A N N U A L
R E P O R T
2020
WISDOM. PERFORMANCE. BRIGHT FUTURE. TRUST.
Merger Arbitrage Flagship Fund
Percent Return (%)
Gross
Return
Net
Return
90 Day
T-Bill
T-Bill +
400bps
9.45
8.55
4.35
4.69
9.13
5.33
3.89
5.33
4.32
4.89
9.07
12.40
0.06
6.39
12.39
9.40
5.49
8.90
4.56
7.11
18.10
16.61
10.10
12.69
12.14
14.06
7.90
12.29
7.05
12.00
9.43
23.00
45.84
-13.67
33.40
30.47
6.70
5.98
2.65
2.92
6.44
3.43
2.29
3.43
2.63
3.07
6.35
9.15
-0.94
4.26
8.96
6.63
3.69
6.26
2.45
4.56
13.57
12.31
7.21
9.21
8.84
10.27
5.53
8.91
4.78
8.76
6.67
17.55
35.66
-14.54
26.14
22.64
0.58
2.25
1.86
0.84
0.27
0.03
0.03
0.05
0.07
0.08
0.13
0.16
1.80
4.74
4.76
3.00
1.24
1.07
1.70
4.09
5.96
4.74
5.06
5.25
5.25
5.75
4.24
3.09
3.62
5.75
7.92
8.63
6.76
5.90
6.24
7.82
4.58
6.25
5.86
4.84
4.27
4.03
4.03
4.05
4.07
4.08
4.13
4.16
5.80
8.74
8.76
7.00
5.24
5.07
5.70
8.09
9.96
8.74
9.06
9.25
9.25
9.75
8.24
7.09
7.62
9.75
11.92
12.63
10.76
9.90
10.24
11.82
Gross
Excess
Return
4.87
2.30
-1.52
-0.15
4.86
1.30
-0.15
1.28
0.25
0.82
4.94
8.24
-5.74
-2.35
3.63
2.40
0.25
3.83
-1.14
-0.98
8.14
7.87
1.04
3.44
2.89
4.31
-0.34
5.20
-0.57
2.25
-2.49
10.37
35.08
-23.57
23.16
18.65
Year
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
The performance above refers to our merger arbitrage flagship fund. Both net and gross returns are shown. Net returns are net of management and incen-
tive fees. Gross returns are gross of management and incentive fees. Individual investment returns may differ due to timing of investment and other factors.
Past performance is not indicative of future results.
Average Annual Excess Return
3.40%
Dear Partners/Shareholders:
How does one even begin to summarize 2020? In economic terms, it was a year that began with a 3.6% unemployment rate,
and ended with nearly $1 trillion in lost economic output and over ten million jobless Americans. In human terms, the cost of
the COVID-19 pandemic is immeasurable, claiming over one half million lives, doubling the number of families experiencing
food insecurity and straining relationships with family and friends. If it were not for the Fed’s open checkbook and fiscal
stimulus, and the miraculous speed of rolling out vaccines, the consequences of this insidious virus would be unfathomable.
(Y)our team continues to observe social distancing guidelines and remains fully operational and focused, with teammates in
the office on a rotating schedule. Over the years we have invested in technology and infrastructure that allow teammates to
work remotely in anticipation of the need to invest seamlessly from disparate locations.
Looking back at 2020 -
We are privileged to share Associated Capital’s (“AC”) financial results for 2020. As always, we value your trust and support.
• COMMITMENT TO COMMUNITY - (Y)our “S” in ESG - in August, our Board approved the continuation of the
shareholder designated charitable contribution program with a $0.20 per share designation for registered shareholders.
This translates into approximately $4.0 million in donations, which brings our total projected contributions to $24.0
million since our spin-off from GAMCO in November 2015. Since the inception of this program, there have been
over one hundred sixty 501(c)3 organizations (listed on the back inside cover) which received designations from our
shareholders.
• Our MERGER ARBITRAGE strategy had its best year in ten years. The funds rebounded sharply from compressed
“spreads” in March and ended up the year with a 9.5% gross return (6.7% net) for 2020. Since inception in February
1985, we have compounded net annual returns of 7.4%. As a result, a $10 million investment by a tax free vehicle in this
fund at its inception would be worth approximately $128 million as of December 31, 2020.
• On August 5, 2020, AC distributed its shares of Morgan Group Holdings (MGHL:OTC) to shareholders, completing the
final step in the process which began with the merger of G.research into Morgan Group in October 2019. In the 2020
financials, Morgan Group is being carried as a discontinued operation. As a result of the transaction, revenues were reset
and we immediately reduced operating losses on an ongoing basis.
• On September 22, 2020 AC completed the $175 million initial public offering of PMV Consumer Acquisition Corp.
(NYSE:PMVC), a special acquisition vehicle created to pursue a business combination with a company in the broadly
defined consumer space having an enterprise value between $200 million and $3.5 billion. Our first SPAC, the Gabelli
Value for Italy S.p.a. (VALU), an Italian company listed on the LSE’s Borsa Italian AIM segment launched in April 2018
with €110 million of capital. Facing a transaction deadline during the height of the coronavirus pandemic in Italy, VALU
had limited options, and elected to return capital to shareholders.
• At year end, we rationalized our fund line-up, resulting in the elimination of three funds. We continue to incubate
strategies with proprietary capital, which may result in the launch of one or more funds, including a technology fund
which invests through a mixed lens of value and growth and ended the year with a 67% gross return.
•
In March, Associated Capital completed the purchase of an office building in St. James, London. The building will serve
as the European headquarters for the firm, together with its UK affiliated company, Gabelli Asset Management UK,
Limited.
• We continue to evaluate options for our investment in GAMCO Investors, Inc. At year end, we held 2.7 million shares of
GAMCO with a tax basis significantly higher than the current market value.
• We paid semi-annual dividends of $0.10 per share, paying out $4.6 million to shareholders.
• Book value ended the year at $40.36 per share versus $39.89 at December 31, 2019.
As previously discussed, Gabelli Private Equity Partners was created to launch a private equity business, somewhat akin to
the success our predecessor firm had in the 1980s. We will continue our outreach initiatives with business owners, corporate
management, and various financial sponsors.
In 2021, we will continue to explore new avenues, including L.P.’s in our investments, to put our capital to work by pursuing
deals, new distribution channels and new products.
Sincerely,
Mario J. Gabelli
Executive Chairman
Douglas R. Jamieson Chief Executive Officer and President
In 2020, AC made significant advances despite the challenges presented by the coronavirus
pandemic. Our team moved seamlessly to remote operations; our Arb team, led by Ralph Rocco,
had a stellar year…generating the best results in a decade; we completed the spin-off of G.research
(Morgan Group Holdings) to our shareholders on August 5; and, under Marc Gabelli’s leadership,
we launched our first U.S. SPAC, PMV Consumer Acquisition Corp. We strengthened our finance
and accounting team by adding Tim Schott as EVP and CFO and Mike Kuhlman .as Senior Vice
President and Controller
At Gabelli & Partners, the marketing and business development team has done an excellent job
maintaining and expanding relationships across the globe while managing the business within the
parameters and in line with the restrictions we all have to operate within over the past year. The teams’ in office and remote
scheduling has provided continuous service to our investors and partners. While travel restrictions have paused their regular
trips here and abroad, meetings, roadshows and the 21st Annual Arbitrage Dinner all continued, albeit virtually. The fruits of
their labors are evident with increased inclusion in searches and new inflows particularly in our M&A strategy which finished
2020 up 9.5% gross; 6.7% net. The team also oversees and cultivates relationships with several outside distributors as well as
private banks, financial intermediaries, and investor platforms in continental Europe, Asia and elsewhere abroad. In regards
to distribution, we are continuously exploring strategic relationships in order to better position our firm and funds across
various new markets.
In addition, PMV Consumer Acquisition Corp., a special purpose acquisition corporation (SPAC), was launched in September
2020 raising $175 million. It was created to pursue an initial business combination following the consumer globally with
companies having an enterprise valuation in the range of $200 million to $3.5 billion. AC’s co-investment represents one
part of our three pronged approach to direct investing.
In March, we completed the purchase of an office building at 3 St. James Place in London which will serve as the European
headquarters. Once the travel restrictions are lifted and everyone is able to move in, we invite you to visit.
A S S E TS U N D E R MANAG E M E NT
Assets under management (dollars in millions) ended 2020 at $1351. The decline was largely the result of the redemption by a
large corporate plan following its merger. We continue to see interest in products from new investor groups, especially outside of
the United States.
Non-Market Correlated
ENGLISH
ITALIAN
CHINESE
JAPANESE
SPANISH
Deals...Deals...and More Deals - Now in five languages.
Originally published in 1999 by Gabelli University Press.
“There are many advantages to investing in risk arbitrage. Let’s focus on three: risk arbitrage
returns are not closely correlated with those of the stock market; they are less volatile than returns
on the S&P 500; and longer term they are higher than those returns afforded by traditional investing.
While these three factors provide for excellent results in the world of arbitrage, the real beauty of
risk arb investing is that there is rarely a down year. Because risk arb returns are consistently
positive year in and year out, they fulfill the concept of a compound return. We proclaim this source
of compounded earnings as the eighth wonder of the world.
Compounding is the secret to wealth creation over a period of decades.”
Regina M. Pitaro
(Deals...Deals...and More Deals, 1999)
Regina M. Pitaro
Columbia University,
Graduate School of Business M.B.A., Finance
Loyola University of Chicago M.A., Anthropology
Fordham University B.S., Anthropology
“Give a man a fish and you feed him
for a day. Teach a man to arbitrage, and
you feed him forever.” - Warren Buffett
In 1999, we published one of the few
books on merger arbitrage, Deals…
Deals…and More Deals. Our new
publication, Merger Masters: Tales of
Arbitrage, profiles leading investors
who share our enthusiasm for merger
arbitrage and have utilized
the
investment discipline in various forms
over the last half-century. It also
includes the perspective of iconic CEOs
who have used M&A to build value
and, in the process, tangled with the
arbitrage community. Merger Masters
is now available on Amazon.com.
M E RG E R AR B ITR AG E
The alternative investment strategies focus on fundamental, active, event-
driven special situations and merger arbitrage. It is led by the merger
arbitrage portfolios which returned an unleveraged +9.6%, (+6.7 % return net
of fees and expenses) for all of 2020. This strategy benefits from corporate
merger and acquisitions activity that totaled $3.6 trillion globally in 2020.
While this was a decrease of 5% compared to 2019, the second half of the year
saw record M&A levels. Deal activity during the second half of 2020 totaled
$2.3 trillion, a 90% increase year over year.
Dealmaking was largely driven by deals between $5-$10 billion in value—which accounted for over $515 billion in volume,
up 36% year over year. M&A volume in the United States totaled $1.4 trillion, a decrease of 21% year-over-year; however,
volumes in the second half the year were nearly triple that of the first half. European M&A totaled $1 trillion in 2020, an
increase of 36%. Asia Pacific and Japan both saw strong volumes as well, with increases of 16% and 7%, respectively. The
most active sectors for M&A activity were Technology ($684 billion, an all-time record), Financials and Energy & Power.
The merger arbitrage investment process begins with the announcement of an
acquisition, when an acquirer makes an offer for all of the target company’s
stock. The target’s shares usually trade at a discount, or spread, to the final
deal price because of the time value of money, regulatory approval risks or
any other risks that might prevent a transaction from closing. Our typical
investment process involves buying shares of the target at a discount, earning
the spread to the deal price when the deal closes, and reinvesting the profits
in new deals in a similar manner. By owning a diversified portfolio of deals, we
mitigate the adverse impact of deal specific risks. Our investment process in
M&A has a long track record of attractive, non-market correlated returns.
From a portfolio perspective, we finished 2020 on a high note, with strong performance from deals in our pipeline, as well as
our absolute return investments. Our diversified approach to portfolio construction, as well as our focus on highly strategic
and fully financed acquisitions, positioned us to withstand dramatic spread widening in early 2020 due to the COVID-19
pandemic. As markets dislocated in the first half of 2020, we put capital to work investing in deals with greater potential
returns, as we have during previous market selloffs since 1985. Throughout 2020, we found the market was often mispricing
risk in deals, and we benefitted when deals closed according to schedule. Regulators adapted to a remote work environment
to grant timely approvals, as did advisers and corporate management, allowing for a strong comeback in deal activity in the
second half.
We are finding attractive investment opportunities in newly announced deals, and continue to add to existing positions in
our portfolio. We remain focused on investing in highly strategic, well-financed deals with an added focus on near-term
catalysts. The top holdings in our fund remain deals we expect to close in the near term and those with the highest certainty
of value. We are optimistic about our prospects to continue to generate absolute returns and are off to a good start in 2021.
The strategy is offered domestically through partnerships and separately managed accounts. Internationally, the strategy
is offered through corporations and EU-regulated UCITS structures and the London Stock Exchange listed investment
company, Gabelli Merger Plus Trust (GMP-LN).
S PECIAL PU R P OS E ACQ U I S ITI O N CO M PAN I E S
(S PAC S )
SPACs are essentially blind pools raised by a Sponsor to acquire a single unspecified target company within a limited time
frame (typically two years).
In 2020, the market for SPACs accelerated, raising a total of $83 billion across 248 offerings. The markets are full of liquidity
and SPACs provide investors with limited downside risk and, at the same time, provide private companies with a quick and
an innovative way to market at lower cost fees compared to a traditional IPO.
Associated Capital launched PMV Consumer Acquisition Corp.(“PMV”) in September to pursue an initial business combination
with target companies having an enterprise valuation in the $200 million to $3.5 billion range. PMV’s structure and the team’s
experience in corporate mergers and acquisitions and financial engineering makes PMV an attractive partner.
PMV Consumer Acquisition is Associated Capital Group’s second launch of a SPAC and follows the template established for
other SPACs by our affiliates. PMV is part of Associated Capital’s three-pronged approach to direct investing which includes
its “fund-less” private equity vehicle, Gabelli Private Equity Partners, and Gabelli Principal Strategies (“GPS”) which was
organized to invest in the capital structure of small and mid-sized companies.
Opportunity in Consumer
We believe consumer-oriented companies possess attractive qualities for investors, including: predictable, often recurring
revenue streams; resilient free cash flow generation; and pricing power with an ability to leverage fixed costs to profitably
scale both organically and inorganically.
In consumer and its adjacent sectors, there are also a number of trends: these include demographic shifts in terms of birth
rates, aging, size of the population and per capita income, which will drive consumer spending; an accelerating shift to digital
and omni-channel, which impacts supply chains, manufacturing, distribution, marketing and selling practices; a consumer
focus on brand and company values; and, key differentiators in function, nutrition, and quality as consumers select products
for their functional benefits, including the increased consumer focus on health, wellness and nutrition.
The past performance of our management team and its affiliates is not a guarantee that we will be able to identify a suitable
candidate for our initial business combination or of success with respect to any business combination we may consummate.
Finally, there is no assurance that the SPAC will be successful in completing a business combination or that any business
combination will be successful.
Investors
Sponsor
Target
Plus
Free look at
deal with
upside via
warrants
Minus
Opportunity
cost on capital
Plus
Reward via
promote
Minus
Potential
loss of initial
capital
Plus
Ability to go
public quickly,
monetize
and retain
interests
Minus
Second
IPO could
be poorly
received, leav-
ing orphaned
equity
CO N D E N S E D CO N SO LI DATE D BAL AN CE S H E E T (in thousands)
ASSETS
Cash and cash equivalents (a)
Investments
Receivables
Other assets (b)
Assets of discontinued operations (c)
Total assets
LIABILITIES AND EQUITY
Compensation payable
Securities sold, not yet purchased
Income taxes payable
Accrued expenses and other liabilities
Liabilities of discontinued operations (c)
Total liabilities
December 31,
2020
2019
$383,962
544,486
36,766
209,331
-
$1,174,545
$371,038
576,003
37,061
18,667
8,137
$1,010,906
$18,567
17,571
9,746
20,444
-
66,328
$19,536
16,419
3,622
21,409
2,100
63,086
Redeemable noncontrolling interests (d)
206,828
50,385
Stockholders' equity
Total equity
Total liabilities and equity
Shares outstanding
Average
Year-end
901,389
901,389
$1,174,545
897,435
897,435
$1,010,906
22,369
22,274
22,534
22,475
(a) Includes $5 million and $13 million held by
consolidated investment funds in 2020 and in
2019, respectively.
(b) Includes $175 million in Investments in U.S.
Treasury Bills held in trust from the consolidation
of the PMV SPAC.
(c) Represents assets and liabilities of Morgan
Group Holdings spun-off August 5, 2020.
(d) 2020 includes $155 million in PMV common
stock subject to possible redemption. The
remainder consists of third-party capital
balances in consolidated investment funds.
Q UARTE R LY FI NAN CIAL I N FO R MATI O N
Quarterly financial information for 2020 and 2018 is presented below.
(In thousands, except per share data)
Revenues
Operating Loss
Net income/(loss) from continuing operations, net of tax
Income/(loss) from discontinued operations, net of tax
Net income attributable to Associated Capital, Inc 's shareholders
Net income attributable to Associated Capital, Inc 's
shareholders per share
Basic - Continuing operations
Basic - Discontinued operations
Basic - Total
Fully diluted
Revenues
Operating Loss
Net income/(loss) from continuing operations, net of tax
Income/(loss) from discontinued operations, net of tax
Net income attributable to Associated Capital, Inc 's shareholders
Net income attributable to Associated Capital, Inc 's
shareholders per share
Basic - Continuing operations
Basic - Discontinued operations
Basic - Total
Fully diluted
1st
$2,962
(640)
(77,069)
(231)
$(73,355)
(3.26)
(0.01)
$(3.27)
$(3.27)
1st
$2,733
(6,528)
25,672
(1,018)
$23,147
$1.07
(0.05)
$1.02
$1.02
2nd
$2,067
(3,661)
37,935
(262)
$35,237
1.58
(0.01)
$1.57
$1.57
2nd
$2,723
(2,027)
974
(822)
$(932)
$0.00
(0.04)
$(0.04)
$(0.04)
2020
3rd
$1,945
(3,552)
6,891
(139)
$5,815
0.27
(0.01)
$0.26
$0.26
2019
3rd
$2,755
(2,593)
5,893
(301)
$5,951
$0.27
(0.01)
$0.26
$0.26
4th
$12,009
(4,616)
52,752
-
$51,119
2.28
-
$2.28
$2.28
4th
$13,994
(2,112)
12,057
251
11,022
$0.48
0.02
$0.50
$0.50
Total
$18,983
$(12,469)
$20,509
$(632)
$18,816
$0.87
(0.03)
$0.84
$0.84
Total
$22,205
$(13,260)
$44,596
$(1,890)
$39,188
$1.82
(0.08)
$1.74
$1.74
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020 Or
For the transition period from
to
Commission file number 001-37387
Associated Capital Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
191 Mason Street, Greenwich, CT
(Address of principal executive offices)
47-3965991
(I.R.S. Employer Identification No.)
06830
(Zip Code)
Registrant’s telephone number, including area code (203) 629-9595
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock, par value $0.001 per share
Trading Symbol
AC
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ☐ No ☒.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes ☐ No ☒.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days Yes ☒ No ☐.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”,
“accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Non-accelerated filer ☒
Accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15
U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes ☐ No ☒.
The aggregate market value of the class A common stock held by non-affiliates of the registrant as of June 30, 2020
(the last business day of the registrant’s most recently completed second fiscal quarter) was $125,203,285.
As of February 28, 2021, 3,249,309 shares of class A common stock and 18,962,918 shares of class B common stock
were outstanding. GGCP, Inc., a private company controlled by the Company’s Executive Chairman, held 77,165
shares of class A common stock and indirectly held 18,423,741 shares of class B common stock. Other executive
officers and directors of GGCP, Inc. held 19,100 and 36,758 shares of class A and class B common stock,
respectively. In additional, there are 155,500 Phantom Restricted Stock Awards outstanding as of December 31,
2020.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s definitive proxy statement relating to
the 2021 Annual Meeting of Shareholders are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of
this report.
2
Associated Capital Group, Inc.
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2020
Part I
Item 1
Business
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 10
Item 11
Item 12
Item 13
Item 14
Item 15
Item 16
Part II
Part III
Part IV
Business Strategy
Competition
Intellectual Property
Regulation
Employees
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market For The Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of
Equity Securities
Selected Financial Data
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
Quantitative And Qualitative Disclosures About Market Risk
Financial Statements And Supplementary Data
Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
Controls And Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters
Certain Relationships And Related Transactions, and Director Independence
Principal Accountant Fees And Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
Power of Attorney
Exhibit 21.1 - Subsidiaries of Associated Capital Group, Inc.
6
8
9
9
10
13
13
13
13
14
14
14
15
15
22
23
59
59
60
60
60
60
60
60
61
62
63
64
Certifications
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
3
This page was intentionally left blank
4
Forward-Looking Statements
Our disclosure and analysis in this report and in documents that are incorporated by reference contain some forward-
looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). 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. You should not place undue reliance on these statements. They use words such as “anticipate,”
“estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. 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. Some of the factors that could cause our actual results to differ
from our expectations or beliefs include, without limitation: the adverse effect from a decline in the securities markets;
a decline in the performance of our products; 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. We also direct your
attention to any more specific discussions of risk contained in our other public filings or in documents incorporated by
reference here or in prior filings or reports.
We are providing these statements as permitted by the Private Litigation Reform Act of 1995. 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.
Definitions
Unless we have indicated otherwise, or the context otherwise requires, references in this report to “Associated Capital
Group, Inc.,” “AC Group,” “the Company,” “AC,” “we,” “us” and “our” or similar terms are to Associated
Capital Group, Inc., its predecessors and its subsidiaries through which our operations are actually conducted.
The information provided in response to Item 7. Management Discussion and Analysis (“MD&A”) of Financial
Condition and Results of Operation is provided as a supplement to, and should be read in conjunction with, the
Consolidated Financial Statements and the notes thereto included in Item 8 to this report.
PART 1: OVERVIEW
Giving Back to Society - (Y)our “S” in ESG
AC seeks to be a good corporate citizen in our community through the way we conduct our business activities as well
as by other measures such as serving our community, sponsoring local organizations and developing our teammates.
Since our spin-off in 2015, AC has supported over 160 qualified charities that address a broad range of local, national
and international concerns. The recipients were identified by our shareholders through AC’s Shareholder-Designated
Contribution Program. The 2020 program, approved by our Board in August 2020, allows each shareholder of record
at February 28, 2021 to designate a qualified charity to receive a $0.20 per share donation from AC. We expect that the
Company’s total contributions for the 2020 program will be approximately $4.0 million bringing cumulative donations
to approximately $24.0 million.
5
ITEM 1: BUSINESS
Your Business
We are a Delaware corporation, incorporated in 2015, that provides alternative investment management services and operates a
direct investment business that invests in new and existing businesses. We derive a significant amount of investment income/(loss)
from proprietary investments in funds that we manage.
Alternative Investment Management
We conduct our investment management activities through our wholly-owned subsidiary Gabelli & Company Investment Advisers,
Inc. (“GCIA”) and its wholly-owned subsidiary, Gabelli & Partners, LLC (“Gabelli & Partners”). GCIA is an investment adviser
registered with the Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940, as amended (the
“Advisers Act”). GCIA and Gabelli & Partners together 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 and across a range of risk and event arbitrage portfolios. The
business earns management and incentive fees from its advisory activities. Management fees are largely based on a percentage of
assets under management (“AUM”). Incentive fees are based on the percentage of the investment returns of certain client portfolios.
We manage assets on a discretionary basis and invest in a variety of U.S. and foreign securities. We primarily employ absolute
return strategies with the objective of generating positive returns. We serve a wide variety of investors including private wealth
management clients, corporations, corporate pension and profit-sharing plans, foundations and endowments, as well as serving as
sub-advisor to certain third-party investment funds.
In event merger arbitrage, the goal is to earn absolute positive returns. We introduced our first alternative fund, Gabelli Arbitrage
(renamed Gabelli Associates), in February 1985. Our typical investment process involves buying shares of the target at a discount,
earning the spread to the deal price when the deal closes, and reinvesting the profits in new deals in a similar manner. By owning a
diversified portfolio of deals, we mitigate the adverse impact of deal-specific risks. Since inception in February 1985, we have
compounded net annual returns of 7.4%. As a result, a $10 million investment by a tax free vehicle in this fund at its inception would
be worth more than $128 million, as of December 31, 2020. In addition, the value of such an investment would have exhibited
significantly less volatility than that of broad equity indices.
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 funds have been added to balance investors’ geographic, strategy and sector needs. Today,
we manage Investment Partnerships in multiple categories, including event merger arbitrage, event-driven value and other
strategies.
6
Assets Under Management
As of December 31, 2020, we managed approximately $1.35 billion in assets. The following table sets forth AC’s total
AUM, including investment funds and separately managed accounts, for the dates shown (in millions):
December 31,
2020
2019
Event Merger Arbitrage
Event-Driven Value (a)
Other (b)
Total (c)
$
$
1,126
180
45
1,351
1,525
132
59
1,716
$
$
(a) Excluding event merger arbitrage.
(b) Includes investment vehicles focused on private equity, merchant banking, non-investment-grade credit and capital
structure arbitrage.
(c) Includes $235 and $259 of proprietary capital, respectively.
Proprietary Capital
The proprietary capital is earmarked for our direct investment business that invests in new and existing businesses,
using a variety of techniques and structures. The direct investment business is developing along three core pillars;
Gabelli Private Equity Partners, LLC (“GPEP”), formed in August 2017 with $150 million of authorized capital as a
“fund-less” sponsor; the SPAC business (Gabelli special purpose acquisition vehicles), launched in April 2018 when
the Company sponsored a €110 million initial public offering of its first special purpose acquisition corporation, the
Gabelli Value for Italy S.p.a., which was subsequently liquidated on July 8, 2020 at the apex of the pandemic in Italy.
Finally, Gabelli Principal Strategies Group, LLC (“GPS”) was created to pursue strategic operating initiatives.
7
On September 22, 2020, Associated Capital announced the $175 million initial public offering of its special purpose acquisition
corporation (“SPAC”), PMV Consumer Acquisition Corp. (NYSE:PMVC). PMV Consumer Acquisition Corp. (“PMV”) was created to
pursue an initial business combination following the consumer globally with companies having an enterprise valuation in the range of
$200 million to $3.5 billion.
We have a proprietary portfolio of cash and investments which we expect to use to invest primarily in funds that we will manage,
provide seed capital for new products, including SPACs that we or our affiliates sponsor, expand our geographic presence, develop
new markets and pursue strategic acquisitions and alliances.
Morgan Group Holding Co. Spin-Off
On March 16, 2020, the Company announced that its Board of Directors approved the spin-off of Morgan Group Holding Co.
(“Morgan Group”) which included our institutional research services business, to AC’s shareholders whereby AC would distribute
to its shareholders on a pro rata basis the 50,000,000 shares of Morgan Group that it owned upon close of the spin-off.
On May 5, 2020, the Morgan Group board approved a reverse stock split of the issued and outstanding shares of their common stock,
par value $0.01 per share, in a ratio of 1-for-100 that was effective on June 10, 2020.
On August 5, 2020, the distribution of AC’s 83.3% stake in Morgan Group was completed to shareholders of record as of July 30,
2020. Based on the distribution ratio, AC shareholders received approximately 0.022356 shares of Morgan Group common stock for
each share of AC common stock they held.
The historical financial results of Morgan Group have been reflected in the Company’s consolidated financial statements as
discontinued operations for all periods presented through August 5, 2020.
Business Strategy
Our business strategy targets global growth of the business through continued leveraging of our proven asset management strengths
including the long-term performance record of our alternative investment funds, 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
Since 1985, our results demonstrate our core competence in event driven investing through market cycles. Our “Private
Market Value (PMV) with a Catalyst™” investing approach remains the principal management philosophy guiding our
investment operations. This method is based on investing principles articulated by Graham & Dodd, and further refined by
our Executive Chairman, Mario J. Gabelli.
Growing our Investment Partnerships Advisory Business
We intend to grow our Investment Partnerships advisory operations by gaining share with existing products and
introducing new products within our core competencies, such as event and merger arbitrage. In addition, we intend to grow
internationally.
8
Capitalizing on Acquisitions and Alliances - Direct Investments
We intend to leverage our research and investment capabilities by pursuing acquisitions and alliances that will
broaden our product offerings and add new sources of distribution. In addition, we may make direct investments
in operating businesses using a variety of techniques and structures. For example, on September 22, 2020,
Associated Capital announced the $175 million initial public offering of its special purpose acquisition
corporation, PMV Consumer Acquisition Corp. (NYSE:PMVC). PMV Consumer Acquisition Corp. (“PMV”)
was created to pursue an initial business combination following the consumer globally with companies having
an enterprise valuation in the range of $200 million to $3.5 billion.
Pursuing Partnerships and Joint Ventures
We plan to pursue partnerships and joint ventures with firms that fit with AC’s product quality and that can
provide Asian/European distribution capabilities that would complement our U.S. equity product expertise. We
expect to target opportunities for investors interested in non-market correlated returns.
Competition
The alternative asset management industry is intensely competitive. We face competition in all aspects of our business
from other managers in the United States and around the globe. We compete with alternative investment management
firms, insurance companies, banks, brokerage firms and financial institutions that offer products that have similar
features and investment objectives. Many of these investment management firms are subsidiaries of large diversified
financial companies and may have access to greater resources than us. Many are larger in terms of AUM and revenues
and, accordingly, have larger investment and sales organizations and related budgets. Historically, we have competed
primarily on the basis of the long-term investment performance of our investment products. We have recently taken
steps to increase our distribution channels, brand awareness and marketing efforts.
The market for providing investment management services to institutional and private wealth management clients is
also highly competitive. 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, and focus on
one-year and three-year performance records. Currently, we believe that our investment performance record would be
attractive to potential new institutional and private wealth management clients. While we have significantly increased
our AUM from institutional investors since our founding, 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. We have rights to use the “Gabelli” name, and the “GAMCO” brand, pursuant to a
non-exclusive, royalty-free license agreement we have entered into with GAMCO (the “Service Mark and Name
License Agreement”). We can use these names 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 its quality control provisions. Pursuant to an assignment agreement signed in 1999, Mario J. Gabelli
had 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 institutional research services. In addition, the funds managed by Mario J.
Gabelli outside GAMCO and AC have entered into a license agreement with GAMCO permitting them to continue
limited use of the “Gabelli” name under specified circumstances.
9
Regulation
Virtually all aspects of our businesses are subject to federal, state and foreign laws and regulations. These laws and regulations are
primarily intended to protect investment advisory clients and investors and the financial markets. Under such laws and regulations,
agencies that regulate investment advisors have broad powers, including the power to limit, restrict or prohibit such an advisor 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.
Existing U.S. Regulation Overview
AC and certain of its U.S. subsidiaries are currently subject to extensive regulation, primarily at the federal level, by the SEC, the
United States Department of Labor, and other regulatory bodies. Certain of our U.S. subsidiaries are also subject to anti-terrorist
financing, privacy, and anti-money laundering regulations as well as economic sanctions laws and regulations established by these
agencies.
The Advisers Act
GCIA 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 GCIA to
comply with the requirements of the SEC could have a material adverse effect on us.
We derive substantially all of our revenues from investment advisory services under investment management agreements. Under the
Advisers Act, our investment management agreements may not be assigned without the client’s consent.
Employee Retirement Income Security Act of 1974 (“ERISA”)
GCIA is subject to ERISA and to regulations promulgated thereunder, insofar as it is a “fiduciary” under ERISA with respect to
certain of its clients. ERISA and applicable provisions of the Internal Revenue Code of 1986, as amended, 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.
Anti-Tax Evasion Legislation
Our global business may be impacted by the Foreign Account Tax Compliance Act (“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 Organization for Economic Cooperation and Development (“OECD”) has developed the Common Reporting Standard (“CRS”)
to address the issue of offshore tax evasion on a global basis. Aimed at maximizing efficiency and reducing cost for financial
institutions, the CRS provides a common standard for due diligence, reporting and exchange of information regarding financial
accounts. Pursuant to the CRS, participating jurisdictions will obtain from reporting financial institutions, and automatically
exchange with partner jurisdictions on an annual basis, financial information with respect to all reportable accounts identified by
financial institutions on the basis of common due diligence and reporting procedures. As a result, the Investment Partnerships will
be required to report information on the investors of the Partnerships to comply with the CRS due diligence and reporting
requirements, as adopted by the countries in which the Investment Partnerships are organized.
The FATCA and CRS rules will impact both U.S. and non-U.S. Investment Partnerships and separately managed accounts and
subject us to extensive additional administrative burdens. Our business could also be impacted to the extent there are other changes
to tax laws such as the recent tax reform legislation. Such changes could adversely affect our financial results.
10
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 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 as applicable to us could have a material adverse effect on us.
Laws and Other Issues Relating to Taking Significant Equity Stakes in Companies
Investments by AC, its affiliates, and those made on behalf of their respective advisory clients and Investment
Partnerships often represent a significant equity ownership position in an issuer’s equity. This may be due to the fact
that AC is deemed to be a member of a “group” that includes GAMCO Investors, Inc. (“GAMCO”), an entity under
common control with AC, and, therefore, may be deemed to beneficially own the securities owned by other members
of the group under applicable securities regulations. As of December 31, 2020, by virtue of being a member of the
group, AC was deemed to hold five percent or more beneficial ownership with respect to 80 equity securities. 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;” various
federal and state regulatory limitations, including (i) state gaming laws and regulations, (ii) federal communications
laws and regulations; (iii) federal and state public utility laws and regulations, as well as federal proxy rules governing
stockholder communications; and (iv) 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.
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 increased regulation related to private pools of capital, including changes with respect to:
investor eligibility; trading activities, record-keeping and reporting; the scope of anti-fraud protections; safekeeping of
client assets; tax treatment; and a variety of other matters. AC 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.
Existing European Regulation Overview
Alternative Investment Fund Managers Directive
Our European activities are impacted by the European Union’s (“EU”) Alternative Investment Fund Managers
Directive (“AIFMD”). AIFMD regulates managers of, and service providers to, a broad range of alternative
investment funds (“AIFs”) domiciled within and, potentially, outside the EU. AIFMD also regulates the marketing of
all AIFs inside the European Economic Area. AIFMD’s requirements restrict AIF marketing and impose additional
compliance and disclosure obligations on AC regarding items such as remuneration, capital requirements, leverage,
valuation, stakes in EU companies, depositaries, domicile of custodians and liquidity management. These 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”) impacting depositary functions,
remuneration policies and sanctions. The latest initiative in this area, UCITS V, seeks to align the depositary regime,
remuneration rules and sanctioning powers of regulators under the UCITS Directive with the requirements of AIFMD.
11
Similarly, the European Securities and Markets Authority recently revised its guidelines for exchange-traded and other UCITS
funds. These 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. We are following the guidelines with respect to our collateral management arrangements applicable
to the EPM of the UCITS funds for which GCIA acts as a sub-advisor. The costs of complying with increasing regulation in the EU
may negatively impact the net performance of the UCITs fund that GCIA sub advises and therefore may result in decreased
remuneration to GCIA for this sub advisory activity.
Markets in Financial Instruments Directive
The EU’s revised Markets in Financial Instruments Directive (“MiFID II”), which was fully implemented in 2018, created specific
new rules regarding the use of “soft dollars” to pay for research. A MiFID licensed investment firm that provides portfolio
management services or independent investment advisory services to clients may not pay for third-party research with soft dollars
generated through client trading activity. Research must be paid for either (i) by the investment firm out of its own resources or (ii)
through a separate research payment account for each client to pay for the research. While currently GCIA is not directly subject to
MiFID II: (a) GCIA may be invoiced separately by any EU brokers from whom it purchases research in the future; and (b) clients
may begin to require that GCIA “unbundle” research payments from commission trading.
The Financial Conduct Authority (“FCA”) currently regulates Gabelli Securities International (UK) Limited (“GSIL UK”), our MiFID
licensed entity in the United Kingdom. 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 provide
requirements dealing with a firm’s capital resources, senior management arrangements, conduct of business, interaction with clients
and systems and controls. The FCA supervises GSIL UK 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 GSIL and/or its employees.
Clients whose assets we manage in the EU are additionally subject to EU regulations on OTC derivatives which require (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.
Brexit Impact
Through The European Union (Withdrawal) Act of 2018, GSIL UK remains subject to the requirements of MiFID II as in effect on
December 31, 2020 (the “Transition End Date”). MiFID II, sets out detailed requirements governing the organization and conduct of
business of investment firms and regulated markets. MiFID II 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 set out in the Capital Requirements Directive. This directive includes
requirements not only on capital, but also governance and remuneration as well. The obligations introduced through these directives
have a direct effect on some of our European operations. The Company cannot assure you the extent to which the future
amendments to or replacement of MiFID II or other EU regulations will be adopted into UK law and continue to apply to GSIL UK
after the Transition End Date.
Regulatory Matters Generally
The investment management industry is likely to continue to face a high level of regulatory scrutiny and to 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.
12
Employees
On March 1, 2021, we had a full-time staff of 25 teammates, of whom 8 served in the portfolio management, research and trading
areas, 8 served in the marketing and shareholder servicing areas and 9 served in the finance, legal, operations and administrative
areas. We also avail ourselves of services provided by GAMCO in accordance with a transitional services agreement that was
entered into with GAMCO as part of the Spin-off.
Status as a Smaller Reporting Company
We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K. As a
result, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other
public companies that are not “smaller reporting companies.” On March 12, 2020 the SEC finalized amendments to the definitions
of “accelerated” and “large accelerated filer”. The amendments increase the threshold criteria for meeting these categories and were
effective on April 27, 2020 and apply to annual reports due on or after such effective date. Prior to these changes, Associated
Capital was designated as a “smaller reporting company” and an “accelerated” filer as we had more than $75 million in public float
but less than $700 million at the end of Associated Capital’s most recent second quarter. The rule changed the definition of
“accelerated filer” and expands the category of “non-accelerated filer” to include entities with public float of less than $700 million
and less than $100 million in annual revenues. Associated Capital meets the new definition of non-accelerated filer while
continuing to qualify as a “smaller reporting company”, and will no longer be considered an accelerated filer. The categorization of
“accelerated” or “large accelerated filer” determines the requirement for a public company to obtain an auditor attestation of its
internal control over financial reporting. Non-accelerated filers also have additional time to file quarterly and annual reports. All
public companies are required to obtain and file annual financial statements audits as well as provide management’s assertion on the
effectiveness of internal controls over financial reporting, but the external auditor attestation of internal control over financial
reporting is not required for non-accelerated filers like us.
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 a smaller reporting company. We ceased to be an emerging growth company after December 31,
2020.
Our website address is www.associated-capital-group.com. Information on our website is not incorporated by reference herein and
is not part of this report. We provide a link on our website to the following filings as soon as reasonably practicable after they are
electronically filed with or furnished to the Securities and Exchange Commission (“Commission” or “SEC”): our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All such filings on
our website are available free of charge. In addition, these reports and the other documents we file with the SEC are available at
www.sec.gov.
ITEM 1A: RISK FACTORS
Smaller reporting companies are not required to provide the information required by this item.
ITEM 1B: UNRESOLVED STAFF COMMENTS
None.
ITEM 2: PROPERTIES
Our offices are owned by a wholly owned subsidiary of AC and are located at 191 Mason Street, Greenwich, CT 06830. In addition,
AC acquired 3 St. James Place, London, UK on March 3, 2020 which is fully leased to GAMCO.
During 2020, AC paid $143,520 to GAMCO pursuant to a sublease based on the percentage of square footage occupied by several
AC teammates (including pro rata allocation of common space) at GAMCO’s offices at One Corporate Center, in Rye, NY prior to
the relocation to the new headquarters.
13
ITEM 3: LEGAL PROCEEDINGS
Currently, we are not subject to any legal proceedings that individually or in the aggregate involved a claim for damages in
excess of 10% of our consolidated assets. 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 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. However, management believes such
amounts, both those that are probable and those that are reasonably possible, are not material to the Company’s consolidated
financial condition, operations, or cash flows at December 31, 2020. See also Note L, Guarantees, Contingencies and
Commitments, to the consolidated financial statements in Part II, Item 8 of this Form 10-K.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5: MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market for our Stock, Dividends and Stock Repurchase Program
Shares of our Class A Stock are traded on the New York Stock Exchange under the symbol AC.
As of February 1, 2021, there were 115 and 21 holders of record of the Company’s Class A and Class B common stock,
respectively. These figures do not include beneficial holders of Class A shares held in “street” name at various brokerage firms.
In December 2015, the Board of Directors established a stock repurchase program authorizing the Company to repurchase up to
500,000 shares. On February 7, 2017, the Board of Directors reset the available number of shares to be purchased under the stock
repurchase program to 500,000 shares. On August 3, 2017 and May 8, 2018, the Board of Directors authorized the repurchase of
an additional 1 million and 500,000 shares, respectively. Our stock repurchase program is not subject to an expiration date.
The following table provides information for our repurchase of our Class A Stock during the quarter ended December 31, 2020:
Period
10/01/20 - 10/31/20
11/01/20 - 11/30/20
12/01/20 - 12/31/20
Totals
Total
Number of
Shares
Repurchased
27,668
5,064
26,037
58,769
Average
Price Paid Per
Share, net of
Commissions
33.93
$
35.25
35.69
34.82
$
Total Number of
Shares Repurchased as
Part of Publicly
Announced Plans
or Programs
27,668
5,064
26,037
58,769
Maximum
Number of Shares
That May Yet Be
Purchased Under
the Plans or Programs
924,203
919,139
893,102
We have adopted the 2015 Stock Award and Incentive Plan (the “Equity Compensation Plan”). A maximum of 2.0 million shares
of Class A Stock have been reserved for issuance as approved by the Company’s stockholders at the annual meeting of
stockholders held on May 3, 2016. The Company withdrew the registration statement covering the issuance of those shares as of
December 29, 2017.
14
During 2018, the Company awarded 172,800 Phantom Restricted Stock Awards (“Phantom RSAs”) under the Equity
Compensation Plan. During 2020, 23,000 Phantom RSA’s were terminated or forfeited by teammates who transferred to Morgan
Group Holdings Co. On December 28, 2020 the Company awarded an additional 66,850 Phantom RSA’s. As of December 31, 2020,
155,500 awarded but unvested Phantom RSAs are outstanding.
The number of shares remaining available for future issuance under equity compensation plans is 1,303,900.
ITEM 6: SELECTED FINANCIAL DATA
Smaller reporting companies are not required to provide the information required by this item.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS (“MD&A”) OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in China and has since spread quickly to numerous
countries, including the United States. On March 11, 2020, COVID-19 was identified as a global pandemic by the World Health
Organization. In response to its spread, governmental authorities have imposed restrictions on travel and congregation and the
temporary closure of many non-essential businesses in affected jurisdictions, including, beginning in March 2020, in the United
States. As world leaders focused on the unprecedented human and economic challenges of COVID-19, global equity markets
plunged as the coronavirus pandemic spread. In March, the unfolding events led to the worst month for stocks since 2008 and the
worst first quarter since 1937. In the remainder of the year, as a result of unprecedented fiscal and monetary stimulus and the fast
tracking of potential COVID-19 vaccines, some of which have been approved and have begun to be distributed, the markets have
rebounded strongly. The pandemic and resulting economic dislocations did not have a significant adverse impact on our AUM. As a
result of this pandemic, the majority of our employees (“teammates”) are working remotely.
However, there has been no material impact of remote work arrangements on our operations, including our financial reporting
systems, internal control over financial reporting, and disclosure controls and procedures, and there has been no material challenge
in implementing our business continuity plan.
The COVID-19 pandemic has had no material impact on our operations, including our financial reporting systems, internal control
over financial reporting, and disclosure controls and procedures. There has been no material challenge in implementing our business
continuity plan. AC paid the premiums for all teammates enrolled in our healthcare plans during May and from July 1 to December
31, 2020.
Financial Highlights
The following is a summary of the Company’s financial performance for the Quarters and
Years ended December 31, 2020 and 2019:
($000s except per share data or as noted)
Fourth Quarter
Full Year
2020
2019
2020
2019
AUM - end of period (in millions)
Average AUM (in millions)
Net income per share – diluted
Book Value Per Share
$1,351
1,286
$2.29
$40.36
$1,716
1,688
$0.49
$39.89
$1,351
1,399
$0.84
$40.36
$1,716
1,621
$1.74
$39.89
15
Consolidated Statements of Income
Investment advisory and incentive fees, which are based on the amount and composition of AUM in our funds and accounts,
represent our largest source of revenues. Growth in 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 attracts 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. In light of the dynamics created by COVID-19 and its
impact on the global supply chain and banks, oil, travel and leisure, we could experience higher volatility in short term returns of
our funds.
Incentive fees generally consist of an incentive allocation on the absolute gain in a portfolio generally equating to 20% of the
economic profit, as defined in the agreements governing the investment vehicle or account. We recognize such revenue only when
the measurement period has been completed or at the time of an investor redemption.
Compensation includes variable and fixed compensation and related expenses paid to officers, portfolio managers, sales, trading,
research and all other professional staff. Variable compensation is paid to sales personnel and portfolio management and may
represent up to 55% of revenues.
Management fee expense is incentive-based equal to 10% of adjusted aggregate pre-tax profits paid to the Executive Chairman or
his designees for his services pursuant to an employment agreement.
Other operating expenses include general and administrative operating costs.
Other income and expense includes net gains and losses from investments (which include both realized and unrealized gains and
losses from securities and equity in earnings of investments in partnerships), interest and dividend income, and interest expense.
Net gains and losses from investments are derived from our proprietary investment portfolio consisting of various public and
private investments and from consolidated investment funds.
Net income/(loss) attributable to noncontrolling interests represents the share of net income attributable to third-party limited
partners of certain partnerships and offshore funds we consolidate. Please refer to Notes A and E in our consolidated financial
statements included elsewhere in this report.
Consolidated Statements of Financial Condition
We ended 2020 with approximately $911 million in cash and investments, net of securities sold, not yet purchased of $18 million. This
includes $40 million of cash and cash equivalents;
$344 million of short-term U.S. Treasury obligations; $232 million of securities, net of securities sold, not yet purchased, including
shares of GAMCO with a market value of $49 million; and $295 million invested in affiliated and third-party funds and
partnerships, including investments in affiliated closed end funds which have a value of $107 million and more limited liquidity.
Our financial resources provide flexibility to pursue strategic objectives that may include acquisitions, lift-outs, seeding new
investment strategies, and co-investing, as well as shareholder compensation in the form of share repurchases and dividends.
Total shareholders’ equity was $899 million or $40.36 per share as of December 31, 2020, compared to $896 million or $39.89 per
share as of the prior year-end. Shareholders’ equity per share is calculated by dividing the total equity by the number of common
shares outstanding. The increase in equity from the end of 2019 was largely attributable to investment income for the year.
16
Assets Under Management Highlights
We reported assets under management as follows (dollars in millions):
Year Ended December 31,
2020
2019
% Change
Event Merger Arbitrage
Event-Driven Value
Other
Total (a)
$
$
1,126
180
45
1,351
1,525
132
59
1,716
(26.2)
36.4
(23.7)
(21.3)
$
$
(a) Includes $235 million and $259 million of proprietary capital, respectively.
Changes in our AUM during 2020 were as follows (dollars in millions):
Year Ended December 31, 2020
Beginning
Inflows
Outflows
Investment
Return
Ending
Event Merger Arbitrage
Event-Driven Value
Other
Total AUM
$
$
$
$
$
212
64
1
277
(690)
(19)
(18)
(727)
79
3
3
85
1,126
180
45
1,351
$
$
$
$
$
1,525
132
59
1,716
The majority of our AUM have calendar year-end measurement periods, and our incentive fees are primarily recognized in the fourth
quarter. Assets under management declined on a net basis by $450 million for the year ended December 31, 2020 (primarily due to the
redemption by one institutional client following its merger) offset by $85 million in market appreciation.
Operating Results for the Year Ended December 31, 2020 as Compared to the Year Ended December 31, 2019
Revenues
Total revenues were $19.0 million for the year ended December 31, 2020, $3.2 million lower than total revenues of $22.2 million for
the year ended December 31, 2019. Total revenues by type were as follows (dollars in thousands):
Investment advisory and incentive fees
Other revenues
Total revenues
18,288
695
18,983
Year Ended December 31,
2020
2019
$
$
Change
22,148
57
22,205
$
$
(3,860)
638
(3,222)
%
(17.4)
1,119.3
(14.5)
$
$
$
Investment advisory and incentive fees: We earn advisory fees based on our AUM. Investment advisory fees are directly influenced
by the amount of average AUM and the fee rates applicable to various accounts.
Advisory and incentive fees were $18.3 million for 2020 compared to $22.1 million for 2019, a decrease of $3.8 million. This
decrease is the result of the lower average AUM over the period.
17
Incentive fees are directly related to the gains generated for our clients’ accounts. We earn a percentage, usually 20%, of such gains.
Incentive fees were $10.5 million in 2020, down $0.7 million from $11.2 million in 2019, due to lower assets under management
offset by superior investment performance.
Other revenues: Other revenues were $0.7 million for 2020 compared to $0.1 million for 2019, an increase of $0.6 million due primarily to
sublet income of owned properties.
Expenses
Compensation: Compensation, which includes variable compensation, salaries, bonuses and benefits, was $19.4 million for the year
ended December 31, 2020, a decrease of $4.4 million from $23.8 million for the year ended December 31, 2019. Fixed compensation
expense, which includes salaries, bonuses and benefits, decreased to $9.5 million in 2020 from $10.5 million in 2019. The remainder
of compensation expense represents variable compensation that fluctuates with management and incentive fee revenues as well as
the investment results of certain proprietary accounts. Variable payouts are also impacted by the mix of products upon which
performance fees are earned and the extent to which they may exceed their allocated costs. For 2020, these variable payouts (based on
the investment performance of the products with incentive fees) were $9.9 million, a decrease of $3.4 million from $13.3 million in
2019.
Stock-based compensation, which primarily consists of awards accounted for as liabilities, was ($0.2) million in 2020, a decrease of
$1.6 million from $1.4 million recorded in 2019 due to declines in the Company’s share price.
Management fees: Management fee expense is incentive-based and entirely variable compensation equal to 10% of the aggregate
adjusted pre-tax profits, which is paid to the Executive Chairman or his designees pursuant to his employment agreement with AC.
In 2020 and 2019, AC recorded management fee expense of $3.1 million and $5.7 million, respectively.
Other operating expenses: Our other operating expenses were $8.9 million in 2020 compared to $5.9 million in 2019, an increase of $3.0
million due to primarily higher professional fees of
$1.0 million.
Investment and other non-operating income/(expense), net
Net gain/(loss) from investments: Net gain/(loss) from investments is directly related to the performance of our proprietary
portfolio. For the year ended December 31, 2020, net gains from investments were $36.9 million compared to $60.8 million in the
prior year primarily due to mark-to-market changes in our investments.
Interest and dividend income: Interest and dividend income decreased to $8.7 million in 2020 from $13.2 million in 2019 due to
lower interest rates on money market and US Treasury obligations.
Interest expense: Interest expense remained unchanged at $0.2 million for 2020 and 2019.
Income Taxes
In 2020, we recorded an income tax expense of $9.4 million resulting in an effective tax rate (“ETR”) of 31.4%. The 2020 ETR is
above the standard corporate tax rate of 21% primarily from state income taxes, a valuation allowance on the carryforward of
charitable contributions and foreign investments. In 2019, we recorded an income tax expense of $12.6 million resulting in an ETR
of 22.1%. The 2019 ETR is above the standard corporate tax rate of 21% primarily due to state income taxes and a valuation
allowance on carryforward of charitable contributions. In addition, the Company recorded a valuation allowance of $1.8 million and
$1.4 million against deferred tax assets attributable to charitable contribution carryovers as of December 31, 2020 and 2019,
respectively.
Noncontrolling Interests
Net income attributable to noncontrolling interests was $1.0 million in 2020 compared to $3.5 million in 2019. The decrease of $2.5
million was driven primarily by decreased earnings from a UK Partnership.
18
Net Income/(Loss)
Net income for the year ended December 31, 2020 was $18.8 million compared to net income of $39.2 million for the prior year.
The change was primarily driven by lower gains on our investment portfolio primarily driven by the COVID-19 pandemic.
Liquidity and Capital Resources
Our principal assets consist of cash and cash equivalents; short-term treasury securities; marketable securities, primarily equities,
including 2.8 million shares of GAMCO; and interests in affiliated and third-party funds and partnerships. Although Investment
Partnerships may be subject to restrictions as to the timing of distributions, the underlying investments of such Investment
Partnerships are generally liquid, and the valuations of these products reflect that underlying liquidity.
Summary cash flow data is as follows (in thousands):
Cash flows provided by (used in) from continuing operations:
Operating activities
Investing activities
Financing activities
Net decrease from continuing operations
Cash flows provided by (used in) discontinued operations:
Operating activities
Net decrese in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Year ended December 31,
2020
2019
$
(279,483)
(174,072)
150,949
(302,606)
114
(302,492)
342,001
39,509
$
$
$
(41,964)
(5,058)
(11,584)
(58,606)
(2,370)
(60,976)
402,977
342,001
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 investment
performance. We anticipate that our available liquid assets should be sufficient to meet our cash requirements as we build out our
operating business. At December 31, 2020, we had cash and cash equivalents of $39.5 million, investments in U.S. Treasury Bills of
$344.4 and $527.0 million of investments net of securities sold, not yet purchased of $17.6 million. Included in cash and cash equivalents
are $7.2 million and $13.1 million as of December 31, 2020 and 2019, respectively, which were held by consolidated investment funds
and may not be readily available for the Company to access.
Net cash used in operating activities from continuing operations was $279.5 million in 2020 due to $295.8 million increases in trading
securities, including $315.4 million of net purchases of U.S. Treasury Bills, $10.7 of net income adjusted for noncash items,
primarily unrealized gains on securities and equity in net gains from partnerships, net distributions from Investment Partnerships of
$31.0 million and increases in net receivables/payables of $4.0 million.
Net cash used in operating activities from continuing operations was $42.0 million in 2019. Our net income adjusted for noncash
items, primarily unrealized gains on securities and deferred income taxes was $5.4 million, net contributions to Investment
Partnerships of $16.5 million along with a decrease in net receivables/payables of $14.6 million. This was more than offset by
increases in investments in trading securities of $45.4 million.
Net cash used in investing activities from continuing operations was $174.1 million in 2020 due to the investment of cash in a trust
account by the PMV SPAC of $175 million, the purchase of our building in London for $11.1 million and purchases of securities of
$2.7 million partially offset by proceeds from sales of securities of $13.1 million and return of capital on securities of $1.6 million.
19
Net cash used in investing activities from continuing operations was $5.1 million in 2019 due to the purchase of our building in
Greenwich, CT for $6.5 million and purchases of securities of $5.0 million partially offset by proceeds from sales of securities of
$4.9 million, return of capital on securities of $0.9 million, and cash received in acquisition of Morgan Group $0.6 million.
Net cash provided by financing activities from continuing operations was $150.9 million resulting from contributions from redeemable
non-controlling interests of $162.6 million primarily related to contributions to PMV SPAC and nonredeemable non-controlling
interests of $2.4 million reduced by dividends paid of $6.7 million and stock buyback payments of $7.4 million. Cash provided by
discontinued operations from the spin-off of Morgan Group was $0.1 million.
Net cash used in financing activities from continuing operations was $11.5 million in 2019 largely resulting from dividends paid of
$4.5 million, share repurchases of $4.1 million and redemptions to consolidated funds of $2.9 million. Cash used by discontinued
operations from the spin-off of Morgan Group was $2.4 million.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies
In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations
and financial condition in the preparation of our consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America (“GAAP”). We base our estimates on historical experience, when available, and
on other various assumptions that are believed to be reasonable under the circumstances. Actual results could differ significantly
from those estimates under different assumptions and conditions.
We believe that the following critical accounting policies require management to exercise significant judgment:
Major Revenue-Generating Services and Revenue Recognition
The Company’s revenues are derived primarily from investment advisory and incentive fees.
Investment advisory and incentive fees are directly influenced by the level and mix of AUM as fees are derived from a
contractually-determined percentage of the balance of each account as well as a percentage of the investment performance of certain
accounts. Management fees from Investment Partnerships and offshore funds are computed either monthly or quarterly, and
amounts receivable are included in investment advisory fees receivable on the consolidated statements of financial condition. These
revenues vary depending upon the level of capital flows, financial market conditions, investment performance and the fee rates
applicable to each account.
Incentive allocations or fees are generally recognized at the end of an annual measurement period and amounts receivable are
included in investment advisory fees receivable on the consolidated statements of financial condition.
See Note C, Revenue, in the consolidated financial statements for additional information.
Investments in Securities
Investments in securities are a recorded at fair value in the statements of financial condition in accordance with U.S. GAAP.
Securities transactions and any related gains and losses are recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the specific identified cost basis and are included in gain/(loss) from investments, net on the
consolidated statements of income.
Management determines the appropriate classification of securities at the time of purchase. Debt with maturities of greater than
three months at the time of purchase are considered investments in debt securities. The Company has investments in debt securities
accounted for as trading and also investments in U.S Treasury Bills held in trust by PMV which are accounted for as held to
maturity.
20
Securities sold, but not yet purchased are recorded on the trade date, and are stated at fair value and represent obligations of AC to
purchase the securities at prevailing market prices. Therefore, the future satisfaction of such obligations may be for an amount
greater or less than the amounts recorded on the consolidated statements of financial condition. The ultimate gains or losses
recognized are dependent upon the prices at which these securities are purchased to settle the obligations under the sales
commitments. Unrealized gains and losses and realized gains and losses from covers of securities sold, not yet purchased
transactions are included in net gain/(loss) from investments on the consolidated statements of income.
Consolidation
The Company assesses all entities with which it is involved for consolidation on a case by case basis depending on the specific
facts and circumstances surrounding each entity. Pursuant to accounting guidance, the Company first evaluates whether it holds a
variable interest in an entity. The Company considers all economic interests, including proportionate interests through related
parties, to determine if such interests are to be considered a variable interest. Fees paid to the Company that are customary and
commensurate with the level of services provided from entities in which the Company does not hold other economic interests in the
entity are not considered as a variable interest.
For any entity where the Company has determined that it does hold a variable interest, the Company performs an assessment to
determine whether it qualifies as a variable interest entity (“VIE”).
The granting of substantive kick-out rights is a key consideration in determining whether a limited partnership or similar entity is a
VIE and whether or not that entity should be consolidated. The Company evaluates consolidation on a case by case basis those
VIEs in which substantive kick-out rights have been granted to the unaffiliated investors to either dissolve the fund or remove the
general partner.
Under the variable interest entity model, the Company consolidates those entities where it is determined that the Company is the
primary beneficiary of the entity. The Company is determined to be the primary beneficiary when it has a controlling financial
interest in the VIE, which is defined as possessing both (a) the power to direct the activities of the VIE that most significantly
impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE or the right to receive benefits from the
VIE that could potentially be significant to the VIE. If the Company alone is not considered to have a controlling financial interest
in the VIE but the Company and its related parties under common control in the aggregate have a controlling financial interest in the
VIE, the Company will be deemed to be the primary beneficiary if it is the party that is most closely associated with the VIE. When
the Company and its related parties not under common control in the aggregate have a controlling financial interest in a VIE, the
Company would be deemed to be the primary beneficiary if substantially all the activities of the entity are performed on behalf of
the Company.
The Company determines whether it is the primary beneficiary of a VIE at the time it becomes initially involved with the VIE and
reconsiders that conclusion as required. Investments and redemptions (either by the Company, related parties of the Company or
third parties) or amendments to the governing documents of the respective entity may affect an entity’s status as a VIE or the
determination of the primary beneficiary.
Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities (“VOEs”) under the voting interest
model. The Company evaluates whether the entity should be evaluated under the guidance for partnerships and similar entities,
or corporations, and consolidates those entities it controls through a majority voting interest or other means. If the Company is the
general partner or managing member it generally will not be required to consolidate a VOE.
The Company records noncontrolling interests in consolidated Investment Partnerships for which the Company’s ownership is less
than 100%.
See Note E, Investment Partnerships and Other Entities in the consolidated financial statements for additional information.
21
Investments in Partnerships and Affiliates
The Company is general partner or co-general partner of various managed funds. We also have investments in unaffiliated
partnerships, offshore funds and other entities (collectively, “investments in partnerships and affiliates”). The Company accounts
for its investments in partnerships and affiliates under the equity method. Substantially all of the Company’s equity method
investees are entities that record their underlying investments at fair value and included in investments in partnerships. Therefore,
under the equity method of accounting, the Company’s share of the investee’s underlying net income predominantly represents fair
value adjustments in the investments held by the equity method investees. The Company’s share of the investee’s underlying net
income or loss is based upon the most currently available information and is recorded as net gain/(loss) from investments on the
consolidated statements of income. Capital contributions are recorded as an increase in investments when paid, and withdrawals and
distributions are recorded as reductions of the investments when received. Depending on the terms of the investment, the Company
may be restricted as to the timing and amounts of withdrawals.
Income Taxes
For purposes of the preparation of the consolidated financial statements, the provision for income taxes is computed using the asset
and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the consolidated financial statements. Under this method deferred tax assets and liabilities are
recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts on the consolidated
financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is expected
to be recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying values
of deferred tax assets to the amount that is more likely than not to be realized. For each tax position taken or expected to be taken in
a tax return, the Company determines whether it is more likely than not that the position will be sustained upon examination based
on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more
likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at
the largest amount of benefit that is greater than 50% likely of being realized upon settlement. The Company recognizes the accrual
of interest on uncertain tax positions and penalties in the income tax provision on the consolidated statements of income.
Recent Accounting Developments
See Note B, Significant Accounting Policies – Recent Accounting Developments, in the consolidated financial statements.
Seasonality and Inflation
We do not believe that our operations are subject to significant seasonal fluctuations. We do not believe inflation will
significantly affect our compensation costs, as they are substantially variable in nature. The rate of inflation may affect certain
other expenses, however, such as information technology and occupancy costs. To the extent inflation results in rising interest rates
and has other effects upon the securities markets, it may adversely affect our financial position and results of operations by
reducing our AUM, revenues or otherwise.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Smaller reporting companies are not required to provide the information required by this item.
22
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Statements of Income for the years ended December 31, 2020 and 2019
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020 and 2019
Consolidated Statements of Financial Condition at December 31, 2020 and 2019
Consolidated Statements of Equity for the years ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019
Notes to Consolidated Financial Statements
Page
24
26
27
28
29-30
31
32
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission that
are not required under the related instructions or are inapplicable have been omitted.
23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Associated Capital Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial condition of Associated Capital Group, Inc. and subsidiaries
(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity
and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the
“financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no
such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/S/ Deloitte & Touche, LLP
Stamford, Connecticut
March 23, 2021
We have served as the Company’s auditor since 2015.
24
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25
ASSOCIATED CAPITAL GROUP, INC.
AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except per share data)
Revenues
Investment advisory and incentive fees
Other revenues
Total revenues
Expenses
Compensation
Management fee
Other operating expenses
Total expenses
Operating loss
Other income/(expense)
Net gain from investments
Interest and dividend income
Interest expense
Shareholder-designated contribution
Total other income, net
Income before income taxes
Income tax expense
Income from continuing operations, net of taxes
Income/(loss) from discontinued operations, net of taxes
Income before noncontrolling interests
Income attributable to noncontrolling interests
Net income attributable to Associated Capital Group, Inc.'s shareholders
Net income/(loss) per share attributable to Associated Capital Group, Inc.'s
shareholders:
Basic - Continuing operations
Basic - Discontinued operations
Basic - Total
Diluted - Continuing operations
Diluted - Discontinued operations
Diluted - Total
Weighted average shares outstanding:
Basic
Diluted
Actual shares outstanding
See accompanying notes.
26
Year Ended December 31,
2020
2019
$
18,288
695
18,983
$
22,148
57
22,205
19,436
3,101
8,915
31,452
(12,469)
23,810
5,713
5,942
35,465
(13,260)
36,864
8,675
(180)
(3,007)
42,352
29,883
9,374
20,509
(632)
19,877
1,061
18,816
$
60,766
13,214
(216)
(3,281)
70,483
57,223
12,627
44,596
(1,890)
42,706
3,518
39,188
$
$
$
0.87
(0.03)
0.84
0.87
(0.03)
0.84
$
$
$
$
$
$
1.82
(0.08)
1.74
1.82
(0.08)
1.74
22,369
22,369
22,274
22,534
22,534
22,475
ASSOCIATED CAPITAL GROUP, INC.
AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF COMPREHENSIVE
INCOME
(Dollars in thousands)
Year Ended December 31,
2020
2019
Net income before non-controlling interests
Less: Comprehensive income/(loss) attributable to noncontrolling interests
$
19,877
1,061
$
42,706
3,518
Comprehensive income/(loss) attributable to Associated Capital Group, Inc.
$
18,816
$
39,188
See accompanying notes.
27
ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
December 31, December 31,
2020
2019
ASSETS
Cash and cash equivalents
Investments in U.S. Treasury Bills
Investments in equity securities (Including GBL stock with a value of $48.9 million and $57.2 million, respectively)
Investments in affiliated registered investment companies
Investments in partnerships
Receivable from brokers
Investment advisory fees receivable
Receivable from affiliates
Deferred tax assets, net
Goodwill
Other assets
Investments in U.S. Treasury Bills held in trust
Assets of discontinued operations
Total assets
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Payable to brokers
Income taxes payable, net
Compensation payable
Securities sold, not yet purchased
Payable to affiliates
Accrued expenses and other liabilities
Deferred underwriting fee payable
Liabilities of discontinued operations (including payable to affiliates $986)
Total liabilities
Redeemable noncontrolling interests
Commitments and contingencies (Note L)
$
39,509
344,453
249,887
170,605
123,994
24,677
7,346
4,743
2,207
3,519
28,565
175,040
-
$
1,174,545
$
6,496
9,746
18,567
17,571
2,188
5,635
6,125
-
66,328
206,828
$
342,001
29,037
271,320
159,311
145,372
23,141
9,582
4,338
1,820
3,519
13,328
-
8,137
1,010,906
$
$
14,889
3,622
19,536
16,419
483
6,037
2,100
63,086
50,385
Equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized; none issued and outstanding
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized; 6,629,254 and 6,569,254 shares
issued, respectively; 3,311,127 and 3,452,381 shares outstanding, respectively
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized; 19,196,792 shares issued;
18,962,918 and 19,022,918 shares outstanding, respectively
Additional paid-in capital
Retained earnings/(Accumulated Deficit)
Treasury stock, at cost (3,318,127 and 3,116,873 shares, respectively)
Total Associated Capital Group, Inc. equity
Noncontrolling interests (from discontinued operations in 2019)
Total equity
Total liabilities and equity
6
6
19
999,047
13,649
(113,783)
898,938
2,451
901,389
1,174,545
$
19
1,003,450
(701)
(106,342)
896,432
1,003
897,435
1,010,906
$
As of December 31, 2020 and 2019, certain balances include amounts related to consolidated variable interest entities (“ VIEs”) and
voting interest entities ("VOEs"). See Footnote E.
See accompanying notes.
28
ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands, except per share data)
For the three months ended March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020
Associated Capital Group, Inc. shareholders
Retained
Earnings/
(Accumulated
Deficit)
$
(701)
Additional
Paid-in
Capital
1,003,450
$
-
(73,355)
-
(74,056)
$
-
35,237
(2,237)
-
(41,056)
$
-
-
-
5,815
-
(35,241)
$
-
-
51,120
(2,230)
-
13,649
$
-
-
-
$
1,003,450
-
-
-
-
$
1,003,450
-
(4,403)
-
-
-
999,047
$
-
-
-
-
-
999,047
$
Common
Stock
$
25
-
-
-
$
25
-
-
-
-
$
25
-
-
-
-
-
$
25
-
-
-
-
-
$
25
Treasury
Stock
$
(106,342)
-
-
(3,225)
(109,567)
$
-
-
-
(1,068)
(110,635)
$
-
-
-
-
(1,101)
(111,736)
$
-
-
-
-
(2,047)
(113,783)
$
Total
896,432
$
-
(73,355)
(3,225)
819,852
$
-
35,237
(2,237)
(1,068)
851,784
$
-
(4,403)
-
5,815
(1,101)
852,095
$
-
-
51,120
(2,230)
(2,047)
898,938
$
Noncontrolling
Interests
Total
Equity
Redeemable
Noncontrolling
Interests
$
1,003
$
897,435
$
50,385
-
(52)
-
951
-
(48)
-
-
903
$
$
-
(903)
2,072
-
-
2,072
$
-
379
-
-
-
2,451
$
(73,407)
(3,225)
820,803
$
(531)
(3,945)
-
45,909
$
35,189
(2,237)
(1,068)
852,687
$
(5,306)
2,072
5,815
(1,101)
854,167
$
379
51,120
(2,230)
(2,047)
901,389
$
(1,167)
2,436
-
-
47,178
$
156,049
-
937
-
204,164
$
1,031
1,633
-
-
206,828
$
Balance at December 31, 2019
Redemptions of
noncontrolling interests
Net income/(loss)
Purchase of treasury stock
Balance at March 31, 2020
Redemptions of
noncontrolling interests
Net income/(loss)
Dividends declared ($0.10 per share)
Purchase of treasury stock
Balance at June 30, 2020
Contributions from
noncontrolling interests
Spin-off of MGHL
PMV Sponsor members' interest
Net income/(loss)
Purchase of treasury stock
Balance at September 30, 2020
Contributions from
noncontrolling interests
PMV Sponsor members' interest
Net income/(loss)
Dividends declared ($0.10 per share)
Purchase of treasury stock
Balance at December 31, 2020
See accompanying notes.
29
ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands, except per share data)
For the three months ended March 31, 2019, June 30, 2019, September 30, 2019 and December 31, 2019
Balance at December 31, 2018
Redemptions of
noncontrolling interests
Net income/(loss)
Purchase of treasury stock
Balance at March 31, 2019
Redemptions of
noncontrolling interests
Net income/(loss)
Dividends declared ($0.10 per share)
Purchase of treasury stock
Balance at June 30, 2019
Contributions to
noncontrolling interests
Net income/(loss)
Purchase of treasury stock
Balance at September 30, 2019
Redemptions of
noncontrolling interests
Net income/(loss)
Morgan merger
Dividends declared ($0.10 per share)
Purchase of treasury stock
Balance at December 31, 2019
Associated Capital Group, Inc. shareholders
Common
Stock
$
25
Accumulated
Deficit
$
(39,889)
-
-
-
$
25
-
-
-
-
$
25
-
-
-
$
25
-
-
-
-
-
$
25
-
23,147
-
(16,742)
$
-
(932)
-
-
(17,674)
$
-
5,951
-
(11,723)
$
-
11,022
-
-
-
(701)
$
Additional
Paid-in
Capital
1,008,319
$
-
-
-
$
1,008,319
-
-
(2,254)
-
$
1,006,065
-
-
-
$
1,006,065
-
-
(367)
(2,248)
-
$
1,003,450
Treasury
Stock
$
(102,207)
Total
866,248
$
Noncontrolling
Interest
$
-
Total
Equity
Redeemable
Noncontrolling
Interests
$
866,248
$
49,800
-
-
(391)
(102,598)
$
-
23,147
(391)
889,004
$
-
-
-
$
-
-
23,147
(391)
889,004
$
(526)
1,507
-
50,781
$
-
-
-
(1,630)
(104,228)
$
-
(932)
(2,254)
(1,630)
884,188
$
-
-
-
-
$
-
-
(932)
(2,254)
(1,630)
884,188
$
(2,197)
1,084
-
-
49,668
$
-
-
(1,342)
(105,570)
$
-
5,951
(1,342)
888,797
$
-
-
-
$
-
-
5,951
(1,342)
888,797
$
390
(359)
-
49,699
$
-
-
-
-
(772)
(106,342)
$
-
11,022
(367)
(2,248)
(772)
896,432
$
-
-
1,003
-
-
1,003
$
-
11,022
636
(2,248)
(772)
897,435
$
(676)
1,362
-
-
50,385
$
30
ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Year Ended December 31,
2020
2019
$
19,877
(632)
20,509
$
42,706
(1,890)
44,596
(15,000)
52
(209)
891
(20,213)
3,299
(10,173)
19
7,090
2,152
(38,367)
56
(295,795)
(45,439)
(4,829)
35,847
(405)
(1,535)
2,236
(177)
(4,206)
1,705
(8,393)
6,176
(970)
1,534
(299,992)
(279,483)
(28,071)
11,603
(3,049)
1,093
(5,188)
-
3,662
(799)
9,378
204
9,589
(320)
(86,560)
(41,964)
(2,749)
13,115
1,646
(11,084)
(175,000)
(174,072)
$
(4,989)
4,928
932
(6,518)
589
(5,058)
$
Operating activities
Net income/(loss)
Less: (Loss) from discontinued operations, net of taxes
Income from continuing operations
Adjustments to reconcile net income/(loss) to net cash
provided by/(used in) operating activities:
Equity in net (gains) from partnerships
Depreciation and amortization
Deferred income taxes
Donated securities
Unrealized (gains)/losses on securities
Realized losses on sales of securities
(Increase)/decrease in assets:
Investments in trading securities
Investments in partnerships:
Contributions to partnerships
Distributions from partnerships
Receivable from affiliates
Receivable from brokers
Investment advisory fees receivable
Income taxes receivable
Other assets
Increase/(decrease) in liabilities:
Payable to affiliates
Payable to brokers
Income taxes payable and deferred tax liabilities, net
Compensation payable
Accrued expenses and other liabilities
Total adjustments
Net cash provided by/(used in) operating activities
Investing activities
Purchases of securities
Proceeds from sales of securities
Return of capital on securities
Purchase of building
Investment in government securities held in trust account
Net cash provided by/(used in) investing activities
31
ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued) (Dollars in thousands)
Financing activities
Contributions from redeemable noncontrolling interests
Redemptions of redeemable noncontrolling interests
Dividends paid
Purchase of treasury stock
Contributions from nonredeemable noncontrolling interests
Proceeds from promissory note from Executive Chairman
Repayment of promissory note to Executive Chairman
Net cash provided by (used in) financing activities
Cash flows of discontinued operations
Net cash provided by (used in) operating activities
Net increase/(decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosures of cash flow information:
Cash paid for interest
Cash paid/(received) for taxes
Year Ended December 31,
2020
2019
$
162,655
-
(6,716)
(7,441)
2,451
-
-
150,949
-
$
(2,934)
(4,513)
(4,135)
-
2,124
(2,126)
(11,584)
114
(302,492)
342,001
39,509
$
(2,370)
(60,976)
402,977
342,001
$
$
$
177
2,000
$
$
196
4,700
Non-cash activity:
- On September 21, 2020 a deferred underwriting fee of $6.1 million was recorded.
- On December 30, 2020 equity securities in the amount of $4.2 million were distributed from investments in
partnerships to investments in equity securities.
See accompanying notes.
32
A. Organization
Unless we have indicated otherwise, or the context otherwise requires, references in this report to “Associated Capital Group, Inc.,”
“AC Group,” “the Company,” “AC,” “we,” “us” and “our” or similar terms are to Associated Capital Group, Inc., its predecessors
and its subsidiaries.
We are a Delaware corporation that provides alternative investment management, and we derive investment income/(loss) from
proprietary investment of cash and other assets in our operating business.
GCIA 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 businesses earn management and incentive fees from their advisory activities. Management fees are
largely based on a percentage of assets under management. Incentive fees are based on the percentage of the investment returns of
certain clients’ portfolios. GCIA is an investment adviser registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940, as amended (the “Advisers Act”).
We may make direct investments in operating business using a variety of techniques and structures. For example, in April 2018, the
Company sponsored a €110 million initial public offering of its first special purpose acquisition corporation, the Gabelli Value for
Italy S.p.a., an Italian company listed on the London Stock Exchange’s Borsa Italiana AIM segment under the symbol “VALU”.
VALU was created to acquire a small-to medium-sized Italian franchise business with the potential for international expansion,
particularly in the United States. Gabelli Value for Italy S.p.a was subsequently liquidated on July 8, 2020 at the apex of the
pandemic in Italy.
PMV Consumer Acquisition Corp.
On September 22, 2020, Associated Capital announced the $175 million initial public offering of its special purpose acquisition
corporation, PMV Consumer Acquisition Corp. (NYSE:PMVC).
PMV Consumer Acquisition Corp. (“PMV”) was created to pursue an initial business combination following the consumer globally
with companies having an enterprise valuation in the range of $200 million to $3.5 billion. PMV Consumer Acquisition Holding
Company, LLC (“Sponsor”) was created to assist PMV in sourcing, analyzing and consummating acquisition opportunities for that
initial business combination.
The Sponsor and PMV have been consolidated in the financial statements of AC beginning in September 2020 because AC has a
controlling financial interest in these entities. This resulted in the consolidation $177.3 million of assets, $6.3 million of liabilities,
$166.0 million of redeemable noncontrolling interests, $2.4 million of noncontrolling interests relating to PMV and the Sponsor as
of December 31, 2020. In addition, there are several other entities that are consolidated within the financial statements. The details
on the impact of consolidating these entities on the consolidated financial statements can be seen in Note E. Investment
Partnerships and Other Entities.
See Note E for a further discussion of PMV Consumer Acquisition Corp. as well as its registration statement and Form 10K as of
December
Commission website
located
https://www.sec.gov/edgar/searchedgar/companysearch.html under the symbol PMVC.
the U.S.
Securities
Exchange
2020
both
and
31,
on
AC Spin-off
On November 30, 2015, GAMCO Investors, Inc. (“GAMCO” or “GBL”) distributed all the outstanding shares of each class of AC
common stock on a pro rata one-for-one basis to the holders of each class of GAMCO’s common stock (the “Spin-off”).
33
As part of the Spin-off, AC received 4,393,055 shares of GAMCO Class A common stock for $150 million. The Company currently
holds 2,756,876 shares as of December 31, 2020.
Morgan Group Spin-off
On October 31, 2019, the Company closed on a transaction whereby Morgan Group Holding Co., (“Morgan Group”) a company
that trades in the over the counter market under the symbol “MGHL” and under common control of AC’s majority shareholder,
acquired all of the Company’s interest in G.research for 50,000,000 shares of Morgan Group common stock. In addition,
immediately prior to the closing 5.15 million Morgan Group shares were issued under a private placement for $515,000. Subsequent
to the transaction and private placement, the Company had an 83.3% ownership interest in Morgan Group. The transaction was
accounted for pursuant to ASC 805-50, Transactions Between Entities Under Common Control. A common-control transaction is
similar to a business combination because there is no change in control over the entity by the parent. For transactions between
entities under common control, there is no change in basis in the net assets received and therefore they are recorded at their
historical cost.
On March 16, 2020, the Company announced that its Board of Directors approved the spin-off of Morgan Group to AC’s
shareholders in which AC would distribute to its shareholders on a pro rata basis the 50,000,000 shares of Morgan Group that it
owns.
On May 5, 2020, the Morgan Group board approved a reverse stock split of the issued and outstanding shares of their common stock,
par value $0.01 per share, in a ratio of 1‑for‑100 that was effective on June 10, 2020.
Associated Capital held 83.3% of the outstanding shares of Morgan Group through August 5, 2020.
On August 5, 2020, Morgan Group shares held by the Company were distributed to the Company's shareholders of record as of July
30, 2020. Based on the distribution ratio, AC stockholders of record received approximately 0.022356 shares of Morgan Group
common stock for each share of AC common stock held.
The historical financial results of Morgan Group have been reflected in the Company’s consolidated financial statements as
discontinued operations for all periods presented through August 5, 2020.
B. Significant Accounting Policies
Consolidated Financial Statements
All material intercompany transactions and balances have been eliminated. Subsidiaries are fully consolidated from the date
the Company obtains control and continue to be consolidated until the date that such control ceases. The Company’s principal
market is in the United States.
Certain prior year amounts have been conformed to the current year presentation including the presentation of “Noncontrolling
Interests” in the consolidated statement of equity and the presentation of “Unrealized (gains)/losses on securities” within the
operating section of the consolidated statement of cash flows. The amount of gains from investments and dividends with respect to
funds advised by affiliates for the year ended December 31, 2019 was previously reported at an incorrect amount of $38.7 million.
The disclosure in Note I was corrected to reflect the actual amount of $20.1 million.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported on the
consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents primarily consist of an affiliated money market mutual fund which is highly liquid. U.S. Treasury Bills and Notes
with maturities of three months or less at the time of purchase are also considered cash equivalents.
34
Investments in Securities
Securities owned are recorded at fair value in the statements of financial condition with any unrealized gains or losses reported in
current period earnings in gain/(loss) from investments, net on the consolidated statements of income. Securities transactions and any
related gains and losses are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the
specific identified cost basis and are included in gain/(loss) from investments, net on the consolidated statements of income.
Management determines the appropriate classification of debt securities at the time of purchase. Debt securities with maturities of
greater than three months at the time of purchase are considered investments in debt securities. A majority of our investments in debt
securities are accounted for as trading securities, except for the investment in U.S. Treasury Bills held in trust by PMV, which are
accounted for as held to maturity.
Investments in securities are reflected in U.S. Treasury Bills, investments in equity securities, investments in affiliated registered
investment companies and investments U.S. Treasury Bills held in trust.
Securities sold, but not yet purchased are recorded on the trade date, and are stated at fair value and represent obligations of AC to
purchase the securities at prevailing market prices. Therefore, the future satisfaction of such obligations may be for an amount greater
or less than the amounts recorded on the consolidated statements of financial condition. The ultimate gains or losses recognized are
dependent upon the prices at which these securities are purchased to settle the obligations under the sales commitments. Unrealized
gains and losses and realized gains and losses from covers of securities sold, not yet purchased transactions are included in net
gain/(loss) from investments on the consolidated statements of income.
Fair Value of Financial Instruments
The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with
the guidance on fair value measurement. The levels of the fair value hierarchy and their applicability to the Company are described
below:
•
•
•
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the reporting date. Level 1
assets include cash equivalents, government obligations, open-end mutual funds, closed-end funds and equities.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical
or similar assets or liabilities that are not active and inputs other than quoted prices that are observable for the asset or liability
such as interest rates and yield curves that are observable at commonly-quoted intervals. Assets included in this category are
over-the- counter derivatives that have valuation inputs that can generally be corroborated by observable market data.
Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market
activity for the asset or liability. Assets in this category generally include equities that trade infrequently and direct private
equity investments.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in
the fair value hierarchy in which the fair value measurement in its entirety falls has been determined based on the lowest level input
that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to
the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The availability of observable inputs can vary from instrument to instrument and is affected by a wide variety of factors, including, for
example, the type of instrument, whether the instrument is new and not yet established in the marketplace, and other characteristics
particular to the instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the
market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in
determining fair value is greatest for instruments categorized as Level 3.
35
In the absence of a closing price, an average of the bid and ask price is used. Bid prices reflect the highest price that market
participants are willing to pay for an asset. Ask prices represent the lowest price that market participants are willing to accept for an
asset.
Cash equivalents—Cash equivalents primarily consist of an affiliated money market mutual fund which is invested solely in U.S.
Treasury securities and valued based on the net asset value of the fund. Other cash equivalents are valued using unadjusted quoted
market prices. Accordingly, cash equivalents are categorized in Level 1 of the fair value hierarchy.
Investments in securities—Investments in securities and securities sold not yet purchased are generally valued based on quoted
prices from an exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are
categorized in Level 1 of the fair value hierarchy. Securities categorized as Level 2 investments are valued using other observable
inputs. Nonpublic and infrequently traded investments are included in Level 3 of the fair value hierarchy because significant inputs
to measure fair value are unobservable.
Investment in U.S. Treasury Bills held in trust account
At December 31, 2020, debt securities of our consolidated SPAC, PMV, are held in a trust account and consist of U.S. Treasury Bills
accounted for as held-to-maturity in accordance with ASC 320 “Investments – Debt and Equity Securities.” Held-to-maturity
securities are those securities which the Company has the ability and intent to hold until maturity. Held-to- maturity treasury
securities are recorded at amortized cost on the accompanying consolidated balance sheet and adjusted for the amortization or
accretion of premiums or discounts.
Receivables from Affiliates and Payables to Affiliates
Receivables from affiliates consist primarily of sub-advisory fees due from Gabelli Funds, LLC, a subsidiary of GAMCO. Payables
to affiliates primarily consist of expenses paid by affiliates on behalf of the Company pursuant to a transitional services agreement
with GAMCO entered into in connection with the AC Spin-off.
Receivables from and Payables to Brokers
Receivables from and payables to brokers consist of amounts related to purchases and sales of securities as well as cash amounts held
in anticipation of investment.
Consolidation
The Company assesses all entities with which it is involved for consolidation on a case by case basis depending on the specific
facts and circumstances surrounding each entity. Pursuant to accounting guidance, the Company first evaluates whether it holds a
variable interest in an entity. The Company considers all economic interests, including proportionate interests through related parties,
to determine if such interests are considered a variable interest. Fees paid to the Company that are customary and commensurate with
the level of services provided from entities in which the Company does not hold other more than insignificant economic interests in
the entity are not considered as a variable interest.
For any entity where the Company has determined that it does hold a variable interest, the Company performs an assessment to
determine whether it qualifies as a variable interest entity (“VIE”). The granting of substantive kick-out or participating rights is a key
consideration in determining whether a limited partnership or similar entity is a VIE and whether or not that entity should be
consolidated. The Company evaluates for consolidation on a case by case basis those VIEs in which substantive kick-out or
participating rights have been granted to the unaffiliated investors to either dissolve the fund or remove the general partner.
36
Under the variable interest entity model, the Company consolidates those entities where it is determined that the Company is the
primary beneficiary of the entity. The Company is determined to be the primary beneficiary when it has a controlling financial
interest in the VIE, which is defined as possessing both (i) the power to direct the activities of the VIE that most significantly impact
the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that
could potentially be significant to the VIE. When the Company alone is not considered to have a controlling financial interest in the
VIE but the Company and its related parties under common control in the aggregate have a controlling financial interest in the VIE,
the Company will be deemed the primary beneficiary if it is the party that is most closely associated with the VIE. When the
Company and its related parties not under common control in the aggregate have a controlling financial interest in the VIE, the
Company would be deemed to be the primary beneficiary if substantially all the activities of the entity are performed on behalf of the
Company.
The Company determines whether it is the primary beneficiary of a VIE at the time it becomes initially involved with the VIE and
reconsiders that conclusion as required. Investments and redemptions (either by the Company, related parties or third parties) or
amendments to the governing documents of the respective entity may affect an entity’s status as a VIE or the determination of the
primary beneficiary.
Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities (“VOEs”) under the voting interest
model. The Company evaluates whether the entity should be evaluated under the guidance for partnerships and similar entities,
or corporations, and consolidates those entities it controls through a majority voting interest or other means. If the Company is
the general partner or managing member it generally will not be required
to consolidate a VOE.
The Company records noncontrolling interests in consolidated entities for which the Company’s ownership is less than 100%. Refer
to Non-controlling Interests below for additional information.
Investments in Partnerships and Affiliates
The Company is general partner or co-general partner of various affiliated entities. We also have investments in unaffiliated
partnerships, offshore funds and other entities (collectively, “unaffiliated entities”). Given that we are not a general partner or
investment manager in any unaffiliated entity, we neither earn any management or incentive fees nor have a controlling financial
interest in such entity. We do not consolidate any unaffiliated entity.
The balance sheet caption investments in partnerships includes investments in both affiliated and unaffiliated entities.
The Company accounts for its investments in partnerships and affiliates under the equity method. Substantially all of the
Company’s equity method investees are entities that record their underlying investments at fair value and are included in
investments in partnerships. Therefore, under the equity method of accounting, the Company’s share of the investee’s underlying net
income predominantly represents fair value adjustments in the investments held by the equity method investees. The Company’s
share of the investee’s underlying net income or loss is based upon the most currently available information and is recorded as net
gain/(loss) from investments on the consolidated statements of income. Capital contributions are recorded as an increase in
investments when paid, and withdrawals and distributions are recorded as reductions of the investments when received. Depending
on the terms of the investment, the Company may be restricted as to the timing and amounts of withdrawals.
Derivative Financial Instruments
The Company recognizes all derivatives as either assets or liabilities measured at fair value and includes such derivatives in either
investment in securities or securities sold, not yet purchased on the consolidated statements of financial condition. From time to time,
the Company will enter into hedging transactions to manage its exposure to foreign currencies or equity prices related to its
proprietary investments. Except for a foreign exchange contract entered into by the Company, these transactions are not designated
as hedges for accounting purposes, and changes in fair values of these derivatives are included in net gain/(loss) from investments on
the consolidated statements of income. See Note D, Investments in Securities, for additional information.
37
Major Revenue-Generating Services and Revenue Recognition
The Company’s revenues are derived primarily from investment advisory and incentive fees.
Investment advisory and incentive fees are directly influenced by the level and mix of AUM as fees are derived from a contractually-
determined percentage of the balance of each account as well as a percentage of the investment performance of certain accounts.
Management fees from Investment Partnerships and offshore funds are computed either monthly or quarterly, and amounts receivable
are included in investment advisory fees receivable on the consolidated statements of financial condition. These revenues vary
depending upon the level of capital flows, financial market conditions, investment performance and the fee rates applicable to each
account.
Incentive allocations or fees are generally recognized at the end of an annual measurement period and amounts receivable are included
in investment advisory fees receivable on the consolidated statements of financial condition.
See Note C, Revenue, for additional information.
Depreciation
Fixed assets are recorded at cost and depreciated using the straight-line method over their estimated useful lives of four to thirty-nine
years and are included in other assets on the consolidated statements of financial condition.
Fixed assets as of December 31, 2020 and 2019 consisted of the following:
2020
2019
$
$
Buildings
Equipment
Total
Less: accumulated depreciation
Net book value
17,727
186
17,913
(383)
17,530
$
$
6,518
219
6,737
(107)
6,630
The Company is charged or incurs certain overhead expenses that are paid by, or paid on our behalf by, other affiliates and are
included in other operating expenses on the consolidated statements of income. These overhead expenses primarily relate to
centralized functions including finance and accounting, legal, compliance, treasury, tax, internal audit, information technology, human
resources and risk management. These overhead expenses are allocated to the Company by other affiliates or allocated by the
Company to other affiliates as the expenses are incurred, based upon direct usage when identifiable, or by revenue, headcount, space
or other allocation methodologies periodically reviewed by the management of the Company and the affiliates.
The compensation expense and related payroll taxes and benefits of certain dual employees that provide services to both AC and
affiliates that are paid for by GCIA or GAMCO are allocated between the companies based upon the relative time each employee
devotes to each affiliate. These allocated compensation expenses are included in compensation on the consolidated statements of
income.
All of the allocations and estimates in the financial statements are based on assumptions that management of AC believes are
reasonable. However, these allocations may not be indicative of the actual expenses we would have incurred or may incur in the
future.
38
Management Fee
Management fee expense in the amount of 10% of the aggregate pre-tax profits, before consideration of this fee and before
consideration of the income attributable to consolidated funds and partnerships, is paid to the Executive Chairman or his designees in
accordance with his employment agreement.
Stock-Based Compensation
During 2018, the Company’s Board of Directors approved the grant of Phantom Restricted Stock awards (“Phantom RSAs”). The
Phantom RSAs will be settled by a cash payment, net of applicable withholding tax, on the vesting dates. In addition, an amount
equivalent to the cumulative dividends declared on shares of the Company’s Class A common stock during the vesting period will be
paid to participants on vesting.
The Phantom RSAs are accounted for as a liability because cash settlement is required and compensation will be recognized over the
vesting period. In determining the compensation expense to be recognized each period, the Company will remeasure the fair value of
the liability at each reporting date taking into account the remaining vesting period attributable to each award and the current market
value of the Company’s Class A stock. In making these determinations, the Company will consider the impact of Phantom RSAs that
have been forfeited prior to vesting (e.g., due to an employee termination). The Company has elected to consider forfeitures as they
occur.
Goodwill
Goodwill is initially measured as the excess of the cost of an acquired business over the sum of the fair value assigned to assets
acquired less the liabilities assumed. Goodwill is tested for impairment at least annually on November 30th and whenever certain
triggering events are met. In assessing the recoverability of goodwill as of November 30, 2020 and 2019, we performed a qualitative
assessment of whether it was more likely than not that an impairment had occurred and concluded that a quantitative analysis was not
required. As such, no impairment was recorded during 2020 or 2019.
Income Taxes
For purposes of the preparation of the consolidated financial statements, the provision for income taxes is computed using the asset
and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in income tax expense/benefit in the period that includes the enactment date of the change in tax rate.
The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. A
valuation allowance would be recorded to reduce the carrying value of deferred tax assets to the amount that is more likely than not to
be realized. In making such a determination of whether a valuation allowance is necessary, the Company considers all available
positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income,
tax-planning strategies, and results of recent operations. In the event the Company were to determine that the Company would be able
to realize the Company’s deferred income tax assets in the future in excess of their net recorded amount, the Company would make an
adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
For uncertain tax positions the Company first determines whether it is more likely than not that the tax positions will be sustained
based on the technical merits of the position. For those tax positions that meet the more-likely-than-not recognition threshold, the
Company recognizes the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the
related tax authority. The Company recognizes the accrual of interest on uncertain tax positions and penalties in income tax provision
on the consolidated statements of income. Accrued interest and penalties on uncertain tax positions are included within accrued
expenses and other liabilities on the consolidated statements of financial condition.
39
Noncontrolling Interests
Noncontrolling interests in Investment Partnerships or other entities that are redeemable at the option of the holder are classified as
redeemable noncontrolling interests in the mezzanine section of the consolidated statements of financial condition between liabilities
and equity. Noncontrolling interests in other entities that are not redeemable at the option of the holder are classified as such as a
separate component of shareholder’s equity.
Redeemable noncontrolling Interests-PMV
The Company accounts for the common stock held by noncontrolling interest holders of our consolidated SPAC, PMV, as
subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480
“Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified in the mezzanine section of
the consolidated statements of financial condition between liabilities and equity and is measured at redemption value. Conditionally
redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary
equity. PMVs common stock features certain redemption rights that are considered to be outside of the Company’s control and
subject to occurrence of uncertain future events. Accordingly, at December 31, 2020, common stock held by noncontrolling interest
holders is presented at redemption value in redeemable noncontrolling interests, outside of the stockholders’ equity section of the
Company’s balance sheet.
For the years ended December 31, 2020 and 2019, net income/(loss) attributable to noncontrolling interests on the consolidated
statements of income represents the share of net income/(loss) attributable to third-party investors in consolidated funds.
Offering Costs
Offering costs incurred by the initial public offering of PMV consist of legal, accounting, underwriting fees and other costs. Offering
costs amounting to $9,957,390, including deferred underwriting fees of $6,125,000, net of a $175,000 credit paid by the underwriter,
were charged against equity of PMV upon the completion of the initial public offering.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash
equivalents and receivable from brokers. The Company maintains cash and cash equivalents primarily in the Gabelli U.S. Treasury
Money Market Fund, which invests fully in instruments issued by the U.S. government. Receivables from brokers and financial
institutions can exceed the federally insured limit. The concentration of credit risk with respect to advisory fees and incentive fees,
which are included in investment advisory fees receivable and receivables from affiliates on the consolidated statements of financial
condition, is generally limited due to the short payment terms extended to clients by the Company. All investments in securities are
held at third party brokers or custodians.
Business Segment
The Company operates in one business segment. The Company’s chief operating decision maker reviews the Company’s financial
performance at an aggregate level.
Recent Accounting Developments
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends the guidance in GAAP for the accounting for
leases. ASU 2016-02 requires a lessee to recognize assets and liabilities arising from most operating leases in the consolidated
statement of financial position. The Company adopted this ASU effective January 1, 2019 with no material impact on its
consolidated financial statements.
40
In June 2016, the FASB issued ASU 2016-13, Accounting for Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), which
requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical
experience, current conditions, and reasonable and supportable forecasts. Currently, U.S. GAAP requires an “incurred loss”
methodology that delays recognition until it is probable a loss has been incurred. Under ASU 2016-13, the allowance for credit losses
must be deducted from the amortized cost of the financial asset to present the net amount expected to be collected. The Statement of
Income will reflect the measurement of credit losses for newly recognized financial assets as well as the expected increases or
decreases of expected credit losses that have taken place during the period. In November 2019, the FASB issued ASU 2019-10, which
deferred the effective date of this guidance for smaller reporting companies for three years. This guidance is effective for the
Company on January 1, 2023 and requires a modified retrospective transition method, which will result in a cumulative-effect
adjustment in retained earnings upon adoption. Early adoption is permitted. The Company is currently assessing the potential impact
of this new guidance on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other, to simplify the process used to test for
impairment of goodwill. Under the new standard, an impairment loss must be recognized in an amount equal to the excess of the
carrying amount of a reporting unit over its fair value, limited to the total amount of goodwill allocated to that reporting unit. As a
smaller reporting company pursuant to ASU 2019-10, the ASU is effective for the Company on January 1, 2023. This guidance will
be effective for the Company on January 1, 2023 using a prospective transition method and early adoption is permitted. The
Company is currently evaluating the potential effect of this new guidance on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the
Disclosure Requirements for Fair Value Measurement. This ASU adds certain disclosure requirements and modifies or eliminates
requirements under current GAAP. This ASU was effective for fiscal years beginning after December 15, 2019 and early adoption is
permitted. The Company has early adopted the eliminated and modified disclosure requirements effective January 1, 2019.
C. Revenue
The Company’s revenue is accounted for as contracts with customers, and the timing of revenue recognition is based on the
Company’s analysis of the provisions of each respective contract. Depending upon the specific terms, revenue may be recognized
over time or at a point in time. Modifications to contracts may affect the timing of the satisfaction of performance obligations, the
determination of the transaction price, and the allocation of the price to performance obligations, any of which may impact the timing
of the recognition of the related revenue.
The Company’s major revenue sources are as follows:
Investment advisory and incentive fees. The Company and its subsidiaries act as general partner, investment manager or sub-advisor
to investment funds and/or separately managed accounts of institutional investors (e.g., corporate pension plans). The fees that are
paid to the Company are set forth in the offering documents for the investment fund or the separately managed account agreement.
Investment advisory and incentive fee revenue consists of:
a) Asset-based advisory fees – The Company receives a management fee, payable monthly in advance based on value of the net
assets of the client. It is generally set at a rate of 1%-1.5% per annum. Asset-based management fee revenue is recognized
only as the services are performed over the period.
b) Performance-based advisory fees – Certain client contracts call for additional fees and or allocations of income tied to a
certain percentage, generally 20%, of the investment performance of the account over a measurement period, typically the
calendar year. In addition, the contracts provide that performance-based fees or allocations become fixed in the event of an
investor redemption prior to the end of the measurement period. In the event that an account suffers a loss in one period, it
must be recovered before incentive fees are earned by the Company; this is commonly referred to as a “high water mark”
provision. While the Company’s performance obligation is satisfied over time, the Company does not recognize
performance-based fees until the end of the measurement period or the time of the investor redemption when the uncertainty
surrounding the amount of the variable consideration is resolved.
41
c) Sub-advisory fees – Pursuant to agreements with other investment advisors, the Company receives a percentage of
advisory fees received by such advisors from certain of their investment fund clients. These fees may be either asset- or
performance-based. In addition, they may be subject to reduction by certain expenses as set forth in the respective
agreements. Sub-advisory fee revenue which is asset-based is recognized ratably as the services are performed over the
relevant contractual performance period. Sub-advisory fee revenue which is performance-based is recognized only when it
becomes fixed and not subject to adjustment.
The Company reserves the right to waive or reduce asset-based and performance-based fees with respect to certain investors in the
investment funds which may include investments by employees and other related parties. Advisory and incentive fees payable by
investment funds are typically approved by third-party administrators and paid directly from the accounts’ assets. Such fees
attributable to separate accounts may be subject to review and approval by the client and may be paid either from the accounts’
assets or directly by the client.
Our advisory fee revenues are influenced by both the amount of AUM and the investment performance of our products. An overall
decline in the prices of securities may cause our advisory fees to decline by either causing the value of our AUM to decrease or
causing our clients to withdraw funds in favor of investments they perceive to offer greater opportunity or lower risk. Similarly,
success in the investment management business is dependent on investment performance as well as distribution and client services.
Good performance can stimulate sales of our investment products and tends to keep withdrawals and redemptions low, which
generates higher asset-based management fees. 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.
Total revenues by type were as follows for the years ended December 31, 2020 and 2019 (in thousands):
Revenues
Investment advisory and incentive fees
Asset-based advisory fees
Performance-based advisory fees
Sub-advisory fees
Other
Miscellaneous
Year Ended December 31,
2020
2019
$
5,415
5,706
7,167
18,288
$
7,022
7,501
7,625
22,148
695
695
57
57
Total
$
18,983
$
22,205
42
D. Investments in Securities
Investments in securities at December 31, 2020 and 2019 consisted of the following (in thousands):
Debt - Trading Securities:
U.S. Treasury Bills
Equity Securities:
Common stocks
Mutual funds
Other investments
Total investments in securities
2020
2019
Cost
Fair Value
Cost
Fair Value
$
344,367
$
344,453
$
28,428
$
29,037
239,240
546
8,806
592,959
237,377
1,294
11,216
594,340
271,627
1,207
7,847
309,109
262,562
2,196
6,562
300,357
g
Securities sold, not yet purchased at December 31, 2020 and 2019 consisted of the following (in thousands):
2020
2019
Proceeds
Fair Value
Proceeds
Fair Value
Equity securities:
Common stocks
Other investments
Total securities sold, not yet purchased
$
$
14,369
1,209
15,578
$
$
16,090
1,481
17,571
$
$
13,863
13
13,876
$
$
16,300
119
16,419
Investments in affiliated registered investment companies at December 31, 2020 and 2019 consisted of the following (in thousands):
Equity securities:
Closed-end funds
Mutual funds
Total investments in affiliated
registered investment companies
2020
2019
Cost
Fair Value
Cost
Fair Value
$
76,462
48,395
$
106,719
63,886
$
75,646
48,348
$
99,834
59,477
$
124,857
$
170,605
$
123,994
$
159,311
The Company recognizes all equity derivatives as either assets or liabilities measured at fair value and includes them in either
investment in securities or securities sold, not yet purchased on the consolidated statements of financial condition. From time to
time, the Company and/or consolidated funds will enter into hedging transactions to manage their exposure to foreign currencies
and equity prices related to their proprietary investments. At December 31, 2020 and December 31, 2019 we held derivative contracts
on 1.8 million and 3.4 million equity shares, respectively, that are included in investments in securities or securities sold, not yet
purchased on the consolidated statements of financial condition as shown in the table below. We had two foreign exchange
contracts outstanding at December 31, 2019. Except for the foreign exchange contracts entered into by the Company, these
transactions are not designated as hedges for accounting purposes, and changes in fair values of these derivatives are included in net
gain/(loss) from investments on the consolidated statements of income and included in investments in securities, securities sold, not
yet purchased, or receivable from or payable to brokers on the consolidated statements of financial condition. No foreign exchange
contracts were outstanding at December 31, 2020.
43
The following table identifies the fair values of all derivatives and foreign currency positions held by the Company (in thousands):
Asset Derivatives
Liability Derivatives
Statement of
Financial Condition
Location
Derivatives designated as hedging
instruments under FASB ASC 815-20
Foreign exchange contracts
Receivable from brokers
Derivatives not designated as hedging
instruments under FASB ASC 815-20
Equity contracts
Investments in
securities
Fair Value
Statement of
December 31, December 31, Financial Condition December 31, December 31,
Location
Fair Value
2019
2020
2020
2019
$
-
$
23
Payable to brokers
$
-
$
-
$
621
$
291
Securities sold,
not yet purchased
$
938
$
119
Total derivatives
$
621
$
314
$
938
$
119
The following table identifies gains and losses of all derivatives and foreign currency positions held by the Company (in
thousands):
Type of Derivative
Income Statement Location
2020
2019
Year ended December 31,
Foreign exchange contracts
Equity contracts
Net gain/(loss) from investments
Net gain/(loss) from investments
$
(51)
(336)
$
128
(1,951)
Total
$
(387)
$
(1,823)
The Company is a party to enforceable master netting arrangements for swaps entered into with major U.S. financial
institutions as part of its investment strategy. They are typically not used as hedging instruments. These swaps, while settled on
a net basis with the counterparties, are shown gross in assets and liabilities on the consolidated statements of financial
condition. The swaps have a firm contract end date and are closed out and settled when each contract expires.
Gross
Amounts of
Recognized
Assets
Gross Amounts
Offset in the
Statements of
Financial Condition
Net Amounts of
Assets Presented
in the Statements
of Financial Condition
Gross Amounts Not Offset in the
Statements of Financial Condition
Financial
Instruments
Cash Collateral
Received
Net Amount
Swaps:
Swaps:
December 31, 2020
December 31, 2019
$
621
291
-
$
-
$
$
(938)
(119)
-
$
-
$
(317)
172
(In thousands)
621
291
Gross
Amounts of
Recognized
Liabilities
Gross Amounts
Offset in the
Statements of
Financial Condition
Net Amounts of
Liabilities Presented
in the Statements
of Financial Condition
Gross Amounts Not Offset in the
Statements of Financial Condition
Financial
Instruments
Cash Collateral
Pledged
Net Amount
December 31, 2020
December 31, 2019
$
938
119
$
-
-
$
$
(938)
(119)
$
-
-
$
-
-
(In thousands)
938
119
44
E. Investment Partnerships and Other Entities
The Company is general partner or co-general partner of various affiliated entities whose underlying assets consist primarily of
marketable securities (“Affiliated Entities”). We also had investments in unaffiliated partnerships, offshore funds and other entities
of $24.9 million and $20.5 million at December 31, 2020 and 2019, respectively (“Unaffiliated Entities”). We evaluate each entity
to determine its appropriate accounting treatment and disclosure. Certain of the Affiliated Entities, and none of the Unaffiliated
Entities, are consolidated.
Investments in partnerships that are not required to be consolidated are accounted for using the equity method and are included in
investments in partnerships on consolidated statements of financial condition. This caption includes investments in Affiliated
Entities and Unaffiliated Entities which the Company accounts for under the equity method of accounting. The company had
investments in Affiliated Entities totaling $99.1 million and $124.8 million at December 31, 2020 and 2019 respectively. The
Company reflects the equity in earnings of these Affiliated Entities and Unaffiliated Entities as net gain/(loss) from investments on
the consolidated statements of income.
The summarized financial information of the Company’s equity method investments as of and for the years ended December 31, 2020
and 2019 are as follows (in millions):
Total assets
Total liabilities
Total equity
December 31,
2020
December 31,
2019
$
1,653
326
1,327
$
1,607
246
1,361
For the year
2020
2019
Net income/(loss)
64
43
Capital may generally be redeemed from Affiliated Entities on a monthly basis upon adequate notice as determined in the sole
discretion of each entity’s investment manager. Capital invested in Unaffiliated Entities may generally be redeemed at various
intervals ranging from monthly to annually upon notice of 30 to 95 days. Certain Unaffiliated Entities and Affiliated Entities may
require a minimum investment period before capital can be voluntarily redeemed (a “Lockup Period”). No investment in an
Unaffiliated Entity has an unexpired Lockup Period. The Company has no outstanding capital commitments to any Affiliated or
Unaffiliated Entity.
PMV Consumer Acquisition Corp.
The Company has determined that PMV is a voting interest entity (VOE) and since the Sponsor has substantive control of PMV
due to its ability to control the board of directors of PMV, the Sponsor consolidates the assets and liabilities of PMV and the
results of its operations. The Company invested $4.0 million, or approximately 62% of the $6.48 million total Sponsor
partnership commitment. The Sponsor is managed by Company executives. The Company has determined that the Sponsor is a
variable interest entity (VIE) and that the Company is the primary beneficiary and therefore consolidates the assets and
liabilities and results of operations of the Sponsor which includes PMV. However, neither AC nor PMV have a right to the
benefits from nor does it bear the risks associated with the U.S Treasury Bills held in trust assets held by PMV. Further, if the
Company were to liquidate, the U.S. Treasury Bills held in trust assets would not be available to its general creditors, and as a
result, the Company does not consider these assets available for the benefit of its investors.
The registration statement for the PMV initial public offering was declared effective on September 21, 2020. On September 24,
2020, PMV consummated the initial public offering of 17,500,000 units (the “Units” and, with respect to the shares of
common stock included in the Units Sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of
$175,000,000.
45
Simultaneously with the closing of the initial public offering, PMV consummated the sale of 6,150,000 warrants (the “Private
Warrants”) at a price of $1.00 per Private Warrant in a private placement to the Sponsor, generating gross proceeds of $6,150,000.
AC invested $10 million in the Class A shares in PMV and the Sponsor invested $6.1 million in Private Warrants.
Following the closing of the initial public offering on September 24, 2020, an amount of $175,000,000 ($10.00 per Unit) from the net
proceeds of the sale of the Units in the initial public offering and the sale of the Private Warrants was placed in a trust account (the
“Trust Account”) located in the United States, which will only be invested in U.S. U.S. Treasury Bills.
PMV will have until September 24, 2022 to complete a business combination. If PMV is unable to complete a business combination by
September 24, 2022, PMV will cease all operations except for the purpose of winding up, and as promptly as reasonably possible but
not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account. The deferred fee will be
forfeited by the underwriters solely in the event that we fail to complete a business combination within the required time period,
subject to the terms of the underwriting agreement.
46
The following table reflects the net impact of the consolidated entities on the consolidated statements of financial condition (in thousands):
Prior to
Consolidation
December 31, 2020
Consolidated
Entities
As Reported
$
$
$
Assets
Cash and cash equivalents
Investments in U.S. Treasury Bills
Investments in securities (including GBL stock)
Investments in affiliated investment companies
Investments in partnerships
Receivable from brokers
Investment advisory fees receivable
Other assets (1)
Investments in U.S. Treasury Bills held in trust
Total assets
Liabilities and equity
Securities sold, not yet purchased
Accrued expenses and other liabilities (1)
Redeemable noncontrolling interests
Total equity
Total liabilities and equity
Assets
Cash and cash equivalents
Investments in U.S. Treasury Bills
Investments in securities (including GBL stock)
Investments in affiliated investment companies
Investments in partnerships
Receivable from brokers
Investment advisory fees receivable
Other assets (1)
Assets of discontinued operations
Total assets
Liabilities and equity
Securities sold, not yet purchased
Accrued expenses and other liabilities (1)
Liabilities of discontinued operations
Redeemable noncontrolling interests
Total equity
Total liabilities and equity
$
$
$
$
$
$
$
$
$
Prior to
Consolidation
December 31, 2019
Consolidated
Entities
As Reported
$
$
32,347
334,954
167,317
221,318
146,162
6,662
7,400
31,647
-
947,807
9,514
36,904
-
901,389
947,807
328,834
25,050
157,623
211,024
167,781
6,750
9,604
22,976
8,137
937,779
4,625
33,618
2,100
1
897,435
937,779
7,162
9,499
82,570
(50,713)
(22,168)
18,015
(54)
7,387
175,040
226,738
8,057
11,853
206,828
-
226,738
$
13,167
3,987
113,697
(51,713)
(22,409)
16,391
(22)
29
$
73,127
$
11,794
10,949
50,384
-
73,127
$
39,509
344,453
249,887
170,605
123,994
24,677
7,346
39,034
175,040
1,174,545
17,571
48,757
206,828
901,389
1,174,545
342,001
29,037
271,320
159,311
145,372
23,141
9,582
23,005
8,137
1,010,906
16,419
44,567
2,100
50,385
897,435
1,010,906
$
$
$
$
$
$
(1) Represents the summation of multiple captions from the consolidated statement of financial condition
47
The following table reflects the net impact of the consolidated entities on the consolidated statements of income (in thousands):
Total revenues
Total expenses
Operating loss
Total other income, net
Income before income taxes
Income tax expense/(benefit)
Income from continuing operations, net of taxes
Loss from discontinued operations, net of taxes
Income before noncontrolling interests
Income/(loss) attributable to noncontrolling interests
Net income
Total revenues
Total expenses
Operating loss
Total other income, net
Income before income taxes
Income tax expense
Income from continuing operations, net of taxes
Loss from discontinued operations, net of taxes
Income before noncontrolling interests
Income attributable to noncontrolling interests
Net income
Year Ended December 31, 2020
Consolidated
Entities
$
As Reported
$
Prior to
Consolidation
19,473
$
28,652
(9,179)
38,033
28,854
9,426
19,428
(632)
18,796
(20)
18,816
$
Prior to
Consolidation
$
23,761
34,140
(10,379)
64,084
53,705
12,627
41,078
(1,890)
39,188
-
39,188
$
(490)
2,800
(3,290)
4,319
1,029
(52)
1,081
-
1,081
1,081
$
-
$
(1,556)
1,325
(2,881)
6,399
3,518
-
3,518
-
3,518
3,518
$
-
18,983
31,452
(12,469)
42,352
29,883
9,374
20,509
(632)
19,877
1,061
18,816
22,205
35,465
(13,260)
70,483
57,223
12,627
44,596
(1,890)
42,706
3,518
39,188
$
$
Year Ended December 31, 2019
Consolidated
Entities
As Reported
$
With respect to each consolidated VIE, its assets may only be used to satisfy its obligations. The investors and creditors of any
consolidated VIE have no recourse to the Company’s general assets. In addition, the Company neither benefits from such VIE’s assets
nor bears the related risk beyond its beneficial interest in the VIE.
48
The following table presents the balances related to VIEs that are consolidated and included on the consolidated statements of financial
condition as well as the Company’s net interest in these VIEs (in thousands):
December 31,
2020
December 31,
2019
Cash and cash equivalents
Investments in securities (1)
Receivable from brokers
Investments in partnerships and affiliates
Other assets
Accrued expenses and other liabilities
Nonredeemable noncontrolling interests
Redeemable noncontrolling interests
AC Group's net interests in consolidated VIEs
$
$
1,925
20,739
2,784
376
7,105
(138)
(2,451)
(12,661)
17,679
2,224
18,454
2,601
8,363
-
(329)
-
(9,592)
21,721
$
$
(1) In 2020, includes $6.15 million in private placement warrants eliminated in consolidation with PMV
Voting Interest Entities
The following table presents the balances related to PMV and another investment partnership that are consolidated as VOE’s and
included on the consolidated statements of financial condition as well as the Company’s net interest in these VOE’s (in thousands):
December 31,
2020
December 31,
2019
Cash and cash equivalents
Investments in securities
Receivable from brokers
Investments in debt securities held in trust
Other assets
Securities sold, not yet purchased
Accrued expenses and other liabilities
Redeemable noncontrolling interests
AC Group's net interests in consolidated VOEs
$
$
5,558
93,780
15,230
175,040
322
(8,057)
(11,840)
(194,167)
75,866
10,943
99,231
13,790
-
28
(11,794)
(10,665)
(40,792)
60,741
$
$
The Company’s equity method investments include investments in partnerships and offshore funds. These equity method investments
are not consolidated but on an aggregate basis exceed 10% of the Company’s consolidated total assets or income.
49
F. Fair Value
The following tables present information about the Company’s assets and liabilities by major category measured at fair value on a
recurring basis as of December 31, 2020 and 2019 and indicate the fair value hierarchy of the valuation techniques utilized by the
Company to determine such fair value. The following tables present assets and liabilities measured at fair value on a recurring basis as
of the dates specified (in thousands):
Assets
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
$
34,010
Cash equivalents
Investments in securities (including GBL stock):
Trading - U.S. Treasury Bills
Common stocks
Mutual funds
Other
Total investments in securities
Investments in affiliated registered investment companies:
Closed-end funds
Mutual funds
Total investments in affiliated
registered investment companies
Total investments held at fair value
Total assets at fair value
Liabilities
$
Common stocks
Other
Securities sold, not yet purchased
$
$
168,605
752,386
786,396
16,090
543
16,633
December 31, 2020
Significant Other
Observable
Inputs (Level 2)
$
-
Significant
Unobservable
Inputs (Level 3)
$
-
Total
$
34,010
344,453
231,901
1,294
6,133
583,781
104,719
63,886
-
5,440
-
621
6,061
-
-
-
36
-
4,462
4,498
2,000
-
344,453
237,377
1,294
11,216
594,340
106,719
63,886
-
6,061
6,061
$
2,000
6,498
6,498
$
170,605
764,945
798,955
$
-
$
938
938
$
-
$
-
$
-
$
$
16,090
1,481
17,571
December 31, 2019
Significant Other
Observable
Inputs (Level 2)
$
-
Significant
Unobservable
Inputs (Level 3)
$
-
Total
$
343,428
Assets
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
$
343,428
Cash equivalents
Investments in securities (including GBL stock):
Trading - U.S. Treasury Bills
Common stocks
Mutual funds
Other
Total investments in securities
Investments in affiliated registered investment companies:
Closed-end funds
Mutual funds
Total investments in affiliated
registered investment companies
Total investments held at fair value
Total assets at fair value
Liabilities
$
Common stocks
Other
Securities sold, not yet purchased
$
$
29,037
257,520
2,196
2,428
291,181
99,834
59,477
-
4,444
-
509
4,953
-
-
-
89
-
4,134
4,223
-
-
29,037
262,053
2,196
7,071
300,357
99,834
59,477
159,311
450,492
793,920
16,300
-
16,300
-
4,953
4,953
$
-
4,223
4,223
$
159,311
459,668
803,096
$
-
$
119
119
$
-
$
-
$
-
$
$
16,300
119
16,419
50
The following table presents additional information about assets by major category measured at fair value on a recurring basis and
for which the Company has utilized Level 3 inputs to determine fair value:
Year ended December 31, 2020
Year ended December 31, 2019
Beginning balance
Total gains/(losses)
Purchases
Sales
Transfers
Ending balance
Changes in net unrealized
gain/(loss) included in Net
gain/(loss) from
investments related to
Level 3 assets still held as
of the reporting date
Common
S tocks
Other
Total
$
89
(53)
-
-
-
$
36
$
$
4,134
16
2,000
(1,800)
2,112
6,462
4,223
(37)
2,000
(1,800)
2,112
6,498
$
$
Common
S tocks
$
12
14
-
-
63
89
$
Other
Total
$
3,458
673
3
-
-
4,134
$
$
3,470
687
3
-
63
4,223
$
$
(31)
$
(22)
$
(53)
$
(8)
$
673
$
665
Total realized and unrealized gains and losses for level 3 assets are reported in net gain/(loss) from investments in the consolidated
statements of income.
During the years ended December 31, 2020 and 2019, the Company transferred investments with a value of approximately $2,221,000
and $63,000, respectively, from Level 1 to Level 3 due to the unavailability of observable inputs. For the year ended December 31,
2020, the Company transferred an investment with a value of approximately $109,000 from Level 3 to Level 1 due to increased
availability of market price quotations.
At December 31, 2020, assets held in the trust account through PMV were comprised of U.S. Treasury Bills which mature in less than
one year with an amortized cost and fair value of
$175 million.
G. Income Taxes
The provision for income taxes for the years ended December 31, 2020 and 2019 consisted of the following (in thousands):
Federal:
Current
Deferred
State and local:
Current
Deferred
Total
2020
2019
$
9,051
$
5,006
(193)
6,419
532
(16)
531
671
$
9,374
$
12,627
51
A reconciliation of the federal statutory rate to the effective tax rate for the years ended December 31, 2020 and 2019 is set forth
below:
Statutory Federal income tax rate
State income tax, net of Federal benefit
Dividends received deduction
Deferred tax asset valuation allowance
Foreign investments
Noncontrolling interests
Other
Effective income tax rate
2020
21.0%
1.3
(1.4)
1.5
9.9
(1.3)
0.4
31.4%
2019
21.0%
1.6
(0.5)
1.0
-
(1.3)
0.3
22.1%
Significant components of our deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows (in thousands):
Deferred tax assets:
Stock-based compensation expense
Deferred compensation
Shareholder-designated contribution carryover
Other
Deferred tax liabilities:
Investments in securities and partnerships
Other liabilities
Gross deferred tax assets /(liabilities)
Valuation allowance
Net deferred tax assets/(liabilities)
2020
2019
$
430
1,825
3,244
53
5,552
(1,300)
(201)
(1,501)
4,051
(1,844)
2,207
$
$
286
499
2,831
-
3,616
(27)
(384)
(411)
3,205
(1,385)
1,820
$
The Company believes that it is more-likely-than-not that the benefit from a portion of the shareholder-designated charitable
contribution carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance of
$1,844 and $1,385 as of December 31, 2020 and 2019, respectively, on the deferred tax assets related to these charitable
contribution carryforwards.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits related to uncertain tax positions is as
follows (in thousands):
Balance at January 1, 2019
Reductions for tax positions of prior years
Balance at December 31, 2019
Reductions for tax positions of prior years
Balance at December 31, 2020
$
6
(6)
-
$
-
$
-
The Company records penalties and interest related to tax uncertainties in income taxes. These amounts are included in accrued
expenses and other liabilities on the consolidated statements of financial condition.
The Company remains subject to income tax examination by the IRS for the years 2017 through 2019 and state examinations for years
after 2011.
52
H. Earnings per Share
Basic earnings per share is computed by dividing net income/(loss) attributable to our shareholders by the weighted average
number of shares outstanding during the period. Diluted earnings per share is computed by dividing net income/(loss) attributable
to our shareholders by the weighted average number of shares outstanding during the period.
The computations of basic and diluted net income/(loss) per share are as follows (in thousands, except per share data):
(In thousands, except per share amounts)
Income from continuing operations
Less:
Income attributable to noncontrolling interests
Net income from continuing operations attributable to Associated Capital Group, Inc.'s shareholders
Income/(loss) from discontinued operations
Net income attributable to Associated Capital Group, Inc.'s shareholders
Weighted average number of shares of Common Stock outstanding - basic
Weighted average number of shares of Common Stock outstanding - diluted
Basic
Net income/(loss) from continuing operations
Net income/(loss) from discontinued operations
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders per share
Diluted:
Net income/(loss) from continuing operations
Net income/(loss) from discontinued operations
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders per share
$
$
$
$
$
$
For the Years Ending December 31,
2020
2019
20,509
$
44,596
1,061
19,448
(632)
18,816
22,369
22,369
0.87
(0.03)
0.84
0.87
(0.03)
0.84
3,518
41,078
$
(1,890)
39,188
22,534
22,534
1.82
(0.08)
1.74
1.82
(0.08)
1.74
$
$
$
$
I. Related Party Transactions
The following is a summary of certain related party transactions.
GGCP, Inc., a private company controlled by the Executive Chairman, indirectly owns a majority of our Class B stock, representing
approximately 95% of the combined voting power and 83% of the outstanding shares of our common stock at December 31, 2020.
Loans with related parties
On April 23, 2019, the Company issued a promissory note for $2.1 million to our Executive Chairman. The promissory note was
re-paid with interest at 1% per annum on May 28, 2019.
Investments in Securities
In August 2006, a son of the Executive Chairman was given responsibility for managing one proprietary investment account. The
balance in the proprietary investment account at December 31, 2020 and 2019 was $34.3 million and $26.3 million, respectively, of
which $2.8 million and $1.0 million, respectively, is owed to the portfolio manager representing earnings that have been re-invested
in the account.
At December 31, 2020 and 2019, the value of the Company’s investment in GAMCO common stock (GBL) was $48.9 million and $57.2
million, respectively. As of December 31, 2020 and 2019, AC and its subsidiaries own approximately 2.8 million and 2.9 million shares
respectively of GAMCO Class A stock. The Company recorded dividend income of $2.8 million and $0.3 million in 2020 and 2019,
respectively from GAMCO which is included in interest and dividend income on the consolidated statements of income. For the year,
the GBL stock price decreased 9.0% to $17.74 per share, resulting in a $5.5 million net realized and unrealized loss for the Company
versus a net realized and unrealized gain of $7.6 million in 2019.
53
At December 31, 2020 and 2019, the Company invested $31.5 million and $336.7 million, respectively, in the Gabelli U.S. Treasury
Money Market Fund, which is recorded in cash and cash equivalents on the consolidated statements of financial condition. For the
years ended December 31, 2020 and 2019, the Company earned interest of $1.6 million and $7.8 million from the Company’s
investment in this fund, respectively.
Investments in affiliated equity mutual funds advised by Gabelli Funds and Teton Advisors, Inc., an investment advisor under
common control with the Company, totaled $170.7 million and $159.3 million at December 31, 2020 and 2019, respectively and are
included in either investments in affiliated registered investment companies on the consolidated statements of financial condition.
Included in other income/(expense) are $12.0 million and $20.1 million of gains from investments and dividends with respect to
funds advised by Gabelli Funds and Teton Advisors, Inc. for the years ending December 31, 2020 and 2019, respectively.
Investments in Partnerships
We had an aggregate investment in affiliated Investment Partnerships of approximately $99.1 million and $124.8 million at
December 31, 2020 and 2019, respectively. Affiliates of the Company, including its consolidated subsidiaries, generally receive
management fees and incentive fees and allocations of up to 20% with respect to certain of these entities.
Investment Advisory Services
Pursuant to a sub-advisory agreement with the Company, Gabelli Funds pays GCIA 90% of the net revenues it receives related to
investment advisory services provided to GAMCO International SICAV – GAMCO Merger Arbitrage, an investment company
incorporated under the laws of Luxembourg (the “SICAV”). For this purpose, net revenues are defined as gross advisory fees less
expenses related to payouts and expenses of the SICAV paid by Gabelli Funds. GCIA received $7.2 million and $4.1 million during
2020 and 2019, respectively under this sub-advisory agreement. These payments are included in investment advisory and incentive
fees on the consolidated statements of income.
Compensation
In accordance with an employment agreement, the Company pays the Executive Chairman, or his designated assignees, a
management fee equal to 10% of the Company’s pretax profits before consideration of this fee and before consolidation of
Investment Partnerships. In 2020 and 2019, the Company recorded management fee expense of $3.1 million and $5.7 million,
respectively. These fees are recorded as management fee on the consolidated statements of income.
Affiliated Receivables/Payables
At December 31, 2020 and 2019, the receivable from affiliates consists primarily of sub-advisory fees due from Gabelli Funds.
At December 31, 2020 and 2019, the payable to affiliates primarily consisted of expenses paid by affiliates on behalf of the Company.
GAMCO Sublease
In June 2016, AC entered into a sublease agreement with GBL which is subject to annual renewal. Pursuant to the sublease, AC and
its subsidiaries pay a monthly fixed lease amount based on the percentage of square footage occupied by its employees (including
pro rata allocation of common space) at GBL’s corporate offices. For the years ended December 31, 2020 and 2019, the Company
paid $144 thousand and $501 thousand, respectively, under the sublease agreement. These amounts are included in other operating
expenses on the consolidated statements of income.
AC acquired a building at 3 St. James Place, London, UK on March 3, 2020 which is fully leased to GAMCO commencing 2021.
54
J. Equity
Voting Rights
The holders of Class A Common stock (“Class A Stock”) and Class B Common stock (“Class B Stock”) have identical rights except
that holders of Class A Stock are entitled to one vote per share, while holders of Class B Stock are entitled to ten votes per share on
all matters to be voted on by shareholders in general. Holders of each share class, however, are not eligible to vote on matters
relating exclusively to the other share class.
Stock Award and Incentive Plan
The Company maintains one stock award and incentive plan (the “Plan”) approved by the shareholders on May 3, 2016, which is
designed to provide incentives to attract and retain individuals key to the success of AC through direct or indirect ownership of our
common stock. Benefits under the Plan may be granted in any one or a combination of stock options, stock appreciation rights,
restricted stock, restricted stock units, stock awards, dividend equivalents and other stock or cash-based awards. A maximum of 2
million shares of Class A Stock have been reserved for issuance under the Plan by the Compensation Committee of the Board of
Directors (the “Compensation Committee”) which is responsible for administering the Plan. Under the Plan, the Compensation
Committee may grant RSAs and either incentive or nonqualified stock options with a term not to exceed ten years from the grant
date and at an exercise price that it may determine. Through December 31, 2020, approximately 700,000 shares have been awarded
under the Plan leaving approximately 1.3 million shares for future grants.
There were no RSAs outstanding as of December 31, 2020 or 2019.
In August and December 2018, the Company’s Board of Directors approved the grant of 172,800 shares of Phantom Restricted
Stock awards (“Phantom RSAs”). Under the terms of the grants, which were effective August 8 and December 31 of 2018, the
Phantom RSAs vest 30% and 70% after three and five years, respectively. The Phantom RSAs will be settled by a cash payment,
net of applicable withholding tax, on the vesting dates. In addition, an amount equivalent to the cumulative dividends declared on
shares of the Company’s Class A common stock during the vesting period will be paid to participants on vesting.
The Phantom RSAs are treated as a liability because cash settlement is required and compensation will be recognized over the
vesting period. In determining the compensation expense to be recognized each period, the Company will re-measure the fair value
of the liability at each reporting date taking into account the remaining vesting period attributable to each award and the current
market value of the Company’s Class A stock. In making these determinations, the Company will consider the impact of Phantom
RSAs that have been forfeited prior to vesting (e.g., due to an employee termination). The Company has elected to consider
forfeitures as they occur. Based on the closing price of the Company’s Class A Common Stock on December 31, 2020 and 2019, the
total liability recorded by the Company in compensation payable as of December 31, 2020 and 2019, with respect to the Phantom
RSAs was $1.8 million and $2.0 million, respectively.
For the years ended December 31, 2020 and 2019, the Company recorded approximately ($0.2) million and $1.4 million in stock-based
compensation expense, respectively. This expense is included in compensation expense in the consolidated statements of income.
As of December 31, 2020, there were 155,500 Phantom RSAs outstanding. The unrecognized compensation expense related to these was
$3.7 million which is expected to be recognized over a weighted-average period of 2.3 years. During 2020, 31,000 Phantom RSA’s
were forfeited or terminated. On December 28, 2020, 66,850 Phantom RSA’s were issued. As of December 31, 2019, there were
119,650 Phantom RSAs outstanding and $3.9 million unrecognized compensation expense.
Stock Repurchase Program
In December 2015, the Board of Directors established a stock repurchase program authorizing the Company to repurchase up to
500,000 shares. On February 7, 2017, the Board of Directors reset the available number of shares to be purchased under the stock
repurchase program to 500,000 shares. On August 3, 2017 and May 8, 2018, the Board of Directors authorized the repurchase of an
additional 1 million and 500,000 shares, respectively. Our stock repurchase program is not subject to an expiration date.
55
In 2020, the Company repurchased 0.2 million shares at an average price of $36.98 per share for a total investment of $7.4 million. In
2019, the Company repurchased 0.1 million shares at an average price of $37.62 per share for a total investment of $4.1 million.
As of December 31, 2020, the maximum number of shares that may yet be purchased under the plans or programs are 893,102.
Dividends
During 2020, the Company declared and paid dividends of $0.20 per share to class A and class B shareholders totaling $4.5 million.
During 2019, the Company declared dividends of $0.20 per share to class A and class B shareholders totaling $4.5 million, of
which $2.3 million is payable on January 9, 2020 and is included in accrued expenses and other liabilities on the consolidated
statement of financial condition as of December 31, 2019.
K. Retirement Plan
The Company participates in an incentive savings plan (the “Savings Plan”) covering substantially all employees. Company
contributions to the Savings Plan are determined annually by management of the Company but may not exceed the amount
permitted as a deductible expense under the Internal Revenue Code of 1986, as amended. The expense for contributions to the
Savings Plan was approximately $19,000 and $29,000 in 2020 and 2019, respectively, and is included in compensation on the
consolidated statements of income.
L. Guarantees, Contingencies and Commitments
From time to time, the Company 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. The examinations or investigations could result in adverse judgments, settlements, fines,
injunctions, restitutions or other relief. For any such matters, the consolidated financial statements include the necessary provisions
for losses, if any, that the Company believes are probable and estimable. Furthermore, the Company evaluates whether losses exist
which may be reasonably possible and will, if material, make the necessary disclosures. Management believes, however, that such
amounts, both those that are probable and those that are reasonably possible, are not material to the Company’s financial condition,
results of operations or cash flows at December 31, 2020.
The Company has also entered into arrangements with various other third parties, many of which provide for indemnification of the
third parties against losses, costs, claims and liabilities arising from the performance of obligations under the agreements. The
Company has had no claims or payments pursuant to these or prior agreements and believes the likelihood of a claim being made is
remote, and, therefore, no accrual has been made on the consolidated financial statements.
M. Shareholder-Designated Contribution Plan
The Company has established a Shareholder Designated Charitable Contribution program. Under the program, from time to time
each shareholder is eligible to designate a charity to which the Company would make a donation at a rate of twenty cents per share
based upon the actual number of shares registered in the shareholder’s name. The Company recorded an expense of $3.0 million and
$3.3 million related to this program for the years ended December 31, 2020 and 2019, respectively, which is included in shareholder-
designated contribution in the consolidated statements of income. As of December 31, 2020 and 2019, the Company has reflected a
liability in the amount of $2.0 million in connection with this program which is included in accrued expenses and other liabilities on
the consolidated statement of financial condition, respectively.
56
N. Discontinued Operations
As a result of the Morgan Group spin-off, the results of its operations through August 5, 2020 have been classified in the
consolidated statements of income as discontinued operations for all periods presented. There was no gain or loss on the spin-off
for the Company, and it was a tax-free spin-off to AC’s shareholders.
Other than a transition services agreement, Associated Capital does not have any significant continuing involvement in the
operations of Morgan Group after the spin-off, and Associated Capital will not have the ability to influence operating or financial
policies of Morgan Group. All stockholders received 0.022356 shares of Morgan Group stock for each share of AC stock that they
held on the record date for the distribution.
Operating results for the period from January 1, 2020 through August 5, 2020 and the year ended December 31, 2019 were as follows:
Revenues
Institutional research services
Other
Total revenues
Expenses
Compensation
Other operating expenses
Total expenses
Operating loss
Other income (expense)
Net loss from investments
Interest and dividend income
Total other income, net
Income/(loss) from discontinued operations before income taxes
Income tax provision/(benefit)
Income/(loss) from discontinued operations, net of taxes
Net income/(loss) attributable to noncontrolling interests
Net income/(loss) attributable to AC shareholders discontinued operations,
net of taxes
(1) During 2020 reflects the period through August 5, 2020
For the Year Ended
December 31, (1)
2020
2019
$
2,924
36
2,960
$
8,947
113
9,060
2,276
1,699
3,975
(1,015)
(8)
81
73
(942)
(205)
(737)
(105)
8,374
3,184
11,558
(2,498)
(9)
192
183
(2,315)
(501)
(1,814)
76
$
(632)
$
(1,890)
57
The assets and liabilities of Morgan Group have been classified in the consolidated statement of financial condition as of December
31, 2019 as assets and liabilities of discontinued operations and consist of the following:
Cash and cash equivalents
Receivable from brokers
Receivable from affiliates
Deferred tax assets
Other assets
Total assets of discontinued operations
Income taxes payable
Compensation payable
Accrued expenses and other liabilities
Total liabilities of discontinued operations
Noncontrolling interests from discontinued operations
December 31,
2019
$
6,587
1,009
31
184
326
8,137
54
710
1,336
2,100
1,003
Net assets of discontinued operations attributable to AC shareholders
$
5,034
The following table summarizes the net impact of the spin-off to the Company’s equity (deficit) as of August 5, 2020:
$
$
(4,403)
(903)
(5,306)
Decrease in additional paid-in capital
Decrease in noncontrolling interest
Total
58
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our current management, including our CEO and CAO, has evaluated the effectiveness of our disclosure controls and
procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of
December 31, 2020. Based on this evaluation of our disclosure controls and procedures management has concluded that our
disclosure controls and procedures were not effective as of December 31, 2020 because of a material weakness in our
internal control over financial reporting, as further described below.
Notwithstanding that our disclosure controls and procedures as of December 31, 2020 were not effective, and the material
weakness in our internal control over financial reporting as described below, management believes that the consolidated
financial statements and related financial information included in this Annual Report on Form 10-K fairly present in all
material respects our financial condition, results of operations and cash flows as of the dates presented, and for the periods
ended on such dates, in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”).
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act and based upon the criteria established in Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO
framework”)). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance
with GAAP.
An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of
human error or overriding of controls, and therefore can provide only reasonable assurance with respect to reliable financial
reporting. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all
misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective
internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial
statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a
reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be
prevented or detected on a timely basis.
Under the supervision and with the participation of our management we have conducted an evaluation of the effectiveness of
our internal control over financial reporting based on the COSO framework. Based on evaluation under these criteria,
management determined, based upon the existence of the material weakness described below, that we did not maintain
effective internal control over financial reporting as of the Evaluation Date.
The material weakness in internal control over financial reporting was identified in 2019 and caused by the Company not
having sufficient personnel with technical accounting and reporting skills, which resulted in the lack of segregation of duties
to separate financial statement preparation from senior management review and misstatements during 2019 related to non-
routine transactions that were corrected before issuance of our Form 10Qs and 10K for periods in 2019. This material
weakness resulted in an increased risk of a material misstatement in the financial statements.
Changes in Internal Control Over Financial Reporting
There were no changes during the quarter ended December 31, 2020 in our internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
59
Remediation Plan and Status
In light of the material weakness in our internal controls over financial reporting, management has taken steps to enhance
and improve the design and operating effectiveness of our internal controls over financial reporting, including the following
implemented steps: (i) hired additional qualified personnel to address inadequate segregation of duties; (ii) assigned
preparation and review responsibilities to additional personnel for the financial reporting process; (iii) documented the
completion and review of assigned responsibilities through checklists and completed a search to add additional finance staff
to augment accounting personnel.
We are working to remediate the material weakness as quickly and efficiently as possible. However, the material weakness
will not be considered remediated until the remediated controls operate for a sufficient period of time and management has
concluded, through testing, that these controls are operating effectively.
ITEM 9B: OTHER INFORMATION
None.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding the Directors and Executive Officers of AC and compliance with Section 16(a) of the Securities
Exchange Act of 1934 is incorporated herein by reference from the Company’s Proxy Statement for the 2021 Annual
Meeting of Stockholders (the “Proxy Statement”).
AC has adopted a Code of Business Conduct that applies to all of our officers, directors, full-time and part-time employees
and a Code of Conduct that sets forth additional requirements for our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions (together, the “Codes of Conduct”). The
Codes of Conduct are posted on our website (www.associated-capital-group.com) and are available in print free of charge to
anyone who requests a copy. Interested parties may address a written request for a printed copy of the Codes of Conduct to:
Secretary, Associated Capital Group, Inc., 191 Mason Street, Greenwich, Connecticut 06830. We intend to satisfy the
disclosure requirement regarding any amendment to, or a waiver of, a provision of the Codes of Conduct by posting such
information on our website.
In addition to the certifications attached as Exhibits to this Form 10-K, following its 2021 Annual Meeting, AC will also
submit to the New York Stock Exchange (“NYSE”) a certification by our Chief Executive Officer that he is not aware of any
violations by AC of the NYSE corporate governance listing standards as of the date of the certification.
ITEM 11: EXECUTIVE COMPENSATION
Information required by Item 11 is included in our Proxy Statement and is incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information required by Item 12 is included in our Proxy Statement and is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by Item 13 is included in our Proxy Statement and is incorporated herein by reference.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by Item 14 is included in our Proxy Statement and is incorporated herein by reference.
60
PART IV
ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) List of documents filed as part of this Report:
(1) Consolidated Financial Statements and Independent Registered Public Accounting Firm’s Reports included herein:
See Index on page 22.
(2) Financial Statement Schedules
Financial statement schedules are omitted as not required or not applicable or because the information is included in the
Financial Statements or notes thereto.
(3) List of Exhibits:
The agreements included or incorporated by reference as exhibits to this Annual Report on Form 10-K contain
representations and warranties by each of the parties to the applicable agreement. These representations and warranties were
made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as
categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be
inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection
with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from
“materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such
other date or dates as may be specified in the agreement.
The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for
considering whether additional specific disclosures of material information regarding material contractual provisions are
required to make the statements in this report not misleading.
61
Exhibit
Number
2.1
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
21.1
24.1
31.1
31.2
32.1
32.2
Description of Exhibit
Separation and Distribution Agreement, dated November 30, 2015, between GAMCO Investors, Inc., a Delaware corporation
(“GAMCO”), and Associated Capital Group, Inc., a Delaware corporation (the “Company”). (Incorporated by reference to Exhibit
2.1 to the Company’s Form 8-K dated November 30, 2015 filed with the Securities and Exchange Commission on December 4,
2015).
Amended and Restated Certificate of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s
Form 8-K dated November 19, 2015 filed with the Securities and Exchange Commission on November 25, 2015).
Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Report on Form 8-K
dated November 19, 2015 filed with the Securities and Exchange Commission on November 25, 2015).
Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to Amendment No. 4 to the Company’s Registration
Statement on Form 10 filed with the Securities and Exchange Commission on October 21, 2015).
Description of The Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. (Incorporated
by reference to Exhibit 4.2 to the Company’s Report on Form 10-K filed with the Commission on March 16, 2020)
Service Mark and Name License Agreement, dated November 30, 2015, by and between the Company and GAMCO. (Incorporated
by reference to Exhibit 10.1 to the Company’s Form 8-K dated November 30, 2015 filed with the Commission on December 4,
2015
Transitional Administrative and Management Services Agreement, dated November 30, 2015, by and between the Company and
GAMCO. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K dated November 30, 2015 filed with the
Commission on December 4, 2015).
Employment Agreement between the Company and Mario J. Gabelli dated November 30, 2015 (Incorporated by reference to
Exhibit 10.3 to the Company’s Form 8-K dated November 30, 2015 filed with the Commission on December 4, 2015).
Promissory Note in aggregate principal amount of $250,000,000, dated November 30, 2015, issued by GAMCO in favor of the
Company (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K dated November 30, 2015 filed with the
Commission on December 4, 2015).
Tax Indemnity and Sharing Agreement, dated November 30, 2015, by and between the Company and GAMCO. (Incorporated by
reference to Exhibit 10.5 to the Company’s Form 8-K dated November 30, 2015 filed with the Commission on December 4, 2015).
2015 Stock Award Incentive Plan (Incorporated by reference to Exhibit 10.11 to Amendment No. 4 to the Company’s Registration
Statement on Form 10 filed with the Securities and Exchange Commission on October 21, 2015).
Form of Indemnification Agreement by and between the Company and the Indemnitee defined therein (Incorporated by reference to
Exhibit 10.7 to Amendment No. 4 to the Company’s Registration Statement on Form 10 filed with the Securities and Exchange
Commission on October 21, 2015).
Agreement and Plan of Merger, dated as of October 31, 2019, by and among Morgan Group Holding Co., G.R. acquisition, LLC,
G.research, LLC, Institutional Services Holdings, LLC and Associated Capital Group, Inc. (Incorporated by reference to Exhibit 2.1
to the Current Report on Form 8-K of Morgan Group Holding Co. filed with the Securities and Exchange Commission on
November 6, 2019).
Subsidiaries of the Company.
Powers of Attorney (included on page 62 of this Report).
Certification of CEO pursuant to Rule 13a-14(a).
Certification of CFO pursuant to Rule 13a-14(a).
Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
ITEM 16: FORM 10-K SUMMARY
None.
62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwich, State of Connecticut, on
March 23, 2021.
ASSOCIATED CAPITAL GROUP, INC.
By: /s/ Timothy H. Schott
Name: Timothy H. Schott
Title: Chief Financial Officer
Date: March 23, 2021
63
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Kevin Handwerker and Timothy H. Schott
and each of them, their true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for
them in their name, place and stead, in any and all capacities, to sign any and all amendments to this report and to file the
same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission,
and hereby grants to such attorney-in-fact and agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in
the capacities and on the dates indicated.
Signature
/s/ Douglas R. Jamieson
Douglas R. Jamieson
/s/ Timothy H. Schott
Timothy H. Schott
/s/ Mario J. Gabelli
Mario J. Gabelli
/s/ Marc Gabelli
Marc Gabelli
/s/ Daniel R. Lee
Daniel R. Lee
/s/ Bruce M. Lisman
Bruce M. Lisman
/s/ Frederic V. Salerno
Frederic V. Salerno
/s/ Salvatore F. Sodano
Salvatore F. Sodano
/s/ Elisa M. Wilson
Elisa M. Wilson
Date
March 23, 2021
March 23, 2021
March 23, 2021
March 23, 2021
March 23, 2021
March 23, 2021
March 23, 2021
March 23, 2021
March 23, 2021
Title
President and
Chief Executive Officer
(Principal Executive
Officer)
Chief Financial
Officer (Principal
Financial Officer)
Executive Chairman of
the Board and Director
Director
Director
Director
Director
Director
Director
64
Exhibit 21.1
Subsidiaries of Associated Capital Group, Inc.
The following table lists the direct and indirect subsidiaries of Associated Capital Group, Inc. (the “Company”), except those
subsidiaries when considered in the aggregate would not constitute a “significant subsidiary” as defined in the rules promulgated
under the Securities Act. In accordance with Item 601 (21) of Regulation S-K, the omitted subsidiaries considered in the aggregate as
a single subsidiary would not constitute a “significant subsidiary” as defined under Rule 1-02(w) of Regulation S-X.
Name
Gabelli & Company Investment Advisers, Inc.
(100%-owned by the Company)
Gabelli & Partners LLC
(100%-owned by Gabelli & Company Investment Advisers, Inc.)
Jurisdiction of Incorporation or
Organization
Delaware
Delaware
65
Exhibit 31.1
I, Douglas R. Jamieson, certify that:
Certifications
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Associated Capital Group, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of income and cash flows of the registrant as of, and for, the periods presented in
this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of the end of the period covered by this
report; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Douglas R. Jamieson
By:
Name: Douglas R. Jamieson
Title:
Chief Executive Officer
Date: March 23, 2021
66
Exhibit 31.2
I, Timothy H. Schott, certify that:
Certifications
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Associated Capital Group, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of income and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of the end of the period covered by this report; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
By:
Name:
Title:
/s/ Timothy H. Schott
Timothy H. Schott
Chief Financial Officer
Date:
March 23, 2021
67
Exhibit 32.1
Certification
of CEO
Pursuant to
18 U.S.C.
Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of Associated Capital Group, Inc. (the “Company”) for the year ended December 31,
2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Douglas R. Jamieson, as Chief Executive
Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of income of the
Company.
/s/ Douglas R. Jamieson
By:
Name: Douglas R. Jamieson
Title: Chief Executive Officer
Date: March 23, 2021
This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by
the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.
68
Exhibit 32.2
Certification of
CFO Pursuant to
18 U.S.C.
Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of Associated Capital Group, Inc. (the “Company”) for the year ended December 31,
2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Timothy H. Schott, as Chief Financial Officer
of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the
best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of income of the
Company.
/s/ Timothy H. Schott
By:
Name: Timothy H. Schott
Title: Chief Financial Officer
Date: March 23, 2021
This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by
the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.
69
ENGLISH
ITALIAN
CHINESE
JAPANESE
SPANISH
This page was intentionally left blank
70
Board of Directors
Marc Gabelli
Co-Chief Executive Officer
Gabelli Securities International Limited (UK)
Daniel R. Lee
Chief Executive Officer and Director
Full House Resorts, Inc.
Salvatore F. Sodano
Former Vice Chairman
Broadridge Financial Solutions, Inc.
Mario J. Gabelli, CFA
Executive Chairman
Associated Capital Group, Inc.
Officers
Mario J. Gabelli, CFA
Executive Chairman
Douglas R. Jamieson
Chief Executive Officer and President
Bruce M. Lisman
Former Chairman
JP Morgan’s Global Equity Division
Frederic V. Salerno
Former Vice Chairman
Verizon Communications Inc.
Elisa M. Wilson
President
Gabelli Foundation, Inc.
Kevin Handwerker
Executive Vice President, General Counsel
and Secretary
Douglas R. Jamieson
Chief Executive Officer and President
Kenneth D. Masiello, CPA
Chief Accounting Officer
Timothy H. Schott
Executive Vice President and Chief Financial Officer
Corporate and Shareholder Information
Investor Relations
For our 10-K and other shareholder information, as well as
information on our products and services, visit our website at
www.associated-capital-group.com or write to:
191 Mason Street
Greenwich, CT 06830
203-629-9595
email: investor@associated-capital-group.com
Transfer Agent
Computershare
250 Royall Street
Canton, MA 02021
(781) 575-2000
Trading Information
New York Stock Exchange
Class A Common Stock
Symbol - AC
Website
www.associated-capital-group.com
Investment Services Information
Alternative Investments
Contact: Michael M. Gabelli
Managing Director and President
914-921-7787
email: alternatives@gabelli.com
Gabelli Equity Partners
Contact: Jeffrey Illustrato
C.O.O.
914-921-7711
Email: jillustrato@gabelli.com
Annual Meeting
Our 2021 Virtual Annual Meeting of Shareholders
will be held at 8:00 a.m. on June 4, 2021.
“The more you give, the more you receive”
Our shareholders designated contributions to the following
501(c)(3) organizations
The Board of Directors of Associated Capital Group, Inc. established an inaugural Shareholder Designated Charitable Contribution program in
2016. The company continued this initiative into 2018. To date, AC has donated approximately $20 million on behalf of its shareholders.
Under the program, each registered shareholder could designate one charitable organization (two charitable organizations for holders with
8,000 shares or more) to which AC contributed on the shareholder’s behalf.
AC’s program tracks the shareholder program launched by GAMCO Investors, Inc. in April 2013 which was based, in part, on the program
established by Berkshire Hathaway in 1981. The Berkshire Hathaway program continued for over 20 years, until 2003. Warren Buffett’s letter to
shareholders at the inception of Berkshire’s program explained that charitable giving in this manner provides significant benefits to shareholders.
Each eligible shareholder is able to choose whether a contribution of corporate funds based on his/her ownership interest is to be made, and if
so, to specify the recipient of that contribution. The shareholder’s judgment – not the judgment of the company’s directors or management –
controls the contribution process.
♦ ♦ ♦
We are fortunate to live in the
wealthiest nation in the world and
to have the ability to share our
good
fortune. SINCE 2016, WE
WERE ABLE TO SUPPORT MANY
WORTHY ENDEAVORS, INCLUDING
THESE DESIGNATED BY OUR
SHAREHOLDERS. In addition, our
teammates have donated countless
hours of service
to scores of
charitable organizations.
Abilis ♦ Alzheimer’s Disease & Related Disorders Association ♦ Alzheimer’s Foundation of America ♦ America Needs You ♦ American Associates
of Ben-Gurion University of the Negev ♦ American Cancer Society ♦ American Heart Association ♦ American Macular Degeneration Foundation
♦ American National Red Cross ♦ American Refugee Committee ♦ Amigos Del Museo Del Barrio ♦ Archbishop Wood High School ♦ Arizona
State University Foundation ♦ Arthritis Foundation ♦ Atlantis Educational Foundation ♦ Aurora Ice Association ♦ Bay Area Discovery Museum ♦
Bedford Audubon Society ♦ Blythedale Children’s Hospital ♦ Bob Woodruff Family Foundation ♦ Boston College Trustees ♦ Boys and Girls Club
of Truckee Meadows ♦ Bristol Riverside Theater Co. ♦ Brunswick School ♦ Cathedral of St. John the Baptist ♦ Catholic Big Sisters & Big Brothers
♦ Catholic Charities of the Archdiocese of New York ♦ CCM of Westchester ♦ Center for All Abilities ♦ Central Scholarship Bureau ♦ Chaminade
High School ♦ Change for Kids ♦ Chicago Chesed Fund ♦ Christian Brothers Academy ♦ Church-in-the-Garden ♦ CityArts ♦ Citymeals-on-
Wheels ♦ Columbia University ♦ Columbus Citizens Foundation ♦ Cornell University ♦ Cow Hollow Preschool ♦ Cristo Rey Jesuit High School
♦ Direct Relief International ♦ Disabled American Veterans ♦ Disabled Veterans National Foundation ♦ Doctors Without Borders USA ♦ Don
♦ Downtown Community Television Center
Bosco Community Center of Port Chester
♦ Elevation Chapel ♦ Eva’s Village ♦
♦ Eastchester Volunteer Ambulance Corps.
Fidelity Investments Charitable Gift Fund
Fairfield University ♦ Feeding America ♦
University of New York at Binghamton
♦ Folds of Honor Foundation ♦ The State
Friends of Animals ♦ Futures in Education
♦ Fountain Valley School of Colorado ♦
Answer ♦ Greenwich Hospital ♦ Greenwich
♦ Gilchrist Hospice Care ♦ Give Me an
♦ Haley House ♦ Hank’s Yanks Baseball
International Film Festival ♦ Groton School
♦ Hetrick-Martin Institute ♦ Hindu
Foundation ♦ Heifer Project International
Program
Society of Nevada ♦ Homeless Prenatal
Honeywell Humanitarian
Surgery Fund ♦ Immaculate Conception
Relief Foundation ♦ Hospital for Special
Semper Fi Fund ♦ Inner-City Scholarship
Church - Bronx, NY ♦ Injured Marine
International Campaign for Tibet ♦ Iona
Fund ♦ Interfaith Nutrition Network ♦
America’s Founding Principles ♦ Jewish
College ♦ Jack Miller Center for Teaching
Greater Pittsburgh ♦ Joel Barlow High
Communal Fund ♦ Jewish Federation of
F. Kennedy Medical Center Foundation ♦
School, Regional School District #9 ♦ John
K9s for Warriors ♦ Kids in Crisis ♦ Lee
Junior League of Greenwich Connecticut ♦
Services of the Hudson Valley ♦ Leukemia
Memorial Health System Foundation ♦ Legal
Reserve ♦ Los Angeles Team Mentoring
and Lymphoma Society ♦ LongHouse
New York ♦ Manhattan College ♦ Marc
Make-A-Wish Foundation of Metro
♦
♦ Marin Country Day School ♦ Marine
Lustgarten Pancreatic Cancer Foundation
Corps Scholarship Foundation ♦ Masters
School ♦ McMaster University Ontario ♦
Meals on Wheels Association of America ♦ Memorial Sloan-Kettering Cancer Center ♦ Millbrook School ♦ Mount Sinai Medical Center ♦ National
Audubon Society ♦ National Brain Tumor Society ♦ Natural Resources Defense Council ♦ Nature Conservancy ♦ New Israel Fund ♦ New Jersey
Institute of Technology Foundation ♦ New York and Presbyterian Hospital ♦ New York City Relief ♦ Northeastern University ♦ Northern Nevada
HIV Outpatient Program Education and Services ♦ Northwell Health Foundation ♦ Operation Smile ♦ Pacific House ♦ Peck Slip School Parent
Teachers Association ♦ Pediatric Cancer Research Foundation ♦ Pennsylvania Troopers Helping Troopers Foundation ♦ Perlman Music Program ♦
Planned Parenthood Federation of America ♦ Planned Parenthood of Southern New England ♦ Planned Parenthood Shasta Diablo ♦ Prospects,
Opportunity and Enrichment ♦ Putnam-Indian Field School ♦ Rainforest Action Network ♦ Rainforest Alliance ♦ Randolph Foundation ♦ Rector
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