Note 9 – Investments

The Company’s investments reported on the Consolidated Statements of Financial Condition consist of investments in private equity partnerships and other investments in unconsolidated affiliated companies. The Company’s investments are relatively high-risk and illiquid assets. Realized and unrealized gains and losses on the private equity investments are included within Investment Management Revenue. The Company’s share of earnings (losses) on the investments in G5, ABS and Pan are included within Income (Loss) from Equity Method Investments on the Consolidated Statements of Operations.

Investments in Private Equity

The Company’s investments in private equity partnerships include investments in Evercore Capital Partners II L.P. and its affiliated entities (“ECP II”), Discovery Americas I, L.P. (the “Discovery Fund”), Evercore Mexico Capital Partners II (“EMCP II”), Evercore Mexico Capital Partners III (“EMCP III”), CSI Capital, L.P. (“CSI Capital”) and Trilantic Capital Partners Associates IV L.P. (“Trilantic IV”). Portfolio holdings of the private equity funds are carried at fair value. Accordingly, the Company reflects its pro rata share of the unrealized gains and losses occurring from changes in fair value. Additionally, the Company reflects its pro rata share of realized gains, losses and carried interest associated with any investment realizations.

In 2012, the Company held an initial and second closing on EMCP III, a private equity fund focused on middle market investments in Mexico. Subscribed capital commitments were $96,500 as of December 31, 2012, which included a capital commitment of $3,600 by the Company.

The Company has concluded that EP II L.L.C., the general partner of ECP II, is a VIE pursuant to ASC 810. The Company owns 8%-9% of the carried interest earned by the general partner of ECP II. The Company’s assessment of the design of EP II L.L.C. resulted in the determination that the Company is not acting as an agent for other members of the general partner and is a passive holder of interests in the fund, evidenced by the fact that the Company is a non-voting, non-managing member of the general partner and, therefore, has no authority in directing the management operations of the general partner. Furthermore, the Company does not have the obligation to absorb significant losses or the right to receive benefits that could potentially have a significant impact to EP II L.L.C. Accordingly, the Company has concluded that it is not the primary beneficiary of EP II L.L.C.

As a result of its investment in CITIC Securities International Partners, LTD (“CSIP”), during 2010, the Company made an investment of $3,164 in CSI Capital, a China focused fund affiliated with CSIP.

A summary of the Company’s investment in the private equity funds as of December 31, 2012 and 2011 was as follows:


	December 31, 2012		December 31, 2011
ECP II	$	3,793	$	5,037
Discovery Fund		3,060		2,393
EMCP II		10,400		9,674
EMCP III		1,696		—
CSI Capital		3,056		3,496
Trilantic IV		4,573		4,551

Total Private Equity Funds	$	26,578	$	25,151

Net realized and unrealized gains (losses) on private equity fund investments, including performance fees, were ($206), $6,200 and $2,148 for years ended December 31, 2012, 2011 and 2010, respectively. In the event the funds perform poorly, the Company may be obligated to repay certain carried interest previously distributed. As of December 31, 2012, the Company had $2,701 of previously received carried interest that may be subject to repayment.

Trilantic Capital Partners

During the first quarter of 2010, the Company made an investment in Trilantic. See Note 15 for further information. This investment had a balance of $14,999 and $15,549 as of December 31, 2012 and 2011, respectively.

Equity Method Investments

A summary of the Company’s other equity investments as of December 31, 2012 and 2011 was as follows:


	December 31, 2012		December 31, 2011
G5	$	19,720	$	20,595
ABS		46,851		45,104
Pan		2,749		2,531

Total	$	69,320	$	68,230

During the fourth quarter of 2010, the Company made an equity method investment in G5. At December 31, 2012, the Company’s economic ownership interest in G5 was 49%. This investment resulted in earnings of $1,368, $1,340 and $64 for the years ended December 31, 2012, 2011 and 2010, respectively, included within Income (Loss) from Equity Method Investments on the Consolidated Statements of Operations.

ABS

During the fourth quarter of 2011, the Company made an equity method investment in ABS. At December 31, 2012, the Company’s economic ownership interest in ABS was 45%. This investment resulted in earnings of $3,394 for the year ended December 31, 2012, included within Income (Loss) from Equity Method Investments on the Consolidated Statement of Operations.

Pan

In 2008, the Company made an equity method investment of $4,158 in Pan and maintains a 50% interest at December 31, 2012. This investment resulted in earnings (losses) of $90, ($420) and ($621) for the years ended December 31, 2012, 2011 and 2010, respectively, included within Income (Loss) from Equity Method Investments on the Consolidated Statements of Operations.

In 2011 and 2012, the Company provided Pan with additional funding in exchange for notes receivable, which are treated as debt on Pan’s statement of financial condition. The terms of the notes receivable require Pan to periodically pay interest on the debt. These notes, with a carrying value of $1,122 as of December 31, 2012, are due in 2016 and 2017. Based on the terms, the Company viewed the lending activities as reconsideration events and concluded in both 2011 and 2012 that Pan is a VIE as it did not have a sufficient level of equity to finance its activities without additional subordinated financial support. The Company’s assessment of the primary beneficiary of Pan included assessing which parties have the power to significantly impact the economic performance of Pan and the obligation to absorb losses of Pan, which could be potentially significant to Pan, or the right to receive benefits from Pan that could be potentially significant. Specifically, the Company concluded the other stakeholders, including Pan’s Chief Executive Officer, have the most significant influence in impacting the cash flows, operating margins and revenues and that the Company is not the primary beneficiary of Pan. The terms of the loan agreements did not change or modify the governance structure of Pan’s operating agreement, in which the Company holds two of the four seats on Pan’s Board.

As of December 31, 2012 and 2011, the Company has not recorded any of the assets or liabilities of Pan on the Consolidated Statements of Financial Condition.

The maximum exposure to loss represents the aggregate of (i) the Company’s equity interest in Pan in both the common and preferred shares, (ii) the outstanding notes receivable on loans made to Pan and (iii) the amount of undrawn preferred capital commitment. See Note 18 for a description of the Company’s commitment to purchase preferred equity of Pan.

Other

The Company allocates the purchase price of its equity method investments, in part, to the inherent finite-lived identifiable intangible assets of the investees. The Company’s share of the earnings of the investees has been reduced by the amortization of these identifiable intangible assets inherent in the investments of $2,696, $944 and $236 for the years ended December 31, 2012, 2011 and 2010 respectively.

Cost Basis Investments

In 2009, the Company invested $1,250 in CSIP in exchange for a 5% noncontrolling interest in the entity that was accounted for on the cost basis. During the fourth quarter of 2011, the Company and CSIP agreed to terminate the advising activities with respect to this venture and, accordingly, the Company incurred a charge for the write-off of this investment of $1,250, included within Other Operating Expenses on the Consolidated Statement of Operations.