EX-99.1 2 a2226253zex-99_1.htm EX-99.1

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Exhibit 99.1

        GAMCO INVESTORS, INC.
One Corporate Center
Rye, NY 10580

            , 2015

Dear Owner:

        We are pleased to report that the previously announced plan to spin-off our alternative investment management business, our institutional research services business and certain cash and other assets (collectively, the "Gabelli Securities Group") is expected to become effective on November 19, 2015. Prior to the spin-off, GAMCO Investors, Inc. ("GAMCO") will transfer the businesses and assets of the Gabelli Securities Group to Associated Capital Group, Inc. ("ACG"), a newly formed holding company that will become a publicly held company on November 19, 2015.

        We believe that separating the Gabelli Securities Group as an independent, publicly owned company is in the best interests of both ACG and GAMCO. The spin-off will permit each company to tailor its strategic plans and growth opportunities, more efficiently raise and allocate resources, including capital raised through debt or equity offerings, allow flexibility for each company to use its own stock as currency for teammate incentive compensation and potential acquisitions and provide investors a more targeted investment opportunity.

        At the time of the spin-off, you will receive:

    one share of ACG class A common stock, par value $0.001 per share ("ACG Class A Stock"), for each share of GAMCO class A common stock, par value $0.001 per share ("GAMCO Class A Stock"), that you hold at 5:00 p.m. New York City time on November 12, 2015 (the "record date"); and

    one share of ACG class B common stock, par value $0.001 per share ("ACG Class B Stock"), for each share of GAMCO class B common stock, par value $0.001 per share ("GAMCO Class B Stock"), that you hold on the record date.

        If you sell your shares of GAMCO Class A Stock or GAMCO Class B Stock (collectively, "GAMCO common stock") prior to November 9, 2015, you may also be selling your right to receive shares of ACG Class A Stock and/or ACG Class B Stock (collectively, "ACG common stock") in the spin-off. You are encouraged to consult with your financial advisor regarding the specific implications of selling your GAMCO common stock prior to or on the distribution date.

        We intend for the distribution of ACG common stock in the spin-off to be tax-free for our stockholders. It is a condition to completing the spin-off that we receive an opinion of counsel that the distribution of ACG common stock to GAMCO stockholders will qualify as a tax-free distribution for United States federal income tax purposes.

        GAMCO will provide its U.S. stockholders with information to enable them to compute their tax basis in both GAMCO and ACG common stock. This information will be posted on GAMCO's website at www.gabelli.com shortly after the distribution.

        Following the distribution, you will own shares in both GAMCO and ACG. The GAMCO Class A Stock will continue to trade on the New York Stock Exchange under the symbol "GBL." ACG intends to list the ACG Class A Stock on the New York Stock Exchange under the symbol "AC." Consistent with the GAMCO Class B Stock, the ACG Class B Stock will not be listed on any exchange, nor will it be transferable. However, the ACG Class B Stock may be converted into ACG Class A Stock pursuant to the provisions of our certificate of incorporation.

        The enclosed information statement, which is being mailed to all holders of GAMCO common stock on the record date, describes the distribution in detail and contains important information about ACG, its business, financial condition and results of operations. We urge you to read the information statement carefully.


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        We want to thank you for your continued support of GAMCO, and we look forward to your future support of ACG. Please note that no stockholder vote is required for the spin-off to occur, and no stockholder vote is being sought.

        Stockholders of GAMCO with inquiries related to the distribution should contact GAMCO's transfer agent, Computershare Trust Company, N.A., at (877) 282-1168 or (781) 575-2879 (outside the United States, Canada and Puerto Rico).

    Sincerely,

 

 

/s/ KEVIN HANDWERKER

EVP and General Counsel

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Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to the ACG Class A Stock has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

PRELIMINARY INFORMATION STATEMENT SUBJECT TO COMPLETION, DATED OCTOBER 30, 2015

INFORMATION STATEMENT
RELATING TO THE DISTRIBUTION OF COMMON STOCK OF

ASSOCIATED CAPITAL GROUP, INC.
by
GAMCO INVESTORS, INC.

        This information statement is being furnished in connection with the distribution by GAMCO Investors, Inc. ("GAMCO") to holders of its common stock of all the outstanding shares of common stock of its wholly owned subsidiary Associated Capital Group, Inc., a newly formed Delaware corporation ("ACG"). Prior to the distribution, GAMCO will transfer to ACG its alternative investment management business, its institutional research services business and certain cash and other assets (collectively, the "Gabelli Securities Group").

        As a result of the spin-off, you will receive:

    one share of ACG class A common stock, par value $0.001 per share ("ACG Class A Stock"), for each share of GAMCO class A common stock, par value $0.001 per share ("GAMCO Class A Stock"), that you hold at 5:00 p.m. New York City time on November 12, 2015 (the "record date"); and

    one share of ACG class B common stock, par value $0.001 per share ("ACG Class B Stock"), for each share of GAMCO class B common stock, par value $0.001 per share ("GAMCO Class B Stock"), that you hold on the record date.

        In addition, our management team, along with certain of GAMCO's teammates, will receive shares of ACG Class A Stock in the distribution as a result of their ownership of certain equity awards of GAMCO entitling them to the same benefits as holders of GAMCO Class A Stock. The distribution will be effective at 11:59 p.m. New York City time on November 19, 2015 (the "distribution date"). For GAMCO stockholders who own GAMCO Class A Stock or GAMCO Class B Stock (collectively, "GAMCO common stock"), in registered form, in most cases the transfer agent will credit their shares of ACG Class A Stock or ACG Class B Stock (collectively, "ACG common stock") to book-entry accounts established to hold their ACG common stock. Our distribution agent will mail these stockholders a statement reflecting their ACG common stock ownership shortly after the distribution date. For stockholders who own GAMCO common stock through a broker, bank or other nominee, their shares of ACG common stock will be credited to their accounts by that broker, bank or other nominee.

        No stockholder approval of the distribution is required. GAMCO stockholders will not be required to pay for the shares of ACG common stock to be received by them in the distribution or to surrender or to exchange shares of GAMCO common stock in order to receive ACG common stock or to take any other action in connection with the distribution.

        There is currently no trading market for the ACG common stock. We will apply to have the ACG Class A Stock listed on the New York Stock Exchange (the "NYSE") under the symbol "AC."

        In reviewing this information statement, you should carefully consider the matters described in "Risk Factors" beginning on page 19.

        Upon completion of the spin-off, Mario J. Gabelli and his affiliates will control approximately 94.7% of the voting power and approximately 73.8% of the outstanding shares of ACG common stock. As a result, we will be a "controlled company" within the meaning of the corporate governance standards of the NYSE. See "Management—Corporate Governance—Controlled Company Exception."

        We are an "emerging growth company" as well as a "smaller reporting company," each as defined under the federal securities laws. See "Business—Status as an Emerging Growth Company and a Smaller Reporting Company."

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

        This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

        GAMCO first mailed this information statement to its stockholders on                        , 2015

        The date of this information statement is                        , 2015.


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  Page  

SUMMARY

    1  

RISK FACTORS

   
19
 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

   
37
 

THE SPIN-OFF

   
38
 

DIVIDEND POLICY

   
47
 

REGULATORY APPROVALS

   
47
 

BUSINESS

   
48
 

SELECTED HISTORICAL COMBINED CONSOLIDATED FINANCIAL DATA

   
59
 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
60
 

ARRANGEMENTS BETWEEN GAMCO AND ACG AFTER THE SPIN-OFF

   
78
 

MANAGEMENT

   
83
 

EXECUTIVE COMPENSATION

   
91
 

DESCRIPTION OF CAPITAL STOCK

   
96
 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

   
102
 

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

   
105
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   
106
 

WHERE YOU CAN FIND MORE INFORMATION

   
108
 

COMBINED CONSOLIDATED FINANCIAL STATEMENTS

   
F-1
 

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SUMMARY

        This summary highlights selected information contained elsewhere in this information statement relating to the separation of the Gabelli Securities Group from GAMCO and the distribution of ACG common stock by GAMCO to the holders of GAMCO common stock. This summary may not contain all of the information that is important to you. To better understand the separation and ACG, you should carefully read this entire information statement including the risks described in "Risk Factors" and our financial statements and the notes thereto beginning on page F-1.

        Except as otherwise indicated or unless the context otherwise requires, "ACG," "we," "us," "our" and the "Company" refer to Associated Capital Group, Inc., a Delaware corporation, and its subsidiaries, which after giving effect to the spin-off will succeed to the business of the Gabelli Securities Group. On October 13, 2015, Gabelli Securities Group, Inc. changed its name to Associated Capital Group, Inc. The financial statements beginning on page F-1 have not been updated to take into account that name change. References to the "Formation Transactions" mean the transactions to be completed by GAMCO and its affiliates to facilitate or in connection with the spin-off as described in "The Spin-Off—The Formation Transactions." All references to "GAMCO" are: (i) for periods prior to the Formation Transactions, GAMCO Investors, Inc., individually or together with its subsidiaries as the context may require; and (ii) for periods after the Formation Transactions, GAMCO Investors, Inc., excluding the Gabelli Securities Group, after giving effect to the spin-off. Unless the context otherwise requires, all references in this information statement to our certificate incorporation and bylaws refer to our certificate of incorporation and bylaws as amended and restated prior to the spin-off.

        We refer in this information statement to the transaction in which we will be spun-off from GAMCO and become an independent public company as the "separation," the "distribution" or the "spin-off."

        Unless otherwise indicated or the context requires otherwise, we describe in this information statement the Gabelli Securities Group businesses to be contributed to us by GAMCO as if the spin-off has already occurred. However, we are a newly formed entity that will not have conducted any separate operations prior to the spin-off and some of the actions necessary to transfer assets and liabilities of GAMCO to us have not occurred but will occur prior to the distribution date. Following the spin-off, we will be an independent public company. Accordingly, our historical financial results as part of GAMCO contained herein may not reflect our financial results in the future as an independent public company or what our financial results would have been had we been an independent public company during the periods presented.

Our Business

        We are a newly formed Delaware corporation organized to be the holding company for GAMCO's alternative investment management business, institutional research services business and certain cash and other assets in the spin-off. Our principal executive offices are located at One Corporate Center, Rye, NY 10580. Our telephone number is (914) 921-5135. Our website address is www.associated-capital-group.com. Information contained on or connected to our website does not and will not constitute part of this information statement or the Registration Statement filed on Form 10, of which this information statement is a part.

Alternative Investment Management

        We own a 93.9% interest in Gabelli Securities, Inc. ("GSI"), a registered investment advisor. GSI and its wholly owned subsidiary, Gabelli & Partners, LLC ("Gabelli & Partners"), collectively serve as general partners or investment managers to investment funds including limited partnerships and offshore companies (collectively, "Investment Partnerships"), and separate accounts. We primarily manage assets in equity event-driven value strategies, across a range of risk and event arbitrage portfolios. The business earns fees from its advisory assets, and income (loss) from trading and investment portfolio activities. The advisory fees include management and incentive fees. Management

 

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fees are largely based on a percentage of the portfolios' levels of assets under management ("AUM"). Incentive fees are based on the percentage of profits derived from the investment performance delivered to clients' invested assets. As of June 30, 2015, we managed a total of $1.1 billion in assets. GSI is registered with the Securities and Exchange Commission (the "SEC") as an investment advisor under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). Certain employees of GAMCO own 1.9% of GSI, and the remaining 4.2% of GSI is owned by individual investors unrelated to GAMCO.

Institutional Research Services

        We operate our institutional research services business through G.research, LLC ("G.research"), a wholly owned subsidiary of GSI. G.research is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Through G.research, we provide institutional research services as well as act as an underwriter. G.research is regulated by the Financial Industry Regulatory Authority ("FINRA"). G.research's revenues are derived primarily from institutional research services.

Our Strategy

        Our business strategy targets global growth of the business through continued leveraging of our proven asset management strengths including our funds, long-term performance record, diverse product offerings and experienced investment, research and client relationship professionals. In order to achieve performance and growth in AUM and profitability, we are pursuing a strategy which includes the following key elements:

    continuing an active fundamental investment approach;

    growing our Investment Partnerships advisory business;

    capitalizing on acquisitions, alliances and lift-outs;

    pursuing partnerships and joint ventures;

    continuing our sponsorship of industry conferences; and

    attracting and retaining experienced professionals.

        For more information, see "Business—Business Strategy."

The Spin-Off

        GAMCO's board of directors (the "GAMCO Board") regularly reviews the various businesses conducted by GAMCO to ensure that resources are deployed and activities are pursued in the best interests of its stockholders. As part of this evaluation of a possible separation, the GAMCO Board considered a number of factors, including the strategic focus and flexibility of the businesses, their ability to operate and compete efficiently and effectively and the probability of the successful execution of the various structural alternatives. Upon careful review and consideration, the GAMCO Board determined that the spin-off of the Gabelli Securities Group is in the best interests of GAMCO. The GAMCO Board's determination was based on a number of factors, including the following:

    Potential Increase in Aggregate Stock Value.  Following a spin-off, a number of corporations have experienced an increase in the aggregate stock value of the two companies' shares. An increase in the aggregate stock value would better enable both GAMCO and ACG to use their respective stock to pursue and achieve their respective strategic objectives, including enhanced equity compensation programs and potential acquisitions with less dilution to existing stockholders.

    Creation of Two Focused Companies.  The spin-off will allow each business to more effectively pursue its own distinct operating priorities, strategies and opportunities for long-term growth and

 

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      profitability across the global investment management landscape. It is expected to speed up decision-making at each company, allowing each to adapt more rapidly to changing market conditions and customer dynamics.

    Tailored Capital Structure.  The spin-off will permit each company to implement a capital structure tailored to its particular strategy and business needs, facilitating a more flexible and efficient allocation of capital.

    Differentiated Financing Options.  The spin-off will provide each company with direct access to capital markets and facilitate the ability of each to capitalize on its unique growth opportunities and effect future acquisitions and strategic alliances possibly using common stock as currency.

    Increased Transparency.  The spin-off will increase transparency and clarity of the businesses of each of GAMCO and ACG and allow investors to separately value GAMCO and ACG based on their distinct investment identities, including the merits, performance, growth profile, and future prospects of their respective businesses. The separation will also provide investors with two distinct and targeted investment opportunities.

    Potential Reduced Volatility in GAMCO Common Stock and Possible Improved Valuation for GAMCO. The inherent volatility effects of performance fees received by ACG on GAMCO common stock will be reduced, which may result in an improved valuation for GAMCO's far larger mutual fund and institutional and private wealth management businesses.

    Improve Strategic Flexibility.  The spin-off is expected to provide each company with increased flexibility to pursue new partnership and strategic opportunities that may have previously been unavailable for strategic or other reasons, including potentially allowing both GAMCO and ACG to do business with each other's competitors.

    Provide Incentive Compensation that is More Relevant to Teammates of Each Business.  The spin-off will create a new publicly traded equity security and permit the creation of restricted stock units and other forms of equity compensation for ACG. This will facilitate incentive compensation arrangements for teammates more directly tied to the performance of each company's business, and enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives.

        With $1.1 billion in AUM at June 30, 2015, ACG represented 2.4% of GAMCO's AUM, which was $45.4 billion at June 30, 2015. We believe that ACG, following the spin-off, will devote greater attention to implementing a growth strategy as it will no longer be overshadowed by the GAMCO umbrella under which it currently operates. In order to facilitate this spin-off, ACG's board of directors (our "Board") appointed Mario J. Gabelli, the Chairman and Chief Executive of GAMCO, to serve as our Executive Chairman and Chief Executive Officer and Marc Gabelli to serve as our President. Kieran Caterina, GAMCO's Finance Director and Co-Chief Accounting Officer, will also serve as our Chief Financial Officer. We have appointed Salvatore F. Sodano, Daniel R. Lee, Bruce M. Lisman and Richard L. Bready as independent members of our Board, and Mr. Sodano will serve as Vice Chairman of our Board. Messrs. Bready and Marc Gabelli are both current members of the GAMCO Board. It is expected that Mr. Bready will resign from the GAMCO Board on the distribution date. We believe that the spin-off and new independent board representation, along with management hires we make in the future, will enable us to devote greater attention to implementing a growth strategy. That strategy will be focused entirely on benefiting ACG and our stockholders, rather than on functioning as part of the larger GAMCO organization, in which decisions must take into account the interests of the entire entity, not solely those of ACG.

 

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Status as an Emerging Growth Company and Smaller Reporting Company

        As a company with less than $1 billion in revenues during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"). For as long as a company is deemed to be an emerging growth company, it may take advantage of certain reduced reporting and other regulatory requirements that are generally unavailable to other public companies.

        In addition, we qualify as a "smaller reporting company" under the Exchange Act. As a smaller reporting company, we enjoy many of the same exemptions as emerging growth companies, and those exemptions would continue to be available to us even after the emerging growth company status expires if we still are a smaller reporting company at such time. For a discussion of the implications of our status as an "emerging growth company" and as a "smaller reporting company," see "Business—Status as an Emerging Growth Company and Smaller Reporting Company" and "Risk Factors—Risks Related to the ACG Common Stock—The reduced disclosure requirements applicable to us as an 'emerging growth company' and a 'smaller reporting company' may make ACG common stock less attractive to investors."

Our Assets Under Management

        The following table sets forth ACG's total AUM for the dates shown.


Assets Under Management
(in thousands)

 
  At June 30,   At December 31,  
Category(a)
  2015   2014   2013   2012   2011   2010  

Event Merger Arbitrage

  $ 855,158   $ 795,894   $ 690,975   $ 721,065   $ 512,661   $ 400,996  

Event-Driven Value

    132,946     166,825     140,091     123,648     131,833     54,944  

Other(b)

    76,198     76,827     76,050     75,469     65,300     59,593  

Total

  $ 1,064,302   $ 1,039,546   $ 907,116   $ 920,182   $ 709,794   $ 515,533  

(a)
Asset levels include various structures, including managed accounts, partnerships and offshore companies.

(b)
Includes investment vehicles focused on private equity, merchant banking, non-investment-grade credit and capital structure arbitrage.

Conflicts of Interest

        See "Certain Relationships and Related Party Transactions."

 

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Questions and Answers About the Spin-Off

        See "The Spin-Off" for a more detailed description of the matters summarized below.

How will the spin-off work?

  All shares of ACG common stock are currently held by GAMCO. On the distribution date, all of the shares of ACG common stock held by GAMCO will be distributed pro rata to the holders of GAMCO common stock as of the record date.

What is being distributed in the distribution?

 

You will receive (i) one share of ACG Class A Stock for each share of GAMCO Class A Stock that you hold as of the record date and (ii) one share of ACG Class B Stock for each share of GAMCO Class B Stock that you hold on the record date. GAMCO will distribute approximately            shares of ACG Class A Stock and            shares of ACG Class B Stock in the distribution, based upon the number of shares of GAMCO common stock outstanding on the date of this information statement. The actual number of shares of ACG Class A Stock and ACG Class B Stock to be distributed in the spin-off will be equal to the number of shares of GAMCO Class A Stock and GAMCO Class B Stock, respectively, outstanding as of the record date. The shares of ACG common stock to be distributed by GAMCO will constitute all of the issued and outstanding shares of ACG common stock immediately after the distribution. The actual number of shares of ACG common stock to be issued in the distribution will be determined as of the record date. For more information, see "Shares Eligible for Future Sale" and "Description of Capital Stock—Common Stock and Performance Common Stock."

What is the record date for the distribution?

 

5:00 p.m. New York City time on November 12, 2015.

When will the distribution occur?

 

We expect that shares of ACG common stock will be distributed by our transfer agent in its capacity as the distribution agent, on behalf of GAMCO, effective at 11:59 p.m. New York City time on the distribution date.

If I am a record holder of GAMCO common stock, when will I receive my ACG common stock? Will I receive a stock certificate for ACG common stock distributed as a result of the spin-off?

 

Registered holders of GAMCO common stock who are entitled to participate in the spin-off will receive their shares in book-entry form on the distribution date. A book-entry account statement reflecting their ownership of ACG common stock will be provided shortly after the distribution date. For additional information, registered stockholders in the United States, Canada or Puerto Rico should contact GAMCO's transfer agent, Computershare Trust Company, N.A., at (877) 282-1168 or through its website at www.computershare.com. Stockholders from outside the United States, Canada and Puerto Rico may call (781) 575-2879. See "The Spin-Off—When and How You Will Receive Shares of ACG Common Stock."

 

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If I hold my GAMCO common stock through a broker, bank or other nominee, when will I receive my ACG common stock?

 

It is expected that persons that hold their GAMCO common stock through a broker, bank or other nominee will have their brokerage account credited with ACG common stock shortly after the distribution date. For additional information, those stockholders should contact their broker or bank directly.

What will ACG's relationship with GAMCO be after the spin-off?

 

After the spin-off, the principal elements of our relationship with GAMCO will be governed by a Separation and Distribution Agreement (the "Separation Agreement") and a Transitional Administrative and Management Services Agreement (the "Transitional Services Agreement"). We cannot assure you that these agreements will be on terms as favorable to ACG as agreements with unaffiliated third parties. Among the principal services GAMCO will provide to us pursuant to the Transitional Services Agreement are:

 

accounting, financial reporting and consolidation services, including the services of a financial and operations principal;

 

treasury services, including, without limitation, insurance and risk management services and administration of benefits;

 

tax planning, tax return preparation, recordkeeping and reporting services;

 

human resources, including but not limited to the sourcing of permanent and temporary employees as needed, recordkeeping, performance reviews and terminations;

 

legal and compliance advice, including the services of a Chief Compliance Officer;

 

technical/technology consulting; and

 

operations and general administrative assistance, including office space, office equipment and furniture, payroll, procurement, and administrative personnel.

 

In addition, ACG will provide GAMCO with payroll services pursuant to the Transitional Services Agreement. Services provided by GAMCO to ACG or by ACG to GAMCO under the Transitional Services Agreement will be charged at cost. The Transitional Services Agreement is terminable by either party on 30 days' prior written notice to the other party. The Transitional Services Agreement has a term of twelve months.

 

For more information, see "Arrangements Between GAMCO and ACG After the Spin-Off."

 

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What do I have to do to participate in the spin-off?

 

You are not required to take any action to receive shares of ACG common stock in the spin-off. No vote of GAMCO stockholders is required and none will be obtained for the spin-off. If you own shares of GAMCO common stock on the record date, you will receive a pro rata number of shares of ACG common stock. Please do not mail in GAMCO common stock certificates in connection with the spin-off.

Can I receive fractional shares in the spin-off?

 

No. Any fractional share of ACG common stock otherwise issuable to you will be sold on your behalf, and you will receive a cash payment with respect to that fractional share. Such cash payment generally will constitute taxable income to you.

 

For an explanation of how the cash payments for fractional shares will be determined, see "The Spin-Off—Treatment of Fractional Shares."

Will GAMCO incur any debt or issue any stock in connection with the spin-off?

 

On or before the distribution date, GAMCO expects to issue to ACG a $250 million five-year, 4.0% note, the original principal amount of which will be paid off by GAMCO ratably over five years, or sooner at GAMCO's option, with interest payable in cash or in kind ("PIK"), at GAMCO's option (the "GAMCO Note"). In addition, after the record date and before the distribution date, GAMCO expects to issue to GSI $150 million worth of GAMCO Class A Stock currently held in treasury (the "Former GAMCO Treasury Shares") in exchange for a note receivable from GSI to GAMCO in a principal amount equal to the value of Former GAMCO Treasury Shares at the time of the issuance of the Former GAMCO Treasury Shares, with an interest rate of 4.0%, payable in cash (the "GSI Note"). The GSI Note must be repaid on the earlier of (i) demand by the holder of the GSI Note or (ii) the fifth anniversary of the issuance of the GSI Note. In accordance with NYSE shareholder approval rules, GAMCO will not issue more than 19.99% of the number of shares of GAMCO common stock outstanding immediately prior to the issuance of the Former GAMCO Treasury Shares (the "NYSE 19.99% Limit"), as it has not received shareholder approval for such issuance. To the extent the price at which the Former GAMCO Treasury Shares are sold to GSI would cause the number of Former GAMCO Treasury Shares to be issued to GSI to exceed the NYSE 19.99% Limit, the dollar amount of the Former GAMCO Treasury Shares to be sold to GSI and the amount of the GSI Note will each be reduced so that the number of Former GAMCO Treasury Shares issued does not exceed the NYSE 19.99% Limit. GAMCO will contribute the GSI Note to ACG at the time of the spin-off resulting in GSI owing ACG all amounts due pursuant to the GSI Note. The proceeds we receive pursuant to these transactions and our potential future sale of the

 

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Former GAMCO Treasury Shares may be used to, among other things, provide seed capital for Investment Partnerships that we expect to form and, possibly, acquisitions, alliances and lift-outs. See "The Spin-Off—The Formation Transactions" and "Arrangements Between GAMCO and ACG After the Spin-Off—GAMCO Note."

Can GAMCO decide to cancel the distribution of ACG common stock if it wishes to do so?

 

Yes. GAMCO has the right to terminate the spin-off and the distribution of ACG common stock at any time in its sole discretion, if any event or development occurs or exists that in the judgment of the GAMCO Board makes the spin-off inadvisable.

What will happen to the listing of GAMCO Class A Stock?

 

Immediately after the spin-off of ACG common stock, GAMCO Class A Stock will continue to be traded on the NYSE under its existing symbol "GBL."

Who will serve as distribution agent, transfer and agent registrar for the ACG common stock?

 

Expected to be Computershare Trust Company, N.A.

Is the distribution taxable for U.S. federal income tax purposes?

 

The distribution is conditioned on the receipt by GAMCO of certain opinions from its tax advisors substantially to the effect that the distribution will be tax-free to GAMCO and its stockholders under Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"). Based on these tax opinions, for U.S. federal income tax purposes, you should not recognize any gain or loss and no amount should be included in your income as a result of the Formation Transactions or upon your receipt of shares of ACG common stock pursuant to the distribution. Notwithstanding the foregoing, if you receive cash in lieu of fractional shares as a result of the spin-off, you will generally be subject to tax on the receipt of such cash. Neither GAMCO nor ACG has applied for a private letter ruling from the Internal Revenue Service (the "IRS") with respect to the tax consequences of the distribution. Accordingly, there can be no assurance that the IRS or another taxing authority will not assert that the distribution is taxable to GAMCO, ACG or GAMCO stockholders. For more information, see "The Spin-Off—Material U.S. Federal Income Tax Consequences on the Spin-Off." Tax matters are very complex and the tax consequences of the distribution to any particular GAMCO stockholder will depend on that stockholder's particular situation. GAMCO stockholders should consult with their own tax advisors to determine the specific tax consequences of the spin-off to them.

 

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How will the spin-off affect my tax basis in GAMCO common stock?

 

Your tax basis in the GAMCO common stock held by you immediately prior to the spin-off will be allocated between the GAMCO common stock and ACG common stock held by you immediately after the spin-off in proportion to their respective fair market values. You should consult your tax advisor on this matter. See "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off" for more information.

Does ACG intend to pay dividends on ACG common stock?

 

We currently contemplate paying a dividend; however, we cannot assure you that we will pay any dividend. Whether we pay cash dividends in the future will be at the discretion of our Board and will be dependent upon our financial condition, earnings, capital requirements, legal and regulatory considerations and any other factors that our Board decides are relevant. See "Dividend Policy" for further information.

How will ACG common stock trade?

 

There is not currently a public market for the ACG Class A Stock. We have applied to have the ACG Class A Stock listed on the NYSE under the symbol "AC." Beginning shortly before the record date and continuing through the distribution date, we expect that there will be a "when-issued" trading market in the ACG Class A Stock. The "when-issued" market will be a trading market for the ACG Class A Stock that will be distributed to holders of shares of GAMCO common stock on the distribution date. If you owned shares of GAMCO common stock on the record date, you will be entitled to ACG Class A Stock distributed pursuant to the distribution. You may trade this entitlement to shares of ACG Class A Stock, without the shares of GAMCO Class A Stock you own, on the "when-issued" market. On the first trading day following the distribution date, "when-issued" trading with respect to the ACG Class A Stock will end and "regular way" trading will begin.

 

There will be no trading market for the ACG Class B Stock.

Will the number of shares of GAMCO common stock I own change as a result of the spin-off?

 

No. The number of shares of GAMCO common stock you own will not change as a result of the spin-off.

Whom can I contact for more information?

 

If you have questions relating to the mechanics of the distribution of ACG common stock, you should contact the distribution agent:

 

Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021-1011
Telephone: (877) 282-1168 or 781-575-2879 (outside the United States, Canada and Puerto Rico)

 

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Before the spin-off, if you have any questions regarding the spin-off, you should contact:

 

GAMCO Investors, Inc.
One Corporate Center
Rye, NY 10580
Telephone: (914) 921-5000
Attention: Kevin Handwerker

 

After the spin-off, if you have any questions regarding the spin-off or ACG common stock, you should contact:

 

Associated Capital Group, Inc.
One Corporate Center
Rye, NY 10580
Telephone: (914) 921-5135
Attention: David Goldman

 

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Summary Historical Combined Consolidated Financial Data

        Associated Capital Group, Inc. was formed on April 15, 2015 and had nominal assets and no liabilities, and conducted no operations prior to the date of this information statement. Therefore, we believe that a presentation of the historical results of ACG would not be meaningful. Accordingly, the following tables set forth our summary historical combined consolidated financial data as of and for each of the six months ended June 30, 2015 and June 30, 2014 and the fiscal years in the three year period ended December 31, 2014.

        Our historical combined consolidated financial statements included in this information statement have been presented on a "carve-out" basis from GAMCO's consolidated financial statements using the historical results of operations, cash flows, assets and liabilities attributable to the Gabelli Securities Group and include allocation of expenses from GAMCO for certain functions, including general corporate expenses related to information technology, operations, financial reporting, legal, regulatory and compliance and human resource activities, which may not be representative of the future costs we will incur as an independent public company. Our historical combined consolidated financial statements reflect, among other things, (i) GAMCO's contribution to ACG of its 93.9% interest in GSI and (ii) approximately $630 million of cash and other assets that will be contributed by GAMCO to ACG prior to the distribution date. Our historical financial statements do not reflect changes that we expect to experience in the future as a result of our spin-off from GAMCO. Our historical combined consolidated financial statements also do not reflect the allocation of certain transactions between GAMCO and us as reflected under "—Summary Unaudited Pro Forma Combined Consolidated Financial Statements." Consequently, the financial information included here may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an independent publicly traded company during the periods presented.

        The summary historical combined consolidated financial data presented below should be read in conjunction with our audited historical combined consolidated financial statements and accompanying notes, "—Summary Unaudited Pro Forma Combined Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  Six Months
Ended
June 30,
  Year Ended December 31,  
Income Statement Data (in thousands)
  2015   2014   2014   2013   2012  

Revenues

  $ 9,539   $ 8,456   $ 21,029   $ 20,422   $ 21,549  

Total expenses

    16,887     15,380     30,953     34,942     34,270  

Operating loss

    (7,348 )   (6,924 )   (9,924 )   (14,520 )   (12,721 )

Total other income, net

    11,796     13,863     9,542     54,906     23,503  

Income before income taxes

    4,448     6,939     (382 )   40,386     10,782  

Income tax provision

    1,234     2,073     775     13,157     3,106  

Net income before noncontrolling interests

    3,214     4,866     (1,157 )   27,229     7,676  

Net income (loss) attributable to noncontrolling interests

    (26 )   429     (4,157 )   463     170  

Net income

  $ 3,240   $ 4,437   $ 3,000   $ 26,766   $ 7,506  

 

 
   
  December 31,  
 
  June 30,
2015
 
Balance Sheet Data (in thousands)
  2014   2013   2012  

Total assets

  $ 766,623   $ 754,694   $ 588,720   $ 589,715  

Long-term obligations

                 

Other liabilities and noncontrolling interest

    113,525     171,767     93,345     79,211  

Total liabilities and noncontrolling interest

    113,525     171,767     93,345     79,211  

Total equity

  $ 653,098   $ 582,927   $ 495,375   $ 510,504  

 

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Summary Unaudited Pro Forma Combined Condensed Consolidated Financial Statements

        The following tables set forth our unaudited pro forma combined condensed consolidated statements of income for the six months ended June 30, 2015 and the year ended December 31, 2014 and our unaudited pro forma combined condensed consolidated statement of financial condition as of June 30, 2015 (collectively, the "Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Financial Statements"). The Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Financial Statements were derived from our historical combined condensed consolidated financial statements, included elsewhere within this information statement. Our unaudited pro forma combined condensed consolidated statements of income for the six months ended June 30, 2015 and the year ended December 31, 2014 and our unaudited pro forma combined condensed consolidated statement of financial condition at June 30, 2015 have been prepared as though the distribution occurred as of January 1, 2014.

        In connection with the distribution, GAMCO will transfer to ACG GAMCO's alternative investment management business, its institutional research services business and certain cash and other assets.

        Our unaudited pro forma combined condensed consolidated financial data presented below should be read in conjunction with our historical combined condensed consolidated financial statements, included elsewhere within this information statement, and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

        Our unaudited pro forma combined condensed consolidated financial data are for illustrative purposes only and do not reflect what our financial position and results of operations would have been had the spin-off occurred on the date indicated and are not necessarily indicative of our future financial position and future results of operations.

        The unaudited pro forma combined condensed consolidated financial data constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See "Special Note Regarding Forward-Looking Statements" in this information statement.

 

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Associated Capital Group

Unaudited Pro Forma Combined Condensed Consolidated Statement of Income

For the Six Months Ended June 30, 2015

(in thousands)

Income Statement Data
  Historical   Pro Forma
Adjustments
   
  Pro Forma  

Revenues

                       

Investment advisory and incentive fees

  $ 4,437   $       $ 4,437  

Distribution fees and other income

    1,035             1,035  

Institutional research services

    4,067             4,067  

Total revenues

    9,539             9,539  

Expenses:

                       

Compensation

    11,476             11,476  

Stock based compensation

    1,265             1,265  

Management fee

    496     503   (a)     999  

Other operating expenses

    3,650     688   (b)(c)     4,338  

Total expenses

    16,887     1,191         18,078  

Operating loss

    (7,348 )   (1,191 )       (8,539 )

Other income (expense)

                       

Net gain from investments

    10,705             10,705  

Interest and dividend income

    1,752     5,560   (d)(e)     7,312  

Interest expense

    (661 )   156   (c)     (505 )

Total other income, net

    11,796     5,716         17,512  

Income before income taxes

    4,448     4,525         8,973  

Income tax provision

    1,234     1,523   (f)     2,757  

Net income before noncontrolling interests

    3,214     3,002         6,216  

Net income (loss) attributable to noncontrolling interests

    (26 )           (26 )

Net income

  $ 3,240   $ 3,002       $ 6,242  

Net income attributable to ACG's shareholders per share:

                       

Basic

                  $ 0.25  

Diluted

                  $ 0.25  

Weighted average shares outstanding(g):

                       

Basic

                    25,098  

Diluted

                    25,386  

See Notes to the Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.

 

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Associated Capital Group

Unaudited Pro Forma Combined Condensed Consolidated Statement of Income

For the Year Ended December 31, 2014

(in thousands)

Income Statement Data
  Historical   Pro Forma
Adjustments
   
  Pro Forma  

Revenues

                       

Investment advisory and incentive fees

  $ 9,779   $       $ 9,779  

Distribution fees and other income

    2,090             2,090  

Institutional research services

    9,160             9,160  

Total revenues

    21,029             21,029  

Expenses:

                       

Compensation

    22,298             22,298  

Stock based compensation

    1,921             1,921  

Management fee

    (37 )   1,094   (a)     1,057  

Other operating expenses

    6,771     1,375   (b)(c)     8,146  

Total expenses

    30,953     2,469         33,422  

Operating loss

    (9,924 )   (2,469 )       (12,393 )

Other income (expense)

                       

Net gain from investments

    6,502             6,502  

Interest and dividend income

    4,416     12,000   (d)(e)     16,416  

Interest expense

    (1,376 )   312   (c)     (1,064 )

Total other income, net

    9,542     12,312         21,854  

Income before income taxes

    (382 )   9,843         9,461  

Income tax provision

    775     2,922   (f)     3,697  

Net income before noncontrolling interests

    (1,157 )   6,921         5,764  

Net income (loss) attributable to noncontrolling interests

    (4,157 )           (4,157 )

Net income

  $ 3,000   $ 6,921       $ 9,921  

Net income attributable to ACG's shareholders per share:

                       

Basic

                  $ 0.39  

Diluted

                  $ 0.39  

Weighted average shares outstanding(g):

                       

Basic

                    25,335  

Diluted

                    25,558  

See Notes to the Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.

 

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Associated Capital Group

Unaudited Pro Forma Combined Condensed Consolidated Statement of Financial Condition

As of June 30, 2015

(in thousands)

 
  Historical   Pro Forma
Adjustments
   
  Pro Forma    

ASSETS

                         

Cash and cash equivalents

  $ 361,082   $ (60,531 ) (h)   $ 300,551    

Investments in securities

    106,579     150,000   (i)     256,579    

Investments in sponsored registered investment companies

    126,305             126,305    

Investments in partnerships

    108,947             108,947    

Receivable from brokers

    56,384             56,384    

Investment advisory fees receivable

    1,595             1,595    

Receivable from affiliates

    291     (178 ) (j)     113    

Goodwill

    3,254             3,254    

Other assets

    2,186             2,186    

Total assets

  $ 766,623   $ 89,291       $ 855,914    

LIABILITIES AND EQUITY

   
 
   
 
 

 

   
 
 

 

Payable to brokers

 
$

48,885
 
$

     
$

48,885
   

Income taxes payable and deferred tax liabilities

    16,556     1,523   (f)     18,079    

Compensation payable

    6,077     503   (a)     6,580    

Securities sold, not yet purchased

    9,825             9,825    

Mandatorily redeemable noncontrolling interests

    1,281             1,281    

Payable to affiliates

    23,190     (23,190 ) (j)        

Accrued expenses and other liabilities

    1,768     532   (b)     2,300    

Total liabilities

    107,582     (20,632 )       86,950    

Redeemable noncontrolling interests

   
5,943
   
       
5,943
   

Class A common stock, $0.001 par value

   
   
7
 

(l)

   
7
   

Class B common stock, $0.001 par value

        19   (l)     19    

Additional paid-in-capital

    643,726     359,897   (i)(k)(l)(m)(n)     1,003,623    

Accumulated comprehensive income

    9,372             9,372    

Note receivable from GAMCO

        (250,000 ) (k)     (250,000 )  

Total equity

    653,098     109,923   (o)     763,021   (A)

Total liabilities and equity

  $ 766,623   $ 89,291       $ 855,914    

(A)
In addition to total equity, management believes the analysis of adjusted book value ("ABV") and ABV per share, both non-GAAP financial measures, are useful in analyzing the Company's financial condition during the period in which it builds its core operating business. For GAAP purposes, the amount of the GAMCO Note, which will be issued to ACG as part of the spin-off transaction, is treated as a reduction in equity for the period all or a portion of it is outstanding. The GAMCO Note is expected to be paid down ratably over five years or sooner at GAMCO's option. As GAMCO pays down the GAMCO Note, ACG's total equity will increase, and once the GAMCO Note is fully paid off by GAMCO, ACG's total equity and ABV will be the same. ABV and ABV per share represent book value and book value per share, respectively, without reducing equity for the period all or any portion of the GAMCO Note is outstanding, which results in non-GAAP pro forma ABV and ABV per share of $1,013,021 and $39.38, respectively, as of June 30, 2015. The calculations of ABV and ABV per share at June 30, 2015 are shown below:

        Reconciliation of GAAP financial measures to non-GAAP

 
  Total   Per Share  

Total equity

  $ 763,021   $ 29.66  

Add: note receivable from GAMCO

    250,000     9.72  

Adjusted book value

  $ 1,013,021   $ 39.38  

See Notes to the Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.

 

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Notes to the Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Financial Statements

(a)
Reflects 10% management fee based on pre-tax income excluding this fee. See Note B. Significant Accounting Policies—Management Fee on page F-20 of the attached combined consolidated financial statements.

(b)
Reflects adjustments to other operating expenses totaling $532,000 and $1,063,000 for the six months ended June 30, 2015 and for 2014, respectively, relating to the expected additional costs based upon GAMCO's historical experience of being a separate public company and include board of director expenses, transfer agent fees, stock exchange listing fees and increased legal and audit fees. These expenses are in addition to the expenses ACG expects to incur under the Transitional Services Agreement, which are included in our historical combined consolidated financial statements.

(c)
Reflects the change in character of allocated rent of $156,000 for the six months ended June 30, 2015 and $312,000 for 2014 formerly paid by ACG from a capital lease arrangement to an operating sub-lease arrangement with ACG.

(d)
Reflects interest income on the $250 million GAMCO Note that will be issued to ACG in connection with the spin-off. The GAMCO Note pays interest at 4%, which is payable in cash or PIK, and will be paid off ratably over five years, or sooner at GAMCO's option. For the six months ended June 30, 2015 and for 2014, interest income from the GAMCO Note was $5.0 million and $10.0 million, respectively.

(e)
Reflects the dividend income on the Former GAMCO Treasury Shares expected to be sold to GSI prior to the spin-off using the actual dividends per share that were paid by GAMCO through June 30, 2015 and in 2014. GAMCO has paid quarterly dividends of $0.07 per share for the first two quarters of 2015. In 2014, GAMCO paid quarterly dividends of $0.06 per share during the first three quarters and $0.07 per share in the fourth quarter. In addition GAMCO paid a special dividend of $0.25 per share in the fourth quarter of 2014. For the first two quarters of 2015 and for 2014, dividends on the Former GAMCO Treasury Shares would have totaled $560,000 and $2.0 million, respectively, assuming $150 million of Former GAMCO Treasury Shares are sold to GSI. To the extent the price at which the Former GAMCO Treasury Shares are sold to GSI would cause the number of Former GAMCO Treasury Shares to be issued to GSI to exceed the NYSE 19.99% Limit, the dollar amount of the Former GAMCO Treasury Shares to be sold to GSI and the amount of the GSI Note will each be reduced so that the number of Former GAMCO Treasury Shares issued does not exceed the NYSE 19.99% Limit.

(f)
Reflects tax adjustments using the applicable statutory tax rate in the jurisdiction the adjustment related to. The effective tax rate of ACG could be significantly different (either higher or lower) depending on the post-spin-off activities. A reconciliation of the effective tax rate for the pro forma adjustments to the federal statutory tax rate is shown below:

 
  Six Months
Ended
June 30,
2015
  2014  

Federal statutory tax rate

    35.0 %   35.0 %

State & Local, net of Federal benefit

    1.2 %   0.1 %

Dividends received deductions

    (3.0 )%   (5.0 )%

Other

    0.5 %   (0.4 )%

Total effective tax rate

    33.7 %   29.7 %

 

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(g)
As we expect to distribute one share of ACG common stock for each GAMCO common stock, the weighted average basic and diluted shares outstanding are based on GAMCO's actual weighted average basic and diluted shares outstanding for the six months ended June 30, 2015 and the full year 2014.

(h)
The reduction in cash and cash equivalents of $60,531 consists of the following:

Cash used to pay down payable to affiliates(j)

  $ (23,190 )

Cash received from receivable from affiliates(j)

    178  

Interest and dividend income for YTD June 2015(d)(e)

    5,560  

Net income from 2014

    6,921  

Net transfer to GAMCO(n)

    (50,000 )

Change in cash and cash equivalents

  $ (60,531 )
(i)
Reflects the ownership of $150 million of GAMCO Class A Stock. These shares currently are held in GAMCO's treasury and are expected to be sold to GSI prior to the spin-off in exchange for the GSI Note. The GSI Note will then be contributed to ACG as part of the spin-off. However, to the extent the price at which the Former GAMCO Treasury Shares are sold to GSI would cause the number of Former GAMCO Treasury Shares to be issued to GSI to exceed the NYSE 19.99% Limit, the dollar amount of the Former GAMCO Treasury Shares to be sold to GSI and the amount of the GSI Note will each be reduced so that the number of Former GAMCO Treasury Shares issued does not exceed the NYSE 19.99% Limit. In addition, the Former GAMCO Treasury Shares will be treated as available for sale securities at ACG for accounting purposes. The actual value of the Former GAMCO Treasury Shares and the GSI Note may vary materially from the illustrative valuation provided in the Unaudited Pro Forma Combined Consolidated Balance Sheet due to the difference in the number of shares of GAMCO Class A Stock outstanding before and after the sale of the Former GAMCO Treasury Shares and the difference in GAMCO's capital structure before and after the sale of the Former GAMCO Treasury Shares. We cannot predict what the market value of the GAMCO Class A Stock will be at the time of the spin-off or thereafter. Refer to "Risk Factors—Risks Related to the Spin-Off—Your ownership in GAMCO will be diluted as a result of the sale of Former GAMCO Treasury Shares to ACG" and "Risk Factors—Risks Related to the Spin-Off—Our unaudited pro forma combined condensed consolidated financial data included in this information statement are for illustrative purposes only and do not reflect what our financial position and results of operations would have been had the spin-off occurred on the date indicated in the pro forma data and are not necessarily indicative of our future financial position and future results of operations."

(j)
Reflects the settlement of intercompany balances between ACG and GBL prior to the spin-off. At June 30, 2015, ACG owed certain GAMCO entities $23,190, including the $16 million demand loan with GAMCO, and was owed by certain GAMCO entities $178. It is assumed that these payables and receivables will be settled concurrently with the spin-off, resulting in a net payment by ACG to GAMCO of $23,012.

(k)
Reflects the issuance of the GAMCO Note in connection with the spin-off. For GAAP purposes, the GAMCO Note receivable is presented as contra-equity.

(l)
Reflects 25,725,291 shares of ACG common stock at a par value of $0.001 per share. The number of shares is based on the number of GAMCO shares outstanding on June 30, 2015 and an expected distribution ratio of (i) one share of ACG Class A Stock for each share of GAMCO Class A Stock and (ii) one share of ACG Class B Stock for each share of GAMCO Class B Stock held on the record date.

(m)
Reflects the pro forma net income from 2014 of $6,921 and YTD June 2015 of $3,002.

 

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(n)
Net transfer to GAMCO of $50.0 million represents the amount of cash required by GAMCO to satisfy certain liabilities at June 30, 2015.

(o)
Reflects reconciliation of the equity contribution as follows:

Pro forma value of GSI Note(i)

  $ 150,000  

Pro forma net income—2014 and YTD June 2015(m)

    9,923  

Note receivable from GAMCO(d)

    250,000  

Net transfer to GAMCO(n)

    (50,000 )

Non-GAAP equity

  $ 359,923  

Less: GAAP presentation of GAMCO note as contra-equity(k)

    (250,000 )

Total equity

  $ 109,923  

 

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RISK FACTORS

        You should carefully consider the risks described below and all of the other information in this information statement in evaluating ACG. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

        See also "Special Note Regarding Forward-Looking Statements."


Risks Related to the Spin-Off

We may not achieve the benefits expected from our spin-off from GAMCO and may be more susceptible to adverse events.

        We expect that, as a company independent from GAMCO, we will be able to grow organically and through acquisitions. Nonetheless, we may not be able to achieve any of these benefits. Furthermore, by separating from GAMCO, there is a risk that we may be more susceptible to adverse events than we would have otherwise experienced as a subsidiary of GAMCO. As a subsidiary of GAMCO, we enjoyed certain benefits, including economies of scope and scale in costs, employees and business relationships. These benefits may not be as readily achievable as a smaller, stand-alone company.

After the separation, certain of our directors and officers may have actual or potential conflicts of interest because of their positions or relationships with GAMCO.

        After the separation, Mario J. Gabelli will serve as our Chairman and Chief Executive Officer and will also continue to serve as Chairman and Chief Executive Officer of GAMCO. Our President, Marc Gabelli, is a son of Mario J. Gabelli and also serves on the GAMCO Board. Marc Gabelli will continue to have responsibilities relating to GAMCO after the distribution date, including continuing to serve on the GAMCO Board and participating on GAMCO's portfolio management team. Kieran Caterina, GAMCO's Finance Director and Co-Chief Accounting Officer, will also serve as our Chief Financial Officer. In addition, some of our portfolio managers and employees will initially be provided pursuant to the Transitional Services Agreement with GAMCO and will be officers or employees of GAMCO. Such dual assignments could create, or appear to create, potential conflicts of interest when our and GAMCO's officers and directors face decisions that could have different implications for the two companies.

        ACG has renounced its rights to certain business opportunities, and our certificate of incorporation will provide that no director or officer of ACG will breach their fiduciary duty and therefore be liable to ACG or its stockholders by reason of the fact that any such individual directs a corporate opportunity to another person or entity (including GAMCO) instead of ACG, or does not refer or communicate information regarding such corporate opportunity to ACG, unless (x) such opportunity was expressly offered to such person solely in his or her capacity as a director or officer of ACG or as a director or officer of any of our subsidiaries, and (y) such opportunity relates to a line of business in which ACG or any of its subsidiaries is then directly engaged; provided, however, if the conditions specified in the immediately preceding clauses (x) and (y) are satisfied, any officer or director of ACG may pursue such corporate opportunity (or direct it to another person or entity) if either (i) ACG renounces its interest in the potential business opportunity in writing or (ii) ACG does not within a reasonable period of time, begin to pursue, or thereafter continue to pursue, such corporate opportunity diligently and in good faith. Our certificate of incorporation specifically provides that any person purchasing, receiving or otherwise becoming an owner of any shares of our capital stock, or any interest therein, will be deemed to have notice of and to have consented to the corporate opportunity policy contained in our certificate of incorporation.

        Also, some of our directors, executive officers, portfolio managers and teammates own shares of GAMCO common stock and GAMCO restricted stock awards ("RSAs") or other GAMCO equity awards. At the time of the spin-off, these equity awards will be supplemented by the awarding of ACG equity awards. Specifically, outstanding RSAs relating to GAMCO will remain unchanged, with each RSA holder also receiving an equal number of RSAs relating to ACG. The terms of the new ACG

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RSAs will remain substantially the same as the terms of the pre-spin-off GAMCO RSAs. The ownership of these RSAs may create, or may create the appearance of, conflicts of interest.

        Mario J. Gabelli is deemed to control GSI by his control of GAMCO Investors, Inc. through GGCP Holdings, LLC ("Holdings"), an intermediate subsidiary of GGCP, Inc. ("GGCP"), a private company controlled by Mario J. Gabelli. It is anticipated that after the distribution, Mario J. Gabelli will control ACG and will continue to control GSI through his ownership and control of Holdings. Marc Gabelli is President of GGCP.

        In addition, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between GAMCO and ACG regarding the terms of the agreements governing the separation and the relationship thereafter between the companies. The executive officers and other personnel of GAMCO who serve as directors or executive management of ACG may interpret these agreements in their capacity as GAMCO employees in a manner that would adversely affect the business of ACG.

        Also, certain subsidiaries of GAMCO and GSI, which will be ACG's 93.9% owned subsidiary after the spin-off, are investment advisers. The executive officers and other personnel of GAMCO who also serve as directors or executive management of ACG may be confronted with the possibility of making decisions in their GAMCO capacity that would adversely affect the business of ACG.

        Both ACG and GAMCO expect to be vigilant in attempting to identify and resolve any potential conflicts of interest, including but not limited to the types described above, at the earliest possible time. However, there can be no guarantee that the interests of ACG may not be adversely affected at some point by such a conflict.

The separation from GAMCO may adversely affect the level of our AUM.

        Our revenues are dependent on the amount of our AUM as well as the performance of our products. Many investors may have invested money in alternative investment products (the "Alternative Investments") in part because GSI was a subsidiary of GAMCO. There can be no assurance that we will be able to attract investors to the Alternative Investments at the same rate as in prior years. In addition, we can make no assurance that current investors will not redeem their investments from the Alternative Investments as a result of our changed relationship with GAMCO. The occurrence of either of these events could adversely affect our business, results of operations and financial condition.

Concerns about our prospects as a stand-alone company could affect our ability to attract and retain employees or individuals whom we are attempting to recruit as employees.

        Our employees or individuals whom we are attempting to recruit as employees may have concerns about our prospects as a stand-alone company, including our ability to maintain our independence and our inability to continue our current reliance on GAMCO's resources after the spin-off. If we are not successful in assuring our employees or individuals whom we are attempting to recruit as employees of our prospects as an independent company, our employees or recruits may seek or accept other employment, which could adversely affect our business and our results of operations.

We may have been able to receive better terms from unaffiliated third parties than the terms provided in our agreements with GAMCO.

        The agreements related to our separation from GAMCO, including, but not limited to, the Separation Agreement, the Transitional Services Agreement and the Service Mark and Name License Agreement, were negotiated in the context of our separation from GAMCO while ACG was still majority-owned by GAMCO. Accordingly, they may not reflect terms that would have been reached between unaffiliated parties. The terms of the agreements we negotiated in the context of our separation related to, among other things, indemnities and other obligations between GAMCO and us. Had these agreements been negotiated with unaffiliated third parties, they might have been more favorable to us. For more information, see "Arrangements Between GAMCO and ACG After the Spin-Off."

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In connection with the spin-off, GAMCO will indemnify us for certain liabilities. There can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that GAMCO's ability to satisfy its indemnification obligations will not be impaired in the future.

        Pursuant to the Separation Agreement, GAMCO will agree to indemnify us from certain liabilities, as discussed further in the section entitled "Arrangements Between GAMCO and ACG After the Spin-Off." Third parties could seek to hold us responsible for any of the liabilities that GAMCO has agreed to retain, and there can be no assurance that the indemnity from GAMCO will be sufficient to protect us against the full amount of such liabilities or that GAMCO will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from GAMCO any amounts for which we are held liable, we may be temporarily required to bear those losses until such recovery. Each of these risks could adversely affect our business, results of operations and financial condition.

At this time, there has been no authoritative determination as to whether the distribution will qualify for tax-free treatment for GAMCO, ACG or GAMCO stockholders under U.S. tax laws. It could be determined in the future that the distribution should have been considered a taxable event with respect to U.S. federal income tax purposes for ACG, GAMCO or GAMCO stockholders.

        As noted above, the distribution is conditioned on the receipt by GAMCO of certain opinions from its tax advisors substantially to the effect that the distribution will be tax-free to GAMCO and its stockholders under Section 355 of the Code. However, neither GAMCO nor ACG has applied for a private letter ruling from the IRS with respect to the tax consequences of the distribution. Accordingly, there can be no assurance that the IRS or another taxing authority will not assert that the distribution is taxable to GAMCO, ACG or GAMCO stockholders. If that were to happen, among other things, each GAMCO stockholder who receives shares of ACG common stock in the spin-off may be treated as receiving a taxable distribution and GAMCO would realize taxable income to the extent the distribution consists of appreciated property distributed by GAMCO.

        For more information, see "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off." Tax matters are very complex and the tax consequences of the spin-off to any particular GAMCO stockholder will depend on that stockholder's particular situation. GAMCO stockholders should consult with their own tax advisors to determine the specific tax consequences of the spin-off to them.

The aggregate post-distribution value of the ACG Class A Stock and the GAMCO Class A Stock may not equal or exceed the pre-spin-off value of the GAMCO Class A Stock.

        After the spin-off, the GAMCO Class A Stock will continue to be listed and traded on the NYSE under the symbol "GBL." The ACG Class A Stock is expected to be listed on the NYSE under the symbol "AC." We cannot assure you that the combined value of the GAMCO Class A Stock and the ACG Class A Stock after the spin-off, as adjusted for any changes in the combined capitalization of these companies, will be equal to or greater than the value of GAMCO Class A Stock prior to the spin-off. Until the market has fully evaluated the business of GAMCO without the business of ACG, the value of GAMCO may fluctuate significantly. Similarly, until the market has fully evaluated the business of ACG, the value of ACG may fluctuate significantly.

Our unaudited pro forma combined condensed consolidated financial data included in this information statement are for illustrative purposes only and do not reflect what our financial position and results of operations would have been had the spin-off occurred on the date indicated in the pro forma data and are not necessarily indicative of our future financial position and future results of operations.

        Our unaudited pro forma combined condensed consolidated financial data included in this information statement are for illustrative purposes and may not reflect the value of ACG after the spin-off. A significant portion of ACG's assets after the spin-off will consist of investment securities, including the Former GAMCO Treasury Shares, the value of which may fluctuate significantly over time. Subject to the NYSE 19.99% Limit, GSI expects to purchase $150 million of Former GAMCO Treasury Shares in exchange for the GSI Note prior to the spin-off, and GAMCO will contribute the

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GSI Note to us as part of the spin-off. The share price at which the GAMCO Class A Stock trades in the market subsequent to GSI's purchase of the Former GAMCO Treasury Shares may vary materially from the price paid for the Former GAMCO Treasury Shares by GSI, which will result in the total value of the Former GAMCO Treasury Shares differing materially from the illustrative $150 million valuation provided in the unaudited pro forma combined condensed consolidated financial data included in this information statement. This variance may be due to, among other things, the difference in the number of shares of GAMCO Class A Stock outstanding before and after the sale by GAMCO of the Former GAMCO Treasury Shares, the difference in GAMCO's capital structure before and after such sale and fluctuations in GAMCO's operating results. In addition, due to the NYSE 19.99% Limit, GSI may purchase less than $150 million of Former GAMCO Treasury Shares.

        The unaudited pro forma financial statements included in this information statement were prepared based on prospective ownership of less than 20% of GAMCO's fully diluted shares outstanding as described in footnote (i) to the Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Financial Statements on page 17 of this information statement. Therefore, changes in fair value of this investment are accounted for under the available for sale U.S. GAAP treatment with fair value movements of the investment being reflected in equity but not impacting the unaudited pro forma combined condensed consolidated statement of income. Subsequent to the spin-off, GAMCO, at its sole discretion, may issue or repurchase its shares of GAMCO Class A Stock, which may result in our ownership percentage of GAMCO decreasing or increasing. Should we reach or surpass a 20% ownership threshold, even if caused by actions beyond our control, we would then be required by U.S. GAAP to account for our ownership of the Former GAMCO Treasury Shares using the equity method. Alternatively, and also according to U.S. GAAP, contemporaneously with any future date on which equity method accounting is required, we may elect to carry the Former GAMCO Treasury Shares at fair value (the "fair value option"). To the extent we elect to use the equity method, the value attributed to the Former GAMCO Treasury Shares in our future financial statements may be lower than the future fair market value of the Former GAMCO Treasury Shares and lower than the value reflected in the Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Financial Statements included in this information statement. To the extent we elect to use either the equity method or the fair value option, other income and net income would be impacted in our future financial statements and may be higher or lower than that reflected in the Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Statements of Income.

        Accordingly, investors should not place undue reliance on the Associated Capital Group Unaudited Pro Forma Combined Condensed Consolidated Financial Statements in this information statement.

Your ownership in GAMCO will be diluted as a result of the sale of Former GAMCO Treasury Shares to ACG

        As noted above, in order to capitalize ACG, GAMCO will sell to GSI, our 93.9% owned subsidiary, up to $150 million of Former GAMCO Treasury Shares in Exchange for the GSI Note, which will be contributed to ACG prior to the spin-off. As a result, you will experience significant dilution in your ownership of GAMCO common stock, and this dilution will be more significant the lower the market price is for the GAMCO Class A Stock at the time of the sale of the Former GAMCO Treasury Shares.


Risks Related to Our Industry

Changes in laws or regulations or in governmental policies and compliance with existing laws or regulations could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability and materially and adversely affect our business.

        Our business is subject to extensive regulation in the United States, primarily at the federal level, including regulation by the SEC under the Advisers Act as well as other securities laws, by the Department of Labor under the Employee Retirement Income Security Act of 1974, as amended

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("ERISA"), and regulation by FINRA and state regulators. The Advisers Act imposes numerous obligations on investment advisors, including record-keeping, advertising and operating requirements, fiduciary and disclosure obligations, custodial requirements and prohibitions on fraudulent activities. In addition, our businesses are also subject to regulation by the Financial Conduct Authority ("FCA") in the United Kingdom, and we are also subject to the laws of other non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies.

        Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of our subsidiaries' registrations as an investment advisor or broker-dealer. Industry regulations are designed to protect our clients and investors in our funds and other third parties who deal with us and to ensure the integrity of the financial markets. Our industry is frequently altered by new laws or regulations and by revisions to, and evolving interpretations of, existing laws and regulations, both in the United States and in other nations. Changes in laws or regulations or in governmental policies could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability and materially and adversely affect our business.

We are subject to extensive and pervasive regulation around the world.

        Our business is subject to extensive regulation around the world. These regulations subject our business activities to a pervasive array of increasingly detailed operational requirements, compliance with which is costly, time-consuming and complex. We may be adversely affected by our failure to comply with current laws and regulations or by changes in the interpretation or enforcement of existing laws and regulations. Challenges associated with interpreting regulations issued in numerous countries in a globally consistent manner may add to such risks if regulators in different jurisdictions have inconsistent views or provide only limited regulatory guidance. In particular, violation of applicable laws or regulations could result in fines, temporary or permanent prohibition of certain activities, reputational harm and related client terminations, suspensions of employees or revocation of their licenses, suspension or termination of investment adviser, broker-dealer or other registrations or other sanctions, which could have a material adverse effect on our reputation or business and may cause our AUM, revenue and earnings to decline. For a more extensive discussion of the laws, regulations and regulators to which ACG is subject, see "Business—Regulation."

New tax legislation or changes in U.S. and foreign tax laws and regulations or challenges to ACG's historical taxation practices may adversely affect ACG's effective tax rate, business and overall financial condition.

        Our businesses may be affected by new tax legislation or regulations, or the modification of existing tax laws and regulations, by U.S. or non-U.S. authorities. In particular, the Foreign Account Tax Compliance Act ("FATCA") has introduced expansive new investor onboarding, withholding and reporting rules aimed at ensuring U.S. persons with financial assets outside of the United States pay appropriate taxes. The FATCA rules will impact both U.S. and non-U.S. funds and subject ACG to extensive additional administrative burdens. Certain of our FATCA compliance is done by third parties, and we cannot be certain that they will always comply with applicable FATCA rules. Similarly, there has been renewed momentum by several European Union ("EU") Member States to introduce national financial transaction taxes ("FTTs"), which would impose taxation on a broad range of financial instrument and derivatives transactions. If introduced as proposed, FTTs could have an adverse effect on ACG's financial results and on clients' performance results. In addition, the Organization for Economic Co-operation and Development recently launched a base erosion and profit shifting proposal ("BEPS") that aims to rationalize tax treatment across jurisdictions. If the BEPS proposal becomes the subject of legislative action in the format proposed, it could have unintended taxation consequences for collective investment vehicles and our tax position, which could adversely affect our financial condition.

        We also manage significant assets in products and accounts that have specific tax and after-tax related objectives, which could be adversely impacted by changes in tax policy. Additionally, any new legislation, modification or interpretation of tax laws could impact ACG's corporate tax position. The application of complex tax regulations involves numerous uncertainties and in the normal course of

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business, U.S. and non-U.S. tax authorities may review and challenge ACG's historical tax positions. These challenges may result in adjustments to ACG's tax position, or impact the timing or amount of, taxable income, deductions or other tax allocations, which may adversely affect ACG's effective tax rate and overall financial condition.

To the extent we are forced to compete on the basis of price, we may not be able to maintain our current fee structure.

        The investment management business is highly competitive and has relatively low barriers to entry. To the extent we are forced to compete on the basis of price, we may not be able to maintain our current fee structure. Although our investment management fees vary from product to product, historically we have competed primarily on the performance of our products and not on the level of our investment management fees relative to those of our competitors. In recent years, however, there has been a trend toward lower fees in the investment management industry. In order to maintain our fee structure in a competitive environment, we must be able to continue to provide clients with investment returns and service that make investors willing to pay our fees. We cannot be assured that we will succeed in providing investment returns and service that will allow us to maintain our current fee structure. Fee reductions on existing or new business could have an adverse effect on our profit margins and results of operations.

Catastrophic and unpredictable events could have a material adverse effect on our business.

        A terrorist attack, political unrest, war (whether or not directly involving the United States), power failure, cyber-attack, technology failure, natural disaster or many other possible catastrophic or unpredictable events could adversely affect our future revenues, expenses and earnings by, among other things: causing disruptions in United States, regional or global economic conditions; interrupting our normal business operations; inflicting employee casualties, including loss of our key executives; requiring substantial expenditures and expenses to repair, replace and restore normal business operations; and reducing investor confidence.

        Pursuant to the Transitional Services Agreement with GAMCO, we have a disaster recovery plan to address certain contingencies, but it cannot be assured that this plan will be effective or sufficient in responding to, eliminating or ameliorating the effects of all disaster scenarios. If our employees or vendors we rely upon for support in a catastrophic event are unable to respond adequately or in a timely manner, we may lose clients resulting in a decrease in AUM which may have a material adverse effect on revenues and net income.

The soundness of other financial institutions could adversely affect our business.

        Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We and the investments we manage may have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including: brokers and dealers, commercial banks, investment banks, clearing organizations, mutual and hedge funds and other institutions. Many of these transactions expose us and the accounts we manage to credit risk in the event of the counterparty's default. There is no assurance that any such losses would not materially and adversely impact ACG's revenues and earnings.


Risks Related to Our Business

Control by Mario J. Gabelli of a majority of the combined voting power of ACG common stock may give rise to conflicts of interests.

        Mario J. Gabelli, through his control and majority ownership of GGCP and his individual ownership of ACG common stock, will beneficially own a majority of our outstanding ACG Class B Stock, representing approximately 94.7% voting control. As long as Mario J. Gabelli indirectly beneficially owns a majority of the combined voting power of ACG common stock, he will have the ability to elect all of the members of our Board and thereby control our management and affairs, including determinations with respect to acquisitions, dispositions, borrowings, issuances of common

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stock or other securities, and the declaration and payment of dividends on the ACG common stock. In addition, Mario J. Gabelli will be able to determine the outcome of all matters submitted to a vote of our stockholders for approval and will be able to cause or prevent a change in control of ACG. As a result of Mario J. Gabelli's control, none of our agreements with Mario J. Gabelli and other companies controlled by him can be assumed to have been arrived at through "arm's-length" negotiations, although the parties endeavor to implement market-based terms. There can be no assurance that we would not have received more favorable terms, or offered less favorable terms to, an unaffiliated party.

        In addition, Mario J. Gabelli, through his control and majority ownership of GGCP, controls GAMCO, and he could take actions that favor GAMCO over ACG.

        Please see "Description of Capital Stock—Corporate Opportunity and Conflict of Interest Policies" for information relating to provisions in our certificate of incorporation that address conflicts of interest that may arise and that limit the liability of Mario J. Gabelli, certain of his affiliates and immediate family members, including Marc Gabelli, as well as our other directors and officers for certain transactions that may involve conflicts of interest.

We may compete with GAMCO for clients and investment opportunities.

        Although our business is expected to focus primarily on alternative investment management and institutional services, while GAMCO is expected to focus primarily on its mutual fund and institutional and private wealth management businesses, situations may arise where we find ourselves directly competing with GAMCO for investment clients and opportunities. For example, it is possible that a potential investor might consider investing in ACG and GAMCO investment products and that such potential investor will have to choose between our investment products and those offered by GAMCO. In addition, ACG and GAMCO could pursue the same investment opportunities in the future.

Investors in our products have the right to redeem their investments in our products on a regular basis and could redeem a significant amount of AUM during any given quarterly period, which would result in significantly decreased revenues.

        Subject to any specific redemption provisions applicable to a product, investors may generally redeem their investments in our products on an annual or quarterly basis following the expiration of a specified period of time. In a declining market, the pace of redemptions and consequent reduction in our AUM potentially could accelerate. Furthermore, investors in our products may also invest in products managed by other alternative asset managers that have restricted or suspended redemptions or may in the future do so. Such investors may redeem capital from our products, even if our performance is superior to such other alternative asset managers' performance, if they are restricted or prevented from redeeming capital from those other managers.

        The decrease in revenues that would result from significant redemptions in our products could have a material adverse effect on our results of operations, cash flows and business. In 2009, due to factors related to the financial crisis, investors redeemed approximately $62 million invested in ACG's products which represented approximately 20% of ACG's AUM at that time. If economic and market conditions remain uncertain or worsen, we may once again experience significant redemptions.

Our business and financial condition may be materially adversely impacted by the highly variable nature of our revenues, results of operations and cash flows. In a typical year, a substantial portion of our incentive allocation income is determined and recorded in the fourth quarter of each year, which means that our interim results are not expected to be indicative of our results for a full year.

        Our revenues are influenced by the combination of the amount of AUM and the investment performance of our products. Asset flows, whether inflows or outflows, can be highly variable from month to month and quarter to quarter. Furthermore, our products' investment performance, which affects the amount of AUM, can be volatile due to, among other things, general market and economic conditions. Accordingly, our revenues, results of operations and cash flows may be highly variable. This variability is exacerbated during the fourth quarter of each fiscal year, primarily due to the fact that a

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substantial portion of our revenues historically has been, and we expect will continue to be, derived from incentive allocation income from our products. Incentive allocation income is contingent on the investment performance of the products as of the relevant measurement period, which generally is as of the end of each calendar year. We may also experience fluctuations in our results from quarter to quarter due to a number of other factors, including changes in management fees resulting from changes in the values of our products' investments, other changes in the amount of AUM, changes in our operating expenses, unexpected business developments and initiatives and, as discussed above, general economic and market conditions. Such variability and unpredictability may lead to volatility or declines in the price of the ACG Class A Stock, once it starts trading, and cause our results for a particular period not to be indicative of our performance in a future period or meaningful as a basis of comparison against results for a prior period.

        The amount of incentive allocation income that may be generated by our products is uncertain until it is determined and realized at a particular point in time. We generally do not record incentive allocation income in our interim financial statements other than incentive allocation income earned as a result of investor redemptions during the period. As a result of these and other factors, our interim results may not be indicative of historical performance or the results that may be expected for a full year.

        In addition, a substantial portion of our products' AUM have "high-water marks." This means that if an investor experiences losses in a given year, we will not be able to earn incentive allocation income with respect to such investor's investment unless and until our investment performance surpasses the high-water mark. The incentive allocation income we earn is therefore dependent on the net asset value of each investor's investment in our products. As of December 31, 2014, approximately 3% of our AUM was subject to a high-water mark. During 2014, 2013 and 2012 there were prior year loss carryforwards that needed to be earned for our clients before we could charge an incentive allocation that resulted in lost incentive allocation income of approximately $0.2 million, $0.2 million and $0.1 million, respectively. We can make no assurances that our investors will not experience losses in future years and, as a result, we may not earn incentive allocation income in those or subsequent years until such losses are earned back.

A decline in the prices of securities generally could lead to a decline in our AUM, revenues and earnings.

        Substantially all of our revenues are directly related to both the amount of our AUM and the performance of our investment products. Under our investment advisory contracts, the investment advisory fees we receive are typically based on the market value of AUM. Accordingly, a decline in the prices of securities generally may cause our revenues and net income to decline by either causing the value of our AUM to decrease, which would result in lower investment advisory fees, or causing our clients to withdraw funds in favor of investments they perceive to offer greater opportunity or lower risk, which would also result in lower fees. The securities markets are highly volatile, and securities prices may increase or decrease for many reasons beyond our control, including but not limited to economic and political events, war (whether or not directly involving the United States), acts of terrorism, unanticipated changes in currency exchange rates, interest rates, inflation rates, the yield curve, defaults by derivative counterparties, bond default risks, the sovereign debt crisis in Europe and other factors that are difficult or impossible to predict or even to identify. If a decline in securities prices caused our revenues to decline, it could have a material adverse effect on our earnings.

The loss of the services of Mario J. Gabelli and other key personnel could have a material adverse effect on our business.

        We are dependent on the efforts of Mario J. Gabelli, our Executive Chairman and Chief Executive Officer. In this regard, it is expected that Mario J. Gabelli will resign as our Chief Executive Officer approximately one year after the date of the spin-off. However, it is expected that he will remain our Executive Chairman after he resigns as Chief Executive Officer. The loss of the services of Mario J. Gabelli could have a material adverse effect on our business, and we cannot provide assurance that we

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will be able to find a suitable replacement as Chief Executive Officer if Mario J. Gabelli resigns in a year as expected.

        Our future success depends to a substantial degree on our ability to retain and attract other qualified personnel to conduct our investment management business. The market for qualified portfolio managers is extremely competitive and has grown more so in recent periods as the investment management industry has experienced growth. We anticipate that it will be necessary for us to add portfolio managers and investment analysts as we further diversify our investment products and strategies. There can be no assurance, however, that we will be successful in our efforts to recruit and retain the required personnel. In addition, our investment professionals and senior marketing personnel have direct contact with our clients, which can lead to strong client relationships. The loss of these personnel could jeopardize our relationships with certain clients, and result in the loss of such accounts. The loss of key management professionals or the inability to recruit and retain sufficient portfolio managers and marketing personnel could have a material adverse effect on our business.

We have experienced and may again experience periods of rapid growth and significant declines in AUM, which place significant demands on our legal, compliance, accounting, risk management, administrative and operational resources.

        Our AUM grew from approximately $230 million as of December 31, 1999 to $814 million as of December 31, 2004. Between December 31, 2004 and December 31, 2008, our AUM had declined to $295 million due to investment losses and redemptions experienced by our funds over that period. As of June 30, 2015, our AUM had grown to approximately $1.1 billion.

        Rapid changes in our AUM impose significant demands on our legal, compliance, accounting, risk management, administrative and operational infrastructure. The complexity of these demands and the time and expense required to address them, is a function not simply of the amount by which our AUM have changed, but also of significant differences in the investing strategies employed within our funds and the time periods during which these changes occur. Furthermore, our future growth will depend on, among other things, our ability to develop and maintain highly reliable operating platforms, management systems and financial reporting and compliance infrastructures that are also sufficiently flexible to promptly and appropriately address our business needs, applicable legal and regulatory requirements and relevant market and other operating conditions, all of which can change rapidly.

There may be adverse effects on our business from a decline in the performance of the securities markets.

        Our results of operations are affected by many economic factors, including the performance of the securities markets. During the 1990s, unusually favorable and sustained performance of the U.S. securities markets, and the U.S. equity market in particular, attracted substantial inflows of new investments in these markets. That contributed to significant market appreciation which, in turn, led to an increase in our AUM and revenues. More recently, the securities markets in general have experienced significant volatility, and such volatility may continue or increase in the future. At June 30, 2015, our AUM are primarily invested in equity securities. Any decline in the securities markets, in general, and the equity markets, in particular, could reduce our AUM and consequently reduce our revenues. In addition, any such decline in the equity markets, failure of these markets to sustain their prior levels of growth, or continued short-term volatility in these markets could result in investors withdrawing from the equity markets or decreasing their rate of investment, either of which would be likely to adversely affect us. Also, from time to time, a relatively high proportion of the assets we manage may be concentrated in particular economic or industry sectors. A general decline in the performance of securities in those industry sectors could have an adverse effect on our AUM and revenues.

There is a possibility of losses associated with proprietary investment activities.

        Currently, we maintain large proprietary investment positions in securities. Market fluctuations and other factors may result in substantial losses in our proprietary accounts, which could have an adverse effect on our balance sheet, reduce our ability or willingness to make new investments or impair our credit ratings.

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Future investment performance could reduce revenues and other income.

        Success in the investment management business is dependent on investment performance as well as distribution and client servicing. Good performance generally stimulates sales of our investment products and tends to keep withdrawals and redemptions low, which generates higher management fees (which are based on the amount of AUM). Conversely, poor performance, both in absolute terms and/or relative to peers and industry benchmarks, tends to result in decreased sales, increased withdrawals and redemptions and in the loss of clients, with corresponding decreases in revenues to us. Failure of our investment products to perform well could, therefore, have a material adverse effect on us.

        In addition, when our investment products experience strong results relative to the market or other asset classes, clients' investments in our products may increase beyond their target levels, and we could, therefore, suffer withdrawals as our clients rebalance their investments to fit their asset allocation preferences.

There is a possibility of losses associated with underwriting, trading and market-making activities.

        Our underwriting and trading activities are primarily conducted through our subsidiary, G.research, primarily as agent. Such activities subject our capital to significant risks of loss. The risks of loss include those resulting from ownership of securities, extension of credit, leverage, liquidity, counterparty failure to meet commitments, client fraud, employee errors, misconduct and fraud (including unauthorized transactions by traders), failures in connection with the processing of securities transactions and litigation. We have procedures and internal controls to address such risks, but there can be no assurance that these procedures and controls will prevent losses from occurring.

The loss of institutional research services and underwriting revenues from GAMCO and its affiliates would have an adverse effect on our results of operations, and we can provide no assurance that these revenues will continue after the spin-off.

        Institutional research services revenues totaled $9.2 million, $8.9 million, and $11.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. G.research earned $4.7 million, $4.8 million and $4.8 million, or approximately 54%, 58% and 61%, of its commission revenue from transactions executed on behalf of funds advised by Gabelli Funds, LLC, and private wealth management clients advised by GAMCO. In addition, G.research earned $0.6 million, $0.8 million and $3.2 million in underwriting revenues for the years ended December 31, 2014, 2013 and 2012, respectively. All of these underwriting revenues related to funds affiliated with GAMCO. We can provide no assurance that these institutional research and underwriting revenues from GAMCO and its affiliates will continue after the spin-off, and the loss of these revenues would have an adverse effect on our results of operations.

We may have liability as a general partner or otherwise with respect to our Alternative Investments.

        We act as general partner for Investment Partnerships, including arbitrage, event-driven long/short, sector focused and merchant banking limited partnerships. As a general partner of these partnerships, we may be held liable for the partnerships' liabilities in excess of their ability to pay such liabilities. In addition, in certain circumstances, we may be liable as a control person for the acts of our Investment Partnerships. As of June 30, 2015, our AUM included approximately $937 million in Investment Partnerships. A substantial adverse judgment or other liability with respect to our Investment Partnerships could have a material adverse effect on us.

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Operational risks may disrupt our businesses, result in regulatory action against us or limit our growth.

        We face operational risk arising from errors made in the execution, confirmation or settlement of transactions or from transactions not being properly recorded, evaluated or accounted for. Our business is highly dependent on our ability to process, on a daily basis, transactions across markets in an efficient and accurate manner. Consequently, we rely heavily on our financial, accounting and other data processing systems. Despite the reliability of these systems and the training and skill of our teammates and third parties we rely on, it remains likely that errors may occasionally occur due to the extremely large number of transactions we process. In addition, if systems we use are unable to accommodate an increasing volume of transactions, our ability to expand our businesses could be constrained. If any of these systems do not operate properly or are disabled, we could suffer financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage.

Failure to maintain adequate infrastructure could impede our productivity and growth. Additionally, failure to maintain effective information and cyber security policies, procedures and capabilities could disrupt operations and cause financial losses that could result in a decrease in our earnings or stock price.

        Our infrastructure, including information systems, hardware, software, networks and other technology, is vital to the competitiveness of our business. Our information systems and technology is currently provided by GAMCO pursuant to the Transitional Services Agreement. The failure of GAMCO to maintain an adequate infrastructure commensurate with the size and scope of our business could impede our productivity and growth, which could cause our earnings or stock price to decline. GAMCO outsources a significant portion of our information systems operations to third parties, who are responsible for providing the management, maintenance and updating of such systems. Technology is subject to rapid change, and we cannot guarantee that our competitors may not implement more advanced technology platforms for their products than we do for ours. In addition, there can be no assurance that the cost of maintaining such outsourcing arrangements will not increase from its current level, which could have a material adverse effect on us.

        In addition, any inaccuracies, delays, system failures or security breaches in these and other systems could subject us to client dissatisfaction and losses. Our technology systems may be subject to unauthorized access, computer viruses or other malicious code or other events that could have a security impact. There can be no assurance that breach of our technology systems could result in material losses (such material losses including the loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by the breach, additional security costs to mitigate against future incidents and litigation costs resulting from the incident) relating to such security breach of our technology systems.

        If a successful cyber attack or other security breach were to occur, our confidential or proprietary information, or the confidential or proprietary information of our clients or their counterparties, that is stored in, or transmitted through, such technology systems could be compromised or misappropriated. Moreover, loss of confidential customer identification information could harm our reputation and subject us to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenues. Further, although we take precautions to password protect and encrypt our laptops and other mobile electronic hardware, there can be no assurance that these measures will always provide sufficient protection. If such hardware is stolen, misplaced or left unattended, it may become vulnerable to hacking or other unauthorized use, creating a possible security risk and resulting in potentially costly actions by us.

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The failure of one of our vendors to fulfill its obligations to us could have a material adverse effect on us and our clients.

        We and GAMCO depend on a number of key vendors for various fund administration, accounting, custody and transfer agent roles and other operational needs. Our or GAMCO's failure or inability to diversify sources for key services or the failure of any key vendors to fulfill their obligations could lead to operational issues for us and, with respect to certain products, could result in financial losses for us and our clients.

We face exposure to legal actions, including litigation and arbitration claims and regulatory and governmental examinations and/or investigations. Insurance coverage for these matters may be inadequate.

        The volume of litigation and arbitration claims against financial services firms and the amount of damages claimed has increased over the past several years. The types of claims that we may face are varied. For example, we may face claims against us for purchasing securities that are inconsistent with a client's investment objectives or guidelines or arising from an employment dispute. The risk of litigation is difficult to predict, assess or quantify, and may occur years after the activities or events at issue. In addition, from time to time we may become the subject of governmental or regulatory investigations and/or examinations. Even if we prevail in a legal or regulatory action, the costs alone of defending against the action or the harm to our reputation could have a material adverse effect on us. The insurance coverage that we maintain with respect to legal and regulatory actions may be inadequate or may not cover certain proceedings.

Compliance failures could adversely affect us.

        Our investment management activities are subject to client guidelines. A failure to comply with these guidelines could result in damage to our reputation or in our clients seeking to recover losses, withdrawing their investments or terminating their contracts, any of which could cause our revenues and earnings to decline. There can be no assurance that the precautions and procedures that we have instituted and installed or the insurance we maintain to protect ourselves in case of client losses will protect us from potential liabilities.

Our reputation is critical to our success.

        Our reputation is critical to acquiring, maintaining and developing relationships with our clients and third-party intermediaries. In recent years, there have been a number of well-publicized cases involving fraud, conflicts of interest or other misconduct by individuals in the financial services industry. Misconduct by our staff, or even unsubstantiated allegations, could result not only in direct financial harm but also in harm to our reputation, causing injury to the value of our brands and our ability to retain or attract AUM. In addition, in certain circumstances, misconduct on the part of our clients or other parties could damage our reputation. Moreover, reputational harm may cause us to lose current employees and we may be unable to attract new employees with similar qualification or skills. Damage to our reputation could substantially reduce our AUM and impair our ability to maintain or grow our business, which could have a material adverse effect on us.

We face strong competition from numerous and sometimes larger companies.

        We compete with numerous investment management companies, stock brokerage and investment banking firms, insurance companies, banks, savings and loan associations and other financial institutions. The periodic establishment of new investment management companies and other competitors increases the competition that we face. At the same time, consolidation in the financial services industry has created stronger competitors with greater financial resources and broader distribution channels than our own. Competition is based on various factors, including, among others,

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business reputation, investment performance, product mix and offerings, service quality and innovation, distribution relationships and fees charged. Our competitive success in all of these areas cannot be assured. Additionally, competing securities dealers whom we rely upon to distribute our products also sell their own proprietary investment products, which could limit the distribution of our investment products. To the extent that existing or potential customers, including securities dealers, decide to invest in or distribute the products of our competitors, the sales of our products as well as our market share, revenues and net income could decline. Both GAMCO and ACG have asset management as their principal business and derive most of their revenues through that business and, as such, may compete with each other.

If third-party investors in our funds exercise their right to remove us as investment manager or general partner of our products, we would lose the AUM in such funds, which would eliminate our management fees and incentive allocation income derived from such products.

        The governing agreements of most of our investment partnerships and offshore funds provide that, subject to certain conditions, third-party investors in those funds have the right, without cause, to vote to remove us as investment manager or general partner of the investment partnerships or offshore fund by a simple majority vote, resulting in the elimination of the AUM by those products and the management fees and incentive allocation income derived from those products. In addition to having a significant negative impact on our revenues, results of operations and cash flows, the occurrence of such an event would likely result in significant reputational damage to us.

If we were deemed an investment company under the Investment Company Act of 1940, as amended, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

        We intend to rely on the exclusion from the definition of "investment company" provided by Rule 3a-2 under the Investment Company Act of 1940, as amended (the "Investment Company Act"). Under this rule, an issuer is not deemed to be an "investment company" if the issuer has a bona fide intent to be engaged primarily, as soon as is reasonably possible but in any event by the expiration of a one year time period, in a business other than that of an "investment company." As provided in Rule 3a-2, during the one year period, the issuer must undertake activities that are consistent with an objective to no longer be an "investment company" by the end of this period. In addition, the issuer's board of directors must adopt a resolution that commits the issuer to undertake activities in order to achieve this objective.

        As explained elsewhere in this information statement, we are a newly formed company that will serve as the holding company for GAMCO's alternative investment management and institutional research services businesses that we will receive in the spin-off. Because we will also receive cash and securities in the spin-off to fund our business strategy, we may be deemed to be an "investment company" on the distribution date because we might be deemed to own "investment securities" that exceed 40% of the value of our adjusted total assets on an unconsolidated basis. As we also explain elsewhere in this information statement, however, we intend to actively pursue our business strategy to grow our alternative investment management business and the related broker-dealer business after the spin-off.

        We intend to grow our business and expand our product offerings through organic growth and, possibly, acquisitions, alliances and lift-outs. The term "organic growth" in this context means growth by the development of alternative investment products, such as hedge funds and private equity funds that invest in particular alternative asset classes. ACG, through one of its affiliates, may take a general partner or managing member interest in such funds, which may involve the expenditure of a significant amount of capital. In addition, we may acquire other alternative investment managers, including, without limitation, hedge, private equity or real estate fund managers, or enter into joint ventures or

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other strategic alliances with other managers. We may also seek to build our alternative asset management business through lift-outs—i.e., by hiring a team of alternative asset portfolio managers.

        Although we will explore these various alternatives in the near term, whether and when we may achieve any of these objectives is difficult to predict because our success in doing so will depend on the confluence of a number of factors, such as whether a target company has the resources that we desire in a merger or strategic alliance, the synergy between ACG and any such target company, the state of the alternative investment management business generally, ACG's and the target's competencies at managing a potential collaboration, the overall economic and market conditions, etc. We expect to deploy our cash and securities to build our alternative asset management business by means of these methods. Our management team will evaluate all such alternatives and seek the best opportunities available to accomplish this goal, while seeking to maximize stockholder value.

        We recognize, however, that there is a risk we may not be able to deploy our assets rapidly enough in pursuit of our business strategy so that we would no longer be an "investment company" at the expiration of the one year period permitted by Rule 3a-2. If this were to occur and we could not satisfy the conditions of SEC staff no-action letters that permit a longer period in order to no longer be an investment company (and no other relief from regulation as an investment company were available), we would be required to register under the Investment Company Act. In such case, we would be subject to significant restrictions imposed on our operations by the Investment Company Act, including limitations on our capital structure and our ability to transact business with affiliates. These limitations could make it impractical for us to continue our business as contemplated and would have a material adverse effect on our business.


Risks Related to the ACG Common Stock

The disparity in the voting rights among the classes of shares may have a potential adverse effect on the price of the ACG Class A Stock.

        The holders of ACG Class A Stock and ACG Class B Stock have identical rights except that (i) holders of ACG Class A Stock are entitled to one vote per share, while holders of ACG Class B Stock are entitled to ten votes per share on all matters to be voted on by stockholders in general, and (ii) holders of ACG Class A Stock are not eligible to vote on matters relating exclusively to ACG Class B Stock and vice versa. Upon completion of our spin-off, Mario J. Gabelli, through his control and majority ownership of GGCP and his individual ownership of ACG common stock, will beneficially own a majority of the outstanding ACG Class B Stock, representing approximately 94.7% voting control. As long as Mario J. Gabelli indirectly beneficially owns a majority of the combined voting power of the ACG common stock, he will have the ability to elect all of the members of our Board and thereby control our management and affairs, including, among other things, any determinations with respect to acquisitions, dispositions, borrowings, issuances of common stock or other securities, and the declaration and payment of dividends on the ACG common stock. The differential in voting rights and the ability of ACG to issue additional ACG Class B Stock could adversely affect the value of the ACG Class A Stock to the extent the investors, or any potential future purchaser of ACG, view the superior voting rights of the ACG Class B Stock to have value. While there is no current intention to issue additional ACG Class B Stock, there is no prohibition on ACG issuing additional shares of ACG Class B Stock in the future.

An active public trading market for the ACG Class A Stock may not develop.

        Prior to the time "when-issued" trading begins in the ACG Class A Stock (see "The Spin-Off—Trading Markets for the ACG Common Stock"), there will be no public market for the ACG Class A Stock. We expect that the NYSE will approve the listing of the ACG Class A Stock under the symbol "AC." However, a liquid public market for the ACG Class A Stock may not develop, especially because

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a large percentage of the ACG common stock will be held by a limited number of stockholders. If an active trading market for the ACG Class A Stock does not develop, the market price and liquidity of the ACG Class A Stock may be materially and adversely affected.

We cannot predict the prices at which the ACG Class A Stock may trade after the spin-off.

        The market price of the ACG Class A Stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

    our quarterly or annual earnings, or those of other companies in our industry;

    actual or anticipated reductions in our revenue, net earnings and cash flow resulting from actual or anticipated decline in AUM;

    changes in accounting standards, policies, guidance, interpretations or principles;

    the failure of securities analysts to cover ACG after the spin-off or changes in financial estimates by analysts;

    changes in earnings estimates by securities analysts or our ability to meet those estimates;

    the operating and stock price performance of other comparable companies;

    overall market fluctuations; and

    general economic conditions.

        In particular, the realization of any of the risks described in these "Risk Factors" could have a significant and adverse impact on the market price of the ACG Class A Stock. In addition, the stock market in general has experienced extreme price and volume volatility that has often been unrelated to the operating performance of particular companies. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. The price of the ACG Class A Stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our stock price.

We cannot predict how the investment community will value the GAMCO Note ($250 million) given the GAAP accounting treatment as a reduction to book value.

        For GAAP purposes, the amount of the GAMCO Note, which will be issued by GAMCO to ACG as part of the spin-off transaction, will be treated as a reduction in equity during the period all or any portion of the GAMCO Note is outstanding. Management utilizes adjusted book value ("ABV"), a non-GAAP measure, in its analysis of our financial condition. ABV includes the outstanding value of the GAMCO Note. Management believes ABV is useful in analyzing our financial condition during the period in which we build our core operating business. The GAMCO Note will be paid down ratably over five years or sooner at GAMCO's option. As GAMCO pays down the note, ACG's GAAP book value will increase, and once the GAMCO Note is fully paid off by GAMCO, ACG's GAAP book value and ABV will be the same. It is possible that the investment community will rely on the GAAP treatment of the GAMCO Note rather than on the non-GAAP ABV, which may have an adverse effect on the value of our stock.

Future sales of ACG Class A Stock in the public market or sales or distributions of ACG Class B Stock could lower our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute our stockholders' ownership in us.

        We may sell additional shares of ACG Class A Stock in public or private offerings. We also may issue additional shares of ACG Class A Stock or convertible debt securities. In addition, sales by our current stockholders could be perceived negatively.

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        No prediction can be made as to the effect, if any, that future sales or distributions of ACG Class B Stock owned by Holdings will have on the market price of the ACG Class A Stock from time to time. Sales or distributions of substantial amounts of ACG Class A Stock or ACG Class B Stock, or the perception that such sales or distributions are likely to occur, could adversely affect the prevailing market price for the ACG Class A Stock.

The reduced disclosure requirements applicable to us as an "emerging growth company" and a "smaller reporting company" may make ACG common stock less attractive to investors.

        We are an "emerging growth company" as defined in the the JOBS Act, and we may avail ourselves of certain exemptions from various reporting requirements of public companies that are not "emerging growth companies," including, but not limited to, an exemption from complying with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act") and, like smaller reporting companies, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirement of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may remain an emerging growth company for up to five full fiscal years following the spin-off. We would cease to be an emerging growth company, and, therefore, become ineligible to rely on the above exemptions, if we (a) have more than $1 billion in annual revenue in a fiscal year, (b) issue more than $1 billion of non-convertible debt over a three-year period or (c) become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur after: (i) we have filed at least one annual report; (ii) we have been an SEC-reporting company for at least 12 months; and (iii) the market value of ACG Class A Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter. We cannot predict if investors will find ACG common stock less attractive because we may rely on these exemptions.

        We also qualify as a "smaller reporting company" under the Exchange Act. As a smaller reporting company, we enjoy many of the same exemptions and reduced disclosure requirements as emerging growth companies, and those exemptions would continue to be available to us even after the emerging growth company status expires if we still are a smaller reporting company at such time.

        If some investors find ACG Class A Stock less attractive as a result of the exemptions available to us as an emerging growth company and a smaller reporting company, there may be a less active trading market for ACG Class A Stock (assuming a market develops) and our value may be more volatile than that of an otherwise comparable company that does not avail itself of the same or similar exemptions.

We have identified a material weakness in our internal control over financial reporting. Our failure to establish and maintain effective internal control over financial reporting could result in our failure to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which in turn could cause the trading price of the ACG Class A Stock to decline.

        Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. After discussions with our independent registered public accounting firm, we concluded that we have a material weakness in our internal control over financial reporting. This material weakness was specific to the controls around the transfer of financial information from GAMCO to ACG during its formation process and not in the design or operation of controls related to the normal course recognition, valuation or reporting of investment transactions. Realized gains related to a single investment were inadvertently included in ACG's combined consolidated statements of income when the investment itself was not one of the assets

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transferred to ACG from GAMCO as part of the spin-off. See Note B to our audited combined consolidated financial statements beginning on page F-1 for a description of the restatement resulting from this material weakness. To address this material weakness, we have enhanced our procedures to include a detailed review of the transactions relating to this one investment that will not be transferred as part of the spin-off to ensure that we are properly accounting for it. Any future weaknesses or deficiencies or any failure to implement required new or improved controls or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements.

        We are not currently required to comply with the SEC's rules implementing Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC's rules implementing Sections 302 and 404(a) of the Sarbanes-Oxley Act, which will require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. While we will be required to disclose material changes made to our internal control over financial reporting on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404(a) of the Sarbanes-Oxley Act until the year following our first annual report required to be filed with the SEC. To comply with the requirements of being a public company, we may need to implement additional internal controls and reporting systems. Pursuant to the Transitional Services Agreement, we will rely on GAMCO, an entity that is subject to Section 404(b) of the Sarbanes-Oxley Act, for some of our internal control systems.

        Furthermore, while we expect to be required to comply with Section 404(a) of the Sarbanes-Oxley Act for our fiscal year ending December 31, 2016, we are not required to have our independent registered public accounting firm attest to the effectiveness of our internal controls under Section 404(b) of the Sarbanes-Oxley Act until our first annual report subsequent to our ceasing to be an "emerging growth company." Once it is required to do so, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, operated or reviewed.

        Our failure to establish and maintain effective internal control over financial reporting could result in our failure to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which in turn could cause the trading price of the ACG Class A Stock to decline. Failure to maintain adequate internal control over financial reporting could potentially subject us to sanctions or investigations by the SEC, FINRA or other regulatory authorities, as well as increasing the risk of liability arising from litigation based on securities law.

        For additional information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Controls and Procedures."

Upon the listing of shares of the ACG Class A Stock on the NYSE, we will be a "controlled company" within the meaning of NYSE rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

        After completion of the spin-off, Mario J. Gabelli and his affiliates will control a majority of the voting power of the ACG common stock. As a result, we will be a "controlled company" within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain corporate

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governance requirements, including the requirements that, within one year of the date of the listing of the ACG Class A Stock:

    we have a board that is composed of a majority of "independent directors," as defined under the rules of the NYSE;

    we have a compensation committee that is composed entirely of independent directors; and

    we have a nominating/corporate governance committee that is composed entirely of independent directors.

        Following the spin-off, we intend to utilize some of these exemptions. For example, we do not expect that our Nominating Committee will be comprised of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

Our certificate of incorporation provides that certain lawsuits must be litigated in Delaware, which may limit your ability to obtain a favorable judicial forum for disputes with us.

        Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of ACG to ACG or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or our bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery in the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware). Accordingly, it may not be possible for stockholders to litigate any action relating to the foregoing matters outside of the State of Delaware, even though stockholders may view other forums to be more favorable.


Risks Related to Our Regulatory Environment

Changes in laws or regulations or in governmental policies could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability and materially and adversely affect our business.

        Our business is subject to extensive regulation in the United States, primarily at the federal level, including regulation by the SEC under the Advisers Act. We are registered with the SEC as an investment adviser. The Advisers Act imposes numerous obligations on investment advisers, including record-keeping, advertising and operating requirements, disclosure obligations and a broad range of other highly-detailed and complex regulatory requirements. Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of GSI's registration as an investment adviser. Changes in laws or regulations or in governmental policies could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability and have a material adverse effect on our business.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Our disclosure and analysis in this information statement contain some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements because they do not relate strictly to historical or current facts. In some cases, these forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. They also appear in any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance of our products, expenses, the outcome of any legal proceedings, and financial results. Although we believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know about our business and operations, there can be no assurance that our actual results will not differ materially from what we expect or believe. The factors described under "Risk Factors" and the following factors could cause our actual results to differ from our expectations or beliefs:

    the adverse effect from a decline in the securities markets;

    a decline in the performance of our products;

    the impact of our separation from GAMCO;

    our inability to realize the benefits of our separation from GAMCO;

    a general downturn in the economy;

    changes in government policy or regulation;

    changes in our ability to attract or retain key employees; and

    unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations.

        Other factors not described above, may also cause our actual results to differ from our expectations and belief. Except as required by law, we do not undertake to update publicly any forward-looking statements if we subsequently learn that we are unlikely to achieve our expectations or if we receive any additional information relating to the subject matters of our forward-looking statements.

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THE SPIN-OFF

General

        The GAMCO Board regularly reviews the various businesses conducted by GAMCO to ensure that resources are deployed and activities are pursued in the best interests of its stockholders. On April 10, 2015, GAMCO announced that the GAMCO Board had authorized its management to take various actions in contemplation of the spin-off of the Gabelli Securities Group to GAMCO's stockholders in a spin-off transaction. This authorization is subject to, among other things, the conditions described below under "—Spin-Off Conditions and Termination."

        The Gabelli Securities Group consists of GAMCO's interests in GSI and its subsidiaries, GAMCO's interest in certain cash accounts, investments accounts, investment partnerships and offshore funds that GAMCO will contribute to ACG as part of the spin-off. GAMCO will also contribute its interests in investment management contracts for the GAMCO International SICAV ("SICAV") and the GAMA Select Energy Plus Master Fund ("Select Energy Fund") at the effective time of the spin-off. GSI is currently 93.9% owned by GAMCO, 1.9% owned by certain GAMCO employees and 4.2% owned by investors unrelated to GAMCO. On the distribution date, GAMCO's 93.9% interest in GSI will be contributed to ACG. The other interests in GSI will remain unchanged.

The Formation Transactions

        GAMCO plans to provide us with substantial additional capital to enable us to pursue a number of growth initiatives, including providing seed capital for Investment Partnerships that we expect to form. After the record date and before the distribution date and subject to the NYSE 19.99% limit, GAMCO expects to issue to GSI up to $150 million worth of GAMCO Class A Stock currently held in treasury, in exchange for the GSI Note. In addition, prior to the distribution date, we expect that GAMCO will have undertaken certain transactions that will result in the following being in place as of the distribution date:

    The $250 million GAMCO Note will have been issued to ACG;

    GAMCO will have contributed the following to ACG:

    its 93.9% interest in GSI;

    the GSI Note; and

    approximately $630 million of cash and other assets.

Reasons for the Spin-Off

        The GAMCO Board has determined upon careful review and consideration that the spin-off of the Gabelli Securities Group from the rest of GAMCO and the establishment of ACG as a separate, publicly traded company is in the best interests of GAMCO. The GAMCO Board's determination was based on a number of factors, including the following:

    Potential Increase in Aggregate Stock Value.  Following a spin-off, a number of corporations have experienced an increase in the aggregate stock value of the two companies' shares. An increase in the aggregate stock value would better enable both GAMCO and ACG to use their respective stock to pursue and achieve their respective strategic objectives, including enhanced equity compensation programs and potential acquisitions with less dilution to existing stockholders.

    Creation of Two Focused Companies.  The spin-off will allow each business to more effectively pursue its own distinct operating priorities, strategies and opportunities for long-term growth and profitability across the global investment management landscape. It is expected to speed up

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      decision-making at each company, allowing each to adapt more rapidly to changing market conditions and customer dynamics.

    Tailored Capital Structure.  The spin-off will permit each company to implement a capital structure tailored to its particular strategy and business needs, facilitating a more flexible and efficient allocation of capital.

    Differentiated Financing Options.  The spin-off will provide each company with direct access to capital markets and facilitate the ability of each to capitalize on its unique growth opportunities and effect future acquisitions and strategic alliances possibly using common stock as currency.

    Increased Transparency.  The spin-off will increase transparency and clarity of the businesses of each of GAMCO and ACG and allow investors to allow investors to separately value GAMCO and ACG based on their distinct investment identities, including the merits, performance, growth profile, and future prospects of their respective businesses. The separation will also provide investors with two distinct and targeted investment opportunities.

    Potential Reduced Volatility in GAMCO Common Stock and Possible Improved Valuation for GAMCO. The inherent volatility effects of performance fees received by ACG on GAMCO common stock will be reduced, which may result in an improved valuation for GAMCO's far larger mutual fund and institutional and private wealth management businesses.

    Improve Strategic Flexibility.  The spin-off is expected to provide each company with increased flexibility to pursue new partnership and strategic opportunities that may have previously been unavailable for strategic or other reasons, including potentially allowing both GAMCO and ACG to do business with each other's competitors.

    Provide Incentive Compensation that is More Relevant to Teammates of Each Business.  The spin-off will create a new class of publicly traded equity securities and permit the creation of restricted stock units and other forms of equity compensation for ACG. This will facilitate incentive compensation arrangements for teammates more directly tied to the performance of each company's business, and enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives.

        With $1.1 billion in AUM at June 30, 2015, ACG represented 2.4% of GAMCO's AUM, which was $45.4 billion at June 30, 2015. We believe that ACG, following the spin-off, will devote greater attention to implementing a growth strategy as it will no longer be overshadowed by the GAMCO umbrella under which it currently operates. In order to facilitate this distribution, our Board appointed Mario J. Gabelli, the Chairman and Chief Executive of GAMCO, to serve as our Executive Chairman and Chief Executive Officer and Marc Gabelli to serve as our President. Kieran Caterina, GAMCO's Finance Director and Co-Chief Accounting Officer, will also serve as our Chief Financial Officer. We have appointed Messrs. Salvatore F. Sodano, Daniel R. Lee, Bruce M. Lisman and Richard L. Bready as independent members of our Board, and Mr. Sodano will serve as Vice Chairman of our Board. Messrs. Bready and Marc Gabelli are both current members of the GAMCO Board. It is expected that Mr. Bready will resign from the GAMCO Board on the distribution date. We believe that the spin-off and new independent board representation, along with management hires we make in the future as our revenues warrant, will enable us to devote greater attention to implementing a growth strategy. That strategy will be focused entirely on benefiting ACG and our stockholders, rather than on functioning as part of the larger GAMCO organization, in which decisions must take into account the interests of the entire entity, not solely those of ACG.

        The GAMCO Board also considered a number of potentially negative factors in evaluating the separation, including the potential loss of synergies from operating as a subsidiary and potential increased costs, potential disruptions to ACG's businesses as a result of the separation and the risks of

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being unable to achieve the benefits expected to be achieved by the spin-off. The GAMCO Board concluded that the potential benefits of the spin-off greatly outweighed these factors.

Interests of Certain Persons

        Mario J. Gabelli controls GGCP, a private company of which he is the Chief Executive Officer. GGCP, through Holdings, is the beneficial owner of approximately 94% of the combined voting power of the outstanding GAMCO common stock and approximately 72% of the equity interest of GAMCO. By virtue of his ownership of GGCP, Mario J. Gabelli may be deemed to control GAMCO. In addition, upon completion of the spin-off, Mario J. Gabelli may be deemed to control ACG.

        See "Certain Relationships and Related Party Transactions" for a description of the registration rights agreement that we expect to enter into with Mario Gabelli and GGCP prior to the spin-off.

        Mario J. Gabelli will not receive any ACG RSAs as he has never been granted any GAMCO RSAs.

        Marc Gabelli, who will serve as our President, has served as President and Managing Director of GGCP since GAMCO's initial public offering in February 1999. In addition, he will receive 10,000 ACG RSAs in the spin-off with respect to the 10,000 GAMCO RSAs he currently owns.

        Kieran Caterina, who will serve as our Chief Financial Officer, will receive 7,000 ACG RSAs in the spin-off with respect to the 7,000 GAMCO RSAs he currently owns.

        See "Certain Relationships and Related Party Transactions" for additional information about the interests of GAMCO's officers and directors in ACG and the spin-off.

Manner of Effecting the Spin-Off

        Our Board and the GAMCO Board have approved the spin-off of ACG to the holders GAMCO common stock. No stockholder vote is necessary to effectuate the spin-off and none will be obtained.

        The general terms and conditions relating to the spin-off will be set forth in Separation Agreement between GAMCO and us. Under the Separation Agreement, the spin-off will be effective on the distribution date. As a result of the spin-off, you will receive:

    one share of ACG Class A Stock for each share of GAMCO Class A Stock that you on the record date; and

    one share of ACG Class B Stock for each share of GAMCO Class B Stock that you hold on the record date.

        As discussed under "—Trading of GAMCO Class A Stock After the Record Date and Prior to the Distribution," if a stockholder of record of GAMCO Class A Stock sells those shares in the "regular way" market after the record date and prior to the distribution, that stockholder also will be selling the right to receive shares of ACG common stock in the distribution. The distribution will be made in book-entry form. For registered GAMCO stockholders, our transfer agent will credit their shares of ACG common stock to book-entry accounts established to hold their shares of ACG common stock. Book-entry refers to a method of recording stock ownership in our records in which no physical certificates are issued. For stockholders who own GAMCO common stock through a bank or brokerage firm, their shares of ACG common stock will be credited to their accounts by the bank or broker. See "—When and How You Will Receive Shares of ACG Common Stock." Each share of ACG common stock that is distributed will be validly issued, fully paid and nonassessable. Holders of shares of ACG common stock will not be entitled to preemptive rights. See "Description of Capital Stock." Following the spin-off, stockholders whose shares are held in book-entry form may request the transfer of their shares of ACG Class A Stock to a brokerage or other account at any time, without charge.

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        You will not be required to make any payment for the shares of ACG common stock that you receive nor will you be required to surrender or exchange your shares of GAMCO common stock or take any other action to receive ACG common stock.

Treatment of Fractional Shares

        The transfer agent will aggregate all fractional shares of ACG Class A Stock and sell them on behalf of those holders who otherwise would be entitled to receive a fractional share. We anticipate that these sales will occur as soon as practicable after the distribution date. Those holders will then receive a cash payment in the form of a check in an amount equal to their pro rata share of the total net proceeds of those sales. Your check for any cash that you may be entitled to receive instead of fractional shares of ACG common stock will be mailed to you.

        It is expected that all fractional shares held in street name will be aggregated and sold by brokers or other nominees according to their standard procedures. You should contact your broker or other nominee for additional details.

        None of GAMCO, ACG or the transfer agent will guarantee any minimum sale price for the fractional shares of ACG Class A Stock. Neither we nor GAMCO will pay any interest on the proceeds from the sale of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient stockholders. See "—Material U.S. Federal Income Tax Consequences of the Spin-Off."

Results of the Spin-Off

        After the spin-off, we will be a publicly traded company. Immediately following the spin-off, we expect that there will be approximately            shares of ACG Class A Stock and approximately             shares of ACG Class B Stock issued and outstanding, based on the number of shares of GAMCO common stock outstanding as of the date of this information statement. The actual number of shares of ACG Class A Stock and ACG Class B Stock to be distributed in the spin-off will be equal to the number of shares of GAMCO Class A Stock and GAMCO Class B Stock, respectively, outstanding as of the record date.

        You will not be required to make any payment for the shares of ACG common stock you receive, nor will you be required to surrender or exchange your shares of GAMCO common stock or take any other action in order to receive the shares of ACG common stock to which you are entitled. The spin-off will not affect the number of outstanding shares of GAMCO common stock or any rights of GAMCO stockholders, except that the number of outstanding shares of GAMCO Class A Stock will increase as a result of the sale of the Former GAMCO Treasury Shares to GSI. In addition, the spin-off may affect the market value of the outstanding GAMCO common stock. Immediately following the spin-off, we expect to have approximately            registered holders of shares of ACG Class A Stock and            holders of ACG Class B Stock.

        As noted above, Mario J. Gabelli controls GGCP, the indirect holder of approximately 94% of the combined voting power of the outstanding GAMCO common stock and approximately 72% of the equity interest of GAMCO as of the date of this information statement. By virtue of his ownership of GGCP, Mario J. Gabelli may be deemed to control GAMCO. Accordingly, immediately following the spin-off, Mario J. Gabelli may be deemed to control ACG.

        Mario J. Gabelli has served in two capacities with regard to GSI. The first capacity is as Chief Executive Officer of GAMCO and the second is as a member of the portfolio management team for Gabelli Associates Fund, Gabelli Associates Limited, Gabelli Associates Fund II and Gabelli Associates Limited II E, which are arbitrage partnerships managed by GSI that we collectively refer to as the Arbitrage Partnerships, and as a portfolio manager for certain assets that have been included in the

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event-driven value partnerships since GAMCO's public offering in 1999. In his role as CEO of GAMCO, Mario J. Gabelli has made and, until the distribution date, will make, decisions relating to GSI as a subsidiary of GAMCO. After the spin-off, Mario J. Gabelli will continue in his role as CEO of GAMCO. However, as GSI will no longer be a subsidiary of GAMCO, Mario J. Gabelli's role as CEO of GAMCO will have no bearing on ACG. However, Mario J. Gabelli will continue to exert influence and control over GSI by providing advice and expertise to GSI through his role as Chairman and CEO of ACG and his position as the controlling stockholder of ACG through his ownership and control of the majority of the shares of GGCP. In addition, after the spin-off, Mario J. Gabelli will continue to serve as a member of the portfolio management team for the Arbitrage Partnerships and as a portfolio manager for certain assets that are included in the event-driven value partnerships.

        We and GAMCO will be parties to agreements that govern the spin-off and our future relationship. For a more detailed description of these agreements, see "Arrangements Between GAMCO and ACG After the Spin-Off."

When and How You Will Receive Shares of ACG Common Stock

        On the distribution date, GAMCO will release its shares of ACG common stock for distribution by Computershare Trust Company, N.A., as the distribution agent. The distribution agent will cause the shares of ACG common stock to which you are entitled to be registered in your name or in the "street name" of your bank or brokerage firm.

        "Street Name" Holders.    Many GAMCO stockholders hold their GAMCO common stock in an account with a bank or brokerage firm. If this applies to you, that bank or brokerage firm is the registered holder that holds the shares of GAMCO common stock on your behalf. For stockholders who hold their GAMCO common stock in an account with a bank or brokerage firm, the ACG common stock being distributed will be registered in the "street name" of your bank or broker, who in turn will electronically credit your account with the shares that you are entitled to receive in the distribution. We anticipate that banks and brokers will generally credit their customers' accounts with ACG common stock on or shortly after the distribution date. We encourage you to contact your bank or broker if you have any questions regarding the mechanics of having your shares credited to your account.

        Registered Holders.    If you are the registered holder of GAMCO common stock and hold your GAMCO common stock either in physical form or in book-entry form, the shares of ACG common stock distributed to you will be registered in your name and you will become the holder of record of the number of shares of ACG common stock that you are entitled to receive in the distribution. Our distribution agent will send you a statement reflecting your ownership of ACG common stock.

        Direct Registration System.    As part of the spin-off, we will be adopting a direct registration system for book-entry share registration and transfer of the ACG common stock. The shares of ACG common stock to be distributed in the spin-off will be distributed as uncertificated shares registered in book-entry form through the direct registration system. No certificates representing your shares will be mailed to you in connection with the spin-off. Under the direct registration system, instead of receiving stock certificates, you will receive a statement reflecting your ownership interest in our shares. The distribution agent will begin mailing book-entry account statements reflecting your ownership of shares promptly after the distribution date. You can obtain more information regarding the direct registration system by contacting our transfer agent and registrar, Computershare Trust Company, N.A., at (877) 282-1168 or through its website at www.computershare.com.

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Transferability of Shares You Receive

ACG Class A Stock

        The shares of the ACG Class A Stock distributed to stockholders will be freely transferable, except for shares received by persons who may be deemed to be our "affiliates" under the Securities Act of 1933, as amended (the "Securities Act"). Persons who may be deemed to be our affiliates after the spin-off generally include individuals or entities that control, are controlled by, or are under common control with us, and include our directors and certain of our officers. Our affiliates will be permitted to sell their shares of ACG Class A Stock only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act ("Rule 144").

        Under Rule 144, an affiliate may not sell within any three-month period shares of ACG Class A Stock in excess of the greater of:

    1% of the then outstanding number of shares of ACG Class A Stock; and

    the average weekly trading volume of ACG Class A Stock on the NYSE during the four calendar weeks preceding the filing of a notice with the SEC on Form 144 with respect to such sale.

        Sales under Rule 144 are also subject to certain provisions regarding the manner of sale, notice requirements and availability of current public information about us. Among other restrictions, sales will not be able to be made using Rule 144 until ACG has been subject to the reporting requirements of Section 13 of the Exchange Act for a period of at least 90 days, which will occur on                , 2016.

ACG Class B Stock

        The ACG Class B Stock may not be transferred. However, the ACG Class B Stock can be converted into ACG Class A Stock pursuant to the provisions of our certificate of incorporation and then sold. The ACG Class A Stock received by our affiliates upon the conversion of the ACG Class B Stock will be subject to the same restrictions applicable to our affiliates described under "—Transferability of Shares You Receive—ACG Class A Stock."

Employee Stock-Based Plans

        Pursuant to GAMCO's 2002 Stock Award and Incentive Plan, the holders of GAMCO RSAs are generally entitled to an equitable adjustment in their awards, in order to prevent their dilution due to a spin-off. Therefore, in the spin-off, the holders of GAMCO RSAs will receive ACG RSAs. The new ACG RSAs will have essentially the same terms as the GAMCO RSAs, such that the holders GAMCO RSAs will have awards of the same financial value and other terms immediately before and after the spin-off.

Material U.S. Federal Income Tax Consequences of the Spin-Off

        The following discussion summarizes the material U.S. federal income tax consequences of the spin-off to us, GAMCO, and GAMCO stockholders. This discussion is based upon the U.S. federal income tax laws and regulations now in effect and as currently interpreted, and does not take into account possible changes in such tax laws or interpretations, any of which may be applied retroactively. It is not intended to and does not constitute tax advice for any individual or legal entity, nor may or should it be so interpreted.

        Each stockholder is urged to consult his or her tax advisor as to the specific tax consequences of the spin-off to that stockholder, including the effect of any state, local or foreign tax laws or U.S. tax laws other than those relating to income taxes and of changes in applicable tax laws.

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        The following summary is for general information only and may not be applicable to stockholders who received their shares of ACG common stock pursuant to an employee benefit plan (or otherwise as compensation) or who are not citizens or residents of the United States (or are not otherwise United States persons) within the meaning of the Code or who are otherwise subject to special treatment under the Code, such as tax-exempt entities, partnerships (including arrangements treated as partnerships for U.S. federal income tax purposes), financial institutions, insurance companies, dealers or traders in public securities, and persons who hold their shares of GAMCO common stock as part of a straddle, hedge, conversion, constructive sale, synthetic security, integrated investment or other risk-reduction transaction for U.S. federal income tax purposes. Each stockholder's individual circumstances may affect the tax consequences of the spin-off to such stockholder. In addition, no information is provided with respect to tax consequences under any applicable foreign, state or local laws. Consequently, stockholders are advised to consult their own tax advisor as to the specific tax consequences of the spin-off and the effect of possible changes in tax laws.

        If a partnership (including any arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of GAMCO common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding shares of GAMCO common stock should consult its tax advisor regarding the tax consequences of the spin-off.

        We have not sought and have not received, and do not plan on seeking or obtaining, a ruling from the IRS regarding the tax consequences of the spin-off. Accordingly, there can be no assurance that the IRS or another taxing authority will not assert that the distribution is taxable to GAMCO, ACG or GAMCO stockholders. However, as discussed previously, we expect that the distribution of ACG shares will not be taxable to GAMCO, ACG or GAMCO stockholders. The distribution is expected to meet the requirements for a tax-free spin-off under Section 355 of the Code. Therefore, we believe that the spin-off will produce the following consequences:

    GAMCO will not recognize any gain or loss upon the spin-off of the stock of ACG to the GAMCO stockholders;

    no gain or loss will be recognized by, or be includible in the income of, a holder of GAMCO common stock solely as the result of the receipt of ACG common stock in the spin-off;

    the aggregate basis of GAMCO common stock and ACG common stock in the hands of GAMCO stockholders immediately after the spin-off will be the same as the basis of GAMCO common stock held by the stockholders immediately before the spin-off, allocated between the common stock of GAMCO and ACG in proportion to the relative fair market values of each on the distribution date;

    the holding period of ACG common stock received by GAMCO stockholders will include the holding period of their GAMCO common stock with respect to which the spin-off was made, provided that such GAMCO common stock is held as a capital asset on the date of the spin-off; and

    the receipt of cash in lieu of a fractional share of ACG common stock generally will be treated as a sale of ACG common stock, and a GAMCO stockholder will recognize gain or loss equal to the difference between the amount of cash received and the stockholder's basis in the fractional share of ACG common stock, as determined above. The gain or loss will be long-term capital gain or loss if the holding period for the fractional share of ACG common stock, as determined above, is more than one year.

        Although we expect the spin-off to be tax-free under Section 355(e) of the Code, the spin-off could nevertheless become taxable to GAMCO (but not GAMCO's stockholders) if ACG or GAMCO were to undergo a change in control pursuant to a plan or a series of related transactions that include

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the spin-off. Any transaction that occurs within the four-year period beginning two years prior to the spin-off is presumed to be part of a plan or a series of related transactions, which include the spin-off unless GAMCO establishes otherwise. In this context, a change in control generally means a shift in 50% or more of the ownership of either GAMCO or ACG.

        Certain transactions related to the spin-off could result in the recognition of income or gain by GAMCO.

        The foregoing is a summary of the material U.S. federal income tax consequences of the spin-off under current law. The foregoing does not purport to address all U.S. federal income tax consequences or tax consequences that may arise under the tax laws of various states or other jurisdictions or that may apply to particular categories of stockholders. Each GAMCO stockholder should consult his, her or its tax advisor as to the particular tax consequences of the distribution to such stockholder, including the application of U.S. federal, state, local and foreign tax laws, and the effect of possible changes in tax laws that may affect the tax consequences described above.

Information Reporting

        Treasury Regulations require certain "significant" GAMCO stockholders who receive ACG common stock pursuant to the spin-off to attach to his or her U.S. federal income tax return for the taxable year in which the spin-off occurs a detailed statement setting forth certain information with respect to the spin-off. ACG will provide adequate information to such stockholders for this purpose.

Trading Markets for the ACG Common Stock

        There is currently no public market for the ACG common stock. We have applied to have the ACG Class A Stock listed on the NYSE under the symbol "AC." We anticipate that trading of the ACG Class A Stock will commence on a "when-issued" basis shortly before the record date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. On the first trading day following the distribution date, when-issued trading with respect to the ACG Class A Stock will end and "regular way" trading will begin. Regular way trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full business day following the date of the transaction. We cannot predict what the trading prices for the ACG Class A Stock will be before or after the distribution date. See "Risk Factors—Risks Related to the ACG Common Stock." In addition, we cannot predict any change that may occur in the trading price of GAMCO Class A Stock as a result of the spin-off.

        We do not intend to list the ACG Class B Stock on any exchange, and we do not expect that a trading market for the ACG Class B Stock will develop.

Trading of GAMCO Class A Stock After the Record Date and Prior to the Distribution

        Beginning on or shortly before the record date and through the distribution date, there will be two concurrent markets in which to trade GAMCO Class A Stock: a regular way market and an ex-distribution market. Shares of GAMCO Class A Stock that trade in the regular way market will trade with an entitlement to shares of ACG Class A Stock distributed in connection with the spin-off. Shares of GAMCO Class A Stock that trade in the ex-distribution market will trade without an entitlement to shares of ACG Class A Stock distributed in connection with the spin-off. Therefore, if you owned shares of GAMCO Class A Stock on the record date and sell those shares in the regular way market on or prior to the distribution date, you also will be selling your right to receive the shares of ACG Class A Stock that would have been distributed to you in connection with the spin-off. If you sell those shares of GAMCO Class A Stock in the ex-distribution market prior to or on the distribution date, you will still receive the shares of ACG Class A Stock that were to be distributed to you in connection with the spin-off as a result of your ownership of the shares of GAMCO common stock.

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Spin-Off Conditions and Termination

        We expect that the spin-off's distribution date will be on or about November 19, 2015, provided that, among other things:

    the SEC has declared effective our registration statement on Form 10, of which this information statement is a part, under the Exchange Act, with no stop order in effect with respect to the Form 10;

    this information statement shall have been mailed to the holders of GAMCO common stock;

    the actions and filings, if any, necessary under securities and blue sky laws of the states of the United States and any comparable laws under any foreign jurisdictions must have been taken and become effective;

    no order, injunction, decree or regulation issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the spin-off will be in effect and no other event outside GAMCO's control will have occurred or failed to occur that prevents the consummation of the spin-off;

    the approval for listing of the ACG Class A Stock on the NYSE, subject to official notice of issuance, shall have been obtained;

    GAMCO shall have received an opinion from its tax counsel regarding the tax-free status of the spin-off as of the distribution date (see "—Material U.S. Federal Income Tax Consequences of the Spin-Off"); and

    no event or development has occurred or exists that, in the judgment of the GAMCO Board, in its sole discretion, makes the spin-off inadvisable.

Reasons for Furnishing and Content of this Information Statement

        This information statement is being furnished solely to provide information to holders of GAMCO common stock who will receive shares of ACG common stock in connection with the spin-off. It is not provided as an inducement or encouragement to buy or sell any securities. You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after the date, and neither GAMCO's nor ACG's management has an obligation or intention to update the information.

Accounting Treatment

        The spin-off will be accounted for by GAMCO as a dividend at historical cost, and no gain or loss will be recorded.

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DIVIDEND POLICY

        We currently contemplate paying a dividend; however, we cannot assure you that we will pay any dividend. Whether we pay cash dividends in the future will be at the discretion of our Board and will be dependent upon our financial condition, results of operations, capital requirements, and any other factors that our Board determines are relevant.


REGULATORY APPROVALS

        Other than certain approvals already received from FINRA, we do not believe any regulatory approvals are required in connection with the spin-off.

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BUSINESS

Overview

        ACG was incorporated under the laws of the State of Delaware on April 15, 2015 to be the holding company for the Gabelli Securities Group in the spin-off.

Alternative Investment Management

        We own a 93.9% interest in GSI, a registered investment advisor. GSI and its wholly owned subsidiary, Gabelli & Partners, collectively serve as general partners or investment managers to Investment Partnerships, and separate accounts. We primarily manage assets in equity event-driven value strategies, across a range of risk and event arbitrage portfolios. The business earns fees from its advisory assets, and income (loss) from trading and investment portfolio activities. The advisory fees include management and incentive fees. Management fees are largely based on a percentage of the portfolios' levels of AUM. Incentive fees are based on the percentage of profits derived the from investment performance delivered to clients' invested assets. As of June 30, 2015, we managed a total of $1.1 billion in assets. GSI is registered with the SEC as an investment advisor under the Advisers Act. Certain employees of GAMCO own 1.9% of GSI, and the remaining 4.2% of GSI is owned by individual investors unrelated to GAMCO. Stockholders of GSI who are employees of GSI or its affiliates may only sell their GSI shares to GSI at the book value per share of the previous fiscal year end. Upon completion of the spin-off, stockholders who are employees of GSI or its affiliates will only be permitted to sell their GSI shares to GSI at the book value per share of the previous fiscal year end.

        In our event-driven value funds we seek investments trading at prices that differ from those determined using our proprietary "Private Market Value (PMV) with a Catalyst™" methodology where we have identified a near-term catalyst to narrow the market difference to PMV. Catalysts can include a spinoff, stock buyback, asset sale, management change, regulatory change or accounting change.

        Event merger arbitrage is a subset of event-driven value investing where the catalyst, an acquisition of the company, has been announced. In event merger arbitrage, the goal is to capture the difference between the market value of a security and what the acquirer is paying in the acquisition. Returns in merger arbitrage are primarily driven by the successful completion of the announced transactions in the portfolio. Other factors that can affect returns include short-term interest rates and the availability of investable deals. While merger arbitrage returns have historically been non-market correlated and deal-specific, event-driven value returns are more correlated to broader equity markets.

        We generally manage assets on a discretionary basis and invest in a variety of U.S. and foreign securities utilizing a bottom up value investment style. Our managed funds primarily employ absolute return strategies such that we strive to generate positive returns regardless of market cycles or performance.

        We introduced our first alternative fund, a merger arbitrage partnership, Gabelli Arbitrage (renamed Gabelli Associates), in February 1985. We then launched the Gabelli Rosenthal partnership in July 1985 to focus on leveraged buyout opportunities. An offshore version of the event merger arbitrage strategy was added in 1989. Building on our strengths in global event-driven value investing, several new Investment Partnerships have been added to balance investors' geographic, strategy and sector needs. Today, we offer 20 Investment Partnerships in multiple categories, including event merger arbitrage, event-driven value and other across a broad range of absolute return products. Within our event merger arbitrage strategy, as of June 30, 2015, we managed approximately $855 million of assets for investors who seek positive returns not correlated to fluctuations of the general market. These funds seek to drive returns by investing mostly in announced merger and acquisition transactions that are primarily dependent on deal closure and less on the overall market environment. In event-driven value, as of June 30, 2015, we managed approximately $133 million of assets focused on the U.S. and

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non-U.S. markets. We also manage $76 million of assets in a variety of other series of Investment Partnerships designed to offer investors a mechanism to diversify their portfolios by global economic and sectoral opportunities. These include sector, high yield, capital structure and venture capital or merchant banking portfolios. Since our inception, we have been closely identified with, and have enhanced, the "value" style of investing consistent with our fundamental objective of providing an absolute return for our clients. Our investment objective is to earn a superior risk-adjusted return over the long-term through our proprietary fundamental research. We serve a wide variety of investors including private wealth management accounts, corporations, corporate pension and profit-sharing plans, foundations, endowments, jointly-trusteed plans and municipalities as well as serving as sub-advisor to certain third-party investment funds.

Assets Under Management

        The following table sets forth ACG's total AUM for the dates shown.


Assets Under Management
(in thousands)

 
  At June 30,   At December 31,  
Category(a)
  2015   2014   2013   2012   2011   2010  

Event Merger Arbitrage

  $ 855,158   $ 795,894   $ 690,975   $ 721,065   $ 512,661   $ 400,996  

Event-Driven Value(b)

    132,946     166,825     140,091     123,648     131,833     54,944  

Other(c)

    76,198     76,827     76,050     75,469     65,300     59,593  

Total

  $ 1,064,302   $ 1,039,546   $ 907,116   $ 920,182   $ 709,794   $ 515,533  

(a)
Asset levels include various structures, including managed accounts, partnerships and offshore companies.

(b)
Excluding event merger arbitrage.

(c)
Includes investment vehicles focused on private equity, merchant banking, non-investment-grade credit and capital structure arbitrage.

Institutional Research Services

        We operate our institutional research services business through G.research, a wholly owned subsidiary of GSI. G.research is a broker-dealer registered under the Exchange Act. Through G.research, we act as an underwriter and provide institutional research services. G.research is regulated by FINRA. G.research's revenues are derived primarily from institutional research services, underwriting fees and selling concessions. As noted below, a significant portion of our institutional research services and underwriting revenues are from GAMCO and its affiliates. While the spin-off is not expected to have any impact on our provision of these services to GAMCO and its affiliates, we can provide no assurance that GAMCO and its affiliates will continue use our institutional research and underwriting services after the spin-off to the same extent as they have historically or at all.

Institutional Research Services

        G.research provides institutional investors with investment ideas in numerous industries and special situations, with a particular emphasis on small-cap and mid-cap companies. Our research analysts are industry-focused, following sectors that are based on our core competencies. They research companies of all market capitalizations on a global basis. The primary function of the research team is to gather data, array the data, and then project and interpret data from which investment decisions can be made. Analysts publish their insights in the form of research reports and daily notes. In addition, G.research

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hosts numerous conferences each year which bring together industry leaders and institutional investors. The objective of the institutional research services is to provide superior investment ideas to investment decision makers.

        Analysts are generally assigned to research platforms, coordinated by a senior analyst, in order to ensure a consistent process, enhance idea cross-fertilization and knowledge-sharing. Our platforms include Digital, which includes cable, telecommunications, broadcasting, publishing, advertising, entertainment and technology; utilities and renewable energy; Consumer, Health and Wellness, Autos, Aerospace and Capital Goods; Natural Resources; and Financial Services.

        G.research generates institutional research services revenues through brokerage activities from securities transactions executed on an agency basis on behalf of institutional and private wealth management clients as well as from retail customers and mutual funds. Institutional research services revenues totaled $9.2 million, $8.9 million, and $11.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. G.research earned $4.7 million, $4.8 million and $4.8 million, or approximately 54%, 58% and 61%, of its commission revenue from transactions executed on behalf of funds advised by Gabelli Funds, LLC, and private wealth management clients advised by GAMCO Asset Management Inc. for the years ended December 31, 2014, 2013 and 2012, respectively. Additionally, for the year ended December 31, 2014, Gabelli Funds, LLC and GAMCO Asset Management Inc. paid $0.8 million and $0.7 million, respectively, to G.research pursuant to research services agreements. Gabelli Funds, LLC and GAMCO Asset Management Inc. are both wholly owned subsidiaries of GAMCO. G.research continues to pursue expansion of such activities.

Underwriting

        During 2014, G.research participated as Sales Manager in the at the market offerings of The GAMCO Global Gold, Natural Resources & Income Trust and acted as Dealer Manager for The Gabelli Equity Trust Rights Offering, the Gabelli Multimedia Trust Rights Offering, the Gabelli Healthcare & Wellness Trust Rights Offering, and acted as co-manager in The Gabelli Health & Wellness Trust 5.875% Series B Cumulative Preferred Stock Offering. For the year ended December 31, 2014, G.research earned $0.6 million for these roles. During 2013, G.research participated as Sales Manager in the at the market offerings of The GAMCO Global Gold, Natural Resources & Income Trust and acted as Dealer Manager for The Gabelli Global Utility and Income Trust's Series A Preferred Share Rights Offering, and acted as co-manager in The GAMCO Global Gold, Natural Resources & Income Trust 5% Series B Cumulative Preferred Stock Offering. For the year ended December 31, 2013, G.research earned $0.8 million for these roles. During 2012, G.research participated as Sales Manager in the at the market offerings of The GAMCO Global Gold, Natural Resources & Income Trust and acted as Dealer Manager for The Gabelli Equity Trust's Series F Cumulative Preferred Rights Offering, and acted as co-underwriter for The Gabelli Equity Trust's Series H Cumulative Preferred Stock Offering. For the year ended December 31, 2012, G.research earned $3.2 million for these roles.

Proprietary Trading

        We received a substantial portion of the cash and investments previously held by GAMCO prior to the spin-off. We expect to use this proprietary investment portfolio to provide seed capital in introducing new products, expand our geographic presence, develop new markets and pursue strategic acquisitions, alliances and lift-outs. Our proprietary portfolios are largely invested in products we manage or that are managed by GAMCO.

Business Strategy

        Our business strategy targets global growth of the business through continued leveraging of our proven asset management strengths including our funds, long-term performance record, diverse product

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offerings and experienced investment, research and client relationship professionals. In order to achieve performance and growth in AUM and profitability, we are pursuing a strategy which includes the following key elements:

Continuing an active fundamental Investment Approach

        After the spin-off, our legacy of Gabelli "Private Market Value (PMV) with a Catalyst™" (event driven value investing) will remain the principal management philosophy of ACG and an important methodology guiding our business operations. This method is based on the investing principles articulated by Graham & Dodd in 1934, and has been further augmented by our founder Mario J. Gabelli. This approach, however, will not necessarily be utilized in connection with all of our products.

Growing our Investment Partnerships Advisory Business

        We intend to grow our Investment Partnerships advisory business by gaining share in existing products and introducing new products within our core competencies, such as event and merger arbitrage. In addition, we intend to grow internationally.

Capitalizing on Acquisitions, Alliances and Lift-outs

        We intend to leverage our research and investment capabilities to selectively and opportunistically pursue acquisitions, alliances and lift-outs that will broaden our product offerings and add new sources of distribution.

Pursuing Partnerships and Joint Ventures

        We expect to pursue partnerships and joint ventures with partners that we believe have a strong fit with ACG with respect to product quality and that would provide Asian/European distribution capabilities that would complement our U.S. equity product expertise.

Continuing Our Sponsorship of Industry Conferences

        G.research, our institutional research services business, sponsors industry conferences and management events throughout the year. At these conferences and events, senior management from leading companies share their thoughts on the industry, competition, regulation and the challenges and opportunities in their businesses with portfolio managers and securities analysts. These meetings are an important component of the research services provided to institutional clients. Specifically, in 2014, we hosted 5 such meetings: our 38th Annual Automotive Aftermarket Symposium, 24th Annual Pump Valve & Energy Infrastructure Conference, 20th Annual Aircraft Supplier Conference, 6th Annual Movie & Entertainment Conference and 5th Annual Specialty Chemicals Conference.

Attracting and Retaining Experienced Professionals

        We offer significant variable compensation that provides opportunities to our staff. We expect to increase the scope of our investment management capabilities by adding portfolio managers and other investment personnel in order to expand our products. Our ability to attract and retain highly-experienced investment and other professionals with a long-term commitment to us and our clients has been, and will continue to be, a significant factor in our long-term growth.

Competition

        The alternative asset management industry is intensively competitive and is expected to remain so. We face competition in all aspects of our business and in each of our investment strategies from other managers both in the United States and globally. We compete with other alternative investment management firms, insurance companies, banks, brokerage firms and other financial institutions that offer products that have similar features and investment objectives. Many of these investment

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management firms are subsidiaries of large diversified financial companies and may have access to greater resources, including liquidity sources, not available to us. Many others are much larger in terms of AUM and revenues and, accordingly, have much larger sales organizations and marketing budgets. Historically, we have competed primarily on the basis of the long-term investment performance of many of our investment products. However, we have taken steps to increase our distribution channels, brand name awareness and marketing efforts.

        The market for providing investment management services to institutional and private wealth management clients is also highly competitive. Approximately 27% of our investment advisory fee revenue for the year ended December 31, 2014 was derived from our institutional and private wealth management. Selection of investment advisors by U.S. institutional investors is often subject to a screening process and to favorable recommendations by investment industry consultants. Many of these investors require their investment advisors to have a successful and sustained performance record, often five years or longer with focus also on one-year and three-year performance records. We have significantly increased our AUM on behalf of U.S. institutional investors since our entry into the institutional asset management business. At the current time, we believe that our investment performance record would be attractive to potential new institutional and private wealth management clients. However, no assurance can be given that our efforts to obtain new business will be successful.

Intellectual Property

        Service marks and brand name recognition are important to our business. We have rights to the service marks under which our products are offered. Upon consummation of the spin-off, we will have rights to use the "Gabelli" name, the "GAMCO" name, pursuant to a Service Mark and Name License Agreement, a non-exclusive, royalty-free perpetual license agreement we will enter into with GAMCO on the distribution date (the "Service Mark and Name License Agreement"). Pursuant to an assignment agreement, Mario J. Gabelli has assigned to GAMCO all of his rights, title and interests in and to the "Gabelli" name for use in connection with investment management services and brokerage services. However, under the assignment agreement, Mario J. Gabelli retains any and all rights, title and interests he has or may have in the "Gabelli" name for use in connection with (i) charitable foundations controlled by Mario J. Gabelli or members of his family and (ii) entities engaged in private investment activities for Mario J. Gabelli or members of his family. In addition, the funds managed by Mario J. Gabelli outside GAMCO and ACG have entered into a license agreement with GAMCO permitting them to continue limited use of the "Gabelli" name under specified circumstances. GAMCO has licensed to us its rights to the "Gabelli" name and the "GAMCO" name for use with respect to our funds, collective investment vehicles, investment partnerships and other investment products pursuant to the Service Mark and Name License Agreement. The Service Mark and Name License Agreement has a perpetual term, subject to termination only in the event we are not in compliance with the quality control provisions in the Service Mark and Name License Agreement.

Regulation

        Virtually all aspects of our businesses are subject to various federal, state and foreign laws and regulations. These laws and regulations are primarily intended to protect investment advisory clients and investors, the markets and customers of broker-dealers. Under such laws and regulations, agencies that regulate investment advisors and broker-dealers have broad powers, including the power to limit, restrict or prohibit such an advisor or broker-dealer from carrying on its business in the event that it fails to comply with such laws and regulations. In such an event, the possible sanctions that may be imposed include civil and criminal liability, the suspension of individual employees, injunctions, limitations on engaging in certain lines of business for specified periods of time, revocation of the investment advisor and other registrations, censures and fines.

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Global Regulatory Reform

        We are subject to numerous regulatory reform initiatives in each country in which we do business. Any such initiative, or any new laws or regulations or changes in enforcement of existing laws or regulations, could materially and adversely impact the scope or profitability of ACG's business activities, lead to business disruptions, require ACG to change certain business practices and expose ACG to additional costs (including compliance and legal costs), as well as reputational harm. ACG's profitability also could be materially and adversely affected by modification of the rules and regulations that impact the business and financial communities in general, including changes to the laws governing taxation, antitrust regulation and electronic commerce.

        Dodd-Frank Wall Street Reform and Consumer Protection Act.    In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "DFA") was signed into law in the United States. The DFA is expansive in scope and requires the adoption of extensive regulations and numerous regulatory decisions, many of which have been adopted. As the impact of these rules will become evident over time, it is not yet possible to predict the ultimate effects that the DFA, or subsequent implementing regulations and decisions, will have upon ACG's business, financial condition and results of operations.

        Securities and Exchange Commission Review of Asset Managers.    Our business may also be impacted by the SEC regulatory initiatives. For example, on December 11, 2014 the Chair of the SEC announced that she is recommending that the SEC enhance its oversight of asset managers by (i) expanding and updating data requirements with which asset managers must comply, (ii) improving fund level controls, including those related to liquidity levels and the nature of specific instruments and (iii) ensuring that asset management firms have appropriate transition plans in place to deal with market stress events or situations where an investment adviser is no longer able to serve its clients. Although these recommendations have not yet resulted in any proposed rules, any additional SEC oversight or the introduction of any new reporting, disclosure or control requirements could expose us to additional compliance costs and may require us to change how we operate our business.

        Taxation.    Our global business may be impacted by the FATCA, which was enacted in 2010 and introduced expansive new investor onboarding, withholding and reporting rules aimed at ensuring U.S. persons with financial assets outside of the United States pay appropriate taxes. In many instances, however, the precise nature of what needs to be implemented will be governed by bilateral Intergovernmental Agreements ("IGAs") between the United States and the countries in which we do business or have accounts. While many of these IGAs have been put into place, others have yet to be concluded. The FATCA rules will impact both U.S. and non-U.S. funds and subject us to extensive additional administrative burdens. The Organization for Economic Co-operation and Development has also recently launched the BEPS proposal that aims to rationalize tax treatment across jurisdictions. If the BEPS proposal becomes the subject of legislative action in the format proposed, it could have unintended taxation consequences for collective investment vehicles and our tax position, which could adversely affect our financial condition.

        In addition, certain individual EU Member States, such as France and Italy, have enacted national FTTs. There has also been renewed momentum by several other Member States to introduce FTTs, which would impose taxation on a broad range of financial instrument and derivatives transactions. In general, any tax on securities and derivatives transactions would impact investors and would likely have a negative impact on the liquidity of the securities and derivatives markets, could diminish the attractiveness of certain types of products that we manage in those countries and could cause clients to shift assets away from such products. An FTT could significantly increase the operational costs of our entering into, on behalf of our clients, securities and derivatives transactions that would be subjected to an FTT, which could adversely impact our financial results and clients' performance results.

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        Our business could also be impacted to the extent there are other changes to tax laws. For example, the administration recently announced its proposed U.S. federal budget, which called for new industry fees for financial firms. To the extent such fees are adopted and found to apply to us, such fees could adversely affect our financial results.

        Alternative Investment Fund Managers Directive.    Our European business is impacted by the EU Alternative Investment Fund Managers Directive ("AIFMD"), which became effective on July 21, 2011. The AIFMD regulates managers of, and service providers to, a broad range of alternative investment funds ("AIFs") domiciled within and (depending on the precise circumstances) outside the EU. The AIFMD also regulates the marketing of all AIFs inside the European Economic Area ("EEA"). The AIFMD is being implemented in stages, which run through 2018. Compliance with the AIFMD's requirements restrict alternative investment fund marketing and impose additional compliance and disclosure obligations regarding remuneration, capital requirements, leverage, valuation, stakes in EU companies, depositaries, the domicile of custodians and liquidity management on ACG. These new compliance and disclosure obligations and the associated risk management and reporting requirements will subject us to additional expenses.

        Undertakings for Collective Investment in Transferable Securities.    The EU has also adopted directives on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities ("UCITS") as regards depositary functions, remuneration policies and sanctions. The latest initiative in this area, UCITS V, which became effective in September 2014, seeks to align the depositary regime, remuneration rules and sanctioning powers of regulators under the UCITS Directive with the requirements of the AIFMD. UCITS V is required to be adopted in the national law of each EU member state during the second quarter of 2016. Similarly, in August 2014 ESMA revised the guidelines it initially published in 2012 on exchange-traded funds and other UCITS funds. The guidelines introduced new collateral management requirements for UCITS funds concerning collateral received in the context of derivatives using Efficient Portfolio Management ("EPM") techniques (including securities lending) and over-the-counter derivative transactions. These rules, which are now in effect, required us to make a series of changes to its collateral management arrangements applicable to the EPM of its UCITS fund ranges. Compliance with the UCITS directives will cause us to incur additional expenses associated with new risk management and reporting requirements.

Existing U.S. Regulation Overview

        ACG and certain of its U.S. subsidiaries are currently subject to extensive regulation, primarily at the federal level, by the SEC, the Department of Labor, FINRA and other government agencies and regulatory bodies. Certain of our U.S. subsidiaries are also subject to various anti-terrorist financing, privacy, anti-money laundering regulations and economic sanctions laws and regulations established by various agencies.

The Investment Advisers Act of 1940

        GSI is registered with the SEC under the Advisers Act and is regulated by and subject to examination by the SEC. The Advisers Act imposes numerous obligations on registered investment advisors including fiduciary duties, disclosure obligations and record keeping, operational and marketing requirements. The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act, ranging from censure to termination of an investment advisor's registration. The failure of GSI to comply with the requirements of the SEC could have a material adverse effect on us.

        We derive a substantial majority of our revenues from investment advisory services through our various investment management agreements. Under the Advisers Act, our investment management agreements may not be assigned without the client's consent.

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Broker-Dealer and Trading and Investment Regulation

        G.research is registered as broker-dealer with the SEC and is subject to regulation by FINRA and various states. In its capacity as a broker-dealer, G.research is required to maintain certain minimum net capital amounts. These requirements also provide that equity capital may not be withdrawn, advances to affiliates may not be made or cash dividends paid if certain minimum net capital requirements are not met. G.research's net capital, as defined, met or exceeded all minimum requirements as of June 30, 2015. As a registered broker-dealer, G.research is also subject to periodic examination by FINRA, the SEC and the state regulatory authorities.

        Our trading and investment activities for client accounts are regulated under the Exchange Act, as well as the rules of various U.S. and non-U.S. securities exchanges and self-regulatory organizations, including laws governing trading on inside information, market manipulation and a broad number of technical requirements (e.g., short sale limits, volume limitations and reporting obligations) and market regulation policies in the United States and globally. Violation of any of these laws and regulations could result in restrictions on our activities and damage our reputation.

Potential Legislation Relating to Private Pools of Capital

        We manage a variety of private pools of capital, including hedge funds. Congress, regulators, tax authorities and others continue to explore, on their own and in response to demands from the investment community and the public, increased regulation related to private pools of capital, including changes with respect to investor eligibility, certain limitations on trading activities, record-keeping and reporting, the scope of anti- fraud protections, safekeeping of client assets and a variety of other matters. ACG may be materially and adversely affected by new legislation, rule-making or changes in the interpretation or enforcement of existing rules and regulations imposed by various regulators.

ERISA

        Subsidiaries of ACG are subject to ERISA and to regulations promulgated thereunder, insofar as they are "fiduciaries" under ERISA with respect to certain of their clients ERISA and applicable provisions of the Code, impose certain duties on persons who are fiduciaries under ERISA and prohibit certain transactions involving ERISA plan clients. Our failure to comply with these requirements could have a material adverse effect on us.

The Patriot Act

        The USA Patriot Act of 2001 contains anti-money laundering and financial transparency laws and mandates the implementation of various new regulations applicable to broker-dealers and other financial services companies, including standards for verifying client identification at account opening, and obligations to monitor client transactions and report suspicious activities. Anti-money laundering laws outside of the United States contain some similar provisions. Our failure to comply with these requirements could have a material adverse effect on us.

Laws and Other Issues Relating to Taking Significant Equity Stakes in Companies

        Investments by ACG and on behalf of our advisory clients and Investment Partnerships often represent a significant equity ownership position in an issuer's class of stock. As of December 31, 2014, we had five percent or more beneficial ownership with respect to 120 equity securities (this is partially due to the fact that we may be deemed to be a member of "group" with GAMCO and therefore may be deemed to beneficially own the securities owned by that group). This activity raises frequent regulatory, legal and disclosure issues regarding our aggregate beneficial ownership level with respect to portfolio securities, including issues relating to issuers' stockholder rights plans or "poison pills," and various federal and state regulatory limitations, including state gaming laws and regulations, federal

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communications laws and regulations and federal and state public utility laws and regulations, as well as federal proxy rules governing stockholder communications and federal laws and regulations regarding the reporting of beneficial ownership positions. Our failure to comply with these requirements could have a material adverse effect on us.

Existing International Regulation Overview

        Our international operations are subject to the laws and regulations of a number of international jurisdictions, as well as oversight by numerous regulatory agencies and bodies in those jurisdictions. In some instances, they are also affected by U.S. laws and regulations that have extra-territorial application.

        Below is a summary of certain international regulatory standards to which ACG is subject. It is not meant to be comprehensive as there are parallel legal and regulatory arrangements in force in many jurisdictions where ACG's subsidiaries conduct business.

        Of note among the various other international regulations to which ACG is subject, are the extensive and increasingly stringent regulatory reporting requirements that necessitate the monitoring and reporting of issuer exposure levels (thresholds) across the holdings of managed funds and accounts and those of ACG.

European Regulation

        The FCA currently regulates ACG in the United Kingdom. It also regulates those U.K. subsidiaries' branches established in other European countries and the U.K. branches of certain of ACG's U.S. subsidiaries. Authorization by the FCA is required to conduct certain financial services related business in the United Kingdom under the Financial Services and Markets Act 2000. The FCA's rules adopted under that Act govern the majority of a firm's capital resources requirements, senior management arrangements, conduct of business, interaction with clients and systems and controls. The FCA supervises ACG through a combination of proactive engagement, event-driven and reactive supervision and thematic based reviews in order to monitor our compliance with regulatory requirements. Breaches of the FCA's rules may result in a wide range of disciplinary actions against our U.K.-regulated subsidiaries and/or its employees.

        In addition, our U.K.-regulated subsidiaries and other European subsidiaries and branches must comply with the pan-European regulatory regime established by the Markets in Financial Instruments Directive ("MiFID"), which became effective on November 1, 2007 and regulates the provision of investment services and activities throughout the wider EEA. MiFID, the scope of which is being enhanced through MiFID 2 which is described more particularly under "—Global Regulatory Reform" above, sets out detailed requirements governing the organization and conduct of business of investment firms and regulated markets. It also includes pre- and post-trade transparency requirements for equity markets and extensive transaction reporting requirements. In addition, relevant entities must comply with revised obligations on capital resources for banks and certain investment firms (the Capital Requirements Directive), which became effective in January 2014. These include requirements not only on capital, but address matters of governance and remuneration as well. The obligations introduced through these directives will have a direct effect on some of our European operations.

        Our EU-regulated subsidiaries are additionally subject to an EU regulation on OTC derivatives, central counterparties and trade repositories, which was adopted in August 2012 and which requires (i) the central clearing of standardized OTC derivatives, (ii) the application of risk-mitigation techniques to non-centrally cleared OTC derivatives and (iii) the reporting of all derivative contracts from February 2014.

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Regulatory Matters

        The investment management industry is likely to continue facing a high level of regulatory scrutiny and become subject to additional rules designed to increase disclosure, tighten controls and reduce potential conflicts of interest. In addition, the SEC has substantially increased its use of focused inquiries which request information from investment advisors regarding particular practices or provisions of the securities laws. We participate in some of these inquiries in the normal course of our business. Changes in laws, regulations and administrative practices by regulatory authorities, and the associated compliance costs, have increased our cost structure and could in the future have a material adverse impact. Although we have installed procedures and utilize the services of experienced administrators, accountants and lawyers to assist us in adhering to regulatory guidelines and satisfying these requirements, and maintain insurance to protect ourselves in the case of client losses, there can be no assurance that the precautions and procedures that we have instituted and installed, or the insurance that we maintain to protect ourselves in case of client losses, will protect us from all potential liabilities.

Legal Proceedings

        From time to time, we may be named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. We are also subject to governmental or regulatory examinations or investigations. Examinations or investigations can result in adverse judgments, settlements, fines, injunctions, restitutions or other relief. For any such matters, the combined consolidated financial statements include the necessary provisions for losses that we believe are probable and estimable. Furthermore, we evaluate whether there exist losses which may be reasonably possible and, if material, make the necessary disclosures.

Employees

        At the time of the spin-off, ACG is expected to have three executive officers and                other employees performing day-to-day management functions. Additionally, through the Transitional Services Agreement, employees of GAMCO will perform other functions. For more information, see "Management."

Real Estate Properties

        ACG owns no properties. ACG currently pays GAMCO an occupancy charge with respect to the office space it uses at GAMCO's offices at 401 Theodore Fremd Avenue in Rye, NY. ACG will continue to use the same space after the distribution pursuant to the Administrative and Management Services Agreement to be entered into with GAMCO.

Status as an Emerging Growth Company and a Smaller Reporting Company

        We are an "emerging growth company," as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies." These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

        Although we are still evaluating the JOBS Act, we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us as long as we qualify as an emerging growth company, except that we have irrevocably elected not to take advantage of the

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extension of time to comply with new or revised financial accounting standards available under Section 107(b) of the JOBS Act.

        We will, in general, remain as an emerging growth company for up to five full fiscal years following the distribution. We would cease to be an emerging growth company and, therefore, become ineligible to rely on the above exemptions, if we:

    have more than $1 billion in annual revenue in a fiscal year;

    issue more than $1 billion of non-convertible debt during the preceding three-year period; or

    become a "large accelerated filer" as defined in Exchange Act Rule 12b-2, which would occur after: (i) we have filed at least one annual report pursuant to the Exchange Act; (ii) we have been an SEC-reporting company for at least 12 months; and (iii) the market value of ACG common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.

        In addition, we qualify as a "smaller reporting company" under the Exchange Act. As a smaller reporting company, we enjoy many of the same exemptions as emerging growth companies, and those exemptions would continue to be available to us even after the emerging growth company status expires if we still are a smaller reporting company at such time.

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SELECTED HISTORICAL COMBINED CONSOLIDATED FINANCIAL DATA

        The selected historical combined consolidated financial data presented below has been derived in part from, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined consolidated financial statements and the notes thereto beginning on page F-1. Amounts included in the tables related to income statement data and balance sheet data are derived from audited combined consolidated financial statements for the three years ended December 31, 2014, 2013 and 2012 and from the unaudited combined condensed consolidated financial statements for the six months ended June 30, 2015 and 2014.

 
  Six Months
Ended
June 30,
  Year Ended December 31,  
Income Statement Data (in thousands)
  2015   2014   2014   2013   2012  

Revenues

                               

Investment advisory and incentive fees

  $ 4,437   $ 3,234   $ 9,779   $ 10,805   $ 8,952  

Distribution fees and other income          

    1,035     1,042     2,090     677     1,644  

Institutional research services

    4,067     4,180     9,160     8,940     10,953  

Total revenues

    9,539     8,456     21,029     20,422     21,549  

Expenses:

                               

Compensation costs

    11,476     10,063     22,298     23,322     20,864  

Stock based compensation

    1,265     895     1,921     510     3,432  

Management fee

    496     773     (37 )   4,486     1,203  

Other operating expenses

    3,650     3,649     6,771     6,624     8,771  

Total expenses

    16,887     15,380     30,953     34,942     34,270  

Operating loss

   
(7,348

)
 
(6,924

)
 
(9,924

)
 
(14,520

)
 
(12,721

)

Other income (expense), net

                               

Net gain from investments

    10,705     12,701     6,502     50,949     21,012  

Interest and dividend income

    1,752     1,889     4,416     5,865     4,419  

Interest expenses

    (661 )   (727 )   (1,376 )   (1,908 )   (1,928 )

Total other income, net

    11,796     13,863     9,542     54,906     23,503  

Income before income taxes

    4,448     6,939     (382 )   40,386     10,782  

Income tax provision

    1,234     2,073     775     13,157     3,106  

Net income before noncontrolling interests

    3,214     4,866     (1,157 )   27,229     7,676  

Net income (loss) attributable to noncontrolling interests

    (26 )   429     (4,157 )   463     170  

Net income

  $ 3,240   $ 4,437   $ 3,000   $ 26,766   $ 7,506  

 

 
   
  December 31,  
 
  June 30,
2015
 
Balance Sheet Data (in thousands)
  2014   2013   2012  

Cash, cash equivalents and investments

  $ 702,913   $ 653,308   $ 527,749   $ 524,633  

Long-term obligations

                 

Other liabilities and noncontrolling interest

    113,525     171,767     93,345     79,211  

Total liabilities and noncontrolling interest

    113,525     171,767     93,345     79,211  

Total equity

  $ 653,098   $ 582,927   $ 495,375   $ 510,504  

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited combined consolidated financial statements and related notes beginning on page F-1 below. Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this information statement, particularly under "Special Note Regarding Forward-Looking Statements" and "Risk Factors."

Introduction

        Our primary sources of revenues are advisory fees, which are highly correlated to the amount of assets under our management, and incentive fee income, which is based on the investment performance of our funds. AUM, which are directly influenced by the level and changes of the overall equity markets, can also fluctuate through acquisitions, the creation of new products, the addition of new accounts or the loss of existing accounts. At times, the performance of our equity products may differ markedly from popular market indices, and this can also impact our revenues. It is our belief that general stock market trends will have the greatest impact on our level of AUM and hence, revenues. We may also generate gains or losses through our proprietary investment portfolio. This portfolio includes investments in securities, sponsored registered investment companies, investment partnerships and hedge funds and a money market mutual fund invested in U.S. Treasury Bills and Notes. The gains and losses from these investments are impacted by changes in interest rates and the overall equity markets and are included in Other income, net, in our Combined Consolidated Statements of Income.

        As of June 30, 2015, we had over $1.1 billion of AUM, approximately 95% of which was invested in equities and the remaining 5% was invested in fixed income. We conduct our alternative investment management business through our 93.9% owned subsidiary, GSI, and Gabelli & Partners, a wholly owned subsidiary of GSI. GSI is an investment adviser registered under the Advisers Act. We also act as an underwriter and provide institutional research services through G.research, a broker-dealer subsidiary of GSI.

        GSI serves as the investment adviser to Investment Partnerships and separate accounts. Investment advisory fees, which are based on the amount and composition of the AUM in our client accounts, represent ACG's largest source of revenues. Advisory fees include both a management fee based on the level of AUM as well as an incentive allocation fee based on a percentage of the economic gain in the client accounts. Management fees are generally calculated on the assets at the beginning of the period, either monthly or quarterly, and incentive allocations are generally calculated on an annual basis. We recognize revenue only when the measurement period has been completed and when the incentive fees have been earned. Management fee rates for our event merger arbitrage products range from 1.0% to 1.5% and include a 20% incentive allocation. The event-driven value products carry a management fee of between 0.90% to 1.5% and an incentive allocation of 20%. Our other products have a management fee of 1% and an incentive allocation of either 10% or 20%. The following table shows the effective management fee rates for the products and dates indicated:

 
  2010   2011   2012   2013   2014  

Event Merger Arb

    1.00 %   1.00 %   1.02 %   1.00 %   1.01 %

Event Driven Value

    1.19 %   1.21 %   1.30 %   1.14 %   1.12 %

Other

    1.00 %   1.00 %   1.00 %   1.00 %   1.00 %

        The fluctuation in the average effective management fee rate for the Event Merger Arb product line and the Event Diven Value product line was due to the relative amount of AUM in each product

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within those categories as fees vary by product within the Event Merger Arb product line from 1.00% to 1.50% and within the Event Driven Value product line from 0.90% to 1.50%.

        Institutional research services revenues consist of brokerage commissions derived from securities transactions executed on an agency basis on behalf of mutual funds, Institutional and Private Wealth Management clients as well as investment banking revenue, which consists of underwriting profits, selling concessions and management fees associated with underwriting activities. Commission revenues vary directly with account trading activity and new account generation. Investment banking revenues are directly impacted by the overall market conditions, which affect the number of public offerings which may take place.

        In addition to the general level and trends of the stock market, growth in our revenues depends on good investment performance, which influences the value of existing AUM as well as contributes to higher investment and lower redemption rates, and facilitates the ability to attract additional investors while maintaining current fee levels. Growth in AUM is also dependent on being able to access various distribution channels, which is usually based on several factors, including performance and service. Historically, we have depended on direct distribution of our products and services. However, in recent years we have utilized third parties to augment our internal distribution capabilities. As a separate company from GAMCO, we hope to be able to utilize more third parties to distribute our products, some of whom may be direct competitors of GAMCO in the mutual fund and private wealth management areas.

        Net gain/(loss) from investments includes realized and unrealized gains and losses on our proprietary assets, which include investments in stocks, mutual funds and both affiliated and unaffiliated partnerships and offshore funds.

        Interest and dividend income includes interest income earned from cash equivalents that were invested in a money market mutual fund managed by Gabelli Funds, LLC, a wholly owned subsidiary of GAMCO and a registered investment advisor.

Assets Under Management Highlights

        We reported assets under management as follows (dollars in millions):

 
  Six Months
Ended
June 30,
   
   
   
   
   
   
 
 
  Year Ended December 31,    
 
 
  CAGR(a)
2015/2010
 
 
  2015   2014   2013   2012   2011   2010  

Event Merger Arbitrage

  $ 855   $ 796   $ 691   $ 721   $ 513   $ 401     18.3 %

Event-Driven Value

    133     167     140     124     132     55     21.7 %

Other

    76     77     76     75     65     59     5.8 %

Total AUM

  $ 1,064   $ 1,040   $ 907   $ 920   $ 710   $ 515     17.5 %

        Our gross cash inflows by product line were as follows (in millions):

 
  Six Months
Ended
June 30,
  Year Ended December 31,  
 
  2015   2014   2013   2012   2011   2010  

Event Merger Arbitrage

  $ 68   $ 162   $ 79   $ 248   $ 175   $ 183  

Event-Driven Value

    3     45     38     29     92     13  

Other

        5     6     23     3     5  

Total AUM

  $ 71   $ 212   $ 123   $ 300   $ 270   $ 201  

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        Our gross cash outflows by product line were as follows (in millions):

 
  Six Months
Ended
June 30,
  Year Ended December 31,  
 
  2015   2014   2013   2012   2011   2010  

Event Merger Arbitrage

  $ (29 ) $ (68 ) $ (137 ) $ (58 ) $ (79 ) $ (23 )

Event-Driven Value

    (38 )   (21 )   (36 )   (42 )   (9 )   (7 )

Other

    (4 )   (5 )   (13 )   (20 )       (1 )

Total AUM

  $ (71 ) $ (94 ) $ (186 ) $ (120 ) $ (88 ) $ (31 )

        Our net appreciation and depreciation by product line were as follows (in millions):

 
  Six Months
Ended
June 30,
  Year Ended December 31,  
 
  2015   2014   2013   2012   2011   2010  

Event Merger Arbitrage

  $ 20   $ 11   $ 28   $ 18   $ 16   $ 24  

Event-Driven Value

    1     3     14     5     (6 )   8  

Other

    3     1     8     7     3     8  

Total AUM

  $ 24   $ 15   $ 50   $ 30   $ 13   $ 40  

(a)
Compound annual growth rate.

        Our AUM at June 30, 2015 was $1.1 billion, an increase of $0.1 billion, or 10%, from $1.0 billion at December 31, 2014. Outflows of $71 million were offset by inflows of $71 million while market appreciation added $24 million. Our AUM increased to over $1.0 billion at December 31, 2014 from $907 million at December 31, 2013. This increase was due to market appreciation of $15 million and inflows of $212 million, offset partially by outflows of $94 million. Our AUM decreased to $907 million at December 31, 2013 from $920 million at December 31, 2012. This decrease was due to outflows of $186 million, offset partially by market appreciation of $50 million and inflows of $123 million.

Operating Results for the Six Months Ended June 30, 2015 as Compared to the Six Months Ended June 30, 2014

Revenues

        Total revenues were $9.5 million for the six months ended June 30, 2015, $1.0 million, or 12.8%, higher than total revenues of $8.5 million for the six months ended June 30, 2014. Total revenues by revenue component were as follows (dollars in thousands):

 
  Six Months
Ended
June 30,
  Increase
(decrease)
 
 
  2015   2014   $   %  

Investment advisory and incentive fees

  $ 4,437   $ 3,234   $ 1,203     37.2 %

Distribution fees and other income

    1,035     1,042     (7 )   (0.7 )

Institutional research services

    4,067     4,180     (113 )   (2.7 )

Total revenues

  $ 9,539   $ 8,456   $ 1,083     12.8  

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        Investment advisory and incentive fees:    Investment advisory income is directly influenced by the level and mix of average AUM. We earn advisory fees based on the level of average AUM in our products.

        Advisory fees were $4.4 million for the 2015 period compared to $3.2 million for the 2014 period, an increase of $1.2 million, or 37.2%. This increase is directly correlated to the increase in average AUM to $1.045 billion in first half of 2015 from $949 million in the first half of 2014, an increase of $96 million, or 10.1%. Additionally, the 2014 period's revenue is lower by $425,000 from the offset of advisory fees against investment gains from an offshore fund that was being consolidated during 2014 that ceased to be consolidated January 1, 2015.

        Incentive fees are directly related to the gains generated for our clients. We earn a percentage, usually 20%, of the economic gains of our clients' AUM. These fees are recorded at the end of the measurement period, which is typically year-end. For both the first half of 2015 and 2014 we did not record any incentive fee income.

        Institutional research services:    Institutional research services revenues in the 2015 period were $4.1 million, a $0.1 million, or 2.7%, decrease from $4.2 million in the 2014 period resulting from lower brokerage commissions derived from securities transactions executed on an agency basis.

        Distribution fees and other income:    Distribution fees and other income was $1.0 million for both the first half of 2015 and 2014.

Expenses

        Compensation:    Compensation costs, which include variable compensation, salaries, bonuses and benefits, were $12.7 million for the six months ended June 30, 2015, a 15.5% increase from $11.0 million for the six months ended June 30, 2014. Fixed compensation costs, which include salaries, bonuses and benefits, increased 14.1% to $8.9 million in the 2015 period from $7.8 million in 2014 period due primarily to higher salaries in 2015 than 2014. The remainder of the compensation expenses represents variable compensation that fluctuates with management fee and incentive allocation revenues. For the first half of 2015, variable payouts on revenues were $2.6 million, or 27.3% of revenues, an increase of $0.4 million from the $2.2 million, or 26.3% of revenues in the first half of 2014. Variable payouts as a percent of revenues are impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs.

        Stock based compensation:    Stock based compensation was $1.3 million in the 2015 period, an increase of $0.4 million, as compared to $0.9 million in the 2014 period. The increase results from the issuance by GAMCO of 158,600 RSAs during 2014.

        Management fees:    Management fee expense is incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits, which is paid to Mario J. Gabelli pursuant to his employment agreement. In the first half of 2015 and 2014, ACG recorded a management fee expense of $0.5 million and $0.8 million, respectively, as presented in the combined consolidated statements of income.

        Other operating expenses:    Our other operating expenses were $3.7 million in the 2015 period unchanged from $3.7 million in the 2014 period.

Other income/(expense)

        Net gain from investments:    Net gain from investments is directly related to the performance of our proprietary capital accounts. For the six months ended June 30, 2015, net gains from investments were $10.7 million, lower by $2.0 million, or 15.7%, from the prior year's $12.7 million and was largely

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impacted by the relative market performance during these two periods. In the first half of 2015, we realized gains in our trading portfolios of $11.4 million and gains from AFS securities of $25,000. In the first half of 2014, we realized gains in our trading portfolios of $0.8 million and gains from AFS securities of $2.7 million. Additionally, for the holdings in the proprietary portfolio that we held during each period, there were unrealized losses of $0.7 million in the 2015 period, while there were unrealized gains of $9.2 million in the 2014 period.

        Interest and dividend income:    Interest and dividend income decreased $0.1 million, or 5.3%, to $1.8 million in the six months ended June 30, 2015 from $1.9 million in the six months ended June 30, 2014 due to lower dividend income.

        Interest expense:    Interest expense was unchanged at $0.7 million in both the first half of 2015 and 2014.

Income Taxes

        The U.S. generally accepted accounting principles ("GAAP") effective tax rate ("ETR") was 27.7% and 29.9% for the periods ended June 30, 2015 and 2014, respectively.

Noncontrolling Interest

        Net income attributable to noncontrolling interests was a loss of $26,000 in the 2015 period compared to income of $0.4 million in the 2014 period.

Net Income

        Net income for the six months ended June 30, 2015 was $3.2 million versus $4.4 million for the six months ended June 30, 2014 substantially the result of the higher gains from ACG's proprietary investments in the six months ended June 30, 2014 partially offset by increased operating losses.

Operating Results for the Year Ended December 31, 2014 as Compared to the Year Ended December 31, 2013

Revenues

        Total revenues were $21.0 million for the year ended December 31, 2014, $0.6 million, or 3.0%, higher than total revenues of $20.4 million for the year ended December 31, 2013. Total revenues by revenue component were as follows (dollars in thousands):

 
  Year Ended
December 31,
  Increase
(decrease)
 
 
  2014   2013   $   %  

Investment advisory and incentive fees

  $ 9,779   $ 10,805   $ (1,026 )   (9.5 )%

Distribution fees and other income

    2,090     677     1,413     208.7  

Institutional research services

    9,160     8,940     220     2.5  

Total revenues

  $ 21,029   $ 20,422   $ 607     3.0  

        Investment advisory and incentive fees:    Investment advisory income is directly influenced by the level and mix of average AUM. We earn advisory fees based on the level of average AUM in our products.

        Advisory fees were $7.1 million for 2014 compared to $6.5 million for 2013, an increase of $0.6 million, or 9.2%. This increase is directly correlated to the increase in average AUM to $982 million in 2014 from $897 million in 2013, an increase of $85 million, or 9.5%.

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        Incentive fees are directly related to the gains generated for our clients. We earn a percentage, usually 20%, of the economic gains of our clients' AUM. Incentive fees were $2.7 million in 2014, down $1.6 million, or 37.2%, from $4.3 million in 2013 as market appreciation in our clients' accounts were lower in 2014 as compared to 2013.

        Institutional research services:    Institutional research services revenues in 2014 were $9.2 million, a $0.3 million, or 2.5%, increase from $8.9 million in 2013 resulting from higher brokerage commissions derived from securities transactions executed on an agency basis.

        Distribution fees and other income:    Other income was $2.1 million for 2014 versus $0.7 million for 2013, an increase of $1.4 million. This increase was primarily from initiating an annual fee charged to affiliated entities for research services provided which totaled $1.5 million during 2014. There was no such fee charged in 2013.

Expenses

        Compensation:    Compensation costs, which include variable compensation, salaries, bonuses and benefits, were $22.3 million for the year ended December 31, 2014, a 4.3% decrease from $23.3 million for the year ended December 31, 2013. Fixed compensation costs, which include salaries, bonuses and benefits, increased 2.6% to $15.8 million in 2014 from $15.4 million in 2013 due primarily to higher salaries in 2014 than 2013. The remainder of the compensation expenses represents variable compensation that fluctuates with management fee and incentive allocation revenues. For 2014, variable payouts on revenues were $6.5 million, or 30.9% of revenues, down $1.4 million from the $7.9 million, or 38.7% of revenues in 2013. Variable payouts as a percent of revenues are impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs.

        Stock based compensation:    Stock based compensation was $1.9 million in 2014, an increase of $1.4 million, as compared to $0.5 million in 2013. The increase results from the issuance by GAMCO of 576,950 RSAs in the second half of 2013 and 158,600 RSAs during 2014.

        Management fees:    Management fee expense is incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits which is paid to Mario J. Gabelli pursuant to his employment agreement. In 2014 and 2013, ACG recorded a management fee expense of $0.0 million and $4.5 million, respectively, as presented in the combined consolidated statements of income.

        Other operating expenses:    Our other operating expenses were $6.8 million in 2014 compared to $6.6 million in 2013, an increase of $0.2 million, or 3.0%, which was spread among multiple categories of expense.

Other income/(expense)

        Net gain from investments:    Net gain from investments is directly related to the performance of our proprietary capital accounts. For the year ended December 31, 2014, net gains from investments were $6.5 million versus $50.9 million in the prior year. In 2014, we realized gains in our trading portfolios of $5.2 million and gains from AFS securities of $3.0 million. In 2013, we realized gains in our trading portfolios of $6.1 million and gains from AFS securities of $16.4 million. In an effort to diversify the Company's proprietary portfolio, in 2013 we sold $27.4 million of one AFS holding which resulted in gains of $16.3 million. During 2014 we continued to diversify the portfolio and sold an additional $4.3 million of the same security resulting in gains of $2.7 million. Additionally, for the holdings in the proprietary portfolio that we held during each period, there were unrealized losses of $1.7 million in 2014, compared to $28.4 million of unrealized gains in 2013. This year over year change was largely impacted by the relative market performance during each year.

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        Interest and dividend income:    Interest and dividend income decreased $1.5 million, or 25.4%, to $4.4 million in 2014 from $5.9 million in 2013 due to lower dividend income as interest income was $0.1 million in both periods.

        Interest expense:    Interest expense decreased to $1.4 million in 2014 from $1.9 million in 2013 primarily due to the paydown of $10 million of debt owed to GAMCO in March 2014.

Income Taxes

        In 2014, we recorded an income tax provision of $0.8 million despite a pretax loss of $0.4 million due to $4.2 million of losses attributable to noncontrolling interests. This results because income or losses attributable to noncontrolling interests are included in determining pretax earnings but provide no corporate tax provision or benefit. Excluding noncontrolling interests, the effective tax rate ("ETR") was 20.5% in 2014 and 33.0% in 2013. The decrease in ETR is due to the relative impact of book to tax differences on a lower taxable income in 2014.

Noncontrolling Interest

        Net income attributable to noncontrolling interests was a loss of $4.2 million in 2014 compared to income of $0.5 million in 2013, the result of currency fluctuations on Euro denominated share classes in the underlying investment partnerships consolidated for GAAP purposes.

Net Income

        Net income for the year ended December 31, 2014 was $3.0 million versus $26.8 million for the year ended December 31, 2013 substantially the result of the lower gains from ACG's proprietary investments offset by reduced operating losses.

Operating Results for the Year Ended December 31, 2013 as Compared to the Year Ended December 31, 2012

Revenues

        Total revenues were $20.4 million for the year ended December 31, 2013, $1.1 million, or 5.2%, below total revenues of $21.5 million for the year ended December 31, 2012. Total revenues by revenue component were as follows (dollars in thousands):

 
  Year Ended
December 31,
  Increase
(decrease)
 
 
  2013   2012   $   %  

Investment advisory and incentive fees

  $ 10,805   $ 8,952   $ 1,853     20.7 %

Distribution fees and other income

    677     1,644     (967 )   (58.8 )

Institutional research services

    8,940     10,953     (2,013 )   (18.4 )

Total revenues

  $ 20,422   $ 21,549   $ (1,127 )   (5.2 )

        Investment advisory and incentive fees:    Investment advisory income is directly influenced by the level and mix of average AUM. We earn advisory fees based on the level of average AUM in our products.

        Advisory fees were $6.5 million for 2013 compared to $6.2 million for 2012, an increase of $0.3 million, or 4.8%. This increase is directly correlated to the increase in average AUM to $897 million in 2013 from $844 million in 2012, an increase of $53 million, or 6.3%.

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        Incentive fees are directly related to the gains generated for our clients. We earn a percentage, usually 20%, of the economic gains of our clients' AUM. Incentive fees were $4.3 million in 2013, increasing $1.6 million, or 59.3%, from $2.7 million in 2012 as market appreciation in our client's accounts was higher than in 2012.

        Institutional research services:    Institutional research services revenues in 2013 were $8.9 million, a $2.1 million, or 19.1%, decrease from $11.0 million in 2012 resulting from lower revenues from underwriting and syndicate activities. Brokerage commissions derived from securities transactions executed on an agency basis were higher, at $8.3 million in 2013 versus $7.9 million in 2012.

        Distribution fees and other income:    Other income was $0.7 million for 2013 versus $1.6 million for 2012, a decrease of $0.9 million, or 58.8%. This decrease was primarily related to lower distribution fees in 2013 as compared to 2012 of $1.0 million.

Expenses

        Compensation:    Compensation costs, which include variable compensation, salaries, bonuses and benefits, were $23.3 million for the year ended December 31, 2013, an 11.5% increase from $20.9 million for the year ended December 31, 2012. Fixed compensation costs, which include salaries, bonuses and benefits, increased 4.8% to $15.4 million in 2013 from $14.7 million in 2012 due primarily to higher salaries in 2013 than 2012. The remainder of the compensation expenses represents variable compensation that fluctuates with management fee and incentive allocation revenues. For 2013, variable payouts on revenues were $7.9 million, or 38.7% of revenues, increasing $1.7 million from the $6.2 million, or 28.8% of revenues in 2012. Variable payouts as a percent of revenues are impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs.

        Stock based compensation:    Stock based compensation was $0.5 million in 2013, a decrease of $2.9 million, as compared to $3.4 million in 2012. The decrease results from the acceleration of RSAs vesting in 2012 which resulted in additional expense recognized in 2012 that would have been recognized from 2013 through 2016.

        Management fees:    Management fee expense is incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits which is paid to the Chairman (or his designee). In 2013 and 2012, ACG recorded a management fee expense of $4.5 million and $1.2 million, respectively, as presented in the combined consolidated statements of income.

        Other operating expenses:    Our other operating expenses were $6.6 million in 2013 compared to $8.8 million in 2012, a decrease of $2.2 million, or 25.0%. Of this decrease, $0.9 million was the result of lower amortization of advanced commission during 2013 as compared to 2012.

Other income/(expense)

        Net gain from investments:    Net gain from investments is directly related to the performance of our proprietary capital accounts. For the year ended December 31, 2013, net gains from investments were $50.9 million, rising $29.9 million, or 142%, from the prior year's $21.0 million. In 2013, we realized gains in our trading portfolios of $6.1 million and gains from AFS securities of $16.4 million. In 2012, we realized gains in our trading portfolios of $7.7 million and gains from AFS securities of $0.2 million. Additionally, for the holdings in the proprietary portfolio that we held during each period there were unrealized gains of $28.4 million in 2013 as compared to $13.1 million in 2012.

        Interest and dividend income:    Interest and dividend income increased by $1.5 million, or 34.1%, to $5.9 million in 2013 from $4.4 million in 2012.

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Income Taxes

        Income tax expense was $13.2 million in 2013, versus $3.1 million in 2012. The ETR was 32.6% in 2013 and 28.8% in 2012. The increase in the ETR results from higher levels of taxable income.

Noncontrolling Interest

        Noncontrolling interest was an expense of $0.5 million in 2013 compared to $0.2 million in 2012.

Net Income

        Net income for the year ended December 31, 2013 was $26.8 million versus $7.5 million for the year ended December 31, 2012 largely the result of increased gains earned on our proprietary investments.

Liquidity and Capital Resources

        Our principal assets consist of cash equivalents, a U.S. Treasury money market mutual fund, that is invested 100% in U.S. treasuries, managed by Gabelli Funds, Inc., an affiliate. Although investments in Investment Partnerships are subject to restrictions as to the timing of distributions, the underlying investments of such Investment Partnerships are, for the most part, liquid, and the valuations of these products reflect that underlying liquidity.

        Summary cash flow data is as follows (in thousands):

 
  Six Months
Ended June 30,
  Year Ended December 31,  
 
  2015   2014   2014   2013   2012  

Cash flows provided by (used in):

                               

Operating activities

  $ 50,500   $ (4,684 ) $ (58,642 ) $ 40,806   $ (2,772 )

Investing activities

    (40,338 )   4,292     3,839     29,402     1,867  

Financing activities

    65,367     97,280     140,797     (50,518 )   (88,439 )

Net increase (decrease) in cash and cash equivalents

    75,529     96,888     85,994     19,690     (89,344 )

Increase in cash from consolidation

    10                  

Increase in cash from deconsolidation

    13                  

Cash and equivalents at beginning of year

    285,530     199,536     199,536     179,846     269,190  

Cash and equivalents at end of year

  $ 361,082   $ 296,424   $ 285,530   $ 199,536   $ 179,846  

        We require relatively low levels of capital expenditures and have a highly variable cost structure where costs increase and decrease based on the level of revenues we receive. Our revenues, in turn, are highly correlated to the level of AUM and to their investment performance. We anticipate that we will be able to continue to produce positive operating cash flows and that together with our available liquid assets should be sufficient to meet our cash requirements. At June 30, 2015, we had cash equivalents of $361.1 million, an increase of $75.6 million from the prior year-end.

        Net cash provided by operating activities was $50.5 million for the six months ended June 30, 2015, principally resulting from net purchases of securities and partnership interests in our proprietary accounts of $17.4 million, $12.9 million from timing differences in the settlement of trading securities, net income of $3.2 million and a $17.0 million decrease in other assets offset by decreases in its compensation payable of $3.1 million. Net cash used in operating activities was $4.7 million for the six months ended June 30, 2014, principally due to a decrease in compensation payable of $8.0 million.

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        Net cash used in investing activities was $40.3 million in 2015 primarily from purchases of AFS securities while net cash provided by investing activities was $4.3 million in 2014 largely due to proceeds from sales of AFS securities.

        Net cash provided by financing activities was $65.4 million for the six months ended June 30, 2015, largely resulting from $0.1 million in net redemptions from noncontrolling interests and $65.5 million in cash transfers from its parent. Net cash provided by financing activities was $97.3 million for the six months ended June 30, 2014, due to $15.6 million in net contributions from noncontrolling interests and $91.7 million in cash transfers from its parent less $10.0 million for the repayment of a demand loan.

        Net cash used in operating activities was $58.6 million for the year ended December 31, 2014, principally resulting from net purchases of securities and partnership interests in our proprietary accounts of $38.8 million, decreases in its accrued expenses and payables of $9.5 million and a $16.0 million increase in other assets offset by net income of $3.0 million and $7.8 million from timing differences in the settlement of trading securities. Net cash provided by operating activities was $40.8 million for the year ended December 31, 2013, principally due to net income of $26.8 million.

        Net cash provided by investing activities was $3.8 million in 2014 and $29.4 million in 2013, in both years largely due to proceeds from sales of AFS securities.

        Net cash provided by financing activities was $140.8 million for the year ended December 31, 2014, largely resulting from $65.7 million in net contributions from noncontrolling interests and $85.1 million in cash transfers from its parent. Net cash used in financing activities was $50.5 million for the year ended December 31, 2013, due to $11.1 million in net redemptions from noncontrolling interests and net transfers to its parent of $38.9 million.

        G.research is registered with the SEC as broker-dealers and is regulated by FINRA. As such, G.research is subject to the minimum net capital requirements promulgated by the SEC. G.research's net capital exceeded these minimum requirements at June 30, 2015. G.research computes its net capital under the alternative method permitted by the SEC, which requires minimum net capital of the greater of $250,000 or 2% of the aggregate debit items in the reserve formula for those broker-dealers subject to Rule 15c3-3 promulgated under the Exchange Act. As of June 30, 2015, December 31, 2014 and 2013, G.research had net capital, as defined, of approximately $7.3 million, $1.6 million and $3.6 million, respectively, exceeding the regulatory requirement by approximately $7.1 million, $1.4 million and $3.4 million, respectively. Net capital requirements for G.research may increase in accordance with rules and regulations to the extent it engages in other business activities.

        After the record date and before the distribution date and subject to the NYSE 19.99% Limit, GAMCO expects to issue to GSI up to $150 million worth of Former GAMCO Treasury Shares in exchange for the GSI Note. GAMCO will contribute the GSI Note to ACG at the time of the spin-off resulting in GSI owing ACG all amounts due pursuant to the GSI Note. The proceeds we receive pursuant to these transactions and our potential future sale of the Former GAMCO Treasury Shares may be used to, among other things, provide seed capital for Investment Partnerships that we expect to form and, possibly, acquisitions, alliances and lift-outs. See "The Spin-Off—The Formation Transactions" and "Arrangements Between GAMCO and ACG After the Spin-Off—GAMCO Note."

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Off-Balance Sheet Arrangements

        We are the general partner or co-general partner of various Investment Partnerships whose underlying assets consist primarily of marketable securities.

        Our income from these Investment Partnerships consists of our share of the management fees and a 20% incentive allocation on profits earned by the limited partners. We also receive a pro rata return on any investment we have in the Investment Partnership. We earned management fees of $2.9 million, $2.8 million and $3.1 million in 2014, 2013 and 2012, respectively, and incentive fees of $1.0 million, $1.5 million and $1.2 million in 2014, 2013 and 2012, respectively. Our pro rata gain on investments in these limited partnerships totaled $1.5 million, $1.9 million and $0.9 million in 2014, 2013 and 2012, respectively.

        We do not invest in any other off-balance sheet vehicles that provide financing, liquidity, market or credit risk support or engage in any leasing activities that expose us to any liability that is not reflected on our Combined Consolidated Financial Statements.

Contractual Obligations

        The following table sets forth our significant contractual cash obligations as of December 31, 2014 (in thousands):

Contractual Obligations:
  Total   2015   2016   2017   2018   2019   Thereafter  

Demand Notes(1)

    16,000     16,000                      

Occupancy charge

  $ 4,004   $ 312   $ 284   $ 284   $ 284   $ 284   $ 2,556  

Total

  $ 20,004   $ 16,312   $ 284   $ 284   $ 284   $ 284   $ 2,556