,243)	—	(185,243)	—	%
Forfeitures from Employee Terminations (1)	Forfeitures from Employee Terminations (1)	(95,235)	0	(95,235)	0	%	Forfeitures from Employee Terminations (1)	(1,218)	—	(1,218)	—	%
Balance at June 30, 2021		64,839,462	14,202,542	79,042,004	82	%

Balance at March 31, 2022							Balance at March 31, 2022	67,398,678	12,238,362	79,637,040	85	%
(1) The impact of the transaction on APAM’s ownership percentage was less than 1%.							(1) The impact of the transaction on APAM’s ownership percentage was less than 1%.

~~(1)~~ ~~The impact~~Table of ~~the transaction on APAM’s ownership percentage was less than 1%.~~Contents

Changes in ownership of Holdings are accounted for as equity transactions because APAM continues to have a controlling interest in Holdings. Additional paid-in capital and noncontrolling interests - Artisan Partners Holdings in the ~~Unaudited Condensed Consolidated Statements~~unaudited condensed consolidated statements of ~~Financial Condition~~financial condition are adjusted to reallocate Holdings’ historical equity to reflect the change in APAM’s ownership of Holdings.

The reallocation of equity had the following impact on the ~~Unaudited Condensed Consolidated Statements~~unaudited condensed consolidated statements of ~~Financial Condition:~~financial condition:


Statement of Financial Condition		For the Six Months Ended June 30,
		2021		2020
Statements of Financial Condition						Statements of Financial Condition	For the Three Months Ended March 31,
							2022		2021
Additional paid-in capital	Additional paid-in capital	$	(845)	$	(2,089)	Additional paid-in capital	$	373	$	1,254
Noncontrolling interests - Artisan Partners Holdings	Noncontrolling interests - Artisan Partners Holdings	858		2,118		Noncontrolling interests - Artisan Partners Holdings	(369)		(1,241)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(13)		(29)		Accumulated other comprehensive income (loss)	(4)		(13)
Net impact to financial condition	Net impact to financial condition	$	0	$	0	Net impact to financial condition	$	—	$	—

In addition to the reallocation of historical equity, the change in ownership resulted in an increase to deferred tax assets and additional paid-in capital of ~~$0.7~~$0.1 million and ~~$2.0~~$0.7 million for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

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Note 8. Stockholders’ Equity

APAM - Stockholders’ Equity

APAM had the following authorized and outstanding equity as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively:

Outstanding

Authorized

As of June 30, 2021

As of December 31, 2020

Voting Rights (1)

Economic Rights

Authorized

As of March 31, 2022

As of December 31, 2021

Voting Rights (1)

Economic Rights

Common shares

Class A, par value $0.01 per share

500,000,000

64,839,462

63,131,007

1 vote per share

Proportionate

Class A, par value $0.01 per share

500,000,000

67,398,678

66,699,872

1 vote per share

Proportionate

Class B, par value $0.01 per share

200,000,000

3,647,533

4,457,958

1 vote per share

None

Class B, par value $0.01 per share

200,000,000

3,111,745

3,206,580

1 vote per share

None

Class C, par value $0.01 per share

400,000,000

10,555,009

10,983,145

1 vote per share

None

Class C, par value $0.01 per share

400,000,000

9,126,617

9,128,617

1 vote per share

None

(1) The Company’s employees to whom Artisan has granted equity have entered into a stockholders agreement with respect to all shares of APAM common stock they have acquired from the Company and any shares they may acquire from the Company in the future, pursuant to which they granted an irrevocable voting proxy to a Stockholders Committee. As of June 30, 2021, Artisan’s employees held 5,144,657 restricted shares of Class A common stock and all 3,647,533 outstanding shares of Class B common stock, all of which were subject to the agreement.

(1) The Company’s employees to whom Artisan has granted equity have entered into a stockholders agreement with respect to all shares of APAM common stock they have acquired from the Company and any shares they may acquire from the Company in the future, pursuant to which they granted an irrevocable voting proxy to a Stockholders Committee. As of March 31, 2022, Artisan’s employees held 5,342,528 restricted shares of Class A common stock and all 3,111,745 outstanding shares of Class B common stock, all of which were subject to the agreement.

APAM is dependent on cash generated by Holdings to fund any dividends. Generally, Holdings will make distributions to all of its partners, including APAM, based on the proportionate share of ownership each ~~holds~~has in Holdings. APAM will fund dividends to its stockholders from its proportionate share of those distributions after provision for its taxes and other obligations. APAM declared and paid the following dividends per share during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


Type of Dividend	Type of Dividend	Class of Stock	For the Three Months Ended June 30,				For the Six Months Ended June 30,				Type of Dividend	Class of Stock	For the Three Months Ended March 31,
			2021		2020		2021		2020				2022		2021
Quarterly	Quarterly	Class A Common	$	0.88	$	0.61	$	1.85	$	1.29	Quarterly	Class A Common	$	1.03	$	0.97
Special Annual	Special Annual	Class A Common	$	0	$	0	$	0.31	$	0.60	Special Annual	Class A Common	$	0.72	$	0.31

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The following table summarizes APAM’s stock transactions for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:


		Total Stock Outstanding	Class A Common Stock(1)	Class B Common Stock	Class C Common Stock		Total Stock Outstanding	Class A Common Stock(1)	Class B Common Stock	Class C Common Stock
Balance at December 31, 2020		78,572,110	63,131,007	4,457,958	10,983,145
2021 Follow-On Offering		0	963,614	(638,614)	(325,000)
Balance at December 31, 2021						Balance at December 31, 2021	79,035,069	66,699,872	3,206,580	9,128,617

Holdings Common Unit Exchanges	Holdings Common Unit Exchanges	0	274,947	(171,811)	(103,136)	Holdings Common Unit Exchanges	—	96,835	(94,835)	(2,000)
Restricted Share Award Grants	Restricted Share Award Grants	740,249	740,249	0	0	Restricted Share Award Grants	787,372	787,372	—	—
Restricted Share Award Net Share Settlement	Restricted Share Award Net Share Settlement	(176,194)	(176,194)	0	0	Restricted Share Award Net Share Settlement	(185,243)	(185,243)	—	—
Delivery of Shares Underlying RSUs	Delivery of Shares Underlying RSUs	1,074	1,074	0	0	Delivery of Shares Underlying RSUs	1,060	1,060	—	—
Employee/Partner Terminations	Employee/Partner Terminations	(95,235)	(95,235)	0	0	Employee/Partner Terminations	(1,218)	(1,218)	—	—
Balance at June 30, 2021		79,042,004	64,839,462	3,647,533	10,555,009
Balance at March 31, 2022						Balance at March 31, 2022	79,637,040	67,398,678	3,111,745	9,126,617

(1) There were 328,310 and 304,570 restricted stock units outstanding at June 30, 2021 and December 31, 2020, respectively. In addition, there were 135,230 performance share units outstanding at June 30, 2021. Based on the current status of the market and performance conditions, the 135,230 unvested performance share units would ultimately result in the issuance of 165,233 shares of Class A common stock if all other vesting conditions were met. Restricted stock units and performance share units are not reflected in the table because they are not considered outstanding or issued stock.
(1) There were 367,392 and 327,713 restricted stock units outstanding at March 31, 2022 and December 31, 2021, respectively. In addition, there were 231,170 and 135,230 performance share units outstanding at March 31, 2022 and December 31, 2021 respectively. Based on the current status of the market and performance conditions, the 231,170 unvested performance share units would ultimately result in the issuance of 309,143 shares of Class A common stock if all other vesting conditions were met. Restricted stock units and performance share units are not reflected in the table because they are not considered outstanding or issued stock.						(1) There were 367,392 and 327,713 restricted stock units outstanding at March 31, 2022 and December 31, 2021, respectively. In addition, there were 231,170 and 135,230 performance share units outstanding at March 31, 2022 and December 31, 2021 respectively. Based on the current status of the market and performance conditions, the 231,170 unvested performance share units would ultimately result in the issuance of 309,143 shares of Class A common stock if all other vesting conditions were met. Restricted stock units and performance share units are not reflected in the table because they are not considered outstanding or issued stock.

Each Class A, Class B, Class D and Class E common unit of Holdings (together with the corresponding share of Class B or Class C common stock) is exchangeable for one share of Class A common stock. The corresponding shares of Class B and Class C common stock are immediately canceled upon any such exchange.

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Upon termination of employment with Artisan, an employee-partner’s Class B common units are exchanged for Class E common units and the corresponding shares of Class B common stock are canceled. APAM issues the former employee-partner a number of shares of Class C common stock equal to the former employee-partner’s number of Class E common units. Class E common units are exchangeable for Class A common stock subject to the same restrictions and limitations on exchange applicable to the other common units of Holdings.

Artisan Partners Holdings - Partners’ Equity

Holdings makes distributions of its net income to the holders of its partnership units for income taxes as required under the terms of the partnership agreement and also makes additional distributions under the terms of the partnership agreement. The distributions are recorded in the financial statements on the declaration date, or on the payment date in lieu of a declaration date. Holdings’ partnership distributions for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Holdings Partnership Distributions to Limited Partners	Holdings Partnership Distributions to Limited Partners	$	30,387	$	22,246	$	42,260	$	39,322	Holdings Partnership Distributions to Limited Partners	$	11,168	$	11,873
Holdings Partnership Distributions to APAM	Holdings Partnership Distributions to APAM	125,906		66,251		174,452		111,355		Holdings Partnership Distributions to APAM	60,391		48,546
Total Holdings Partnership Distributions	Total Holdings Partnership Distributions	$	156,293	$	88,497	$	216,712	$	150,677	Total Holdings Partnership Distributions	$	71,559	$	60,419

The distributions are recorded as a reduction to consolidated stockholders’ equity, with the exception of distributions made to APAM, which are eliminated upon consolidation.

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Note 9. Revenue From Contracts with Customers

~~Disaggregated Revenue~~

The following table presents a disaggregation of investment advisory revenue by type and vehicle for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~
For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Management fees
   Artisan Funds $ 176,863 $ 109,697 $ 342,670 $ 224,376
   Artisan Global Funds 11,882 7,313 22,746 15,429
   Separate accounts and other(1)
112,125 77,917 219,419 155,026
Performance fees
   Separate accounts and other(1)
4,079 8,015 10,791 10,947
Total revenues(2)
$ 304,949 $ 202,942 $ 595,626 $ 405,778
(1) Separate accounts and other revenue consists of management fees and performance fees earned from vehicles other than Artisan Funds or Artisan Global Funds, which includes traditional separate accounts, Artisan-branded collective investment trusts and Artisan Private Funds.
(2) All management fees and performance fees from consolidated investment products are eliminated upon consolidation and therefore are omitted from this table.
2021:

Performance fees are subject to the uncertainty of market volatility, and as a result, the entire amount of the variable consideration related to performance fees is constrained until the end of each measurement period. At the end of the quarterly or annual measurement period, revenue is recorded for the actual amount of performance fees earned during that period because the uncertainty has been resolved. For performance fees with annual measurement periods, revenue recognized in the current quarter relates to performance obligations that were partially satisfied in prior periods.

~~Table of Contents~~


	For the Three Months Ended March 31,
	2022		2021
Management fees
Artisan Funds	$	163,586	$	165,807
Artisan Global Funds	11,942		10,864
Separate accounts and other(1)	105,878		107,294
Performance fees
Separate accounts and other(1)	192		6,712

Total revenues (2)	$	281,598	$	290,677
(1) Separate accounts and other revenue consists of management fees and performance fees earned from vehicles other than Artisan Funds or Artisan Global Funds, and therefore includes revenue earned from traditional separate accounts, Artisan-branded collective investment trusts and Artisan Private Funds.
(2) All management fees and performance fees from consolidated investment products were eliminated upon consolidation and therefore are omitted from this table. See Note 15, Related Party Transactions.”

The following table presents the balances of receivables related to contracts with customers:


		As of June 30, 2021		As of December 31, 2020
Customer	Customer					Customer	As of March 31, 2022		As of December 31, 2021
Artisan Funds	Artisan Funds	$	10,068	$	5,227	Artisan Funds	$	5,295	$	5,874
Artisan Global Funds	Artisan Global Funds	5,267		4,473		Artisan Global Funds	5,034		5,433
Separate accounts and other	Separate accounts and other	100,166		87,971		Separate accounts and other	93,708		98,568
Total receivables from contracts with customers	Total receivables from contracts with customers	$	115,501	$	97,671	Total receivables from contracts with customers	$	104,037	$	109,875
Non-customer receivables	Non-customer receivables	6,153		2,217		Non-customer receivables	18,457		5,975
Accounts receivable	Accounts receivable	$	121,654	$	99,888	Accounts receivable	$	122,494	$	115,850

Artisan Funds and Artisan Global Funds are billed on the last day of each month. Artisan Funds and Artisan Global Funds make payments on the same day the invoice is received for the majority of the invoiced amount. The remainder of the invoice is generally paid in the month following receipt of the invoice. Separate accounts and other clients are generally billed on a monthly or quarterly basis, with payments due within 30 days of billing.

Artisan had 0no other contract assets or liabilities from contracts with customers as of ~~June 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021.

Note 10. Compensation and Benefits

Total compensation and benefits consists of the following:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Salaries, incentive compensation and benefits (1)	Salaries, incentive compensation and benefits (1)	$	125,911	$	93,139	$	254,275	$	188,669	Salaries, incentive compensation and benefits (1)	$	127,195	$	128,364

Long-term cash incentive compensation expense	Long-term cash incentive compensation expense	1,921		0		3,135		0		Long-term cash incentive compensation expense	2,649		1,214
Restricted share-based award compensation expense	Restricted share-based award compensation expense	10,181		9,065		20,068		18,252		Restricted share-based award compensation expense	10,088		9,887
Long-term incentive compensation awards		12,102		9,065		23,203		18,252
Long-term incentive compensation expense										Long-term incentive compensation expense	12,737		11,101

Total compensation and benefits	Total compensation and benefits	$	138,013	$	102,204	$	277,478	$	206,921	Total compensation and benefits	$	139,932	$	139,465

(1) Excluding long-term incentive compensation awards
(1) Excluding long-term incentive compensation expense										(1) Excluding long-term incentive compensation expense

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Incentive compensation

Cash incentive compensation paid to members of Artisan’s investment teams and members of its distribution teams is generally based on formulas that are tied directly to revenues. The majority of this incentive compensation is earned on a quarterly basis and paid in the quarter following the quarter in which the incentive was earned with the exception of fourth quarter payments which are paid in the fourth quarter of the year. Cash incentive compensation paid to most other employees is discretionary and subjectively determined based on individual performance and Artisan’s overall results during the applicable year and is generally paid on an annual basis.

Long-term incentive compensation awards consist of both APAM restricted share-based awards and long-term cash awards, which are referred to as franchise capital awards. These awards are described in more detail below.

Restricted share-based awards

Artisan has registered 14,000,000 shares of Class A common stock for issuance under the 2013 Omnibus Incentive Compensation Plan (the “Plan”). Pursuant to the Plan, APAM has granted a combination of restricted stock awards, restricted stock units, and performance share units (collectively referred to as “restricted share-based awards” or "awards") of Class A common stock to employees.

Standard Restricted Shares. Standard restricted shares are generally subject to a pro rata five-year service vesting condition.

Career Shares. Career shares are generally subject to both (i) a pro rata five-year service vesting condition and (ii) a qualifying retirement (as defined in the award agreement) condition.

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Franchise Shares. Like career shares, franchise shares are generally subject to both (i) a pro rata five-year service vesting condition and (ii) a qualifying retirement condition. In addition, franchise shares, which are only granted to investment team members, are subject to a Franchise Protection Clause, which provides that the number of shares that ultimately vest depends on whether certain conditions relating to client cash flows are met. If such conditions are not met, compensation cost will be reversed for any shares that do not vest.

Performance Share Units (PSUs). PSUs are generally subject to (i) a three-year service vesting condition, (ii) certain performance conditions related to the Company's adjusted operating margin and total shareholder return compared to a peer group during a three-year performance period, and (iii) for one-half of the PSUs eligible to vest at the end of the performance period, a qualifying retirement condition. The number of shares of Class A common stock that are ultimately issued in connection with each PSU award will depend upon the outcome of the performance, market and qualified retirement conditions. For the portion of a PSU award with a "performance condition" under ASC 718, expense is recognized over the service period if it is probable that the performance condition will be achieved.

Compensation expense is recognized based on the estimated grant date fair value on a straight-line basis over the requisite service period of the award. The initial requisite service period is generally five years for restricted stock awards and restricted stock units, and three years for performance share units. The fair value of each award is equal to the market price of the Company's common stock on the grant date, except for performance share units with a "market condition" performance metric under ASC 718, which have a grant-date fair value based on a Monte Carlo valuation model.

Unvested restricted share-based awards are subject to forfeiture. ~~The Company’s accounting policy is to record the impact of forfeitures when they occur.~~ Grantees are generally entitled to dividends or dividend equivalents on unvested and vested awards. ~~3,875,758~~2,950,129 shares of Class A common stock were reserved and available for issuance under the Plan as of ~~June 30, 2021.~~March 31, 2022.

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, Artisan granted ~~740,249~~787,372 restricted stock awards, ~~1,306~~1,331 restricted stock units, and ~~75,230~~95,940 performance share units of Class A common stock to employees of the Company. Total compensation expense associated with the ~~2021~~2022 grant is expected to be approximately ~~$44.3~~$38.1 million.

The following tables summarize the restricted share-based award activity for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:


		Weighted-Average Grant Date Fair Value		Restricted Stock Awards and Restricted Stock Units		Weighted-Average Grant Date Fair Value		Restricted Stock Awards and Restricted Stock Units
Unvested at January 1, 2021		$	35.09	5,293,642
Unvested at January 1, 2022					Unvested at January 1, 2022	$	38.18	5,245,394
Granted	Granted	52.93		741,555	Granted	41.86		788,703
Forfeited	Forfeited	29.31		(95,235)	Forfeited	45.67		(1,218)
Vested	Vested	31.53		(685,178)	Vested	34.91		(580,550)
Unvested at June 30, 2021		$	38.17	5,254,784
Unvested at March 31, 2022					Unvested at March 31, 2022	$	39.06	5,452,329

Weighted-Average Grant Date Fair Value Performance Share Units
Unvested at January 1, 2021 $ 52.45 60,000
Granted 68.58 75,230
Forfeited 0 0
Vested 0 0
Unvested at June 30, 2021 $ 61.42 135,230

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	Weighted-Average Grant Date Fair Value		Performance Share Units
Unvested at January 1, 2022	$	61.42	135,230
Granted	53.50		95,940
Forfeited	—		—
Vested	—		—
Unvested at March 31, 2022	$	58.13	231,170

Based on the current status of the market and performance conditions, the ~~135,230~~231,170 unvested performance share units would ultimately result in the issuance of ~~165,233~~309,143 shares of Class A common stock if all other vesting conditions were met.

The unrecognized compensation expense for the unvested restricted stock awards and restricted stock units as of ~~June 30, 2021~~March 31, 2022 was ~~$94.7~~$100.3 million with a weighted average recognition period of ~~3.6~~4.3 years remaining. The unrecognized compensation expense for the unvested performance share units as of ~~June 30, 2021~~March 31, 2022 was ~~$6.4~~$9.5 million with a weighted average recognition period of ~~3.2~~3.5 years remaining.

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During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company withheld a total of ~~176,194~~185,243 restricted shares and paid ~~or will pay~~ a total of ~~$9.2~~$7.4 million as a result of net share settlements to satisfy employee tax withholding obligations. These net share settlements had the effect of shares repurchased and retired by the Company, as they reduced the number of shares outstanding.

Long-term cash awards (franchise capital awards)

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, Artisan granted ~~$35.0~~$48.6 million of franchise capital awards to investment team members in lieu of certain additional restricted share-based awards. The franchise capital awards are subject to the same long-term vesting and forfeiture provisions as restricted share-based awards. Prior to vesting, franchise capital awards are ~~invested in~~generally allocated to one or more of the investment strategies managed by the award recipient's investment team. During the vesting period, the value of the awards will increase or decrease based on the investment returns of the strategies in which the awards are invested. Compensation expense, including the appreciation or depreciation related to investment returns, is recognized on a straight-line basis over the required service period, which is generally five years. Because the awards will be paid out in cash upon vesting, the fair value of unvested awards is recorded as a liability based on the percentage of the service requirement that has been completed.

The company hedges its economic exposure to the change in value of these awards due to market movements by investing the cash reserved for the awards in the underlying investments. The franchise capital award liability and the underlying investment holdings are marked to market each quarter. The change in value of the award liability is recognized as a compensation expense on a straight-line basis over the required service period. The change in value of the underlying investment holdings is recognized in non-operating income (expense) in the period of change. While there is a timing difference between the recognition of the compensation expense and the offsetting investment gain or loss, the compensation expense and investment income will net to zero at the end of the multi-year vesting period for all awards that ultimately vest.

The change in value of the investments had the following impact on the unaudited consolidated statements of operations:


			For the Three Months Ended June 30,				For the Six Months Ended June 30,						For the Three Months Ended March 31,
Statement of Operations Section	Statement of Operations Section	Statement of Operations Line Item	2021		2020		2021		2020		Statement of Operations Section	Statement of Operations Line Item	2022		2021
Operating Expenses		Compensation and benefits	$	213	$	0	$	210	$	0
Operating expenses											Operating expenses	Compensation and benefits	$	(707)	$	(3)
Non-operating income (expense)	Non-operating income (expense)	Other net investment gain (loss)	(2,578)		0		(2,473)		0		Non-operating income (expense)	Other net investment gain (loss)	(2,961)		(105)

The franchise capital award liability was $5.3 million and $6.9 million as of March 31, 2022 and December 31, 2021, respectively, and is included in accrued incentive compensation in the unaudited consolidated statements of financial condition.

Note 11. Income Taxes and Related Payments

APAM is subject to U.S. federal, state and local income taxation on APAM’s allocable portion of Holdings’ income as well as foreign income taxes payable by Holdings’ subsidiaries. APAM’s effective income tax rate was lower than the U.S. federal statutory rate of 21% primarily due to a rate benefit attributable to the fact that, for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, approximately ~~20%~~17% of Artisan Partners Holdings’ full year projected taxable earnings were attributable to other partners and not subject to corporate-level taxes. The effective tax rate was also lower than the statutory rate due to tax deductible dividends paid on unvested restricted share-based awards and favorable tax deductions related to the vesting of restricted share-based awards.

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APAM’s effective tax rate was ~~18.3%~~18.6% and 17.1% for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020.~~respectively.

Components of the provision for income taxes consist of the following:
For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Current:
Federal $ 14,285 $ 5,553 $ 23,317 $ 7,146
State and local 3,920 1,651 6,567 2,519
Foreign 92 55 254 164
Total 18,297 7,259 30,138 9,829
Deferred:
Federal 8,645 7,712 16,957 13,610
State and local 1,523 1,285 2,988 2,268
Total 10,168 8,997 19,945 15,878
Income tax expense (benefit) $ 28,465 $ 16,256 $ 50,083 $ 25,707

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	For the Three Months Ended March 31,
	2022		2021
Current:
Federal	$	7,871	$	9,032
State and local	1,929		2,647
Foreign	140		162
Total	9,940		11,841
Deferred:
Federal	7,532		8,312
State and local	1,314		1,465
Total	8,846		9,777
Income tax expense (benefit)	$	18,786	$	21,618

In connection with the IPO, APAM entered into 2 tax receivable agreements (“TRAs”). The first TRA generally provides for the payment by APAM to a private equity fund (the “Pre-H&F Corp Merger Shareholder”) or its assignees of 85% of the applicable cash savings, if any, of U.S. federal, state and local income taxes that APAM actually realizes (or is deemed to realize in certain circumstances) as a result of (i) the tax attributes of the preferred units APAM acquired in the merger of a wholly-owned subsidiary of the Pre-H&F Corp Merger Shareholder into APAM in March 2013 ~~(ii) net operating losses available as a result of the merger~~ and ~~(iii)~~(ii) tax benefits related to imputed interest.

The second TRA generally provides for the payment by APAM to current or former limited partners of Holdings or their assignees of 85% of the applicable cash savings, if any, of U.S. federal, state and local income taxes that APAM actually realizes (or is deemed to realize in certain circumstances) as a result of (i) certain tax attributes of their partnership units sold to APAM or exchanged (for shares of Class A common stock, convertible preferred stock or other consideration) and that are created as a result of such sales or exchanges and payments under the TRAs and (ii) tax benefits related to imputed interest. Under both agreements, APAM generally will retain the benefit of the remaining 15% of the applicable tax savings.

For purposes of the TRAs, cash savings of income taxes are calculated by comparing APAM’s actual income tax liability to the amount it would have been required to pay had it not been able to utilize any of the tax benefits subject to the TRAs, unless certain assumptions apply. The TRAs will continue in effect until all such tax benefits have been utilized or expired, unless APAM exercises its right to terminate the agreements or payments under the agreements are accelerated in the event that APAM materially breaches any of its material obligations under the agreements.

Payments under the TRAs, if any, will be made pro rata among all TRA counterparties entitled to payments on an annual basis to the extent APAM has sufficient taxable income to utilize the increased depreciation and amortization charges and imputed interest deductions. Artisan expects to make one or more payments under the TRAs, to the extent they are required, prior to or within 125 days after APAM’s U.S. federal income tax return is filed for each fiscal year. Interest on the TRA payments will accrue at a rate equal to one-year LIBOR plus 100 basis points from the due date (without extension) of such tax return until such payments are made. Amounts payable under the TRAs are estimates which may be impacted by factors, including but not limited to, expected tax rates, projected taxable income, and projected ownership levels and are subject to change. Changes in the estimates of amounts payable under tax receivable agreements are recorded as non-operating income (loss) in the ~~Unaudited Consolidated Statements~~unaudited consolidated statements of ~~Operations.~~operations.

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The change in the Company’s deferred tax assets related to the tax benefits described above and the change in corresponding amounts payable under the TRAs for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is summarized as follows:
Deferred Tax Asset - Amortizable basis Amounts payable under TRAs
December 31, 2020 $ 446,954 $ 412,468
2021 Follow-On Offering 16,362 13,908
2021 Holdings Common Unit Exchanges 4,500 3,825
Amortization (19,494) —
Payments under TRAs — (23,836)
June 30, 2021 $ 448,322 $ 406,365

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	Deferred Tax Asset - Amortizable Basis		Amounts Payable Under TRAs
December 31, 2021	$	459,893	$	425,427

2022 Holdings Common Unit Exchanges	1,085		922
Amortization	(10,576)		—


Change in estimate	7		(482)
March 31, 2022	$	450,409	$	425,867

Net deferred tax assets comprise the following:


		As of June 30, 2021		As of December 31, 2020			As of March 31, 2022		As of December 31, 2021
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Amortizable basis (1)	Amortizable basis (1)	$	448,322	$	446,954	Amortizable basis (1)	$	450,409	$	459,893
Other (2)	Other (2)	35,366		35,107		Other (2)	39,835		38,009
Total deferred tax assets	Total deferred tax assets	483,688		482,061		Total deferred tax assets	490,244		497,902
Less: valuation allowance (3)	Less: valuation allowance (3)	0		0		Less: valuation allowance (3)	—		—
Net deferred tax assets	Net deferred tax assets	$	483,688	$	482,061	Net deferred tax assets	$	490,244	$	497,902

(1) Represents the unamortized step-up of tax basis and other tax attributes from the merger and partnership unit sales and exchanges described above. These future tax benefits are subject to the TRA agreements.	(1) Represents the unamortized step-up of tax basis and other tax attributes from the merger and partnership unit sales and exchanges described above. These future tax benefits are subject to the TRA agreements.					(1) Represents the unamortized step-up of tax basis and other tax attributes from the merger and partnership unit sales and exchanges described above. These future tax benefits are subject to the TRA agreements.
(2) Represents the net deferred tax assets associated with the merger described above and other miscellaneous deferred tax assets. These future tax benefits are not subject to the TRA agreements.	(2) Represents the net deferred tax assets associated with the merger described above and other miscellaneous deferred tax assets. These future tax benefits are not subject to the TRA agreements.					(2) Represents the net deferred tax assets associated with the merger described above and other miscellaneous deferred tax assets. These future tax benefits are not subject to the TRA agreements.
(3) Artisan assessed whether the deferred tax assets would be realizable and determined based on its history of taxable income that the benefits would more likely than not be realized. Accordingly, no valuation allowance is required.	(3) Artisan assessed whether the deferred tax assets would be realizable and determined based on its history of taxable income that the benefits would more likely than not be realized. Accordingly, no valuation allowance is required.					(3) Artisan assessed whether the deferred tax assets would be realizable and determined based on its history of taxable income that the benefits would more likely than not be realized. Accordingly, no valuation allowance is required.

Accounting standards establish a minimum threshold for recognizing, and a process for measuring, the benefits of income tax return positions in financial statements. The Company's gross liability for unrecognized tax benefits was $0.2 million and $1.3 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021, respectively. The total amount of unrecognized tax benefits is not expected to significantly increase or decrease within the next twelve months.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. Accrued interest on ~~uncertain~~unrecognized tax ~~positions~~benefits was ~~$0.2 million~~$24 thousand and $238 thousand as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021, respectively. The gross unrecognized tax benefit is recorded within accounts payable, accrued expenses, and other in the Company’s ~~Unaudited Condensed Consolidated Statements~~unaudited condensed consolidated statements of ~~Financial Condition.~~financial condition.

In the normal course of business, Artisan is subject to examination by federal and certain state, local and foreign tax regulators. As of ~~June 30, 2021,~~March 31, 2022, U.S. federal income tax returns filed for the years ~~2017~~2018 through ~~2019~~2020 are open and therefore subject to examination. State, local, and foreign income tax returns filed are generally subject to examination from ~~2016~~2017 to ~~2019.~~2020.

Note 12. Earnings Per Share

Basic earnings per share is computed under the two-class method by dividing income available to Class A common stockholders by the weighted average number of Class A common shares outstanding during the period. Unvested restricted share-based awards are excluded from the number of Class A common shares outstanding for the basic earnings per share calculation because the shares have not yet been earned by employees. Income available to Class A common stockholders is computed by reducing net income attributable to APAM by earnings (both distributed and undistributed) allocated to participating securities, according to their respective rights to participate in those earnings. Except for certain performance share units, unvested share-based awards are participating securities because the awards include non-forfeitable dividend rights during the vesting period. Class B and Class C common shares do not share in profits of APAM and therefore are not reflected in the calculations.

Diluted earnings per share is computed under the more dilutive of the treasury stock method or the two-class method. The weighted average number of Class A common shares outstanding during the period is increased by the assumed conversion of nonparticipating unvested share-based awards into Class A common stock using the treasury stock method.

1918

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The computation of basic and diluted earnings per share for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
Basic and Diluted Earnings Per Share	Basic and Diluted Earnings Per Share	2021		2020		2021		2020		Basic and Diluted Earnings Per Share	2022		2021
Numerator:	Numerator:									Numerator:
Net income attributable to APAM	Net income attributable to APAM	$	88,207	$	46,151	$	165,485	$	80,976	Net income attributable to APAM	$	65,433	$	77,278
Less: Allocation to participating securities	Less: Allocation to participating securities	8,765		6,001		15,120		12,155		Less: Allocation to participating securities	9,431		7,139
Net income available to common stockholders	Net income available to common stockholders	$	79,442	$	40,150	$	150,365	$	68,821	Net income available to common stockholders	$	56,002	$	70,139
Denominator:	Denominator:									Denominator:
Basic weighted average shares outstanding	Basic weighted average shares outstanding	59,821,804		55,884,366		59,292,982		54,574,923		Basic weighted average shares outstanding	62,039,038		58,758,284
Dilutive effect of nonparticipating share-based awards	Dilutive effect of nonparticipating share-based awards	16,570		0		15,777		0		Dilutive effect of nonparticipating share-based awards	31,322		14,985
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	59,838,374		55,884,366		59,308,759		54,574,923		Diluted weighted average shares outstanding	62,070,360		58,773,269
Earnings per share - Basic	Earnings per share - Basic	$	1.33	$	0.72	$	2.54	$	1.26	Earnings per share - Basic	$	0.90	$	1.19
Earnings per share - Diluted	Earnings per share - Diluted	$	1.33	$	0.72	$	2.54	$	1.26	Earnings per share - Diluted	$	0.90	$	1.19

Allocation to participating securities in the table above primarily represents dividends paid to holders of unvested restricted share-based awards, which reduces net income available to common stockholders.

The Holdings limited partnership units are anti-dilutive primarily due to the impact of public company expenses. Unvested restricted share-based awards with non-forfeitable dividend rights during the vesting period are considered participating securities and are therefore anti-dilutive. The following table summarizes the weighted-average shares outstanding that are excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive:


		For the Three Months Ended June 30,		For the Six Months Ended June 30,			For the Three Months Ended March 31,
Anti-Dilutive Weighted Average Shares Outstanding	Anti-Dilutive Weighted Average Shares Outstanding	2021	2020	2021	2020	Anti-Dilutive Weighted Average Shares Outstanding	2022	2021
Holdings limited partnership units	Holdings limited partnership units	14,255,722	17,692,268	14,659,748	18,880,709	Holdings limited partnership units	12,290,007	15,068,264
Unvested restricted share-based awards	Unvested restricted share-based awards	5,577,070	5,402,581	5,463,556	5,290,103	Unvested restricted share-based awards	5,317,845	5,333,755
Total	Total	19,832,792	23,094,849	20,123,304	24,170,812	Total	17,607,852	20,402,019

Note 13. Indemnifications

In the normal course of business, APAM enters into agreements that include indemnities in favor of third parties. Holdings has also agreed to indemnify APAM as its general partner, Artisan Investment Corporation (“AIC”) as its former general partner, the directors and officers of APAM, the directors and officers of AIC as its former general partner, the members of its former Advisory Committee, and its partners, directors, officers, employees and agents. Holdings’ subsidiaries may also have similar agreements to indemnify their respective general partner(s), directors, officers, directors and officers of their general partner(s), partners, members, employees, and agents. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. APAM maintains insurance policies that may provide coverage against certain claims under these indemnities.

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Note 14. Leases

Operating lease expense was as follows:


		For the Three Months Ended March 31,
Lease Type	Classification	2022		2021
Parking leases	Compensation and benefits	$	131	$	127
Office leases	Occupancy	4,597		3,546
Variable lease cost (1)	Occupancy	42		(78)
Short-term lease cost (1)	Occupancy	178		81
Sublease income	Occupancy	(100)		—
Office equipment leases	Communication and technology	38		67
Total operating lease expense		$	4,886	$	3,743
(1) Variable and short-term lease costs are excluded from the measurement of operating lease liabilities.

The table below presents the maturity of operating lease liabilities:


	As of March 31, 2022
2022 (excluding the three months ended March 31, 2022)	$	11,865
2023	17,077
2024	16,491
2025	16,378
2026	15,651
Thereafter	58,413
Total undiscounted lease payments (1)	$	135,875
Adjustment to discount to present value	(22,941)
Operating lease liabilities	$	112,934
(1) Total undiscounted lease payments excludes $13.2 million of operating lease payments associated with leases that have been signed but have not yet commenced as of March 31, 2022. Leases that have been signed but have not yet commenced are also excluded from operating lease assets and operating lease liabilities within the unaudited condensed consolidated statements of financial condition.

As of March 31, 2022, none of the options to extend lease terms were reasonably certain of being exercised. Other information related to leases was as follows:


	For the Three Months Ended March 31,
	2022			2021
Weighted average discount rate	4.2		%	4.6		%
Weighted average remaining lease term	9.2 years			6.7 years
Operating cash flows for operating leases	$	4,432		$	4,149

Note ~~14.~~15. Related Party Transactions

Several of the current executive officers and directors of APAM or entities associated with those individuals, are limited partners of Holdings. As a result, certain transactions (such as TRA payments) between Artisan and the limited partners of Holdings are considered to be related party transactions with respect to these persons.

Holdings also makes estimated state tax payments on behalf of certain limited partners, including related parties. These payments are then netted from subsequent distributions to the limited partners. At March 31, 2022 and December 31, 2021, accounts receivable included $17.6 million and $1.5 million, respectively, of partnership tax reimbursements due from Holdings’ limited partners, including related parties.

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Affiliate transactions—Artisan Funds

Artisan has an agreement to serve as the investment adviser to Artisan Funds, with which certain Artisan employees are affiliated. Under the terms of the agreement, which generally is reviewed and continued by the board of directors of Artisan Funds annually, a fee is paid to Artisan based on an annual percentage of the average daily net assets of each Artisan Fund ranging from ~~0.625%~~0.600% to 1.05%. Artisan has contractually agreed to reimburse for expenses incurred to the extent necessary to limit annualized ordinary operating expenses incurred by certain of the Artisan Funds to not more than a fixed percentage (ranging from 0.88% to ~~1.50%~~1.45%) of a fund’s average daily net assets. In addition, Artisan may voluntarily waive fees or reimburse any of the Artisan Funds for other expenses. The officers and directors of Artisan Funds who are affiliated with Artisan receive no compensation from the funds.

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Investment advisory fees for managing Artisan Funds and amounts reimbursed by Artisan for fees and expenses (including management fees) are as follows:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
Artisan Funds	Artisan Funds	2021		2020		2021		2020		Artisan Funds	2022		2021
Investment advisory fees (Gross of expense reimbursements)	Investment advisory fees (Gross of expense reimbursements)	$	177,041	$	109,863	$	343,007	$	224,630	Investment advisory fees (Gross of expense reimbursements)	$	163,918	$	165,966
Expense reimbursements	Expense reimbursements	$	178	$	166	$	337	$	254	Expense reimbursements	$	332	$	159

Affiliate transactions—Artisan Global Funds

Artisan has an agreement to serve as the investment manager to Artisan Global Funds, with which certain Artisan employees are affiliated. Under the terms of these agreements, a fee is paid based on an annual percentage of the average daily net assets of each fund ranging from 0.75% to 1.85%. Artisan reimburses each sub-fund of Artisan Global Funds to the extent that sub-fund’s annual expenses, not including Artisan’s fee, exceed certain levels, which range from 0.10% to 0.20%. In addition, Artisan may voluntarily waive fees or reimburse any of the Artisan Global Funds for other expenses. The directors of Artisan Global Funds who are also employees of Artisan receive no compensation from the funds.

Investment advisory fees for managing Artisan Global Funds and amounts reimbursed to Artisan Global Funds by Artisan are as follows:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
Artisan Global Funds	Artisan Global Funds	2021		2020		2021		2020		Artisan Global Funds	2022		2021
Investment advisory fees (Gross of expense reimbursements)	Investment advisory fees (Gross of expense reimbursements)	$	11,912	$	7,367	$	22,799	$	15,543	Investment advisory fees (Gross of expense reimbursements)	$	11,977	$	10,887
Elimination of fees from consolidated investment products(1)	Elimination of fees from consolidated investment products(1)	(19)		(13)		(37)		(26)		Elimination of fees from consolidated investment products(1)	(19)		(18)
Consolidated investment advisory fees (Gross of expense reimbursements)	Consolidated investment advisory fees (Gross of expense reimbursements)	$	11,893	$	7,354	$	22,762	$	15,517	Consolidated investment advisory fees (Gross of expense reimbursements)	$	11,958	$	10,869

Expense reimbursements	Expense reimbursements	$	99	$	115	$	187	$	210	Expense reimbursements	$	113	$	88
Elimination of expense reimbursements from consolidated investment products (1)	Elimination of expense reimbursements from consolidated investment products (1)	(88)		(74)		(171)		(122)		Elimination of expense reimbursements from consolidated investment products (1)	(97)		(83)
Consolidated expense reimbursements	Consolidated expense reimbursements	$	11	$	41	$	16	$	88	Consolidated expense reimbursements	$	16	$	5

(1) Investment advisory fees and expense reimbursements related to consolidated investment products are eliminated from revenue upon consolidation.	(1) Investment advisory fees and expense reimbursements related to consolidated investment products are eliminated from revenue upon consolidation.									(1) Investment advisory fees and expense reimbursements related to consolidated investment products are eliminated from revenue upon consolidation.

Affiliate transactions—Artisan Private Funds

Pursuant to written agreements, Artisan serves as the investment manager, and acts as the general partner, for certain Artisan Private Funds. Under the terms of these agreements, Artisan earns a management fee and for certain funds is entitled to receive either an allocation of profits or a performance-based fee. In addition, for a period of time following the formation of each private fund, Artisan has agreed to reimburse the fund to the extent that expenses, excluding Artisan’s management fee, performance fee and transaction related costs, exceed certain levels, which range from 0.10% to 1.00% per annum of the net assets of the fund. Artisan may also voluntarily waive fees or reimburse the funds for other expenses. The directors of Artisan Private Funds and the officers of the general partners of the Artisan Private Funds who are affiliated with Artisan receive no compensation from the funds.

Artisan and certain related parties, including employees, officers and members of the Company’s Board have invested in one or more of the ~~funds~~Artisan Private Funds and currently do not pay a management fee, performance fee or incentive allocation.

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Investment advisory fees for managing the Artisan Private Funds and amounts reimbursed to Artisan Private Funds by Artisan are as follows:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
Artisan Private Funds	Artisan Private Funds	2021		2020		2021		2020		Artisan Private Funds	2022		2021
Investment advisory fees (Gross of expense reimbursements)	Investment advisory fees (Gross of expense reimbursements)	$	3,099	$	1,535	$	5,484	$	2,815	Investment advisory fees (Gross of expense reimbursements)	$	4,215	$	2,385
Elimination of fees from consolidated investment products (1)	Elimination of fees from consolidated investment products (1)	(104)		(55)		(215)		(106)		Elimination of fees from consolidated investment products (1)	(137)		(111)
Consolidated investment advisory fees (Gross of expense reimbursements)	Consolidated investment advisory fees (Gross of expense reimbursements)	$	2,995	$	1,480	$	5,269	$	2,709	Consolidated investment advisory fees (Gross of expense reimbursements)	$	4,078	$	2,274

Expense reimbursements	Expense reimbursements	$	75	$	59	$	154	$	104	Expense reimbursements	$	70	$	79
Elimination of expense reimbursements from consolidated investment products (1)	Elimination of expense reimbursements from consolidated investment products (1)	(30)		(17)		(70)		(30)		Elimination of expense reimbursements from consolidated investment products (1)	(40)		(40)
Consolidated expense reimbursements	Consolidated expense reimbursements	$	45	$	42	$	84	$	74	Consolidated expense reimbursements	$	30	$	39

(1) Investment advisory fees and expense reimbursements related to consolidated investment products are eliminated from revenue upon consolidation.	(1) Investment advisory fees and expense reimbursements related to consolidated investment products are eliminated from revenue upon consolidation.									(1) Investment advisory fees and expense reimbursements related to consolidated investment products are eliminated from revenue upon consolidation.

Note ~~15.~~16. Subsequent Events

Distributions and dividends

APAM, acting as the general partner of Artisan Partners Holdings, declared, effective ~~August 3, 2021,~~April 26, 2022, a distribution by Artisan Partners Holdings of ~~$54.3~~$37.7 million to holders of Artisan Partners Holdings partnership units, including APAM. The board of directors of APAM declared, effective ~~August 3, 2021,~~April 26, 2022, a quarterly dividend of ~~$1.00~~$0.76 per share of Class A common stock. The APAM dividend is payable on ~~August~~May 31, ~~2021,~~2022, to ~~shareholders~~stockholders of record as of ~~August~~May 17, ~~2021.~~2022.

TRA Payments

On April 18, 2022 the Company made a payment of $25.1 million under the tax receivable agreements representing a portion of the Company's estimated total 2022 TRA payments.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview and Recent Highlights

We are an investment management firm focused on providing high-value added, active investment strategies in growing asset classes to sophisticated clients ~~globally.~~around the world. As of ~~June 30, 2021,~~March 31, 2022, our ~~nine~~10 autonomous investment teams managed a total of 2023 investment strategies across multiple asset classes and investment styles. ~~Over our firm’s history, we have created~~Our 24th investment strategy, the Emerging Markets Debt Opportunities strategy managed by EMsights Capital Group, was launched in April 2022.

We focus on attracting, retaining and developing talented investment professionals and creating an environment in which each investment team is provided ample resources and support, transparent and direct financial incentives, a high degree of investment autonomy, and a long-term time horizon. We create new investment strategies ~~that can~~when we identify opportunities to add value for clients, oftentimes through the use of a broad array of securities, instruments, and techniques (which we call degrees of freedom) to differentiate returns and manage risk.

We focus our distribution efforts on sophisticated investors and asset allocators, including institutions and intermediaries that operate with institutional-like decision-making processes. We offer our investment strategies to clients and investors through multiple investment vehicles, including separate accounts and different types of pooled vehicles. As of ~~June 30, 2021,~~March 31, 2022, approximately ~~79%~~77% of our assets under management were managed for clients and investors domiciled in the U.S. and ~~21%~~23% of our assets under management were managed for clients and investors domiciled outside of the U.S.

As a high-value added investment manager we expect that long-term investment performance will be the primary driver of our long-term business and financial results. If we maintain and evolve existing investment strategies and launch new investment strategies that meet the needs of and generate attractive outcomes for sophisticated asset allocators, we believe that we will continue to generate strong business and financial results.

Over shorter time periods, changes in our business and financial results are largely driven by market conditions and fluctuations in our assets under management that may not necessarily be the result of our long-term investment performance or the long-term demand for our strategies. For this reason, we expect that our business and financial results will be lumpy over time.

We strive to maintain a financial model that is transparent and predictable. Currently, we derive nearly all of our revenues from investment management fees, most of which are based on a specified percentage of clients’ average assets under management. A majority of our expenses, including most of our compensation expense, vary directly with changes in our revenues. We invest thoughtfully to support our investment teams and future growth, while also paying out to stockholders and partners a majority of the cash that we generate from operations through ~~distributions~~dividends and ~~dividends.~~distributions. We expect to continue to invest in the growth of the business, with a focus on adding new investment capabilities and more degrees of freedom in areas where both opportunity and client demand exist, and in which we can differentiate our active management and add value for clients.

Business ~~and financial~~highlights for the quarter included:

•Our U.S. Value team launched its third strategy, the Value Income strategy, in March 2022.

•Our newest autonomous investment team, the EMsights Capital Group, launched its first strategy—the Global Unconstrained strategy—in March 2022.

Financial highlights for the quarter included:

•During the three months ended ~~June 30, 2021,~~March 31, 2022, our assets under management ~~increased~~declined to ~~$175.2~~$159.6 billion, ~~an increase~~a decrease of ~~$12.3~~$15.2 billion, or 8%9%, compared to ~~$162.9~~$174.8 billion at ~~March~~December 31, 2021, as a result of ~~$11.3~~$15.8 billion of negative investment returns, ~~and $1.0~~partially offset by $0.7 billion of net client cash inflows.

•Average assets under management for the three months ended ~~June 30, 2021~~March 31, 2022 were ~~$170.5~~$162.2 billion, ~~an increase of 56% from the average of $109.3 billion for the three months ended June 30, 2020, and an increase of 5%~~a less than 1% decrease from the average of $162.9 billion for the three months ended March 31, 2021. Average assets under management for the three months ended March 31, 2022, decreased 8% from the average of $175.9 billion for the three months ended December 31, 2021.

•We earned ~~$304.9~~$281.6 million in revenue for the three months ended ~~June 30, 2021, an increase~~March 31, 2022, a decrease of ~~50%~~3% from revenues of ~~$203.0~~$290.7 million for the three months ended ~~June 30, 2020.~~March 31, 2021. Performance fees of $0.2 million were recognized in the three months ended March 31, 2022, compared to $6.7 million in the three months ended March 31, 2021.

•Our GAAP operating margin was ~~45.2%~~38.0% for the three months ended ~~June 30, 2021,~~March 31, 2022, compared to ~~37.8%~~41.9% for the three months ended ~~June 30, 2020.~~March 31, 2021. Adjusted operating margin was 37.7% for the three months ended March 31, 2022, compared to 41.9% for the three months ended March 31, 2021.

•We generated ~~$1.33~~$0.90 of earnings per basic and diluted share and ~~$1.28~~$0.98 of adjusted EPS.

•We declared and distributed dividends of ~~$0.88~~$1.75 per share of Class A common stock during the three months ended ~~June 30, 2021.~~March 31, 2022.

•We declared, effective ~~August 3, 2021,~~April 26, 2022, a quarterly dividend with respect to the three months ended March 31, 2022, of ~~$1.00~~$0.76 per share of Class A common stock.

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Russia Invasion of Ukraine

Russia’s military invasion of Ukraine in February 2022, the resulting responses by the U.S. and other countries (including the imposition of broad-ranging economic sanctions on Russia, certain Russian individuals and corporations, and on other countries that provide military or economic support to Russia), and the potential for wider conflict has increased volatility and uncertainty in global financial markets and adversely affected regional and global economies. The extent and duration of Russia’s military actions and the repercussions of such actions (including any retaliatory actions or countermeasures that may be taken by those subject to sanctions, including cyber attacks) are impossible to predict, but could result in significant market disruptions, including in certain industries or sectors, and may negatively affect global supply chains, inflation and global growth.

The direct impact of Russia’s invasion of Ukraine on our business is immaterial because we do not have any operations in Russia and only minimal exposure to Russian securities within our investment strategies. However, increased volatility and uncertainty in global financial markets and economies as a result of the invasion and other economic factors has impacted the value of our assets under management. Because the revenue we earn is based on the value of our assets under management, fluctuations in our AUM will result in corresponding fluctuations in our revenues and earnings. We expect volatility and uncertainty in global financial markets, and corresponding fluctuations in the value of AUM to continue as Russia persists in its military actions.

COVID-19 Pandemic

The COVID-19 pandemic continues to impact the manner in which we ~~operate. As~~operate, as the majority of our associates now maintain a hybrid schedule and, as of the date of this filing, the ~~majority~~amount of our employees are working from home and our employees have significantly reduced business travel. Additionally, many third-party vendors on whom we rely for certain critical functions are also operating in remote environments. Given the continued uncertainty surrounding the COVID-19 pandemic, it is difficult to predict how long such remote working conditions and reduced business travel ~~will last. We expect most operating costs to return to pre-COVID-19 levels when employees fully return to the office and resume business travel.~~

remains below pre-pandemic levels. We believe we ~~are operating~~continue to operate well under these ~~circumstances,~~changing circumstances. We are benefiting from the flexible and highly mobile operating environment we have built over 25 years. However, market volatility, as well as changes in our operations and those of our key vendors, may result in increased client redemptions; inefficiencies, delays and decreased communication; and an increase in the number and significance of operational and trade errors. In addition, we do not know what, if any, longer-term impact the current operating ~~circumstances (and/or the extension of them)~~environment will have on our business and results. Given the continued uncertainty surrounding the COVID-19 pandemic, it is difficult to predict whether further changes to associates' work arrangements will be needed and how long reduced business travel will last. We expect most operating costs to return to pre-COVID-19 levels in the near term when our associates fully resume business travel.

The COVID-19 pandemic, together with resulting voluntary and government-imposed actions, has disrupted the global economy and caused significant market fluctuations. Ongoing global health concerns and uncertainty regarding the impact of COVID-19, could lead to further market volatility. Market fluctuations, for any reason, may cause clients to choose to redeem their investments from our investment strategies, which would ultimately impact our AUM, revenues and income.

As the COVID-19 pandemic continues to evolve, it is not possible to predict the full extent to which the pandemic may impact our business, financial results and operations. These impacts, the onset of which may be delayed, will continue to depend on numerous developing factors that remain uncertain and subject to change.

Organizational Structure

Our operations are conducted through Artisan Partners Holdings (“Holdings”) and its subsidiaries. On March 12, 2013, Artisan Partners Asset Management Inc. (“APAM”) and Artisan Partners Holdings LP completed a series of transactions (“the IPO Reorganization”) to reorganize their capital structures in connection with the initial public offering (“IPO”) of APAM’s Class A common stock. The IPO Reorganization and IPO were completed on March 12, 2013. The IPO Reorganization was designed to create a capital structure that preserves our ability to conduct our business through Holdings, while permitting us to raise additional capital and provide access to liquidity through a public company.

~~Our employees and other limited~~Limited partners of Holdings, some of whom are employees, held approximately ~~18%~~15% of the equity interests in Holdings as of ~~June 30, 2021.~~March 31, 2022. As a result, our results reflect that significant noncontrolling interest.

We operate our business in a single segment.

~~2021 Follow-On Offering and~~ Holdings Unit Exchanges

On March 1, 2021, the Company sold 963,614 shares of Class A common stock in an underwritten offering and utilized all of the proceeds to purchase an aggregate of 963,614 common units from certain limited partners of Holdings. In connection with the offering, APAM received 963,614 GP units of Holdings.

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, certain limited partners of Holdings exchanged ~~274,947~~96,835 common units (along with a corresponding number of shares of Class B or Class C common stock of APAM) for ~~274,947~~96,835 shares of Class A common stock. In connection with the exchanges, APAM received ~~274,947~~96,835 GP units of Holdings.

APAM’s equity ownership interest in Holdings increased from ~~80%~~84% at December 31, ~~2020~~2021 to ~~82%~~85% at ~~June 30, 2021,~~March 31, 2022, as a result of these transactions and other equity transactions during the period.

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Financial Overview

Economic Environment

Global equity and debt market conditions materially affect our financial performance. The following table presents the total returns of relevant market indices for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
S&P 500 total returns	S&P 500 total returns	8.5	%	20.5	%	15.3	%	(3.1)	%	S&P 500 total returns	(4.6)	%	6.2	%
MSCI All Country World total returns	MSCI All Country World total returns	7.4	%	19.2	%	12.3	%	(6.3)	%	MSCI All Country World total returns	(5.4)	%	4.6	%
MSCI EAFE total returns	MSCI EAFE total returns	5.2	%	14.9	%	8.8	%	(11.3)	%	MSCI EAFE total returns	(5.9)	%	3.5	%
Russell Midcap® total returns	Russell Midcap® total returns	7.5	%	24.6	%	16.2	%	(9.1)	%	Russell Midcap® total returns	(5.7)	%	8.1	%
MSCI Emerging Markets Index	MSCI Emerging Markets Index	5.0	%	18.1	%	7.4	%	(9.8)	%	MSCI Emerging Markets Index	(7.0)	%	2.3	%
ICE BofA U.S. High Yield Master II Total Return Index	ICE BofA U.S. High Yield Master II Total Return Index	2.8	%	9.6	%	3.7	%	(4.8)	%	ICE BofA U.S. High Yield Master II Total Return Index	(4.5)	%	0.9	%

Key Performance Indicators

When we review our business and financial performance we consider, among other things, the following:


		For the Three Months Ended June 30,						For the Six Months Ended June 30,							For the Three Months Ended March 31,
		2021			2020			2021			2020				2022			2021
		(unaudited; dollars in millions)													(unaudited; dollars in millions)
Assets under management at period end	Assets under management at period end	$	175,214		$	120,574		$	175,214		$	120,574		Assets under management at period end	$	159,621		$	162,883
Average assets under management (1)	Average assets under management (1)	$	170,489		$	109,295		$	166,740		$	111,638		Average assets under management (1)	$	162,155		$	162,907
Net client cash flows (2)	Net client cash flows (2)	$	1,049		$	3,363		$	2,452		$	2,945		Net client cash flows (2)	$	699		$	1,403
Total revenues	Total revenues	$	304.9		$	203.0		$	595.6		$	405.8		Total revenues	$	281.6		$	290.7
Weighted average management fee (3)	Weighted average management fee (3)	70.8		bps	71.8		bps	70.8		bps	71.2		bps	Weighted average management fee (3)	70.4		bps	70.8		bps
Operating margin	Operating margin	45.2		%	37.8		%	43.6		%	36.4		%	Operating margin	38.0		%	41.9		%
Adjusted operating margin (4)	Adjusted operating margin (4)	45.3		%	37.8		%	43.6		%	36.4		%	Adjusted operating margin (4)	37.7		%	41.9		%

(1) We compute average assets under management by averaging day-end assets under management for the applicable period.	(1) We compute average assets under management by averaging day-end assets under management for the applicable period.													(1) We compute average assets under management by averaging day-end assets under management for the applicable period.
(2) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested. Prior period net client cash flows have been recast to exclude Artisan Funds' distributions.
(2) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested.														(2) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested.
(3) We compute our weighted average management fee by dividing annualized investment management fees (which excludes performance fees) by average assets under management for the applicable period.	(3) We compute our weighted average management fee by dividing annualized investment management fees (which excludes performance fees) by average assets under management for the applicable period.													(3) We compute our weighted average management fee by dividing annualized investment management fees (which excludes performance fees) by average assets under management for the applicable period.
(4) Adjusted measures are non-GAAP measures and are explained and reconciled to the comparable GAAP measures in “Supplemental Non-GAAP Financial Information” below.	(4) Adjusted measures are non-GAAP measures and are explained and reconciled to the comparable GAAP measures in “Supplemental Non-GAAP Financial Information” below.													(4) Adjusted measures are non-GAAP measures and are explained and reconciled to the comparable GAAP measures in “Supplemental Non-GAAP Financial Information” below.

Investment advisory fees and assets under management within our consolidated investment products are excluded from the weighted average fee calculations and from total revenues, since any such revenues are eliminated upon consolidation. Assets under management within Artisan Private Funds are included in the reported ~~firm-wide,~~firmwide, separate accounts and other, and institutional assets under management figures reported below.

Assets Under Management and Investment Performance

Changes to our operating results from one period to another are primarily caused by changes in the amount of our assets under management. Changes in the relative composition of our assets under management among our investment strategies and vehicles and the effective fee rates on our products also impact our operating results.

The amount and composition of our assets under management are, and will continue to be, influenced by a variety of factors including, among others:

•investment performance, including fluctuations in both the financial markets and foreign currency exchange rates and the quality of our investment decisions;

•flows of client assets into and out of our various strategies and investment vehicles;

•our decision to close strategies or limit the growth of assets in a strategy or a vehicle when we believe it is in the best interest of our clients, as well as our decision to re-open strategies, in part or entirely;

•our ability to attract and retain qualified investment, management, and marketing and client service professionals;

•industry trends towards products, strategies, vehicles, or services that we do not offer;

•competitive conditions in the investment management and broader financial services sectors; and

•investor sentiment and confidence.

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The table below sets forth changes in our total assets under management:


		For the Three Months Ended June 30,				Period-to-Period					For the Three Months Ended March 31,				Period-to-Period
		2021		2020		$		%			2022		2021		$		%
		(unaudited; in millions)									(unaudited; in millions)
Beginning assets under management	Beginning assets under management	$	162,883	$	95,224	$	67,659	71.1	%	Beginning assets under management	$	174,754	$	157,776	$	16,978	10.8	%
Gross client cash inflows	Gross client cash inflows	8,765		11,301		(2,536)		(22.4)	%	Gross client cash inflows	8,881		10,107		(1,226)		(12.1)	%
Gross client cash outflows	Gross client cash outflows	(7,716)		(7,938)		222		2.8	%	Gross client cash outflows	(8,182)		(8,704)		522		6.0	%
Net client cash flows (1)		1,049		3,363		(2,314)		(68.8)	%
Artisan Funds' distributions not reinvested (2)		(38)		(32)		(6)		(18.8)	%
Investment returns and other (3)		11,320		22,019		(10,699)		(48.6)	%
Net client cash flows										Net client cash flows	699		1,403		(704)		(50.2)	%
Artisan Funds' distributions not reinvested (1)										Artisan Funds' distributions not reinvested (1)	(44)		(37)		(7)		(18.9)	%
Investment returns and other (2)										Investment returns and other (2)	(15,788)		3,741		(19,529)		(522.0)	%

Ending assets under management	Ending assets under management	$	175,214	$	120,574	$	54,640	45.3	%	Ending assets under management	$	159,621	$	162,883	$	(3,262)	(2.0)	%
Average assets under management	Average assets under management	$	170,489	$	109,295	$	61,194	56.0	%	Average assets under management	$	162,155	$	162,907	$	(752)	(0.5)	%

		For the Six Months Ended June 30,				Period-to-Period
		2021		2020		$		%
		(unaudited; in millions)
Beginning assets under management		$	157,776	$	121,016	$	36,760	30.4	%
Gross client cash inflows		18,872		18,380		492		2.7	%
Gross client cash outflows		(16,420)		(15,435)		(985)		(6.4)	%
Net client cash flows (1)		2,452		2,945		(493)		(16.7)	%
Artisan Funds' distributions not reinvested (2)		(75)		(63)		(12)		(19.0)	%
Investment returns and other (3)		15,061		(3,324)		18,385		553.1	%

Ending assets under management		$	175,214	$	120,574	$	54,640	45.3	%
Average assets under management		$	166,740	$	111,638	$	55,102	49.4	%

(1) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested. Prior period net client cash flows have been recast to exclude Artisan Funds' distributions.
(2) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds, including in the Artisan High Income Fund.
(3) Includes the impact of translating the value of assets under management denominated in non-USD currencies into U.S. dollars. The impact was immaterial for the periods presented.
(1) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds.										(1) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds.
(2) Includes the impact of translating the value of assets under management denominated in non-USD currencies into U.S. dollars. The impact was immaterial for the periods presented.										(2) Includes the impact of translating the value of assets under management denominated in non-USD currencies into U.S. dollars. The impact was immaterial for the periods presented.

During the quarter, our AUM ~~increased~~declined by ~~$12.3~~$15.2 billion due to ~~$11.3~~$15.8 billion inof negative investment returns, ~~and $1.0~~partially offset by $0.7 billion of net client cash inflows. 13For the quarter, 15 of our 2023 investment strategies had net inflows totaling ~~$3.6 billion. Our ten strategies with inception dates beginning in 2014 or later had $2.0~~$2.3 billion, ~~in net inflows. We expect those strategies as a group to continue to experience net inflows.~~

~~Our Global Opportunities, Non-U.S. Growth, U.S. Mid-Cap Growth, Global Equity, U.S. Mid-Cap Value, Value Equity and U.S. Small-Cap Growth strategies had a total of $2.5~~which were partially offset by $1.6 billion of net outflows ~~during~~from the ~~quarter, which partially offset the net inflows described above.~~remaining strategies.

Over the long-term, we expect to generate the majority of our AUM growth through investment returns, which has been our historical experience.

We monitor the availability of attractive investment opportunities relative to the amount of assets we manage in each of our investment ~~strategies.~~strategies and the velocity at which the strategies are experiencing inflows. When appropriate, we will close a strategy to new investors or otherwise take action to slow or restrict its growth, even though our aggregate assets under management may be negatively impacted in the short term. We may also re-open a strategy, widely or selectively, to fill available capacity or manage the diversification of our client base in that strategy. We believe that management of our investment capacity protects our ability to manage assets successfully, which protects the interests of our clients and, in the long term, protects our ability to retain client assets and maintain our profit margins.

As of the date of this filing, the Artisan High Income Fund, Artisan International Value Fund and Artisan International Small-Mid Fund are closed to most new investors and their respective strategies have limited availability to most new client relationships. In addition, we are actively managing the capacity of our U.S. Small-Cap Growth strategy with respect to new client relationships.

When we close or otherwise restrict the growth of a strategy, we typically continue to allow additional investments in the strategy by existing clients and certain related entities. We may also permit new investments by other eligible investors in our discretion. As a result, during a given period we may have net client cash inflows in a closed strategy. However, when a strategy is closed or its growth is restricted we expect there to be periods of net client cash outflows.

~~Table of Contents~~

As of the date of this filing, the Artisan High Income Fund, Artisan International Value Fund and Artisan International Small-Mid Fund are closed to most new investors and their respective strategies have limited availability to most new client relationships. In addition, we are actively managing the capacity of our Global Opportunities and U.S. Small-Cap Growth strategies with respect to new client relationships.

The unaudited table on the following page sets forth the average annual total returns for each composite (gross of fees) and its respective broad-based benchmark (and style benchmark, if applicable) over a multi-horizon time period as of ~~June 30, 2021.~~March 31, 2022. Returns for periods less than one year are not annualized.

We measure investment performance based upon the results of our “composites”, which represent the aggregate performance of all discretionary client accounts, including pooled investment vehicles, invested in the same strategy except those accounts with respect to which we believe client-imposed investment restrictions may have a material impact on portfolio construction and those accounts managed in a currency other than U.S. dollars. The results of these excluded accounts, which represented approximately ~~10%~~11% of our assets under management at ~~June 30, 2021,~~March 31, 2022, are maintained in separate composites the results of which are not included below.

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										Average Annual Value-Added(1) Since Inception (bps)										Average Annual Value-Added(1) Since Inception (bps)
		Composite Inception	Strategy AUM		Average Annual Total Returns (Gross) (%)							Composite Inception	Strategy AUM (2)		Average Annual Total Returns (Gross) (%)
Investment Team and Strategy	Investment Team and Strategy	Date	(in $MM)		1 YR	3 YR	5 YR	10 YR	Inception		Investment Team and Strategy	Date	(in $MM)		1 YR	3 YR	5 YR	10 YR	Inception
Growth Team	Growth Team										Growth Team
Global Opportunities Strategy	Global Opportunities Strategy	2/1/2007	$	26,741	35.90%	22.30%	21.64%	15.83%	13.21%	634	Global Opportunities Strategy	2/1/2007	$	23,468	1.60%	18.42%	16.42%	14.44%	12.00%	549
MSCI All Country World Index	MSCI All Country World Index				39.26%	14.55%	14.61%	9.89%	6.87%		MSCI All Country World Index				7.28%	13.74%	11.64%	9.99%	6.51%
Global Discovery Strategy	Global Discovery Strategy	9/1/2017	$	2,446	41.09%	26.62%	---		25.37%	1,207	Global Discovery Strategy	9/1/2017	$	2,061	1.78%	20.89%	---		18.62%	764
MSCI All Country World Index	MSCI All Country World Index				39.26%	14.55%	---		13.30%		MSCI All Country World Index				7.28%	13.74%	---		10.98%
U.S. Mid-Cap Growth Strategy	U.S. Mid-Cap Growth Strategy	4/1/1997	$	17,690	42.57%	29.58%	24.01%	16.98%	16.81%	595	U.S. Mid-Cap Growth Strategy	4/1/1997	$	14,451	(3.42)%	20.05%	18.28%	14.45%	15.64%	563
Russell Midcap® Index	Russell Midcap® Index				49.80%	16.43%	15.61%	13.22%	11.13%		Russell Midcap® Index				6.92%	14.88%	12.61%	12.85%	10.75%
Russell Midcap® Growth Index	Russell Midcap® Growth Index				43.77%	22.37%	20.51%	15.12%	10.86%		Russell Midcap® Growth Index				(0.89)%	14.79%	15.09%	13.51%	10.01%
U.S. Small-Cap Growth Strategy	U.S. Small-Cap Growth Strategy	4/1/1995	$	6,640	38.33%	27.00%	26.12%	18.22%	12.76%	368	U.S. Small-Cap Growth Strategy	4/1/1995	$	4,628	(20.39)%	12.42%	16.23%	14.09%	11.26%	322
Russell 2000® Index	Russell 2000® Index				62.03%	13.51%	16.46%	12.33%	10.12%		Russell 2000® Index				(5.79)%	11.73%	9.74%	11.03%	9.42%
Russell 2000® Growth Index	Russell 2000® Growth Index				51.36%	15.93%	18.75%	13.51%	9.08%		Russell 2000® Growth Index				(14.33)%	9.87%	10.32%	11.20%	8.04%
Global Equity Team	Global Equity Team										Global Equity Team
Global Equity Strategy	Global Equity Strategy	4/1/2010	$	2,989	35.03%	19.89%	19.66%	14.97%	14.92%	487	Global Equity Strategy	4/1/2010	$	2,385	(7.85)%	11.68%	13.94%	12.58%	12.32%	294
MSCI All Country World Index	MSCI All Country World Index				39.26%	14.55%	14.61%	9.89%	10.05%		MSCI All Country World Index				7.28%	13.74%	11.64%	9.99%	9.38%
Non-U.S. Growth Strategy	Non-U.S. Growth Strategy	1/1/1996	$	21,907	25.14%	11.54%	11.70%	8.62%	10.37%	510	Non-U.S. Growth Strategy	1/1/1996	$	17,446	(4.02)%	7.40%	8.43%	7.35%	9.64%	468
MSCI EAFE Index	MSCI EAFE Index				32.35%	8.26%	10.27%	5.89%	5.27%		MSCI EAFE Index				1.16%	7.78%	6.71%	6.27%	4.96%
Non-U.S. Small-Mid Growth Strategy	Non-U.S. Small-Mid Growth Strategy	1/1/2019	$	9,123	43.20%	---			31.83%	1,375	Non-U.S. Small-Mid Growth Strategy	1/1/2019	$	8,220	(6.72)%	14.33%	---		18.35%	720
MSCI All Country World Index Ex USA Small Mid Cap	MSCI All Country World Index Ex USA Small Mid Cap				41.80%	---			18.08%		MSCI All Country World Index Ex USA Small Mid Cap				(1.31)%	8.53%	---		11.15%
China Post-Venture Strategy	China Post-Venture Strategy	4/1/2021	$	147	---				13.05%	763	China Post-Venture Strategy	4/1/2021	$	199	---				(23.33)%	603
MSCI China SMID Cap Index	MSCI China SMID Cap Index				---				5.42%		MSCI China SMID Cap Index				---				(29.36)%
U.S. Value Team	U.S. Value Team										U.S. Value Team
Value Equity Strategy	Value Equity Strategy	7/1/2005	$	3,894	56.13%	14.59%	14.86%	12.27%	9.74%	148	Value Equity Strategy	7/1/2005	$	4,135	11.61%	16.73%	11.90%	11.59%	9.50%	124
Russell 1000® Index	Russell 1000® Index				43.07%	19.14%	17.98%	14.88%	10.77%		Russell 1000® Index				13.27%	18.69%	15.81%	14.52%	10.55%
Russell 1000® Value Index	Russell 1000® Value Index				43.68%	12.41%	11.87%	11.60%	8.26%		Russell 1000® Value Index				11.67%	13.01%	10.28%	11.69%	8.26%
U.S. Mid-Cap Value Strategy	U.S. Mid-Cap Value Strategy	4/1/1999	$	4,035	55.87%	11.20%	12.31%	10.74%	12.97%	280	U.S. Mid-Cap Value Strategy	4/1/1999	$	3,741	8.57%	14.20%	10.03%	10.54%	12.74%	266
Russell Midcap® Index	Russell Midcap® Index				49.80%	16.43%	15.61%	13.22%	10.41%		Russell Midcap® Index				6.92%	14.88%	12.61%	12.85%	10.03%
Russell Midcap® Value Index	Russell Midcap® Value Index				53.06%	11.85%	11.78%	11.73%	10.17%		Russell Midcap® Value Index				11.45%	13.67%	9.99%	12.01%	10.08%
Value Income Strategy											Value Income Strategy	3/1/2022	$	10	---				0.52%	(319)
S&P 500 Market Index											S&P 500 Market Index				---				3.71%
International Value Team	International Value Team										International Value Team
International Value Strategy	International Value Strategy	7/1/2002	$	29,698	49.07%	12.80%	12.92%	10.26%	12.32%	568	International Value Strategy	7/1/2002	$	32,556	6.02%	12.91%	9.70%	10.29%	11.80%	563
MSCI EAFE Index	MSCI EAFE Index				32.35%	8.26%	10.27%	5.89%	6.64%		MSCI EAFE Index				1.16%	7.78%	6.71%	6.27%	6.17%
International Small Cap Value		11/1/2020	$	22	---				49.00%	1,230
International Explorer (3)											International Explorer (3)	11/1/2020	$	25	10.04%	---			32.20%	1,274
MSCI All Country World Index Ex USA Small Cap	MSCI All Country World Index Ex USA Small Cap				---				36.70%		MSCI All Country World Index Ex USA Small Cap				0.03%	---			19.46%
Global Value Team	Global Value Team										Global Value Team
Global Value Strategy	Global Value Strategy	7/1/2007	$	26,089	51.83%	12.12%	13.36%	11.93%	9.43%	299	Global Value Strategy	7/1/2007	$	25,663	4.47%	11.53%	9.66%	11.12%	8.87%	278
MSCI All Country World Index	MSCI All Country World Index				39.26%	14.55%	14.61%	9.89%	6.44%		MSCI All Country World Index				7.28%	13.74%	11.64%	9.99%	6.09%
Select Equity Strategy	Select Equity Strategy	3/1/2020	$	426	50.54%	---			30.24%	(443)	Select Equity Strategy	3/1/2020	$	410	2.61%	---			16.73%	(798)
S&P 500 Market Index	S&P 500 Market Index				40.79%	---			34.67%		S&P 500 Market Index				15.65%	---			24.71%
Sustainable Emerging Markets Team	Sustainable Emerging Markets Team										Sustainable Emerging Markets Team
Sustainable Emerging Markets Strategy	Sustainable Emerging Markets Strategy	7/1/2006	$	998	47.39%	14.39%	15.95%	5.81%	7.62%	101	Sustainable Emerging Markets Strategy	7/1/2006	$	1,026	(15.93)%	4.61%	6.62%	4.46%	5.58%	44
MSCI Emerging Markets Index	MSCI Emerging Markets Index				40.90%	11.26%	13.02%	4.28%	6.61%		MSCI Emerging Markets Index				(11.37)%	4.93%	5.97%	3.36%	5.14%
Credit Team	Credit Team										Credit Team
High Income Strategy	High Income Strategy	4/1/2014	$	7,670	20.26%	9.32%	9.53%	---	8.23%	272	High Income Strategy	4/1/2014	$	7,888	3.17%	8.13%	7.35%	---	7.49%	291
ICE BofA US High Yield Master II Total Return Index	ICE BofA US High Yield Master II Total Return Index				15.62%	7.14%	7.29%	---	5.51%		ICE BofA US High Yield Master II Total Return Index				(0.29)%	4.39%	4.56%	---	4.58%
Credit Opportunities Strategy	Credit Opportunities Strategy	7/1/2017	$	115	39.62%	15.49%	---		15.13%	1,351	Credit Opportunities Strategy	7/1/2017	$	128	11.99%	18.51%	---		14.09%	1,273
ICE BofA US Dollar LIBOR 3-month Constant Maturity Index	ICE BofA US Dollar LIBOR 3-month Constant Maturity Index				0.25%	1.65%	---		1.62%		ICE BofA US Dollar LIBOR 3-month Constant Maturity Index				0.05%	1.02%	---		1.36%
Developing World Team
Developing World Strategy		7/1/2015	$	10,314	54.28%	37.12%	28.01%	---	21.99%	1,360
MSCI Emerging Markets Index					40.90%	11.26%	13.02%	---	8.39%
Antero Peak Group
Antero Peak Strategy		5/1/2017	$	3,245	37.12%	23.28%	---		27.54%	1,016
Floating Rate Strategy											Floating Rate Strategy	1/1/2022	$	51	---				(0.47)%	(37)
Credit Suisse Leveraged Loan Total Return Index											Credit Suisse Leveraged Loan Total Return Index				---				(0.10)%

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Developing World Team										Developing World Team
Developing World Strategy										Developing World Strategy	7/1/2015	$	6,197	(24.25)%	16.47%	15.24%	---	12.93%	817
MSCI Emerging Markets Index										MSCI Emerging Markets Index				(11.37)%	4.93%	5.97%	---	4.76%
Antero Peak Group										Antero Peak Group
Antero Peak Strategy										Antero Peak Strategy	5/1/2017	$	3,803	9.41%	20.05%	---		23.74%	771
S&P 500 Market Index	S&P 500 Market Index				40.79%	18.65%	---	17.38%		S&P 500 Market Index				15.65%	18.91%	---		16.03%
Antero Peak Hedge Strategy	Antero Peak Hedge Strategy	11/1/2017	$	1,025	28.00%	18.34%	---	19.14%	197	Antero Peak Hedge Strategy	11/1/2017	$	1,120	6.09%	15.56%	---		16.02%	31
S&P 500 Market Index	S&P 500 Market Index				40.79%	18.65%	---	17.17%		S&P 500 Market Index				15.65%	18.91%	---		15.71%
EMsights Capital Group										EMsights Capital Group
Global Unconstrained Strategy (4)										Global Unconstrained Strategy (4)	4/1/2022	$	10	---					—
ICE BofA 3-month Treasury Bill Index										ICE BofA 3-month Treasury Bill Index				---				---

Total Assets Under Management	Total Assets Under Management		$	175,214						Total Assets Under Management		$	159,621

(1) Value-added is the amount, in basis points, by which the average annual gross composite return of each of our strategies has outperformed or underperformed its respective benchmark. Value-added for periods less than one year is not annualized. The High Income strategy holds loans and other security types that are not included in its benchmark, which, at times, causes material differences in relative performance. The Credit Opportunities strategy is benchmark agnostic and has been compared to the 3-month LIBOR for reference purposes only. The Antero Peak and Antero Peak Hedge strategies' investments in initial public offerings (IPOs) made a material contribution to performance. IPO investments may contribute significantly to a small portfolio’s return, an effect that will generally decrease as assets grow. IPO investments may be unavailable in the future.
1 Value-added is the amount, in basis points, by which the average annual gross composite return of each of our strategies has outperformed or underperformed its respective benchmark. See Forward-Looking Statements and Other Disclosures for further information on the benchmark indexes used. Value-added for periods less than one year is not annualized. The High Income strategy holds loans and other security types that are not included in its benchmark, which, at times, causes material differences in relative performance. The Credit Opportunities strategy is benchmark agnostic and has been compared to the 3-month LIBOR for reference purposes only. The Antero Peak and Antero Peak Hedge strategies' investments in initial public offerings (IPOs) made a material contribution to performance. IPO investments may contribute significantly to a small portfolio’s return, an effect that will generally decrease as assets grow. IPO investments may be unavailable in the future.										1 Value-added is the amount, in basis points, by which the average annual gross composite return of each of our strategies has outperformed or underperformed its respective benchmark. See Forward-Looking Statements and Other Disclosures for further information on the benchmark indexes used. Value-added for periods less than one year is not annualized. The High Income strategy holds loans and other security types that are not included in its benchmark, which, at times, causes material differences in relative performance. The Credit Opportunities strategy is benchmark agnostic and has been compared to the 3-month LIBOR for reference purposes only. The Antero Peak and Antero Peak Hedge strategies' investments in initial public offerings (IPOs) made a material contribution to performance. IPO investments may contribute significantly to a small portfolio’s return, an effect that will generally decrease as assets grow. IPO investments may be unavailable in the future.
2 AUM for certain strategies include the following amounts for which Artisan Partners provides investment models to managed account sponsors (reported on a one-month lag): Artisan Sustainable Emerging Markets $87 million.										2 AUM for certain strategies include the following amounts for which Artisan Partners provides investment models to managed account sponsors (reported on a one-month lag): Artisan Sustainable Emerging Markets $87 million.
3 Effective March 30, 2022, the International Small Cap Value strategy was re-named the International Explorer strategy.										3 Effective March 30, 2022, the International Small Cap Value strategy was re-named the International Explorer strategy.
4 The Global Unconstrained strategy composite performance began on April 1, 2022. As a result, there is not a performance track record as of March 31, 2022.										4 The Global Unconstrained strategy composite performance began on April 1, 2022. As a result, there is not a performance track record as of March 31, 2022.

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The tables below set forth changes in our assets under management by investment team:
By Investment Team
Three Months Ended Growth Global Equity U.S. Value International Value Global Value Sustainable Emerging Markets Credit Developing World Antero Peak Group Total
June 30, 2021 (unaudited; in millions)
Beginning assets under management $ 50,464 $ 32,326 $ 7,713 $ 27,013 $ 24,468 $ 735 $ 7,010 $ 9,255 $ 3,899 $ 162,883
Gross client cash inflows 2,042 1,146 99 1,729 1,666 210 904 718 251 8,765
Gross client cash outflows (3,426) (1,449) (323) (750) (839) (10) (277) (554) (88) (7,716)
Net client cash flows (1)
(1,384) (303) (224) 979 827 200 627 164 163 1,049
Artisan Funds' distributions not reinvested (2)
— — — — — — (38) — — (38)
Investment returns and other 4,437 2,143 440 1,728 1,220 63 186 895 208 11,320
Ending assets under management $ 53,517 $ 34,166 $ 7,929 $ 29,720 $ 26,515 $ 998 $ 7,785 $ 10,314 $ 4,270 $ 175,214
Average assets under management $ 51,705 $ 33,931 $ 7,982 $ 28,921 $ 25,917 $ 865 $ 7,317 $ 9,700 $ 4,151 $ 170,489
June 30, 2020
Beginning assets under management $ 29,691 $ 22,024 $ 4,973 $ 15,895 $ 13,701 $ 377 $ 3,312 $ 3,366 $ 1,885 $ 95,224
Gross client cash inflows 3,484 1,449 255 2,705 1,075 23 946 942 422 11,301
Gross client cash outflows (1,623) (2,163) (358) (2,139) (922) (7) (319) (331) (76) (7,938)
Net client cash flows (1)
1,861 (714) (103) 566 153 16 627 611 346 3,363
Artisan Funds' distributions not reinvested (2)
— — — — — — (32) — — (32)
Investment returns and other 9,527 4,137 1,142 2,732 2,159 84 444 1,419 375 22,019
Ending assets under management $ 41,079 $ 25,447 $ 6,012 $ 19,193 $ 16,013 $ 477 $ 4,351 $ 5,396 $ 2,606 $ 120,574
Average assets under management $ 35,451 $ 24,250 $ 5,725 $ 17,873 $ 14,912 $ 422 $ 3,960 $ 4,406 $ 2,296 $ 109,295
(1) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested. Prior period net client cash flows have been recast to exclude Artisan Funds' distributions.
(2) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds, including in the Artisan High Income Fund.

~~Table of Contents~~


				By Investment Team																					By Investment Team
Six Months Ended		Growth		Global Equity		U.S. Value		International Value		Global Value		Sustainable Emerging Markets		Credit		Developing World		Antero Peak Group		Total
June 30, 2021				(unaudited; in millions)
Three Months Ended																						Three Months Ended	Growth		Global Equity		U.S. Value		International Value		Global Value		Sustainable Emerging Markets		Credit		Developing World		Antero Peak Group		EMsights Capital Group		Total
March 31, 2022																						March 31, 2022			(unaudited; in millions)
Beginning assets under management	Beginning assets under management	$	52,685	$	32,056	$	7,149	$	24,123	$	22,417	$	679	$	6,338	$	8,853	$	3,476	$	157,776	Beginning assets under management	$	52,434	$	32,998	$	8,053	$	31,816	$	26,744	$	1,173	$	8,157	$	8,102	$	5,277	$	—	$	174,754
Gross client cash inflows	Gross client cash inflows	4,199		2,670		189		4,047		2,896		281		1,824		2,078		688		18,872		Gross client cash inflows	1,871		1,129		251		2,667		910		72		766		699		506		10		$	8,881
Gross client cash outflows	Gross client cash outflows	(6,549)		(2,646)		(768)		(2,264)		(2,122)		(26)		(638)		(1,232)		(175)		(16,420)		Gross client cash outflows	(2,085)		(1,709)		(317)		(1,027)		(990)		(43)		(685)		(1,044)		(282)		—		$	(8,182)
Net client cash flows (1)	Net client cash flows (1)	(2,350)		24		(579)		1,783		774		255		1,186		846		513		2,452		Net client cash flows (1)	(214)		(580)		(66)		1,640		(80)		29		81		(345)		224		10		699
Artisan Funds' distributions not reinvested (2)	Artisan Funds' distributions not reinvested (2)	—		—		—		—		—		—		(75)		—		—		(75)		Artisan Funds' distributions not reinvested (2)	—		—		—		—		—		—		(44)		—		—		—		$	(44)
Investment returns and other	Investment returns and other	3,182		2,086		1,359		3,814		3,324		64		336		615		281		15,061		Investment returns and other	(7,612)		(4,168)		(101)		(875)		(591)		(176)		(127)		(1,560)		(578)		—		$	(15,788)

Ending assets under management	Ending assets under management	$	53,517	$	34,166	$	7,929	$	29,720	$	26,515	$	998	$	7,785	$	10,314	$	4,270	$	175,214	Ending assets under management	$	44,608	$	28,250	$	7,886	$	32,581	$	26,073	$	1,026	$	8,067	$	6,197	$	4,923	$	10	$	159,621
Average assets under management(3)	Average assets under management(3)	$	52,384	$	33,245	$	7,705	$	27,392	$	24,540	$	805	$	7,029	$	9,674	$	3,966	$	166,740	Average assets under management(3)	$	45,274	$	29,577	$	7,875	$	32,209	$	26,411	$	1,094	$	8,133	$	6,699	$	4,880	$	10	$	162,155
June 30, 2020
March 31, 2021																						March 31, 2021
Beginning assets under management	Beginning assets under management	$	34,793	$	27,860	$	7,402	$	22,000	$	19,707	$	234	$	3,850	$	3,374	$	1,796	$	121,016	Beginning assets under management	$	52,685	$	32,056	$	7,149	$	24,123	$	22,417	$	679	$	6,338	$	8,853	$	3,476	$	—	$	157,776
Gross client cash inflows	Gross client cash inflows	4,904		2,759		696		3,978		1,715		305		1,578		1,530		915		18,380		Gross client cash inflows	2,157		1,524		90		2,318		1,230		71		920		1,360		437		—		$	10,107
Gross client cash outflows	Gross client cash outflows	(3,780)		(3,509)		(1,044)		(3,543)		(1,762)		(11)		(944)		(641)		(201)		(15,435)		Gross client cash outflows	(3,123)		(1,197)		(445)		(1,514)		(1,283)		(16)		(361)		(678)		(87)		—		$	(8,704)
Net client cash flows (1)	Net client cash flows (1)	1,124		(750)		(348)		435		(47)		294		634		889		714		2,945		Net client cash flows (1)	(966)		327		(355)		804		(53)		55		559		682		350		—		1,403
Artisan Funds' distributions not reinvested (2)	Artisan Funds' distributions not reinvested (2)	—		—		—		—		—		—		(63)		—		—		(63)		Artisan Funds' distributions not reinvested (2)	—		—		—		—		—		—		(37)		—		—		—		$	(37)
Investment returns and other	Investment returns and other	5,162		(1,663)		(1,042)		(3,242)		(3,647)		(51)		(70)		1,133		96		(3,324)		Investment returns and other	(1,255)		(57)		919		2,086		2,104		1		150		(280)		73		—		$	3,741

Ending assets under management	Ending assets under management	$	41,079	$	25,447	$	6,012	$	19,193	$	16,013	$	477	$	4,351	$	5,396	$	2,606	$	120,574	Ending assets under management	$	50,464	$	32,326	$	7,713	$	27,013	$	24,468	$	735	$	7,010	$	9,255	$	3,899	$	—	$	162,883
Average assets under management	Average assets under management	$	34,603	$	25,252	$	6,037	$	18,980	$	16,452	$	387	$	3,860	$	3,953	$	2,114	$	111,638	Average assets under management	$	53,049	$	32,541	$	7,426	$	25,842	$	23,147	$	744	$	6,737	$	9,643	$	3,778	$	—	$	162,907
(1) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested. Prior period net client cash flows have been recast to exclude Artisan Funds' distributions.
(2) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds, including in the Artisan High Income Fund.
(1) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested.																						(1) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested.
(2) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds.																						(2) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds.
(3) For the EMsights Capital Group, average assets under management is for the day of March 31, 2022, when the team’s first strategy began investment operations.																						(3) For the EMsights Capital Group, average assets under management is for the day of March 31, 2022, when the team’s first strategy began investment operations.

The goal of our marketing, distribution and client services efforts is to establish and maintain a client base that is diversified by investment strategy, ~~investment vehicle~~client type and distribution channel. As distribution channels have evolved to have more institutional-like decision making processes and longer-term investment horizons, we have expanded our distribution efforts into those areas.

The table below sets forth our assets under management by distribution channel (1):


		As of June 30, 2021				As of June 30, 2020					As of March 31, 2022				As of March 31, 2021
		$ in millions		% of total		$ in millions		% of total			$ in Millions		% of Total		$ in Millions		% of Total
		(unaudited)				(unaudited)					(unaudited)				(unaudited)
Institutional	Institutional	$	110,994	63.4	%	$	78,960	65.5	%	Institutional	$	101,764	63.7	%	$	104,152	63.9	%
Intermediary	Intermediary	56,618		32.3	%	36,455		30.2	%	Intermediary	50,912		31.9	%	51,609		31.7	%
Retail	Retail	7,602		4.3	%	5,159		4.3	%	Retail	6,945		4.4	%	7,122		4.4	%
Ending Assets Under Management	Ending Assets Under Management	$	175,214	100.0	%	$	120,574	100.0	%	Ending Assets Under Management	$	159,621	100.0	%	$	162,883	100.0	%

(1) The allocation of assets under management by distribution channel involves the use of estimates and the exercise of judgment.	(1) The allocation of assets under management by distribution channel involves the use of estimates and the exercise of judgment.									(1) The allocation of assets under management by distribution channel involves the use of estimates and the exercise of judgment.

Our institutional channel includes assets under management sourced from defined contribution plan clients, which made up approximately ~~11%~~10% of our total assets under management as of ~~June 30, 2021.~~March 31, 2022.

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The following tables set forth the changes in our assets under management by vehicle type:


Three Months Ended	Three Months Ended	Artisan Funds & Artisan Global Funds		Separate Accounts and Other (1)		Total		Three Months Ended	Artisan Funds & Artisan Global Funds		Separate Accounts and Other (1)		Total
June 30, 2021		(unaudited; in millions)
March 31, 2022								March 31, 2022	(unaudited; in millions)
Beginning assets under management	Beginning assets under management	$	78,789	$	84,094	$	162,883	Beginning assets under management	$	84,363	$	90,391	$	174,754
Gross client cash inflows	Gross client cash inflows	5,666		3,099		8,765		Gross client cash inflows	6,370		2,511		8,881
Gross client cash outflows	Gross client cash outflows	(4,005)		(3,711)		(7,716)		Gross client cash outflows	(6,189)		(1,993)		(8,182)
Net client cash flows (2)	Net client cash flows (2)	1,661		(612)		1,049		Net client cash flows (2)	181		518		699
Artisan Funds' distributions not reinvested (3)	Artisan Funds' distributions not reinvested (3)	(38)		—		(38)		Artisan Funds' distributions not reinvested (3)	(44)		—		(44)
Investment returns and other	Investment returns and other	5,316		6,004		11,320		Investment returns and other	(7,612)		(8,176)		(15,788)
Net transfers (4)	Net transfers (4)	(41)		41		—		Net transfers (4)	(40)		40		—
Ending assets under management	Ending assets under management	$	85,687	$	89,527	$	175,214	Ending assets under management	$	76,848	$	82,773	$	159,621
Average assets under management	Average assets under management	$	82,931	$	87,558	$	170,489	Average assets under management	$	78,442	$	83,713	$	162,155
June 30, 2020
March 31, 2021								March 31, 2021
Beginning assets under management	Beginning assets under management	$	44,426	$	50,798	$	95,224	Beginning assets under management	$	74,746	$	83,030	$	157,776
Gross client cash inflows	Gross client cash inflows	6,818		4,483		11,301		Gross client cash inflows	7,601		2,506		10,107
Gross client cash outflows	Gross client cash outflows	(4,983)		(2,955)		(7,938)		Gross client cash outflows	(5,021)		(3,683)		(8,704)
Net client cash flows (2)	Net client cash flows (2)	1,835		1,528		3,363		Net client cash flows (2)	2,580		(1,177)		1,403
Artisan Funds' distributions not reinvested (3)	Artisan Funds' distributions not reinvested (3)	(32)		—		(32)		Artisan Funds' distributions not reinvested (3)	(37)		—		(37)
Investment returns and other	Investment returns and other	10,321		11,698		22,019		Investment returns and other	1,537		2,204		3,741
Net transfers (4)	Net transfers (4)	—		—		—		Net transfers (4)	(37)		37		—
Ending assets under management	Ending assets under management	$	56,550	$	64,024	$	120,574	Ending assets under management	$	78,789	$	84,094	$	162,883
Average assets under management	Average assets under management	$	51,262	$	58,033	$	109,295	Average assets under management	$	78,311	$	84,596	$	162,907

Six Months Ended		Artisan Funds & Artisan Global Funds		Separate Accounts and Other (1,2)		Total
June 30, 2021		(unaudited; in millions)
Beginning assets under management		$	74,746	$	83,030	$	157,776
Gross client cash inflows		13,267		5,605		18,872
Gross client cash outflows		(9,026)		(7,394)		(16,420)
Net client cash flows (2)		4,241		(1,789)		2,452
Artisan Funds' distributions not reinvested (3)		(75)		—		(75)
Investment returns and other		6,853		8,208		15,061
Net transfers (4)		(78)		78		—
Ending assets under management		$	85,687	$	89,527	$	175,214
Average assets under management		$	80,644	$	86,096	$	166,740
June 30, 2020
Beginning assets under management		$	57,288	$	63,728	$	121,016
Gross client cash inflows		11,543		6,837		18,380
Gross client cash outflows		(10,527)		(4,908)		(15,435)
Net client cash flows (2)		1,016		1,929		2,945
Artisan Funds' distributions not reinvested (3)		(63)		—		(63)
Investment returns and other		(1,626)		(1,698)		(3,324)
Net transfers (4)		(65)		65		—
Ending assets under management		$	56,550	$	64,024	$	120,574
Average assets under management		$	52,563	$	59,075	$	111,638

(1) Separate account and other consists of AUM we manage in or through vehicles other than Artisan Funds or Artisan Global Funds. This AUM includes assets we manage in traditional separate accounts, as well as assets we manage in Artisan-branded collective investment trusts and in Artisan Private Funds. As of June 30, 2021, AUM for certain strategies include the following amounts for which Artisan Partners provides investment models to managed account sponsors (reported on a one-month lag): Artisan Sustainable Emerging Markets $24 million.
(1) Separate accounts and other consists of AUM we manage in or through vehicles other than Artisan Funds or Artisan Global Funds. This AUM includes assets we manage in traditional separate accounts, as well as assets we manage in Artisan-branded collective investment trusts and in Artisan Private Funds. As of March 31, 2022, AUM for certain strategies include the following amounts for which Artisan Partners provides investment models to managed account sponsors (reported on a one-month lag): Artisan Sustainable Emerging Markets $87 million.								(1) Separate accounts and other consists of AUM we manage in or through vehicles other than Artisan Funds or Artisan Global Funds. This AUM includes assets we manage in traditional separate accounts, as well as assets we manage in Artisan-branded collective investment trusts and in Artisan Private Funds. As of March 31, 2022, AUM for certain strategies include the following amounts for which Artisan Partners provides investment models to managed account sponsors (reported on a one-month lag): Artisan Sustainable Emerging Markets $87 million.
(2) Net client cash flows excludes Artisan Funds’ income and capital gain distributions that were not reinvested.								(2) Net client cash flows excludes Artisan Funds’ income and capital gain distributions that were not reinvested.
(3) Artisan Funds’ distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds.								(3) Artisan Funds’ distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds.
(4) Net transfers represent certain amounts that we have identified as having been transferred out of one investment strategy, investment vehicle or account and into another strategy, vehicle or account.								(4) Net transfers represent certain amounts that we have identified as having been transferred out of one investment strategy, investment vehicle or account and into another strategy, vehicle or account.

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~~(2)~~ Net client cash flows excludes Artisan Funds’ income and capital gain distributions that were not reinvested. Prior period net client cash flows have been recast to exclude Artisan Funds’ distributions.

~~(3)~~ ~~Artisan Funds’ distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds, including in the Artisan High Income Fund.~~

~~(4)~~ ~~Net transfers represent certain amounts that we have identified as having been transferred out of one investment strategy, investment vehicle or account and into another strategy, vehicle or account.~~

Results of Operations

Three months ended ~~June 30, 2021, Compared~~March 31, 2022, compared to Three months ended ~~June 30, 2020~~March 31, 2021
For the Three Months Ended June 30, For the Period-to-Period
2021 2020 $ %
Statements of operations data: (unaudited; in millions, except share and per-share data)
Revenues $ 304.9 $ 203.0 $ 101.9 50 %
Operating Expenses
Total compensation and benefits 138.0 102.2 35.8 35 %
Other operating expenses 29.1 24.2 4.9 20 %
Total operating expenses 167.1 126.4 40.7 32 %
Total operating income 137.8 76.6 61.2 80 %
Non-operating income (expense)
Interest expense (2.7) (2.7) — — %
Other non-operating income 12.3 14.1 (1.8) (13) %
Total non-operating income (expense) 9.6 11.4 (1.8) (16) %
Income before income taxes 147.4 88.0 59.4 68 %
Provision for income taxes 28.5 16.2 12.3 76 %
Net income before noncontrolling interests 118.9 71.8 47.1 66 %
Less: Noncontrolling interests - Artisan Partners Holdings 25.7 18.2 7.5 41 %
Less: Noncontrolling interests - consolidated investment products 5.0 7.4 (2.4) (32) %
Net income attributable to Artisan Partners Asset Management Inc. $ 88.2 $ 46.2 $ 42.0 91 %
Share Data
Basic earnings per share $ 1.33 $ 0.72
Diluted earnings per share $ 1.33 $ 0.72
Basic weighted average number of common shares outstanding 59,821,804 55,884,366
Diluted weighted average number of common shares outstanding 59,838,374 55,884,366


	For the Three Months Ended March 31,				For the Period-to-Period
	2022		2021		$		%
Statements of operations data:	(unaudited; in millions, except share and per-share data)
Revenues	$	281.6	$	290.7	$	(9.1)	(3)	%
Operating Expenses
Total compensation and benefits	139.9		139.5		0.4		—	%




Other operating expenses	34.7		29.4		5.3		18	%
Total operating expenses	174.6		168.9		5.7		3	%
Total operating income	107.0		121.8		(14.8)		(12)	%
Non-operating income (expense)
Interest expense	(2.7)		(2.7)		—		—	%




Other non-operating income (expense)	(3.1)		7.1		(10.2)		(144)	%
Total non-operating income (expense)	(5.8)		4.4		(10.2)		(232)	%
Income before income taxes	101.2		126.2		(25.0)		(20)	%
Provision for income taxes	18.8		21.6		(2.8)		(13)	%
Net income before noncontrolling interests	82.4		104.6		(22.2)		(21)	%
Less: Noncontrolling interests - Artisan Partners Holdings	15.6		23.6		(8.0)		(34)	%
Less: Noncontrolling interests - consolidated investment products	1.4		3.7		(2.3)		(62)	%
Net income attributable to Artisan Partners Asset Management Inc.	$	65.4	$	77.3	$	(11.9)	(15)	%
Share Data
Basic earnings per share	$	0.90	$	1.19
Diluted earnings per share	$	0.90	$	1.19
Basic weighted average number of common shares outstanding	62,039,038		58,758,284
Diluted weighted average number of common shares outstanding	62,070,360		58,773,269

Investment Advisory Revenues

Essentially all of our revenues consist of fees earned from managing clients’ assets. Our investment advisory fees, which are comprised of management fees and performance fees, fluctuate based on a number of factors, including the total value of our assets under management, the composition of assets under management among investment vehicles and our investment strategies, changes in the investment management fee rates on our products, the extent to which we enter into fee arrangements that differ from our standard fee schedules, which can be affected by custom and the competitive landscape in the relevant market, and, for the accounts on which we earn performance fees, the investment performance of those accounts.

~~Approximately 4%~~The different fee structures associated with Artisan Funds, Artisan Global Funds and separate accounts and other pooled vehicles, and the different fee schedules applicable to each of our ~~$175.2~~investment strategies, make the composition of our assets under management an important determinant of the investment management fees we earn. Historically, we have received higher effective rates of investment management fees from Artisan Funds and Artisan Global Funds than from traditional separate accounts, reflecting, among other things, the different and broader array of services we provide to Artisan Funds and Artisan Global Funds. Investment management fees for non-U.S. funds may also be higher because they include fees to offset higher distribution costs. Our investment management fees also differ by investment strategy, with higher-capacity strategies having lower standard fee rates than strategies with more limited capacity.

Certain separate account clients pay us fees based on the performance of their accounts relative to agreed-upon benchmarks, which typically results in a lower base fee, but allows us to earn higher fees if the performance we achieve for that client is superior to the performance of an agreed-upon benchmark. We may also receive performance fees or incentive allocations from Artisan Private Funds. Approximately 3% of our $159.6 billion of assets under management as of ~~June 30, 2021~~March 31, 2022 have performance fee billing arrangements. Performance fees of ~~$4.1~~$0.2 million were recognized in the three months ended ~~June 30, 2021,~~March 31, 2022, compared to ~~$8.0~~$6.7 million in the three months ended ~~June 30, 2020.~~March 31, 2021.

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The ~~increase~~decrease in revenues of ~~$101.9~~$9.1 million, or ~~50%~~3%, for the three months ended ~~June 30, 2021,~~March 31, 2022, compared to the three months ended ~~June 30, 2020,~~March 31, 2021, was driven primarily by ~~a $61.2 billion, or 56%, increase~~the $6.5 million decrease in ~~our average assets under management.~~performance fee revenue. The weighted average investment management fee, which excludes performance fees, was 70.4 basis points for the three months ended March 31, 2022 compared to 70.8 basis points for the three months ended June 30, 2021 compared to 71.8 basis points for the three months ended June 30, 2020. The decrease in the weighted average investment management fee was primarily due to a decrease in separate account fee rates resulting from tiered fee structures and client mix.

~~Table of Contents~~

March 31, 2021.

The following table sets forth the investment advisory fees and weighted average management fee earned by investment vehicle. The weighted average management fee for Artisan Funds and Artisan Global Funds reflects the additional services we provide to these pooled vehicles.
Separate Accounts and Other Artisan Funds and Artisan Global Funds
For the Three Months Ended June 30, 2021 2020 2021 2020
(unaudited; dollars in millions)
Investment advisory fees $ 116.2 $ 85.9 $ 188.7 $ 117.1
Weighted average management fee(1)
51.4 bps 54.1 bps 91.3 bps 91.8 bps
Percentage of ending AUM 51 % 53 % 49 % 47 %
(1) We compute our weighted average management fee by dividing annualized management fees (which excludes performance fees) by average assets under management for the applicable period.

Separate accounts and other consists of assets we manage in or through vehicles other than Artisan Funds or Artisan Global Funds, including assets we manage in traditional separate accounts, Artisan-branded collective investment trusts and Artisan Private Funds, as well as assets under advisement related to investment models, for which we provide consulting advice but do not have full discretionary investment authority.


	Separate Accounts and Other (1)						Artisan Funds and Artisan Global Funds
For the Three Months Ended March 31,	2022			2021			2022			2021
	(unaudited; dollars in millions)
Investment advisory fees	$	106.1		$	114.0		$	175.5		$	176.7
Weighted average management fee(2)	51.3 bps			51.5 bps			90.8 bps			91.5 bps
Percentage of ending AUM	52		%	52		%	48		%	48		%
(1) Separate accounts and other consists of assets we manage in or through vehicles other than Artisan Funds or Artisan Global Funds, including assets we manage in traditional separate accounts, Artisan-branded collective investment trusts and Artisan Private Funds, as well as assets under advisement related to investment models, for which we provide consulting advice but do not have discretionary investment authority.
(2) We compute our weighted average management fee by dividing annualized management fees (which excludes performance fees) by average assets under management for the applicable period.

Operating Expenses

~~Operating~~Our operating expenses increased ~~$40.7~~$5.7 million for the three months ended ~~June 30, 2021,~~March 31, 2022, compared to the three months ended ~~June 30, 2020,~~March 31, 2021, primarily as a result of increased travel, occupancy and technology costs. Compensation and benefits expenses increased slightly despite the decline in revenue as fixed compensation costs increased reflecting merit increases, additional headcount (including members of the EMsights Capital Group team), and higher long-term incentive compensation ~~and third-party distribution expense related to increased revenues and increases in other compensation and benefits expenses.~~expense.

Compensation and Benefits


		For the Three Months Ended June 30,				Period-to-Period					For the Three Months Ended March 31,				Period-to-Period
		2021		2020		$		%			2022		2021		$		%
		(unaudited; in millions)									(unaudited; in millions)
Salaries, incentive compensation and benefits(1)	Salaries, incentive compensation and benefits(1)	$	125.9	$	93.1	$	32.8	35	%	Salaries, incentive compensation and benefits(1)	$	127.2	$	128.4	$	(1.2)	(1)	%
Long-term incentive compensation awards	Long-term incentive compensation awards	12.1		9.1		3.0		33	%	Long-term incentive compensation awards	12.7		11.1		1.6		14	%
Total compensation and benefits	Total compensation and benefits	$	138.0	$	102.2	$	35.8	35	%	Total compensation and benefits	$	139.9	$	139.5	$	0.4	0	%
(1) Excluding long-term incentive compensation awards	(1) Excluding long-term incentive compensation awards									(1) Excluding long-term incentive compensation awards

The ~~increase~~decrease in salaries, incentive compensation and benefits was driven primarily by a ~~$28.6~~$6.0 million ~~increase~~decrease in quarterly incentive compensation for our investment and marketing professionals as a result of the decrease in revenue, partially offset by an increase in ~~revenue.~~fixed compensation and benefits expense related to merit increases and increased headcount in 2022, including members of the EMsights Capital Group team.

Long-term incentive compensation award expense increased ~~$3.0~~$1.6 million, as the awards granted during ~~2020~~2021 and ~~2021~~2022 had a higher value than the awards that became fully vested in ~~2020~~2021 and ~~2021.~~2022. During the first quarter of ~~2021,~~2022, the Company's board of directors approved a grant of ~~$79.4~~$86.8 million of long-term incentive awards consisting of ~~$44.4~~$38.2 million of restricted share-based awards and ~~$35.0~~$48.6 million of long-term cash awards, which we refer to as franchise capital awards. Long-term incentive compensation award expense for all outstanding awards is expected to be approximately ~~$11~~$14.0 million per quarter ~~for the remainder of 2021,~~in 2022, excluding the impact of investment ~~returns.~~

~~During the first quarter of 2021, we made our first grant of franchise capital awards to investment professionals in lieu of additional grants of restricted share-based awards. We designed~~returns on the franchise capital awards as an added feature to our long-term incentive program to enhance the alignment between our investment professionals and clients, and to provide investment professionals with greater control over their long-term economic outcome. Franchise capital awards are cash awards that are subject to the same long-term vesting and forfeiture provisions as our restricted share-based awards. ~~Prior to vesting, though, the franchise capital awards will generally be invested in one or more of the investment strategies managed by the award recipient’s investment team.~~

Total compensation and benefits was ~~45%~~50% and ~~50%~~48% of our revenues for the three months ended ~~June 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively. ~~The percentage decreased as revenue increased at a higher rate than compensation and benefits.~~

Other operating expenses

Other operating expenses increased ~~$4.9~~$5.3 million for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to an increase in ~~third-party distribution expense~~travel expenses, occupancy and higher technology expenses as a result of ~~an increase in AUM subject to those fees.~~firm initiatives.

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Non-Operating Income (Expense)

Non-operating income (expense) consisted of the following:


		For the Three Months Ended June 30,				Period-to-Period					For the Three Months Ended March 31,				Period-to-Period
		2021		2020		$		%			2022		2021		$		%
		(unaudited; in millions)									(unaudited; in millions)
Interest expense	Interest expense	$	(2.7)	$	(2.7)	$	—	—	%	Interest expense	$	(2.7)	$	(2.7)	$	—	—	%
Net investment gain (loss) of consolidated investment products	Net investment gain (loss) of consolidated investment products	8.4		12.9		(4.5)		(35)	%	Net investment gain (loss) of consolidated investment products	1.2		6.9		(5.7)		(83)	%

Net gain (loss) on the tax receivable agreements										Net gain (loss) on the tax receivable agreements	0.5		—		0.5		0	%
Other investment gain (loss)	Other investment gain (loss)	3.9		1.2		2.7		225	%	Other investment gain (loss)	(4.8)		0.2		(5.0)		(2,500)	%
Total non-operating income (expense)	Total non-operating income (expense)	$	9.6	$	11.4	$	(1.8)	(16)	%	Total non-operating income (expense)	$	(5.8)	$	4.4	$	(10.2)	(232)	%

Provision for Income Taxes

The provision for income taxes primarily represents APAM’s U.S. federal, state and local income taxes on its allocable portion of Holdings’ income, as well as foreign income taxes payable by Holdings’ subsidiaries. APAM’s effective income tax rate for the three months ended ~~June 30,~~March 31, 2022 and 2021 was 18.6% and ~~2020 was 19.3% and 18.5%~~17.1%, respectively. Several factors contribute to the effective tax rate, including a rate benefit attributable to the fact that approximately ~~20%~~17% and ~~25%~~20% of Holdings’ full year projected taxable earnings were not subject to corporate-level taxes for the three months ended June 30, 2021 and 2020, respectively. Thus, income before income taxes includes amounts that are attributable to noncontrolling interests and not taxable to APAM and its subsidiaries, which reduces the effective tax rate. As APAM’s equity ownership in Holdings increases, the effective tax rate will likewise increase as more income will be subject to corporate-level taxes. The effective tax rate was favorably impacted in both periods due to tax deductible dividends paid on unvested restricted share-based awards.

~~Earnings Per Share~~

Weighted average basic and diluted shares of Class A common stock outstanding were higher for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, as a result of stock offerings, unit exchanges, and equity award grants. See Note 12, “Earnings Per Share” in the Notes to the Unaudited Consolidated Financial Statements for further discussion of earnings per share.

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~~Six months ended June 30, 2021, Compared to Six months ended June 30, 2020~~
For the Six Months Ended June 30, Period-to-Period
2021 2020 $ %
Statements of operations data: (unaudited; in millions, except share and per share data)
Revenues $ 595.6 $ 405.8 $ 189.8 47 %
Operating Expenses
Total compensation and benefits 277.5 206.9 70.6 34 %
Other operating expenses 58.5 51.3 7.2 14 %
Total operating expenses 336.0 258.2 77.8 30 %
Total operating income 259.6 147.6 112.0 76 %
Non-operating income (expense)
Interest expense (5.4) (5.4) — — %
Other non-operating income 19.4 (1.1) 20.5 1,864 %
Total non-operating income (expense) 14.0 (6.5) 20.5 315 %
Income before income taxes 273.6 141.1 132.5 94 %
Provision for income taxes 50.1 25.7 24.4 95 %
Net income before noncontrolling interests 223.5 115.4 108.1 94 %
Less: Noncontrolling interests - Artisan Partners Holdings 49.3 34.3 15.0 44 %
Less: Noncontrolling interests - consolidated investment products 8.7 0.1 8.6 8,600 %
Net income attributable to Artisan Partners Asset Management Inc. $ 165.5 $ 81.0 $ 84.5 104 %
Share Data
Basic earnings per share $ 2.54 $ 1.26
Diluted earnings per share $ 2.54 $ 1.26
Basic weighted average number of common shares outstanding 59,292,982 54,574,923
Diluted weighted average number of common shares outstanding 59,308,759 54,574,923

~~Investment Advisory Revenues~~

The increase in revenues of $189.8 million, or 47%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, was driven primarily by a $55.1 billion, or 49%, increase in our average assets under management. The weighted average management fee, which excludes performance fees, was 70.8 basis points for the six months ended June 30, 2021 compared to 71.2 basis points for the six months ended June 30, 2020. Performance fee revenue was $10.8 million and $10.9 million for the six months ended June 30, 2021 and 2020, respectively.

The following table sets forth the investment advisory fees and weighted average management fee earned by investment vehicle. The weighted average management fee for Artisan Funds and Artisan Global Funds reflects the additional services we provide to these pooled vehicles.
Separate Accounts and Other Artisan Funds and Artisan Global Funds
For the Six Months Ended June 30, 2021 2020 2021 2020
(unaudited; dollars in millions)
Investment advisory fees $ 230.2 $ 165.9 $ 365.4 $ 239.9
Weighted average management fee(1)
51.5 bps 52.8 bps 91.4 bps 91.8 bps
Percentage of ending AUM 51 % 53 % 49 % 47 %
(1) We compute our weighted average management fee by dividing annualized management fees (which excludes performance fees) by average assets under management for the applicable period.

~~Table of Contents~~

~~Operating Expenses~~

Operating expenses increased $77.8 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily as a result of higher incentive compensation and third-party distribution expense related to increased revenues and increases in other compensation and benefits expenses.

~~Compensation and Benefits~~
For the Six Months Ended June 30, Period-to-Period
2021 2020 $ %
(unaudited; in millions)
Salaries, incentive compensation and benefits (1)
$ 254.3 $ 188.6 $ 65.7 35 %
Long-term incentive compensation awards 23.2 18.3 4.9 27 %
Total compensation and benefits $ 277.5 $ 206.9 $ 70.6 34 %
(1) Excluding long-term incentive compensation awards

The increase in salaries, incentive compensation and benefits was driven primarily by a $56.7 million increase in incentive compensation paid to our investment and marketing professionals as a result of the increase in revenue.

~~Long-term incentive compensation award expense increased $4.9 million as the awards granted during 2020~~March 31, 2022 and 2021, ~~had a higher value than the awards that became fully vested in 2020 and 2021.~~

~~Total compensation and benefits was 47% and 51% of our revenues for the six months ended June 30, 2021, and 2020, respectively.~~

~~Other operating expenses~~

Other operating expenses increased $7.2 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to an increase in third-party distribution expense as a result of an increase in AUM subject to those fees and an increase in professional fees. Those increases were partially offset by a $1.4 million decrease in travel and entertainment expenses resulting from the COVID-19 pandemic.

~~Non-Operating Income (Expense)~~

~~Non-operating income (expense) consisted of the following:~~
For the Six Months Ended June 30, Period-to-Period
2021 2020 $ %
(unaudited; in millions)
Interest expense $ (5.4) $ (5.4) $ — — %
Net investment gain (loss) of consolidated investment products 15.3 — 15.3 — %
Other investment gain (loss) 4.1 (1.1) 5.2 (473) %
Total non-operating income (expense) $ 14.0 $ (6.5) $ 20.5 (315) %

~~Provision for Income Taxes~~

Several factors contribute to the effective tax rate, including a rate benefit attributable to the fact that approximately 20% and 25% of Holdings’ full year projected taxable earnings were not subject to corporate-level taxes for the six months ended June 30, 2021 and 2020, respectively. Thus, income before income taxes includes amounts that are attributable to noncontrolling interests and not taxable to APAM and its subsidiaries, which reduces the effective tax rate. As APAM’s equity ownership in Holdings increases, the effective tax rate will likewise increase as more income will be subject to corporate-level taxes. The effective tax rate was favorably impacted in both periods due to tax deductible dividends paid on unvested restricted share-based awards and by the tax deduction related to the vesting of restricted share-based awards.

Earnings Per Share

Weighted average basic and diluted shares of Class A common stock outstanding were higher for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, as a result of stock offerings, unit exchanges, and equity award grants. See Note 12, “Earnings Per Share” in the Notes to the ~~Unaudited Consolidated Financial Statements~~unaudited consolidated financial statements for further discussion of earnings per share.

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Supplemental Non-GAAP Financial Information

Our management uses non-GAAP measures (referred to as “adjusted” measures) of net income to evaluate the profitability and efficiency of the underlying operations of our business and as a factor when considering net income available for distributions and dividends. These adjusted measures remove the impact of (1) net gain (loss) on the tax receivable agreements (if any), (2) compensation expense related to market valuation changes in compensation plans, and (3) net investment gain (loss) of investment products. These adjustments also remove the non-operational complexities of our structure by adding back noncontrolling interests and assuming all income of Artisan Partners Holdings is allocated to APAM. Management believes these non-GAAP measures provide more meaningful information to analyze our profitability and efficiency between periods and over time. We have included these non-GAAP measures to provide investors with the same financial metrics used by management to manage the Company.

Non-GAAP measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Our non-GAAP measures may differ from similar measures used by other companies, even if similar terms are used to identify such measures. Our non-GAAP measures are as follows:

•Adjusted net income represents net income excluding the impact of (1) net gain (loss) on the tax receivable agreements (if any), (2) compensation expense related to market valuation changes in compensation plans, and (3) net investment gain (loss) of investment products. Adjusted net income also reflects income taxes assuming the vesting of all unvested Class A share-based awards and as if all outstanding limited partnership units of Artisan Partners Holdings had been exchanged for Class A common stock of APAM on a one-for-one basis. Assuming full vesting and exchange, all income of Artisan Partners Holdings is treated as if it were allocated to APAM, and the adjusted provision for income taxes represents an estimate of income tax expense at an effective rate reflecting APAM's current federal, state, and local income statutory tax rates. The adjusted tax rate was 24.7% ~~and 24.5%~~ for ~~the 2021 and 2020~~all periods ~~presented, respectively.~~presented.

•Adjusted net income per adjusted share is calculated by dividing adjusted net income by adjusted shares. The number of adjusted shares is derived by assuming the vesting of all unvested Class A share-based awards and the exchange of all outstanding limited partnership units of Artisan Partners Holdings for Class A common stock of APAM on a one-for-one basis.

•Adjusted operating income represents the operating income of the consolidated company excluding compensation expense related to market valuation changes in compensation plans.

•Adjusted operating margin is calculated by dividing adjusted operating income by total revenues.

•Adjusted EBITDA represents adjusted net income before interest expense, income taxes, depreciation and amortization expense.

Net gain (loss) on the tax receivable agreements represents the income (expense) associated with the change in estimate of amounts payable under the tax receivable agreements entered into in connection with APAM’s initial public offering and related reorganization.

Compensation expense related to market valuation changes in compensation plans represents the expense (income) associated with the change in the long term incentive award liability resulting from investment returns of the underlying investment products. Because the compensation expense impact of the investment market exposure is economically hedged, management believes it is useful to reflect the expected net income offset in the calculation of adjusted operating income, adjusted net income, and adjusted EBITDA. The related investment gain (loss) on the underlying investments is included in the adjustment for net investment gain (loss) of investment products.

Net investment gain (loss) of investment products represents the non-operating income (expense) related to the Company’s investments, in both consolidated investment products and nonconsolidated investment products, including investments held to economically hedge compensation plans. Excluding these non-operating market gains or losses on investments provides greater transparency to evaluate the profitability and efficiency of the underlying operations of the business.

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The following table sets forth, for the periods indicated, a reconciliation from GAAP financial measures to non-GAAP measures:


		For the Three Months Ended June 30,						For the Six Months Ended June 30,							For the Three Months Ended March 31,
		2021			2020			2021			2020				2022			2021
		(unaudited; in millions, except per share data)													(unaudited; in millions, except per share data)
Reconciliation of non-GAAP financial measures:	Reconciliation of non-GAAP financial measures:													Reconciliation of non-GAAP financial measures:
Net income attributable to Artisan Partners Asset Management Inc. (GAAP)	Net income attributable to Artisan Partners Asset Management Inc. (GAAP)	$	88.2		$	46.2		$	165.5		$	81.0		Net income attributable to Artisan Partners Asset Management Inc. (GAAP)	$	65.4		$	77.3
Add back: Net income attributable to noncontrolling interests - Artisan Partners Holdings	Add back: Net income attributable to noncontrolling interests - Artisan Partners Holdings	25.7			18.2			49.3			34.3			Add back: Net income attributable to noncontrolling interests - Artisan Partners Holdings	15.6			23.6
Add back: Provision for income taxes	Add back: Provision for income taxes	28.5			16.2			50.1			25.7			Add back: Provision for income taxes	18.8			21.6

Add back: Compensation expense related to market valuation changes in compensation plans	Add back: Compensation expense related to market valuation changes in compensation plans	0.2			—			0.2			—			Add back: Compensation expense related to market valuation changes in compensation plans	(0.9)			—

Add back: Net (gain) loss on the tax receivable agreements														Add back: Net (gain) loss on the tax receivable agreements	(0.5)			—

Add back: Net investment (gain) loss of investment products attributable to APAM	Add back: Net investment (gain) loss of investment products attributable to APAM	(7.2)			(6.6)			(10.5)			1.5			Add back: Net investment (gain) loss of investment products attributable to APAM	5.1			(3.3)
Less: Adjusted provision for income taxes	Less: Adjusted provision for income taxes	33.5			18.1			62.9			34.9			Less: Adjusted provision for income taxes	25.5			29.4
Adjusted net income (Non-GAAP)	Adjusted net income (Non-GAAP)	$	101.9		$	55.9		$	191.7		$	107.6		Adjusted net income (Non-GAAP)	$	78.0		$	89.8

Average shares outstanding	Average shares outstanding													Average shares outstanding
Class A common shares	Class A common shares	59.8			55.9			59.3			54.6			Class A common shares	62.0			58.7
Assumed vesting or exchange of:	Assumed vesting or exchange of:													Assumed vesting or exchange of:
Unvested Class A restricted share-based awards	Unvested Class A restricted share-based awards	5.6			5.4			5.5			5.3			Unvested Class A restricted share-based awards	5.5			5.4

Artisan Partners Holdings units outstanding (noncontrolling interests)	Artisan Partners Holdings units outstanding (noncontrolling interests)	14.3			17.7			14.6			18.8			Artisan Partners Holdings units outstanding (noncontrolling interests)	12.3			15.1
Adjusted shares	Adjusted shares	79.7			79.0			79.4			78.7			Adjusted shares	79.8			79.2

Basic and diluted earnings per share (GAAP)		$	1.33		$	0.72		$	2.54		$	1.26
Basic earnings per share (GAAP)														Basic earnings per share (GAAP)	$	0.90		$	1.19
Diluted earnings per share (GAAP)														Diluted earnings per share (GAAP)	$	0.90		$	1.19
Adjusted net income per adjusted share (Non-GAAP)	Adjusted net income per adjusted share (Non-GAAP)	$	1.28		$	0.71		$	2.41		$	1.37		Adjusted net income per adjusted share (Non-GAAP)	$	0.98		$	1.13

Operating income (GAAP)	Operating income (GAAP)	$	137.8		$	76.6		$	259.6		$	147.6		Operating income (GAAP)	$	107.0		$	121.8

Add back: Compensation expense related to market valuation changes in compensation plans	Add back: Compensation expense related to market valuation changes in compensation plans	0.2			—			0.2			—			Add back: Compensation expense related to market valuation changes in compensation plans	(0.9)			—

Adjusted operating income (Non-GAAP)	Adjusted operating income (Non-GAAP)	$	138.0		$	76.6		$	259.8		$	147.6		Adjusted operating income (Non-GAAP)	$	106.1		$	121.8

Operating margin (GAAP)	Operating margin (GAAP)	45.2		%	37.8		%	43.6		%	36.4		%	Operating margin (GAAP)	38.0		%	41.9		%
Adjusted operating margin (Non-GAAP)	Adjusted operating margin (Non-GAAP)	45.3		%	37.8		%	43.6		%	36.4		%	Adjusted operating margin (Non-GAAP)	37.7		%	41.9		%

Net income attributable to Artisan Partners Asset Management Inc. (GAAP)	Net income attributable to Artisan Partners Asset Management Inc. (GAAP)	$	88.2		$	46.2		$	165.5		$	81.0		Net income attributable to Artisan Partners Asset Management Inc. (GAAP)	$	65.4		$	77.3
Add back: Net income attributable to noncontrolling interests - Artisan Partners Holdings	Add back: Net income attributable to noncontrolling interests - Artisan Partners Holdings	25.7			18.2			49.3			34.3			Add back: Net income attributable to noncontrolling interests - Artisan Partners Holdings	15.6			23.6

Add back: Compensation expense related to market valuation changes in compensation plans														Add back: Compensation expense related to market valuation changes in compensation plans	(0.9)			—
Add back: Net (gain) loss on the tax receivable agreements														Add back: Net (gain) loss on the tax receivable agreements	(0.5)			—

Add back: Net investment (gain) loss of investment products attributable to APAM	Add back: Net investment (gain) loss of investment products attributable to APAM	(7.2)			(6.6)			(10.5)			1.5			Add back: Net investment (gain) loss of investment products attributable to APAM	5.1			(3.3)
Add back: Compensation expense related to market valuation changes in compensation plans		0.2			—			0.2			—
Add back: Interest expense	Add back: Interest expense	2.7			2.7			5.4			5.4			Add back: Interest expense	2.7			2.7
Add back: Provision for income taxes	Add back: Provision for income taxes	28.5			16.2			50.1			25.7			Add back: Provision for income taxes	18.8			21.6
Add back: Depreciation and amortization	Add back: Depreciation and amortization	1.7			1.6			3.3			3.2			Add back: Depreciation and amortization	1.7			1.6
Adjusted EBITDA (Non-GAAP)	Adjusted EBITDA (Non-GAAP)	$	139.8		$	78.3		$	263.3		$	151.1		Adjusted EBITDA (Non-GAAP)	$	107.9		$	123.5

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Liquidity and Capital Resources

Our working capital needs, including accrued incentive compensation payments, have been and are expected to be met primarily through cash generated by our operations. The assets and liabilities of consolidated investment products attributable to third-party investors do not impact our liquidity and capital resources. We have no right to the benefits from, nor do we bear the risks associated with, the assets and liabilities of consolidated investment products, beyond our direct equity investment and any investment advisory fees earned. Accordingly, assets and liabilities of consolidated investment products attributable to third-party investors are excluded from the amounts and discussions below. The following table shows our liquidity position as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(unaudited; in millions)					(unaudited; in millions)
Cash and cash equivalents	Cash and cash equivalents	$	228.7	$	155.0	Cash and cash equivalents	$	187.5	$	189.2
Accounts receivable	Accounts receivable	$	121.7	$	99.9	Accounts receivable	$	122.5	$	115.9
Seed investments(1)	Seed investments(1)	$	67.8	$	62.6	Seed investments(1)	$	81.8	$	71.9
Undrawn commitment on revolving credit facility	Undrawn commitment on revolving credit facility	$	100.0	$	100.0	Undrawn commitment on revolving credit facility	$	100.0	$	100.0
(1) Seed investments include Artisan's direct equity investments in consolidated and nonconsolidated Artisan-sponsored investment products. The balance excludes $37.6 of investments made related to funded long-term incentive compensation plans.
(1) Seed investments include Artisan's direct equity investments in consolidated and nonconsolidated Artisan-sponsored investment products. The balance excludes $78.7 million of investments made related to funded long-term incentive compensation plans.						(1) Seed investments include Artisan's direct equity investments in consolidated and nonconsolidated Artisan-sponsored investment products. The balance excludes $78.7 million of investments made related to funded long-term incentive compensation plans.

We manage our cash balances in order to fund our day-to-day operations. Accounts receivable primarily represent investment advisory fees that have been earned, but not yet received from our clients. We perform a review of our receivables on a monthly basis to assess collectability. As of ~~June 30, 2021,~~March 31, 2022, none of our receivables were considered uncollectible.

We utilize ~~capital~~cash to make seed investments in Artisan-sponsored investment products to support the development of new investment strategies and vehicles. As of ~~June 30, 2021,~~March 31, 2022, the balance of all seed investments, including investments in consolidated investment products, was ~~$67.8~~$81.8 million. ~~The~~Subject to certain restrictions on the timing of redemptions, the seed investments are generally redeemable at our discretion.

During the three months ended March 31, 2022, we also made investments of $48.0 million related to funded long-term incentive compensation plans. As of March 31, 2022, the value of investments held related to funded long-term incentive compensation plans was $78.7 million.

We expect our investment portfolio to continue to grow as we grant additional annual franchise capital awards and make seed investments in new investment strategies and vehicles.

We have $200 million in unsecured notes outstanding and a $100 million revolving credit facility with a five-year term ending August 2022. The notes are comprised of three series, Series C, Series D, and Series E, each with a balloon payment at maturity. The $100 million revolving credit facility was unused as of and for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022.

On December 7, 2021, Holdings entered into a Note Purchase Agreement to issue $90 million of Series F senior notes in a private placement transaction on August 16, 2022, subject to the satisfaction of certain customary closing conditions. The Company will use the proceeds from the Series F senior notes to repay the $90 million of Series C senior notes that mature on August 16, 2022. The Series F senior notes will bear interest at a rate of 3.10% and will mature on August 16, 2032.

The fixed interest rate on each series of unsecured notes is subject to a 100 basis point increase in the event Holdings receives a below-investment grade rating and any such increase will continue to apply until an investment grade rating is received.

These borrowings contain various covenants. Our failure to comply with any of the covenants could result in an event of default under the agreements, giving our lenders the ability to accelerate repayment of our obligations. We were in compliance with all debt covenants as of ~~June 30, 2021.~~March 31, 2022.

Distributions and Dividends

Artisan Partners Holdings’ distributions, including distributions to APAM for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ were as follows:


	For the Three Months Ended March 31,
	2022		2021
	(unaudited, in millions)
Holdings Partnership Distributions to Limited Partners	$	11.2	$	11.9
Holdings Partnership Distributions to APAM	60.4		48.5
Total Holdings Partnership Distributions	$	71.6	$	60.4

For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
(unaudited, in millions)
Holdings Partnership Distributions to Limited Partners $ 30.4 $ 22.2 $ 42.3 $ 39.3
Holdings Partnership Distributions to APAM 125.9 66.3 174.4 111.4
Total Holdings Partnership Distributions $ 156.3 $ 88.5 $ 216.7 $ 150.7

Table of Contents

On ~~August 3, 2021,~~April 26, 2022, we, acting as the general partner of Artisan Partners Holdings, declared a distribution of ~~$54.3~~$37.7 million, payable by Artisan Partners Holdings to holders of its partnership units, including APAM.

APAM declared and paid the following dividends per share during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:
Type of Dividend Class of Stock For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Quarterly Class A Common $ 0.88 $ 0.61 $ 1.85 $ 1.29
Special Annual Class A Common $ — $ — $ 0.31 $ 0.60

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Type of Dividend	Class of Stock	For the Three Months Ended March 31,
		2022		2021
Quarterly	Class A Common	$	1.03	$	0.97
Special Annual	Class A Common	$	0.72	$	0.31

Our board of directors declared, effective ~~August 3, 2021,~~April 26, 2022, a variable quarterly dividend of ~~$1.00~~$0.76 per share of Class A common stock with respect to the ~~June~~March quarter of ~~2021,~~2022, payable on ~~August~~May 31, ~~2021~~2022 to stockholders of record as of the close of business on ~~August~~May 17, ~~2021.~~2022. The variable quarterly dividend represents approximately 80% of the cash generated in the ~~June~~March quarter of ~~2021~~2022 and a pro-rata portion of ~~2021~~2022 tax savings related to our tax receivable agreements.

Subject to Board approval each quarter, we currently expect to pay a quarterly dividend of approximately 80% of the cash the Company generates each quarter. We expect our quarterly cash generation ~~will generally equal~~to approximate adjusted net income plus long-term incentive compensation award expense, less cash reserved for future franchise capital awards (which we expect will approximate 4% of investment management revenues each quarter) with additional adjustments made for certain other sources and uses of cash, including capital expenditures. After the end of the year, our Board will consider paying a special dividend after determining the amount of cash needed for general corporate purposes and investments in growth and strategic initiatives. Although we expect to pay dividends according to our dividend policy, we may not pay dividends according to our policy or at all.

Tax Receivable Agreements (“TRAs”)

In addition to funding our normal operations, we will be required to fund amounts payable under the TRAs that we entered into in connection with the IPO, which resulted in the recognition of a ~~$406.4~~$425.9 million liability as of ~~June 30, 2021.~~March 31, 2022. The liability generally represents 85% of the tax benefits APAM expects to realize as a result of the merger of an entity into APAM as part of the IPO Reorganization, our purchase of partnership units from limited partners of Holdings and the exchange of partnership units (for shares of Class A common stock or other consideration). The estimated liability assumes no material changes in the relevant tax law and that APAM earns sufficient taxable income to realize all tax benefits subject to the TRAs. An increase or decrease in future tax rates will increase or decrease, respectively, the expected tax benefits APAM would realize and the amounts payable under the TRAs. Changes in the estimate of expected tax benefits APAM would realize and the amounts payable under the TRAs as a result of change in tax rates have been and will be recorded in net income.

The liability will increase upon future purchases or exchanges of limited partnership units with the increase representing amounts payable under the TRAs equal to 85% of the estimated future tax benefits, if any, resulting from such purchases or exchanges. We intend to fund the payment of amounts due under the TRAs out of the reduced tax payments that APAM realizes in respect of the tax attributes to which the TRAs relate.

The actual increase in tax basis, as well as the amount and timing of any payments under these agreements, will vary depending upon a number of factors, including the timing of sales or exchanges by the holders of limited partnership units, the price of the Class A common stock at the time of such sales or exchanges, whether such sales or exchanges are taxable, the amount and timing of the taxable income APAM generates in the future and the tax rate then applicable and the portion of APAM’s payments under the TRAs constituting imputed interest or depreciable basis or amortizable basis. In certain cases, payments under the TRAs may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the TRAs. In such cases, we intend to fund those payments with cash on hand, although we may have to borrow funds depending on the amount and timing of the payments. In ~~2021,~~2022, we expect to make payments of approximately ~~$32~~$33.5 million related to the TRAs, ~~$23.8~~$25.1 million of which we paid on April ~~15, 2021.~~18, 2022.

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Cash Flows


		For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020			2022		2021
		(unaudited; in millions)					(unaudited; in millions)
Cash, cash equivalents and restricted cash as of January 1	Cash, cash equivalents and restricted cash as of January 1	$	199.5	$	144.3	Cash, cash equivalents and restricted cash as of January 1	$	200.8	$	199.5
Net cash provided by operating activities	Net cash provided by operating activities	259.5		203.9		Net cash provided by operating activities	191.5		192.7
Net cash provided by (used in) investing activities		(25.1)		16.9
Net cash used in investing activities						Net cash used in investing activities	(56.4)		(22.7)
Net cash used in financing activities	Net cash used in financing activities	(157.3)		(168.8)		Net cash used in financing activities	(132.2)		(53.0)
Net impact of deconsolidation of consolidated investment products	Net impact of deconsolidation of consolidated investment products	(34.8)		—		Net impact of deconsolidation of consolidated investment products	—		(34.8)
Cash, cash equivalents and restricted cash as of June 30		$	241.8	$	196.3
Cash, cash equivalents and restricted cash as of March 31						Cash, cash equivalents and restricted cash as of March 31	$	203.7	$	281.7

Net cash provided by operating activities ~~increased $55.6~~decreased $1.2 million for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to ~~an increase~~a decrease in operating income resulting from ~~higher AUM and~~lower revenues. For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, our operating income, excluding share-based related compensation expense, ~~increased $113.8~~decreased $14.6 million. ~~These increases~~Operating cash flows were ~~partially offset~~also negatively impacted by a ~~$53.8~~$10.8 million ~~decrease~~reduction in cash provided by consolidated investment products. Working capital positively impacted operating cash flows ~~from consolidated investment products,~~by $21.7 million primarily due to ~~an increase in net purchases~~the timing of ~~investments.~~customer accounts receivable payments.

Net cash used in investment activities increased ~~$42.0~~$33.7 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to the ~~six~~three months ended ~~June 30, 2020, primarily~~March 31, 2021, due to a ~~$39.1~~$31.4 million increase in net purchases of investment securities, primarily related to investments made in connection with the funding of a long-term incentive compensation plan.

Net cash used by financing activities ~~decreased $11.5~~increased $79.2 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to a ~~$49.8~~$44.2 million ~~increase~~decrease in contributions from noncontrolling interests in our consolidated investment products and a $36.3 million increase in dividends paid, partially offset by a ~~$3.5~~$0.7 million ~~increase in payments of amounts owed under the TRAs, a $3.3 million increase in taxes paid related to employee net share settlement, a $2.9 million increase~~decrease in distributions to limited ~~partners, and a $28.4 million increase in dividends paid.~~partners.

During the ~~six~~three months ended ~~June 30,~~March 31, 2021, the Company determined that it no longer had a controlling financial interest in an investment product that was previously consolidated. The deconsolidation of the investment product resulted in a $34.8 million decrease in cash, cash equivalents and restricted cash.

Certain Contractual Obligations

As of ~~June 30, 2021,~~March 31, 2022, there have been no material changes to our contractual obligations outside the ordinary course of business from those listed in the “Contractual Obligations” table and related notes to the table in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the SEC on February ~~23, 2021,~~22, 2022, except for the changes in the TRA liability during the year.

As previously discussed in this report, the TRA liability ~~decreased~~increased from ~~$412.5~~$425.4 million at December 31, ~~2020~~2021 to ~~$406.4~~$425.9 million at ~~June 30, 2021.~~March 31, 2022. Amounts payable under the TRAs will increase upon exchanges of Holdings units for our Class A common stock or sales of Holdings units to us, with the increase representing 85% of the estimated future tax benefits, if any, resulting from such exchanges or sales and decrease when payments are made. The actual amount and timing of payments associated with our existing payable under the TRAs or future exchanges or sales, and associated tax benefits, will vary depending upon a number of factors as described under “Liquidity and Capital Resources.” As a result, the timing of payments by period is currently unknown. In ~~2021,~~2022, we expect to make payments of approximately ~~$32~~$33.5 million related to the TRAs, ~~$23.8~~$25.1 million of which we paid on April ~~15, 2021.~~18, 2022.

~~Off-Balance Sheet Arrangements~~

~~As of June 30, 2021, we did not have any off-balance sheet arrangements~~During the three months ended March 31, 2022, the Company entered into two office leases that have ~~or are reasonably likely to have,~~not commenced as of March 31, 2022, resulting in a ~~material current or~~$13.2 million increase in the Company's undiscounted future ~~effect~~operating lease payment obligations. See Note 14, “Leases” for additional details on ~~our financial condition, results of operations, liquidity or capital resources.~~the Company's contractual lease obligations.

Critical Accounting Policies and Estimates

There have been no updates to our critical accounting policies from those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, ~~2020.~~2021.

New or Revised Accounting Standards

None.

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Item 3. Qualitative and Quantitative Disclosures Regarding Market Risk

There have been no material changes in our Quantitative and Qualitative Disclosures Regarding Market Risk from those previously reported in our Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, that are designed to ensure that information required to be disclosed in our 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 our management, including our principal executive and principal financial officers, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) at ~~June 30, 2021.~~March 31, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~June 30, 2021,~~March 31, 2022, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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Part II — Other Information

Item 1. Legal Proceedings

In the normal course of business, we may be subject to various legal and administrative proceedings. Currently, there are no legal or administrative proceedings that management believes may have a material adverse effect on our consolidated financial position, cash flows or results of operations.

Item 1A. Risk Factors

For a discussion of related and other potential risks and uncertainties, see the information under the heading “Risk Factors” in our latest annual report on Form 10-K, which is accessible on the SEC’s website at www.sec.gov.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

As described in Note 8, “Stockholders’ Equity”, to the ~~Unaudited Consolidated Financial Statements~~unaudited consolidated financial statements included in Part I of this report, upon termination of employment with Artisan, an employee-partner’s Class B common units are exchanged for Class E common units and the corresponding shares of APAM Class B common stock are canceled. APAM issues the former employee-partner a number of shares of APAM Class C common stock equal to the former employee-partner’s number of Class E common units. Class E common units are exchangeable for Class A common stock subject to the same restrictions and limitations on exchange applicable to the other common units of Holdings. There were no such issuances during the three months ended ~~June 30, 2021.~~March 31, 2022.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None.

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Table of Contents

Item 6. Exhibits

Exhibit No.

Description

Form

File No.

Exhibit

Filing Date

Filed or Furnished Herewith

31.1

Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following Extensible Business Reporting Language (XBRL) documents are collectively included herewith as Exhibit 101: (i) the Unaudited Condensed Consolidated Statements of Financial Condition as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020;~~2021; (ii) the Unaudited Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020;~~2021; (iii) the Unaudited Consolidated Statements of Comprehensive Income for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020;~~2021; (iv) the Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the three ~~andsix~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020;~~2021; (v) the Unaudited Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (vi) the Notes to Unaudited Consolidated Financial Statements as of and for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements 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.

Artisan Partners Asset Management Inc.

Dated: ~~August 4, 2021~~April 28, 2022


By:			/s/ Eric R. Colson
			Eric R. Colson Chief Executive Officer ~~and Chairman of the Board~~ (principal executive officer)

			/s/ Charles J. Daley, Jr.
			Charles J. Daley, Jr. Executive Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)

4441



Three months ended June 30, 2020	Class A Common stock		Class B Common stock		Class C Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Non-controlling interests - Artisan Partners Holdings		Total stockholders’ equity		Redeemable non-controlling interests
















Balance at April 1, 2020	$	606	$	60	$	120	$	86,224	$	21,294	$	(2,475)	$	4,919	$	110,748	$	37,223
Net income	—		—		—		—		46,151		—		18,132		64,283		7,424
Other comprehensive income - foreign currency translation	—		—		—		—		—		(35)		(9)		(44)		—

Cumulative impact of changes in ownership of Artisan Partners Holdings LP	—		—		—		(2,089)		—		(29)		2,118		0		—
Amortization of equity-based compensation	—		—		—		6,989		—		—		2,000		8,989		—
Deferred tax assets, net of amounts payable under tax receivable agreements	—		—		—		1,415		—		—		—		1,415		—
Issuance of Class A common stock, net of issuance costs	0		—		—		(86)		—		—		—		(86)		—
Forfeitures and employee/partner terminations	—		—		—		—		—		—		—		0		—


Exchange of subsidiary equity	8		(4)		(4)		—		—		—		—		0		—

Capital contributions, net	—		—		—		—		—		—		—		—		1,380

Distributions	—		—		—		—		—		—		(22,246)		(22,246)		—
Dividends	—		—		—		(4,355)		(32,883)		—		(15)		(37,253)		—
Balance at June 30, 2020	$	614	$	56	$	116	$	88,098	$	34,562	$	(2,539)	$	4,899	$	125,806	$	46,027

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



Six months ended June 30, 2021	Class A Common stock		Class B Common stock		Class C Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Non-controlling interests - Artisan Partners Holdings		Total stockholders’ equity		Redeemable non-controlling interests
















Balance at January 1, 2021	$	631	$	45	$	110	$	107,738	$	72,944	$	(991)	$	10,565	$	191,042	$	93,753
Net income	—		—		—		—		165,485		—		49,268		214,753		8,746
Other comprehensive income - foreign currency translation	—		—		—		—		—		187		50		237		—
Cumulative impact of changes in ownership of Artisan Partners Holdings LP	—		—		—		(845)		—		(13)		858		0		—
Amortization of equity-based compensation	—		—		—		16,769		—		—		3,585		20,354		—
Deferred tax assets, net of amounts payable under tax receivable agreements	—		—		—		3,839		—		—		—		3,839		—
Issuance of Class A common stock, net of issuance costs	10		—		—		46,656		—		—		—		46,666		—
Forfeitures and employee/partner terminations	(1)		—		—		1		—		—		—		0		—
Issuance of restricted stock awards	7		—		—		(7)		—		—		—		0		—
Employee net share settlement	(2)		—		—		(7,378)		—		—		(1,778)		(9,158)		—
Exchange of subsidiary equity	3		(2)		(1)		—		—		—		—		0		—
Purchase of equity and subsidiary equity	—		(7)		(3)		(46,918)		—		—		—		(46,928)		—
Capital contributions, net	—		—		—		—		—		—		—		—		55,042
Impact of deconsolidation of CIPs	—		—		—		—		—		—		—		—		(67,083)
Distributions	—		—		—		—		—		—		(42,260)		(42,260)		—
Dividends	—		—		—		0		(138,000)		—		(81)		(138,081)		—
Balance at June 30, 2021	$	648	$	36	$	106	$	119,855	$	100,429	$	(817)	$	20,207	$	240,464	$	90,458



Six months ended June 30, 2020	Class A Common stock		Class B Common stock		Class C Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Non-controlling interests - Artisan Partners Holdings		Total stockholders’ equity		Redeemable non-controlling interests
















Balance at January 1, 2020	$	564	$	78	$	136	$	89,149	$	44,455	$	(1,425)	$	5,544	$	138,501	$	43,110
Net income	—		—		—		—		80,976		—		34,244		115,220		130
Other comprehensive income - foreign currency translation	—		—		—		—		—		(965)		(321)		(1,286)		—

Cumulative impact of changes in ownership of Artisan Partners Holdings LP	—		—		—		(1,568)		—		(149)		1,717		0		—
Amortization of equity-based compensation	—		—		—		14,380		—		—		4,304		18,684		—
Deferred tax assets, net of amounts payable under tax receivable agreements	—		—		—		8,519		—		—		—		8,519		—
Issuance of Class A common stock, net of issuance costs	18		—		—		62,721		—		—		—		62,739		—

Issuance of restricted stock awards	9		—		—		(9)		—		—		—		0		—
Employee net share settlement	(1)		—		—		(3,314)		—		—		(1,215)		(4,530)		—
Exchange of subsidiary equity	24		(4)		(20)		—		—		—		—		0		—
Purchase of equity and subsidiary equity	—		(18)		—		(63,009)		—		—		—		(63,027)		—
Capital contributions, net	—		—		—		—		—		—		—		—		5,228
Impact of deconsolidation of CIPs	—		—		—		—		—		—		—		0		(2,441)
Distributions	—		—		—		—		—		—		(39,322)		(39,322)		—
Dividends	—		—		—		(18,771)		(90,869)		—		(52)		(109,692)		—
Balance at June 30, 2020	$	614	$	56	$	116	$	88,098	$	34,562	$	(2,539)	$	4,899	$	125,806	$	46,027

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