Edgar Filing: GAMCO INVESTORS, INC. ET AL

form10q063012.htm

SECURITIES & EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

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

For the transition period from ___ to ___

Commission File No. 001-14761

GAMCO INVESTORS, INC.
(Exact name of Registrant as specified in its charter)

New York			13-4007862
(State of other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

One Corporate Center, Rye, NY			10580-1422
(Address of principle executive offices)			(Zip Code)

(914) 921-3700
Registrant’s telephone number, including area code

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx Noo Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer", "accelerated filer", and "smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock, as of the latest practical date.

Class		Outstanding at July 31, 2012
Class A Common Stock, .001 par value		6,609,863
Class B Common Stock, .001 par value		20,020,730

INDEX

GAMCO INVESTORS, INC. AND SUBSIDIARIES


PART I.	FINANCIAL INFORMATION


Item 1.	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Statements of Income:
	- Three months ended June 30, 2012 and 2011
	- Six months ended June 30, 2012 and 2011

	Condensed Consolidated Statements of Comprehensive Income:
	- Three months ended June 30, 2012 and 2011
	- Six months ended June 30, 2012 and 2011


	Condensed Consolidated Statements of Financial Condition:
	- June 30, 2012
	- December 31, 2011
	- June 30, 2011

	Condensed Consolidated Statements of Equity:
	- Six months ended June 30, 2012 and 2011

	Condensed Consolidated Statements of Cash Flows:
	- Six months ended June 30, 2012 and 2011

	Notes to Unaudited Condensed Consolidated Financial Statements

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk (Included in Item 2)

Item 4.	Controls and Procedures

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings

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

Item 6.	Exhibits

SIGNATURES

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(Dollars in thousands, except per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Revenues
Investment advisory and incentive fees	$	67,210		$	69,252		$	134,993		$	132,163
Distribution fees and other income		11,006			11,588			22,629			21,933
Institutional research services		2,808			4,241			5,151			7,890
Total revenues		81,024			85,081			162,773			161,986
Expenses
Compensation		32,921			34,365			67,475			67,782
Management fee		2,615			3,626			6,799			6,739
Distribution costs		10,012			9,588			20,189			23,017
Other operating expenses		5,109			7,005			10,931			13,191
Total expenses		50,657			54,584			105,394			110,729		(a)

Operating income		30,367			30,497			57,379			51,257
Other income (expense)
Net gain/(loss) from investments		(4,171	)		3,669			9,707			12,409
Interest and dividend income		1,782			1,861			3,018			3,797
Interest expense		(4,429	)		(3,403	)		(8,833	)		(6,270	)
Total other income (expense), net		(6,818	)		2,127			3,892			9,936
Income before income taxes		23,549			32,624			61,271			61,193
Income tax provision		8,686			11,945			22,442			22,233
Net income		14,863			20,679			38,829			38,960
Net income/(loss) attributable to noncontrolling interests		(242	)		32			(112	)		670
Net income attributable to GAMCO Investors, Inc.'s shareholders	$	15,105		$	20,647		$	38,941		$	38,290

Net income attributable to GAMCO Investors, Inc.'s shareholders
per share:
Basic	$	0.58		$	0.77		$	1.48		$	1.43

Diluted	$	0.57		$	0.77		$	1.47		$	1.42

Weighted average shares outstanding:
Basic		26,258			26,665			26,338			26,783

Diluted		26,426			26,733			26,501			26,872

Dividends declared:	$	0.29		$	0.04		$	0.33		$	0.07

(a) Includes $5.6 million in costs directly related to the launch of a new closed-end fund.

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
UNAUDITED
(Dollars in thousands, except per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012		2011

Net income	$	14,863		$	20,679		$	38,829	$	38,960
Other comprehensive income/(loss), net of tax:
Foreign currency translation		22			(1	)		5		23
Net unrealized gains/(losses) on securities available for sale		(2,579	)		(1,550	)		878		937
Other comprehensive income/(loss)		(2,557	)		(1,551	)		883		960

Comprehensive income		12,306			19,128			39,712		39,920
Less: Comprehensive income/(loss) attributable to noncontrolling interests		242			(32	)		112		(670	)

Comprehensive income attributable to GAMCO Investors, Inc.	$	12,548		$	19,096		$	39,824	$	39,250

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
UNAUDITED
(Dollars in thousands, except per share data)

	June 30,			December 31,			June 30,
	2012			2011			2011
ASSETS
Cash and cash equivalents	$	324,440		$	276,340		$	260,839
Investments in securities		249,630			238,333			298,425
Investments in sponsored registered investment companies		59,561			59,214			64,880
Investments in partnerships		102,119			100,893			98,598
Receivable from brokers		41,513			20,913			35,968
Investment advisory fees receivable		26,026			32,156			25,746
Income tax receivable		402			39			238
Other assets		23,039			28,861			25,964
Total assets	$	826,730		$	756,749		$	810,658

LIABILITIES AND EQUITY
Payable to brokers	$	20,113		$	10,770		$	2,950
Income taxes payable and deferred tax liabilities		12,846			15,296			21,622
Capital lease obligation		5,013			5,072			5,126
Compensation payable		28,985			17,695			29,484
Securities sold, not yet purchased		7,010			5,488			10,244
Mandatorily redeemable noncontrolling interests		1,352			1,386			1,478
Accrued expenses and other liabilities		29,641			24,441			34,620
Sub-total		104,960			80,148			105,524

5.5% Senior notes (due May 15, 2013)		99,000			99,000			99,000
5.875% Senior notes (due June 1, 2021)		100,000			100,000			100,000
Zero coupon subordinated debentures, Face value: $86.3 million at June 30, 2012 and
December 31, 2011 and $86.4 million at June 30, 2011 (due December 31, 2015)		66,598			64,119			61,814
Total liabilities		370,558			343,267			366,338

Redeemable noncontrolling interests		26,162			6,071			35,519
Commitments and contingencies (Note J)
Equity
GAMCO Investors, Inc. stockholders' equity
Preferred stock, $.001 par value; 10,000,000 shares authorized;
none issued and outstanding
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized;
13,781,213, 13,627,397 and 13,569,703 issued, respectively; 6,609,863,
6,684,149 and 6,647,212 outstanding, respectively		13			13			13
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;
24,000,000 shares issued; 20,020,730, 20,070,746 and 20,142,640 shares
outstanding, respectively		20			20			20
Additional paid-in capital		266,231			264,409			263,371
Retained earnings		439,292			409,191			406,666
Accumulated other comprehensive income		23,403			22,520			26,349
Treasury stock, at cost (7,171,350, 6,943,248 and 6,922,491 shares, respectively)		(302,300	)		(292,181	)		(291,287	)
Total GAMCO Investors, Inc. stockholders' equity		426,659			403,972			405,132
Noncontrolling interests		3,351			3,439			3,669
Total equity		430,010			407,411			408,801

Total liabilities and equity	$	826,730		$	756,749		$	810,658

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(In thousands)

For the six months ended June 30, 2012
				GAMCO Investors, Inc. stockholders
											Accumulated
						Additional					Other								Redeemable
	Noncontrolling			Common		Paid-in		Retained			Comprehensive		Treasury						Noncontrolling
	Interests			Stock		Capital		Earnings			Income		Stock			Total			Interests
Balance at December 31, 2011	$	3,439		$	33	$	264,409	$	409,191		$	22,520	$	(292,181	)	$	407,411		$	6,071
Redemptions of redeemable
noncontrolling interests		-			-		-		-			-		-			-			(393	)
Contributions from redeemable
noncontrolling interests		-			-		-		-			-		-			-			20,508
Net income (loss)		(88	)		-		-		38,941			-		-			38,853			(24	)
Net unrealized gains on
securities available for sale,
net of income tax ($515)		-			-		-		-			878		-			878			-
Foreign currency translation		-			-		-		-			5		-			5			-
Dividends declared ($0.33 per
share)		-			-		-		(8,840	)		-		-			(8,840	)		-
Stock based compensation
expense		-			-		1,740		-			-		-			1,740			-
Exercise of stock options
including tax benefit		-			-		82		-			-		-			82			-
Purchase of treasury stock		-			-		-		-			-		(10,119	)		(10,119	)		-
Balance at June 30, 2012	$	3,351		$	33	$	266,231	$	439,292		$	23,403	$	(302,300	)	$	430,010		$	26,162

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(In thousands)

For the six months ended June 30, 2011
			GAMCO Investors, Inc. stockholders
										Accumulated
					Additional					Other								Redeemable
	Noncontrolling		Common		Paid-in		Retained			Comprehensive		Treasury						Noncontrolling
	Interests		Stock		Capital		Earnings			Income		Stock			Total			Interests
Balance at December 31, 2010	$	3,579	$	33	$	262,108	$	370,272		$	25,389	$	(271,773	)	$	389,608		$	26,984
Redemptions of redeemable
noncontrolling interests		-		-		-		-			-		-			-			(839	)
Contributions from redeemable
noncontrolling interests		-		-		-		-			-		-			-			12,897
Deconsolidation of
Partnership		-		-		-		-			-		-			-			(4,103	)
Net income		90		-		-		38,290			-		-			38,380			580
Net unrealized gains on
securities available for sale,
net of income tax ($550)		-		-		-		-			937		-			937			-
Foreign currency translation		-		-		-		-			23		-			23			-
Dividends declared
($0.07 per share)		-		-		-		(1,896	)		-		-			(1,896	)		-
Stock based compensation
expense		-		-		1,263		-			-		-			1,263			-
Purchase of treasury stock		-		-		-		-			-		(19,514	)		(19,514	)		-
Balance at June 30, 2011	$	3,669	$	33	$	263,371	$	406,666		$	26,349	$	(291,287	)	$	408,801		$	35,519

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands)

	Six Months Ended
	June 30,
	2012			2011
Operating activities
Net income	$	38,829		$	38,960
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in net gains from partnerships		(2,651	)		(3,094	)
Depreciation and amortization		359			456
Stock based compensation expense		1,740			1,263
Deferred income taxes		1,434			1,220
Tax benefit from exercise of stock options		24			-
Foreign currency translation		5			23
Other-than-temporary loss on available for sale securities		20			-
Fair value of donated securities		181			56
Gains on sales of available for sale securities		(408	)		(584	)
Accretion of zero coupon debentures		2,497			2,234
Loss on extinguishment of debt		1			-
(Increase) decrease in assets:
Investments in trading securities		(10,137	)		(70,979	)
Investments in partnerships:
Contributions to partnerships		(25,743	)		(10,683	)
Distributions from partnerships		27,168			3,226
Receivable from brokers		(20,601	)		4,966
Investment advisory fees receivable		6,131			19,044
Income tax receivable and deferred tax assets		(362	)		87
Other assets		5,466			(2,312	)
Increase (decrease) in liabilities:
Payable to brokers		9,343			1,396
Income taxes payable and deferred tax liabilities		(4,401	)		(3,108	)
Compensation payable		11,289			5,710
Mandatorily redeemable noncontrolling interests		(34	)		35
Accrued expenses and other liabilities		4,988			12,776
Total adjustments		6,309			(38,268	)
Net cash provided by operating activities	$	45,138		$	692

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED (continued)
(In thousands)

	Six Months Ended
	June 30,
	2012			2011
Investing activities
Purchases of available for sale securities	$	(8	)	$	(4,370	)
Proceeds from sales of available for sale securities		780			5,685
Return of capital on available for sale securities		842			777
Net cash provided by investing activities		1,614			2,092

Financing activities
Contributions from redeemable noncontrolling interests		20,508			12,897
Redemptions of redeemable noncontrolling interests		(393	)		(839	)
Issuance of 5.875% Senior notes due June 1, 2021		-			100,000
Issuance costs on the 5.875% Senior notes due June 1, 2021		-			(934	)
Proceeds from exercise of stock options		58			-
Repurchase of zero coupon subordinated debentures		(18	)		-
Dividends paid		(8,685	)		(1,896	)
Purchase of treasury stock		(10,119	)		(19,514	)
Net cash provided by financing activities		1,351			89,714
Effect of exchange rates on cash and cash equivalents		(3	)		(9	)
Net increase in cash and cash equivalents		48,100			92,489
Cash and cash equivalents at beginning of period		276,340			169,601
Decrease in cash from deconsolidation of partnership		-			(1,251	)
Cash and cash equivalents at end of period	$	324,440		$	260,839
Supplemental disclosures of cash flow information:
Cash paid for interest	$	4,979		$	3,267
Cash paid for taxes	$	25,479		$	23,433

Non-cash activity:
- On January 1, 2011, GAMCO Investors, Inc. was no longer deemed to have control over a certain partnership which resulted in the deconsolidation
of that partnership and decreases of approximately $1,251 of cash and cash equivalents, $2,852 of net assets and $4,103 of noncontrolling interests.
- For the six months ended June 30, 2012 and June 30, 2011, the Company accrued restricted stock award dividends of $106 and $17, respectively.

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

A. Significant Accounting Policies

Basis of Presentation

Unless we have indicated otherwise, or the context otherwise requires, references in this report to “GAMCO Investors, Inc.,” “GAMCO,” “the Company,” “GBL,” “we,” “us” and “our” or similar terms are to GAMCO Investors, Inc., its predecessors and its subsidiaries.

The unaudited interim condensed consolidated financial statements of GAMCO included herein have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP in the United States for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial position, results of operations and cash flows of GAMCO for the interim periods presented and are not necessarily indicative of a full year’s results.

The condensed consolidated financial statements include the accounts of GAMCO and its subsidiaries, including our new broker-dealer, G.distributors, LLC, a wholly-owned subsidiary of GAMCO, which became the distributor for the Gabelli/GAMCO family of funds on August 1, 2011. Intercompany accounts and transactions are eliminated.

These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2011 from which the accompanying condensed consolidated financial statements were derived.

Beginning with the period ended March 31, 2012 the Company has now separately disclosed the amount of investments in sponsored registered investment companies as a new line item in the condensed consolidated statements of financial condition. These amounts were previously included within investments in securities in the condensed consolidated statements of financial condition.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported on the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Developments

In May 2011, the Financial Accounting Standards Board (“FASB”) issued guidance on fair value measurement which expands existing disclosure requirements for fair value measurements and makes other amendments. The guidance requires, for level 3 fair value measurements, (1) a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, (2) a description of the valuation processes in place, and (3) a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs. Additionally, the guidance requires disclosure of the level in the fair value hierarchy of items that are not measured at fair value in the statement of financial condition but whose fair value must be disclosed and clarifies that the valuation premise and highest and best use concepts are not relevant to financial assets or liabilities. The guidance is effective for interim and annual periods beginning after December 15, 2011. The Company adopted this guidance on January 1, 2012 and has reflected the new disclosures in the condensed consolidated financial statements.

In June 2011, the FASB issued guidance which revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires entities to report comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used currently, and the second statement would include components of other comprehensive income (“OCI”). The guidance does not change the items that must be reported in OCI. In December 2011, the FASB indefinitely deferred a portion of the guidance that would have required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which the net income is presented and the statement in which other comprehensive income is presented. The guidance is effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years. The Company adopted the guidance on January 1, 2012 and opted for the two separate but consecutive statements approach. Accordingly, the Company now presents the condensed consolidated statements of comprehensive income immediately following the condensed consolidated statements of income.

In December 2011, the FASB issued guidance which creates new disclosure requirements about the nature of an entity’s right of offset and related arrangements associated with its financial instruments and derivative instruments. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods therein, with retrospective application required. The new disclosures are designed to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under International Financial Reporting Standards. The Company is currently evaluating the impact that the application of this guidance will have on its disclosures.

In July 2012, the FASB issued guidance allowing companies to first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If a company determines, on the basis of qualitative factors, that the fair value of such asset is not more likely than not impaired, it would not need to calculate the fair value of such asset. However, if a company concludes otherwise, it must calculate the fair value of the asset, compare the value with its carrying amount and record an impairment charge, if any. To perform the qualitative assessment, a company must identify and evaluate events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. This guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The application of this guidance is not expected to be material to the condensed consolidated financial statements.

B. Investment in Securities

Investments in securities at June 30, 2012, December 31, 2011 and June 30, 2011 consisted of the following:

	June 30, 2012				December 31, 2011				June 30, 2011
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Government obligations	$	50,119	$	50,139	$	42,124	$	42,126	$	7,924	$	7,925
Common stocks		154,470		162,883		153,294		159,314		238,689		251,118
Mutual funds		1,086		1,406		1,084		1,307		1,081		1,501
Other investments		323		374		466		399		459		487
Total trading securities		205,998		214,802		196,968		203,146		248,153		261,031

Available for sale securities:
Common stocks		15,934		32,815		16,487		33,282		16,780		35,296
Mutual funds		1,361		2,013		1,362		1,905		1,362		2,098
Total available for sale securities		17,295		34,828		17,849		35,187		18,142		37,394

Total investments in securities	$	223,293	$	249,630	$	214,817	$	238,333	$	266,295	$	298,425

Securities sold, not yet purchased at June 30, 2012, December 31, 2011 and June 30, 2011 consisted of the following:

	June 30, 2012				December 31, 2011				June 30, 2011
	Proceeds		Fair Value		Proceeds		Fair Value		Proceeds		Fair Value
Trading securities:	(In thousands)
Common stocks	$	6,194	$	6,687	$	5,271	$	5,415	$	9,416	$	10,238
Other		12		323		49		73		1		6
Total securities sold, not yet purchased	$	6,206	$	7,010	$	5,320	$	5,488	$	9,417	$	10,244

Investments in sponsored registered investment companies at June 30, 2012, December 31, 2011 and June 30, 2011 consisted of the following:

	June 30, 2012				December 31, 2011				June 30, 2011
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Mutual funds	$	19	$	19	$	15	$	18	$	15	$	24
Total trading securities		19		19		15		18		15		24

Available for sale securities:
Closed-end funds		36,266		56,171		37,104		55,855		38,588		60,900
Mutual funds		2,198		3,371		2,213		3,341		2,249		3,956
Total available for sale securities		38,464		59,542		39,317		59,196		40,837		64,856

Total investments in sponsored
registered investment companies	$	38,483	$	59,561	$	39,332	$	59,214	$	40,852	$	64,880

Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of each balance sheet date. Investments in United States Treasury Bills and Notes with maturities of greater than three months at the time of purchase are classified as investments in securities, and those with maturities of three months or less at the time of purchase are classified as cash equivalents. A substantial portion of investments in securities is held for resale in anticipation of short-term market movements and therefore is classified as trading securities. Trading securities are stated at fair value, with any unrealized gains or losses reported in current period earnings. Available for sale (“AFS”) investments are stated at fair value, with any unrealized gains or losses, net of taxes, reported as a component of equity except for losses deemed to be other than temporary which are recorded as unrealized losses in the condensed consolidated statements of income.

The Company recognizes all derivatives as either assets or liabilities measured at fair value and includes them in either investments in securities or securities sold, not yet purchased on the condensed consolidated statements of financial condition. From time to time, the Company and/or the partnerships and offshore funds that the Company consolidates will enter into hedging transactions to manage their exposure to foreign currencies and equity prices related to their proprietary investments. For the three and six months ended June 30, 2012, the Company had derivative transactions in equity derivatives which resulted in net gains of $15,000 and net losses of $14,000, respectively. For the three and six months ended June 30, 2011, the Company had no derivative transactions. At June 30, 2011, the Company did not hold any derivatives. At June 30, 2012 and December 31, 2011, we held derivative contracts on 4.7 million equity shares and 142,000 equity shares, respectively, and the fair value was ($72,000) and $24,000, respectively; these are included in investments in securities in the condensed consolidated statements of financial condition. These transactions are not designated as hedges for accounting purposes, and therefore changes in fair values of these derivatives are included in net gain/(loss) from investments in the condensed consolidated statements of income.

The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of available for sale investments as of June 30, 2012, December 31, 2011 and June 30, 2011:

	June 30, 2012
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Common stocks	$	15,934	$	16,881	$	-		$	32,815
Closed-end Funds		36,266		19,905		-			56,171
Mutual funds		3,559		1,825		-			5,384
Total available for sale securities	$	55,759	$	38,611	$	-		$	94,370

	December 31, 2011
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Common stocks	$	16,487	$	16,795	$	-		$	33,282
Closed-end Funds		37,104		18,779		(28	)		55,855
Mutual funds		3,575		1,671		-			5,246
Total available for sale securities	$	57,166	$	37,245	$	(28	)	$	94,383

	June 30, 2011
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Common stocks	$	16,780	$	18,516	$	-		$	35,296
Closed-end Funds		38,588		22,312		-			60,900
Mutual funds		3,611		2,443		-			6,054
Total available for sale securities	$	58,979	$	43,271	$	-		$	102,250

Unrealized changes to fair value, net of taxes, for the three months ended June 30, 2012 and June 30, 2011 of $2.6 million and $1.6 million in losses, respectively, have been included in other comprehensive income, a component of equity, at June 30, 2012 and June 30, 2011. Return of capital on available for sale securities was $0.3 million and $0.2 million for the three months ended June 30, 2012 and June 30, 2011, respectively. Proceeds from sales of investments available for sale were approximately $0.3 million and $5.6 million for the three month periods ended June 30, 2012 and June 30, 2011, respectively. For the three months ended June 30, 2012 and June 30, 2011, gross gains on the sale of investments available for sale amounted to $0.1 million and $0.5 million, respectively, and were reclassed from other comprehensive income into the condensed consolidated statements of income. There were no losses on the sale of investments available for sale for the three months ended June 30, 2012 or June 30, 2011. Unrealized changes to fair value, net of taxes, for the six months ended June 30, 2012 and June 30, 2011 of $0.9 million and $0.9 million in gains, respectively, have been included in other comprehensive income, a component of equity, at June 30, 2012 and June 30, 2011. Return of capital on available for sale securities was $0.8 million and $0.8 million for the six months ended June 30, 2012 and June 30, 2011, respectively. Proceeds from sales of investments available for sale were approximately $0.8 million and $5.7 million for the six month periods ended June 30, 2012 and June 30, 2011, respectively. For the six months ended June 30, 2012 and June 30, 2011, gross gains on the sale of investments available for sale amounted to $0.4 million and $0.6 million, respectively, and were reclassed from other comprehensive income into the condensed consolidated statements of income. There were no losses on the sale of investments available for sale for the six months ended June 30, 2012 or June 30, 2011. The basis on which the cost of a security sold is determined is specific identification.

Investments classified as available for sale that are in an unrealized loss position for which other-than-temporary impairment has not been recognized consisted of the following:

	June 30, 2012						December 31, 2011							June 30, 2011
			Unrealized						Unrealized							Unrealized
	Cost		Losses		Fair Value		Cost		Losses			Fair Value		Cost		Losses		Fair Value
(in thousands)
Mutual Funds	$	-	$	-	$	-	$	101	$	(28	)	$	73	$	-	$	-	$	-

At December 31, 2011, there was one holding in a loss position which was not deemed to be other-than-temporarily impaired due to the length of time that it had been in a loss position and because it passed scrutiny in our evaluation of issuer-specific and industry-specific considerations. In this specific instance, the investment at December 31, 2011 was a closed-end fund with diversified holdings across multiple companies and across multiple industries. The one holding was impaired for seven consecutive months. The value of this holding at December 31, 2011 was $0.1 million.

At June 30, 2012 and June 30, 2011, there were no available for sale holdings in loss positions.

For the three and six months ended June 30, 2012, there was $20,000 of losses on available for sale securities deemed to be other than temporary.

C. Investments in Partnerships, Offshore Funds and Variable Interest Entities

The Company is general partner or co-general partner of various sponsored limited partnerships and the investment manager of various sponsored offshore funds, and has investments in these totaling $88.0 million, $86.9 million and $78.3 million at June 30, 2012, December 31, 2011 and June 30, 2011, respectively, whose underlying assets consist primarily of marketable securities (the “affiliated entities”). We also have investments in unaffiliated partnerships, offshore funds and other entities of $14.1 million, $14.0 million and $20.3 million at June 30, 2012, December 31, 2011 and June 30, 2011, respectively (the “unaffiliated entities”). We evaluate each entity for the appropriate accounting treatment and disclosure. Certain of the affiliated entities are consolidated. In addition, our statement of financial condition caption “Investments in partnerships” includes those investments, in both affiliated and unaffiliated entities, which the Company accounts for under the equity method of accounting, as well as certain investments that the feeder funds hold that are carried at fair value, as described in Note D. The Company reflects the equity in earnings of these equity method investees and the change in fair value of the consolidated feeder funds under the caption “Net gain/(loss) from investments” on the condensed consolidated statements of income.

The following table highlights the number of entities that we consolidate as well as under which accounting guidance they are consolidated, including consolidated feeder funds (“CFFs”), which retain their specialized investment company accounting, partnerships and offshore funds.

Entities consolidated
	CFFs				Partnerships					Offshore Funds					Total
	VIEs		VOEs		VIEs		VOEs			VIEs			VOEs		VIEs			VOEs
Entities consolidated at December 31, 2010		1		2		-		2			1			-		2			4
Additional consolidated entities		-		-		-		-			-			1		-			1
Deconsolidated entities		-		-		-		(1	)		-			-		-			(1	)
Entities consolidated at June 30, 2011		1		2		-		1			1			1		2			4
Additional consolidated entities		-		-		-		-			-			-		-			-
Deconsolidated entities		-		-		-		-			(1	)		-		(1	)		-
Entities consolidated at December 31, 2011		1		2		-		1			-			1		1			4
Additional consolidated entities		-		-		-		-			-			-		-			-
Deconsolidated entities		-		-		-		-			-			-		-			-
Entities consolidated at June 30, 2012		1		2		-		1			-			1		1			4

On January 1, 2011, upon analysis of several factors, including the additional contribution of capital from unrelated third parties into a partnership that we consolidated for the year ended and as of December 31, 2010, we determined that the Company was no longer deemed to control one particular partnership, resulting in the deconsolidation of this partnership, effective January 1, 2011. The deconsolidation did not result in the recognition of any gain or loss. The Company continues to serve as the general partner and earn fees for this role, and it also maintains an investment in the deconsolidated partnership which is included in investments in partnerships on the condensed consolidated statements of financial condition and is accounted for under the equity method (which approximates fair value).

The following table includes the net impact by line item on the condensed consolidated statements of financial condition for each category of entity consolidated (in thousands):

June 30, 2012

Prior to

Consolidation

CFFs

Partnerships

Offshore Funds

As Reported

Assets