Associated Capital Group, Inc. - Quarter Report: 2017 March (Form 10-Q)

SECURITIES & EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2017

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

For the transition period from ___ to ___

Commission File No. 001-37387

ASSOCIATED CAPITAL GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware		47-3965991
(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

(203) 629-9595

Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer", "accelerated filer", and "smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☒

Non-accelerated filer ☐	Smaller reporting company ☐

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

Yes ☐ No ☒

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

Class		Outstanding at April 30, 2017
Class A Common Stock, .001 par value	(Including 420,240 restricted stock awards)	5,033,013
Class B Common Stock, .001 par value		19,195,649

INDEX

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

PART I.	FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Statements of Financial Condition:
	- March 31, 2017
	- December 31, 2016
	- March 31, 2016

	Condensed Consolidated Statements of Income:
	- Three months ended March 31, 2017 and 2016

	Condensed Consolidated Statements of Comprehensive Income:
	- Three months ended March 31, 2017 and 2016

	Condensed Consolidated Statements of Equity:
	- Three months ended March 31, 2017 and 2016

	Condensed Consolidated Statements of Cash Flows:
	- Three months ended March 31, 2017 and 2016

	Notes to Unaudited Condensed Consolidated Financial Statements

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

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

Item 4.	Controls and Procedures

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.	Exhibits

SIGNATURES

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

UNAUDITED

(Dollars in thousands, except per share data)

	March 31,			December 31,			March 31,
	2017			2016			2016
ASSETS
Cash and cash equivalents	$	307,651		$	314,093		$	203,239
Investments in securities		193,120			207,096			184,819
Investment in GBL stock (4,393,055 shares)		129,990			135,701			162,807
Investments in affiliated registered investment companies		136,284			131,645			115,916
Investments in partnerships		130,058			129,398			113,147
Receivable from brokers		12,021			12,588			23,278
Investment advisory fees receivable		1,349			9,784			1,463
Receivable from affiliates		1,524			1,523			3,507
Goodwill		3,422			3,422			3,254
Other assets		2,214			7,353			1,270
Total assets	$	917,633		$	952,603		$	812,700

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Payable to brokers	$	6,168		$	2,396		$	12,251
Income taxes payable and deferred tax liabilities		4,506			6,978			13,357
Compensation payable		5,991			17,676			4,893
Securities sold, not yet purchased		7,519			9,984			8,014
Mandatorily redeemable noncontrolling interests		-			-			1,421
Payable to affiliates		560			1,455			673
Accrued expenses and other liabilities		7,008			35,862			4,072
Total liabilities		31,752			74,351			44,681

Redeemable noncontrolling interests		4,050			4,230			3,752

Equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized; none issued and outstanding		-			-			-
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized; 6,395,380, 6,398,580 and 6,244,452
shares issued, respectively; 5,051,686, 5,058,648 and 6,154,674 shares outstanding, respectively		6			6			6
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized; 19,196,792, 19,196,792 and
19,196,792 shares issued and outstanding, respectively		19			19			19
Additional paid-in capital		1,007,471			1,007,027			999,644
Retained earnings		(5,751	)		7,327			1,131
GBL 4% PIK Note		(90,000	)		(100,000	)		(250,000	)
Accumulated comprehensive income		11,886			1,317			12,933
Treasury stock, at cost (1,343,694, 1,339,932 and 89,778 shares, respectively)		(41,800	)		(41,674	)		(2,464	)
Total Associated Capital Group, Inc. equity		881,831			874,022			761,269
Noncontrolling interests		-			-			2,998
Total equity		881,831			874,022			764,267
Total liabilities and equity	$	917,633		$	952,603		$	812,700

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

UNAUDITED

(Dollars in thousands, except per share data)

	Three Months Ended
	March 31,
	2017			2016
Revenues
Investment advisory and incentive fees	$	2,401		$	2,068
Institutional research services		2,582			2,438
Other		4			11
Total revenues		4,987			4,517
Expenses
Compensation		6,783			6,312
Management fee		-			274
Stock based compensation		444			644
Other operating expenses		2,092			1,802
Total expenses		9,319			9,032

Operating loss		(4,332	)		(4,515	)
Other income (expense)
Net gain/(loss) from investments		(14,401	)		3,709
Interest and dividend income		2,257			3,434
Interest expense		(70	)		(420	)
Shareholder-designated contribution		(4,895	)		-
Total other income/(expense), net		(17,109	)		6,723
Income/(loss) before income taxes		(21,441	)		2,208
Income tax provision		(8,424	)		661
Net income/(loss)		(13,017	)		1,547
Net income/(loss) attributable to noncontrolling interests		61			(46	)
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders	$	(13,078	)	$	1,593

Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders
per share:
Basic	$	(0.55	)	$	0.06

Diluted	$	(0.55	)	$	0.06

Weighted average shares outstanding:
Basic		23,829			24,863

Diluted		23,829			25,177

Dividends declared:	$	-		$	0.10

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED

(Dollars in thousands, except per share data)

	Three Months Ended
	March 31,
	2017			2016

Net income/(loss)	$	(13,017	)	$	1,547
Other comprehensive income, net of tax:
Net unrealized gains on securities available for sale (a)		10,569			15,514
Other comprehensive income		10,569			15,514

Comprehensive income/(loss)		(2,448	)		17,061
Less: Comprehensive income attributable to noncontrolling interests		61			678

Comprehensive income/(loss) attributable to Associated Capital Group, Inc.	$	(2,509	)	$	16,383

(a)	Net of income tax expense of $5,945, and $8,726, respectively.

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

UNAUDITED

(In thousands)

For the Three Months Ended March 31, 2017

	Associated Capital Group, Inc. shareholders
						Additional					Accumulated									Redeemable
	Common		Retained			Paid-in		GBL 4%			Comprehensive			Treasury						Noncontrolling
	Stock		Earnings			Capital		PIK Note			Income			Stock			Total			Interests
Balance at December 31, 2016	$	25	$	7,327		$	1,007,027	$	(100,000	)	$	1,317		$	(41,674	)	$	874,022		$	4,230
Redemptions of
noncontrolling interests		-		-			-		-			-			-			-			(241	)
Net income (loss)		-		(13,078	)		-		-			-			-			(13,078	)		61
Net unrealized losses on
securities available for sale,
net of income tax benefit ($942)		-		-			-		-			(1,675	)		-			(1,675	)		-
Amounts reclassified from
accumulated other
comprehensive income, net of
income tax expense ($6,887)		-		-			-		-			12,244			-			12,244			-
Stock based compensation
expense		-		-			444		-			-			-			444			-
Proceeds from payment of
GBL 4% PIK Note		-		-			-		10,000			-			-			10,000			-
Purchase of treasury stock		-		-			-		-			-			(126	)		(126	)		-
Balance at March 31, 2017	$	25	$	(5,751	)	$	1,007,471	$	(90,000	)	$	11,886		$	(41,800	)	$	881,831		$	4,050

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

UNAUDITED

(In thousands)

For the Three Months Ended March 31, 2016

				Associated Capital Group, Inc. shareholders
									Additional					Accumulated									Redeemable
	Noncontrolling			Common		Retained			Paid-in		GBL 4%			Comprehensive			Treasury						Noncontrolling
	Interests			Stock		Earnings			Capital		PIK Note			Income			Stock			Total			Interests
Balance at December 31, 2015	$	2,353		$	25	$	2,072		$	999,000	$	(250,000	)	$	(1,857	)	$	(44	)	$	751,549		$	5,738
Redemptions of
noncontrolling interests		-			-		-			-		-			-			-			-			(208	)
Deconsolidation of an offshore
fund		-			-		-			-		-			-			-			-			(1,811	)
Net income (loss)		(79	)		-		1,593			-		-			-			-			1,514			33
Net unrealized gains on
securities available for sale,
net of income tax expense ($8,726)		724			-		-			-		-			14,790			-			15,514			-
Dividends declared ($.10 per share)		-			-		(2,534	)		-		-			-			-			(2,534	)		-
Stock based compensation
expense		-			-		-			644		-			-			-			644			-
Purchase of treasury stock		-			-		-			-		-			-			(2,420	)		(2,420	)		-
Balance at March 31, 2016	$	2,998		$	25	$	1,131		$	999,644	$	(250,000	)	$	12,933		$	(2,464	)	$	764,267		$	3,752

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(In thousands)

	Three Months Ended
	March 31,
	2017			2016
Operating activities
Net income/(loss)	$	(13,017	)	$	1,547
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Equity in net gains from partnerships		(696	)		(2,181	)
Depreciation and amortization		4			3
Stock based compensation expense		444			644
Other-than-temporary loss on available for sale securities		19,131			-
Donated securities		566			-
(Increase) decrease in assets:
Investments in trading securities		11,056			9,801
Investments in partnerships:
Contributions to partnerships		(4,964	)		(17,617	)
Distributions from partnerships		5,000			11,699
Receivable from affiliates		(1	)		3,951
Receivable from brokers		567			32,535
Investment advisory fees receivable		8,435			3,414
Other assets		5,134			628
Increase (decrease) in liabilities:
Payable to brokers		3,772			(38,376	)
Income taxes payable and deferred tax liabilities		(8,416	)		(1,038	)
Payable to affiliates		(895	)		673
Compensation payable		(11,685	)		(6,032	)
Mandatorily redeemable noncontrolling interests		-			292
Accrued expenses and other liabilities		(28,853	)		132
Total adjustments		(1,401	)		(1,472	)
Net cash (used in) provided by operating activities	$	(14,418	)	$	75

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED (continued)

(In thousands)

	Three Months Ended
	March 31,
	2017			2016
Investing activities
Purchases of available for sale securities	$	(2,080	)	$	(219	)
Return of capital on available for sale securities		423			263
Net cash (used in) provided by investing activities		(1,657	)		44

Financing activities
Redemptions of redeemable noncontrolling interests		(241	)		(208	)
Purchase of treasury stock		(126	)		(2,420	)
Proceeds from payment of GBL 4% PIK Note		10,000			-
Net cash provided by (used in) financing activities		9,633			(2,628	)
Net decrease in cash and cash equivalents		(6,442	)		(2,509	)
Cash and cash equivalents at beginning of period		314,093			205,750
Decrease in cash from deconsolidation		-			(2	)
Cash and cash equivalents at end of period	$	307,651		$	203,239
Supplemental disclosures of cash flow information:
Cash paid for interest	$	70		$	128
Cash paid for taxes	$	-		$	1,600

Non-cash activity:

- For the three months ended March 31, 2017 and March 31, 2016, the Company accrued dividends on restricted stock awards of $0 and $49, respectively.

On January 1, 2016, Associated Capital Group, Inc. was no longer deemed to have control over a certain offshore fund which resulted in the deconsolidation of that offshore fund and a decrease of approximately $1 of cash and cash equivalents, a decrease of approximately $104 of net assets and a decrease of approximately $105 of redeemable noncontrolling interests.

On January 1, 2016, AC adopted ASU 2015-02, which amends the consolidation requirements in ASC 810. This resulted in the deconsolidation of a certain consolidated feeder fund and a certain limited partnership and a decrease of approximately $1 of cash and cash equivalents, a decrease of approximately $1,705 of net assets and a decrease of approximately $1,706 of redeemable noncontrolling interests.

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

(Unaudited)

A. Basis of Presentation and Significant Accounting Policies

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.

The Spin-off and Related Transactions

We are a Delaware corporation organized to be the parent operating company for the spin-off of GAMCO Investors, Inc.’s (“GAMCO’s” or “GBL’s”) alternative investment management business, institutional research services operations and certain cash and other assets.

On November 30, 2015, GAMCO distributed all the outstanding shares of each class of common stock of AC Group on a pro rata one-for-one basis to the holders of each class of GAMCO’s common stock. Prior to the distribution, GAMCO contributed the 93.9% interest it held in Gabelli & Company Investment Advisers (“GCIA” f/k/a Gabelli Securities, Inc.) and certain cash and other assets to AC Group. GCIA is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended. 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 business earns fees from its advisory assets, and income (loss) from trading and investment portfolio activities. The advisory fees include management and incentive fees. Management fees are largely based on a percentage of the portfolios' levels of assets under management. Incentive fees are based on the percentage of profits derived from the investment performance delivered to clients' invested assets. GCIA is now a wholly owned subsidiary of AC.

We operate our institutional research services operations through G.research, LLC ("G.research") doing business as “Gabelli & Company”, a wholly owned subsidiary of Institutional Services Holdings, LLC which in turn is a wholly owned subsidiary of the Company. G.research is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Through G.research, we provide institutional research services as well as act as an underwriter. G.research is regulated by the Financial Industry Regulatory Authority ("FINRA"). G.research's revenues are derived primarily from institutional research services.

In addition, the following transactions were also undertaken in connection with the spin-off:

GAMCO issued a promissory note (the “GAMCO Note”) to AC Group in the original principal amount of $250.0 million used to partially capitalize the Company in connection with the spin-off. The GAMCO Note bears interest at 4.0% per annum and has a maturity date of November 30, 2020 with respect to the original principal amount of the GAMCO Note. Interest on the GAMCO Note will accrue from the most recent date for which interest has been paid, or if no interest has been paid, from the effective date of the GAMCO Note; provided, however, that at the election of GAMCO, payment of interest on the GAMCO Note may, in lieu of being paid in cash, be paid, in whole or in part, in kind on the then-outstanding principal amount (a “PIK Amount”). GAMCO will repay all PIK Amounts added to the outstanding principal amount of the GAMCO Note, in cash, on the fifth anniversary of the date on which each such PIK Amount was added to the outstanding principal amount of the GAMCO Note. In no event may any interest be paid in kind subsequent to November 30, 2019. GAMCO may prepay the GAMCO Note prior to maturity without penalty.

AC has received principal repayments totaling $160 million on the GAMCO Note, of which $10 million was received during the first quarter of 2017. $50 million of the prepayment was applied against the principal amount due on November 30, 2016, $50 million against the principal amount due on November 30, 2017, $30 million against the principal amount due on November 30, 2018, and $30 million against the principal amount due on November 30, 2019. Of the $90 million principal amount outstanding, $20 million is due on November 30, 2018, $20 million is due on November 30, 2019, and $50 million is due on November 30, 2020.

In addition, AC Group through GCIA owns 4,393,055 shares of GAMCO Class A common stock. The sale was made from GAMCO to GCIA in advance of the spin-off. GCIA paid the purchase price by issuing a note to GAMCO in the principal amount of $150 million (the “GCIA Note”). In connection with the spin-off, AC Group received the GCIA Note from GAMCO and GCIA became a subsidiary of AC Group.The GCIA Note is thus now an intercompany note within the AC Group.

Basis of Presentation

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

The interim condensed consolidated financial statements include the accounts of AC Group and its subsidiaries. Intercompany accounts and transactions are eliminated.

These interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.

Use of Estimates

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

Reclassification

The Company has reclassified certain prior-period amounts to conform to the current-period presentation. For presentation of 2017 results, the Company reported revenue from its research services agreement with GAMCO in “Institutional Research Services Revenue” instead of “Other Revenue”. The reclassification did not impact revenue, operating expenses, operating income, net income, or equity.

Recent Accounting Developments

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. For public companies, the ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. The Company has adopted this ASU effective January 1, 2017 without a material impact on its condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern,” which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern.” The FASB believes that requiring management to perform the assessment will enhance the timeliness, clarity, and consistency of related disclosures. The ASU is effective for annual periods ending after December 15, 2016, and for annual and interim periods thereafter. The Company has adopted this ASU effective December 31, 2016. No additional disclosures were required in this Report of Form 10Q based on management’s assessment that it does not have substantial doubt about the Company’s ability to continue as a going concern.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers," which supersedes the revenue recognition requirements in the Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the ASC. The core principle of the new ASU No. 2014-09 is for companies to recognize revenue from the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods and is either applied on a retrospective or modified retrospective basis. The Company is currently evaluating this guidance but does not expect it will have a material impact on its condensed consolidated financial statements, although the adoption will likely have an impact around disclosures related to revenue.

In January 2016, the FASB issued ASU 2016-01, which amends the guidance in GAAP on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. For public companies, the new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. To adopt the amendments, entities will be required to make a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year in which the guidance is effective. The Company is currently evaluating this guidance and the impact it will have on its condensed consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, which adds and clarifies guidance on the classification of certain cash receipts and payments in the consolidated statements of cash flows. For public companies, the ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating this guidance and the impact it will have on its condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04 to simplify the process used to test for goodwill. Under the new standard, if “the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.” For public companies, the ASU is effective for annual and any interim impairment tests for periods beginning after December 15, 2019. Early adoption is permitted for impairment tests that occur after January 1, 2017. The Company is currently evaluating this guidance and the impact it will have on its condensed consolidated financial statements.

B. Investment in Securities

Investments in securities (including GAMCO stock) at March 31, 2017, December 31, 2016 and March 31, 2016 consisted of the following:

	March 31, 2017				December 31, 2016				March 31, 2016
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Government obligations	$	99,687	$	99,820	$	119,755	$	119,823	$	99,841	$	99,964
Common stocks		71,511		85,802		69,503		82,158		66,906		79,571
Mutual funds		2,405		3,333		2,402		3,143		2,579		3,215
Other investments		3,411		3,654		1,275		1,472		648		918
Total trading securities		177,014		192,609		192,935		206,596		169,974		183,668

Available for sale securities:
Common stocks		130,869		129,990		150,000		135,701		150,000		162,807
Mutual funds		206		511		206		500		627		1,151
Total available for sale securities		131,075		130,501		150,206		136,201		150,627		163,958

Total investments in securities	$	308,089	$	323,110	$	343,141	$	342,797	$	320,601	$	347,626

Securities sold, not yet purchased at March 31, 2017, December 31, 2016 and March 31, 2016 consisted of the following:

	March 31, 2017				December 31, 2016				March 31, 2016
	Proceeds		Fair Value		Proceeds		Fair Value		Proceeds		Fair Value
Trading securities:	(In thousands)
Common stocks	$	7,279	$	7,467	$	9,583	$	9,947	$	7,951	$	7,947
Other investments		1		52		27		37		2		67
Total securities sold, not yet purchased	$	7,280	$	7,519	$	9,610	$	9,984	$	7,953	$	8,014

Investments in affiliated registered investment companies at March 31, 2017, December 31, 2016 and March 31, 2016 consisted of the following:

	March 31, 2017				December 31, 2016				March 31, 2016
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Mutual funds	$	40,096	$	45,250	$	40,096	$	45,351	$	40,097	$	43,798
Total trading securities		40,096		45,250		40,096		45,351		40,097		43,798

Available for sale securities:
Closed-end funds		64,589		85,123		62,890		80,650		60,865		69,052
Mutual funds		4,387		5,911		4,396		5,644		1,841		3,066
Total available for sale securities		68,976		91,034		67,286		86,294		62,706		72,118

Total investments in affiliated
registered investment companies	$	109,072	$	136,284	$	107,382	$	131,645	$	102,803	$	115,916

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

The following table identifies all reclassifications out of accumulated other comprehensive income ("AOCI") into income for the three months ended March 31, 2017 and 2016 (in thousands):

Amount					Affected Line Items	Reason for
Reclassified					in the Statements	Reclassification
from AOCI					Of Income	from AOCI
Three months ended March 31,
2017			2016
$	(19,131	)	$	-	Net gain/(loss) from investments	Other than temporary impairment of AFS securities
	(19,131	)		-	Income/(loss) before income taxes
	6,887			-	Income tax provision
$	(12,244	)	$	-	Net income/(loss)

The Company recognizes all equity derivatives as either assets or liabilities measured at fair value and includes them in either investments in securities or securities sold, not yet purchased on the condensed consolidated statements of financial condition. From time to time, the Company and/or the partnerships and offshore funds that the Company consolidates will enter into hedging transactions to manage their exposure to foreign currencies and equity prices related to their proprietary investments. At March 31, 2017, December 31, 2016 and March 31, 2016, we held derivative contracts on (3,041) equity shares, 16,000 equity shares and 317,000 equity shares, respectively, that are included in investments in securities or securities sold, not yet purchased on the condensed consolidated statements of financial condition. We had no foreign exchange contracts outstanding at March 31, 2017 and December 31, 2016. We had two foreign exchange contracts outstanding at March 31, 2016 that are included in payable to brokers on the condensed consolidated statements of financial condition. Aside from one foreign exchange contract at March 31, 2016, these transactions are not designated as hedges for accounting purposes, and therefore changes in fair values of these derivatives are included in net gain/(loss) from investments on the condensed consolidated statements of income. The one foreign exchange contract that was designated as a hedge was for a short of British Pounds to hedge the long investment that we have in the London Stock Exchange listed Gabelli Value Plus+ Trust Ltd. closed-end fund which is denominated in British Pounds. As the underlying investment that is being hedged is an available for sale security, the portion of the change in value of the closed-end fund that is currency related is recorded in net gain/(loss) from investments on the condensed consolidated statements of income and not in accumulated comprehensive income.

The following tables identify the fair values and gains and losses of all derivatives held by the Company (in thousands):

		Asset Derivatives							Liability Derivatives
	Statement of	Fair Value						Statement of	Fair Value
	Financial Condition	March 31,		December 31,		March 31,		Financial Condition	March 31,		December 31,		March 31,
	Location	2017		2016		2016		Location	2017		2016		2016
Derivatives designated as hedging
instruments under FASB ASC 815-20
Foreign exchange	Receivable from
contracts	brokers	$	-	$	-	$	-	Payable to brokers	$	-	$	-	$	2,875
Sub total		$	-	$	-	$	-		$	-	$	-	$	2,875
Derivatives not designated as hedging
instruments under FASB ASC 815-20
Equity contracts	Investments in							Securities sold,
	securities	$	102	$	127	$	185	not yet purchased	$	52	$	37	$	67
Foreign exchange	Receivable from
contracts	brokers		-		-		-	Payable to brokers		-		-		5,223
Sub total		$	102	$	127	$	185		$	52	$	37	$	5,290
Total derivatives		$	102	$	127	$	185		$	52	$	37	$	8,165

Type of Derivative	Income Statement Location	Three Months ended March 31,
		2017			2016
Foreign exchange contracts	Net gain/(loss) from investments	$	-		$	1,192
Equity contracts	Net gain/(loss) from investments		(11	)		69
Total		$	(11	)	$	1,261

The Company is a party to enforceable master netting arrangements for swaps entered into as part of the investment strategy of the Company’s proprietary portfolio. They are typically not used as hedging instruments. These swaps, while settled on a net basis with the counterparties, major U.S. financial institutions, are shown gross in assets and liabilities on the condensed 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 Not Offset in the
							Statements of Financial Condition
	Gross		Gross Amounts		Net Amounts of
	Amounts of		Offset in the		Assets Presented
	Recognized		Statements of		in the Statements of		Financial			Cash Collateral
	Assets		Financial Condition		Financial Condition		Instruments			Received		Net Amount
Swaps:	(In thousands)
March 31, 2017	$	102	$	-	$	102	$	(51	)	$	-	$	51
December 31, 2016		96		-		96		(9	)		-		87
March 31, 2016	$	185	$	-	$	185	$	(66	)	$	-	$	119

							Gross Amounts Not Offset in the
							Statements of Financial Condition
	Gross		Gross Amounts		Net Amounts of
	Amounts of		Offset in the		Liabilities Presented
	Recognized		Statements of		in the Statements of		Financial			Cash Collateral
	Liabilities		Financial Condition		Financial Condition		Instruments			Pledged		Net Amount
Swaps:	(In thousands)
March 31, 2017	$	51	$	-	$	51	$	(51	)	$	-	$	-
December 31, 2016		9		-		9		(9	)		-		-
March 31, 2016	$	66	$	-	$	66	$	(66	)	$	-	$	-

The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of available for sale investments as of March 31, 2017, December 31, 2016 and March 31, 2016:

	March 31, 2017
			Gross		Gross
			Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
	(In thousands)
Common stocks	$	130,869	$	-	$	(879	)	$	129,990
Closed-end funds		64,589		20,600		(66	)		85,123
Mutual funds		4,593		1,829		-			6,422
Total available for sale securities	$	200,051	$	22,429	$	(945	)	$	221,535

	December 31, 2016
			Gross		Gross
			Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
	(In thousands)
Common stocks	$	150,000	$	-	$	(14,299	)	$	135,701
Closed-end funds		62,890		17,760		-			80,650
Mutual funds		4,602		1,542		-			6,144
Total available for sale securities	$	217,492	$	19,302	$	(14,299	)	$	222,495

	March 31, 2016
			Gross		Gross
			Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
	(In thousands)
Common stocks	$	150,000	$	12,807	$	-		$	162,807
Closed-end funds		60,865		11,828		(3,641	)		69,052
Mutual funds		2,468		1,749		-			4,217
Total available for sale securities	$	213,333	$	26,384	$	(3,641	)	$	236,076

Changes in net unrealized gains, net of taxes, for the three months ended March 31, 2017 and March 31, 2016 of $10.6 million and $15.5 million in gains, respectively, have been included in other comprehensive income, a component of equity, at March 31, 2017 and March 31, 2016. Return of capital on available for sale securities was $0.4 million and $0.3 million for the three months ended March 31, 2017 and 2016, respectively. For the three months ended March 31, 2017 and March 31, 2016, there were no proceeds from the sales of investments available for sale and no gross gains on the sale of investments available for sale. There were no losses on the sale of investments available for sale for the three months ended March 31, 2017 or March 31, 2016. The cost basis of a security sold is determined using specific identification.

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

	March 31, 2017							December 31, 2016							March 31, 2016
			Unrealized							Unrealized							Unrealized
	Cost		Losses			Fair Value		Cost		Losses			Fair Value		Cost		Losses			Fair Value
(in thousands)
Common stocks	$	130,869	$	(879	)	$	129,990	$	150,000	$	(14,299	)	$	135,701	$	-	$	-		$	-
Closed-end funds		1,864		(66	)		1,798		-		-			-		39,413		(3,641	)		35,772
Total available for sale securities	$	132,733	$	(945	)	$	131,788	$	150,000	$	(14,299	)	$	135,701	$	39,413	$	(3,641	)	$	35,772

At March 31, 2017, there were two holdings in loss positions that were not deemed to be other-than-temporarily impaired due to the length of time that they had been in a loss position and because they passed scrutiny in our evaluation of issuer-specific and industry-specific considerations. In these specific instances, one of the investments at March 31, 2017 was a closed-end fund with diversified holdings across multiple companies and across multiple industries. This holding was impaired for three months at March 31, 2017. The second holding was in GAMCO common stock that was recognized as having an “other than temporary impairment” during the quarter, but which has subsequently had further unrealized losses that were not deemed to be other-than-temporarily impaired at March 31, 2017. The value of these holdings at March 31, 2017 was $131.8 million. If these holdings were to continue to be impaired, we may need to record impairment in a future period on the condensed consolidated statement of income for the amount of unrealized loss, which at March 31, 2017 was $0.9 million.

At December 31, 2016, there was one holding in a loss position which was not deemed to be other-than-temporarily impaired due to the length of time that it has been consecutively in a loss position and because it passed scrutiny in our evaluation of issuer-specific and industry-specific considerations. This holding was a common stock and was impaired for seven consecutive months. This fair value of this holding has exceeded cost during the year ended December 31, 2016.

At March 31, 2016, there were three holdings in loss positions that were not deemed to be other-than-temporarily impaired due to the length of time that they had been in a loss position and because they passed scrutiny in our evaluation of issuer-specific and industry-specific considerations. In these specific instances, the investments at March 31, 2016 were closed-end funds with diversified holdings across multiple companies and across multiple industries. One holding was impaired for three months and two holdings were impaired for nine months at March 31, 2016. The value of these holdings at March 31, 2016 was $35.8 million.

For the three months ended March 31, 2017, there was a $19.1 million loss on an AFS security deemed to be other than temporary. This “other than temporary loss” was on the GAMCO shares. The magnitude and persistence of this loss resulted in the “other than temporary” designation. There were no “other than temporary losses” recognized on AFS securities for the three months ended March 31, 2016.

C. Fair Value

The following tables present information about the Company’s assets and liabilities by major categories measured at fair value on a recurring basis as of March 31, 2017, December 31, 2016 and March 31, 2016 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. Note that the FASB issued new guidance effective for the Company’s first quarter of 2016 amending the current disclosure requirements for investments in certain entities that calculate net asset value per share. The guidance requires investments for which fair value is measured using the net asset value per share practical expedient to be removed from the fair value hierarchy. Instead, those investment amounts are provided as a separate item to permit reconciliation of the fair value of investments included in the fair value hierarchy to the line items presented in the condensed consolidated statements of financial condition.

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2017 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Investments		Other Assets		Balance as of
	Markets for Identical		Observable		Unobservable		Measured at		Not Held at		March 31,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		NAV (a)		Fair Value (b)		2017
Cash equivalents	$	307,640	$	-	$	-	$	-	$	-	$	307,640
Investments in partnerships		-		-		-		126,187		3,871		130,058
Investments in securities (including GBL stock):
AFS - Common stocks		129,990		-		-		-		-		129,990
AFS - Mutual funds		511		-		-		-		-		511
Trading - Gov't obligations		99,820		-		-		-		-		99,820
Trading - Common stocks		85,308		-		494		-		-		85,802
Trading - Mutual funds		3,333		-		-		-		-		3,333
Trading - Other		3,102		102		450		-		-		3,654
Total investments in securities		322,064		102		944		-		-		323,110
Investments in affiliated registered investment companies:
AFS - Closed-end funds		85,123		-		-		-		-		85,123
AFS - Mutual funds		5,911		-		-		-		-		5,911
Trading - Mutual funds		45,250		-		-		-		-		45,250
Total investments in affiliated
registered investment companies		136,284		-		-		-		-		136,284
Total investments		458,348		102		944		126,187		3,871		589,452
Total assets at fair value	$	765,988	$	102	$	944	$	126,187	$	3,871	$	897,092
Liabilities
Trading - Common stocks	$	7,467	$	-	$	-	$	-	$	-	$	7,467
Trading - Other		-		52		-		-		-		52
Securities sold, not yet purchased	$	7,467	$	52	$	-	$	-	$	-	$	7,519

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2016 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Investments		Other Assets		Balance as of
	Markets for Identical		Observable		Unobservable		Measured at		Not Held at		December 31,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		NAV (a)		Fair Value (b)		2016
Cash equivalents	$	314,082	$	-	$	-	$	-	$	-	$	314,082
Investments in partnerships		-		-		-		125,527		3,871		129,398
Investments in securities (including GBL stock):
AFS - Common stocks		135,701		-		-		-		-		135,701
AFS - Mutual funds		500		-		-		-		-		500
Trading - Gov't obligations		119,823		-		-		-		-		119,823
Trading - Common stocks		81,696		1		461		-		-		82,158
Trading - Mutual funds		3,143		-		-		-		-		3,143
Trading - Other		1,062		127		283		-		-		1,472
Total investments in securities		341,925		128		744		-		-		342,797
Investments in affiliated registered investment companies:
AFS - Closed-end funds		80,650		-		-		-		-		80,650
AFS - Mutual funds		5,644		-		-		-		-		5,644
Trading - Mutual funds		45,351		-		-		-		-		45,351
Total investments in affiliated
registered investment companies		131,645		-		-		-		-		131,645
Total investments		473,570		128		744		125,527		3,871		603,840
Total assets at fair value	$	787,652	$	128	$	744	$	125,527	$	3,871	$	917,922
Liabilities
Trading - Common stocks	$	9,947	$	-	$	-	$	-	$	-	$	9,947
Trading - Other		-		37		-		-		-		37
Securities sold, not yet purchased	$	9,947	$	37	$	-	$	-	$	-	$	9,984

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2016 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Investments		Other Assets		Balance as of
	Markets for Identical		Observable		Unobservable		Measured at		Not Held at		March 31,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		NAV (a)		Fair Value (b)		2016
Cash equivalents	$	203,231	$	-	$	-	$	-	$	-	$	203,231
Investments in partnerships		-		-		-		109,552		3,595		113,147
Investments in securities (including GBL stock):
AFS - Common stocks		162,807		-		-		-		-		162,807
AFS - Mutual funds		1,151		-		-		-		-		1,151
Trading - Gov't obligations		99,964		-		-		-		-		99,964
Trading - Common stocks		79,065		-		506		-		-		79,571
Trading - Mutual funds		3,215		-		-		-		-		3,215
Trading - Other		428		185		305		-		-		918
Total investments in securities		346,630		185		811		-		-		347,626
Investments in affiliated registered investment companies:
AFS - Closed-end funds		69,052		-		-		-		-		69,052
AFS - Mutual funds		3,066		-		-		-		-		3,066
Trading - Mutual funds		43,798		-		-		-		-		43,798
Total investments in affiliated
registered investment companies		115,916		-		-		-		-		115,916
Total investments		462,546		185		811		109,552		3,595		576,689
Total assets at fair value	$	665,777	$	185	$	811	$	109,552	$	3,595	$	779,920
Liabilities
Trading - Common stocks	$	7,947	$	-	$	-	$	-	$	-	$	7,947
Trading - Other		-		67		-		-		-		67
Securities sold, not yet purchased	$	7,947	$	67	$	-	$	-	$	-	$	8,014

(a)	Amounts are comprised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient. These investments have not been classified in the fair value hierarchy.

(b)

Amounts are comprised of certain equity method investments which are not accounted for under a fair value measure. In accordance with GAAP, certain equity method investees do not account for both their financial assets and liabilities under fair value measures; therefore, the Company’s investment in such equity method investees may not represent fair value.

The following tables present additional information about assets by major categories measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2017 (in thousands)

							Total
							Unrealized
							Gains or		Total
			Total Realized and				(Losses)		Realized
	December 31,		Unrealized Gains or				Included in		and						Transfers		March
	2016		(Losses) in Income				Other		Unrealized						In and/or		31, 2017
	Beginning				AFS		Comprehensive		Gains or						(Out) of		Ending
Asset	Balance		Trading		Investments		Income		(Losses)		Purchases		Sales		Level 3		Balance
Financial instruments owned:
Trading - Common
stocks	$	461	$	33	$	-	$	-	$	33	$	-	$	-	$	-	$	494
Trading - Other		283		-		-		-		-		167		-		-		450
Total	$	744	$	33	$	-	$	-	$	33		167	$	-	$	-	$	944

There were no transfers between any Levels during the three months ended March 31, 2017.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2016 (in thousands)

								Total
								Unrealized
								Gains or		Total
			Total Realized and					(Losses)		Realized
	December 31,		Unrealized Gains or					Included in		and							Transfers		March
	2015		(Losses) in Income					Other		Unrealized							In and/or		31, 2016
	Beginning					AFS		Comprehensive		Gains or							(Out) of		Ending
Asset	Balance		Trading			Investments		Income		(Losses)			Purchases		Sales		Level 3		Balance
Financial instruments owned:
Trading - Common
stocks	$	508	$	(2	)	$	-	$	-	$	(2	)	$	-	$	-	$	-	$	506
Trading - Other		305		-			-		-		-			-		-		-		305
Total	$	813	$	(2	)	$	-	$	-	$	(2	)	$	-	$	-	$	-	$	811

There were no transfers between any Levels during the three months ended March 31, 2016.

D. Investments in Partnerships, Offshore Funds and Variable Interest Entities (“VIEs”)

The Company is general partner or co-general partner of various affiliated entities in which the Company has investments totaling $112.4 million, $112.3 million and $96.8 million at March 31, 2017, December 31, 2016 and March 31, 2016, respectively, and whose underlying assets consist primarily of marketable securities (the “affiliated entities”). We also have investments in unaffiliated entities of $17.6 million, $17.1 million and $16.3 million at March 31, 2017, December 31, 2016 and March 31, 2016, respectively (the “unaffiliated entities”). On a quarterly basis, we evaluate each entity for the appropriate accounting treatment and disclosure. In February 2015, the FASB issued an accounting update amending the consolidation requirements under GAAP. This guidance was effective for the Company beginning January 1, 2016. Based on the new consolidation guidance, we have determined that two of the affiliated entities, and none of the unaffiliated entities, are required to be consolidated in our condensed consolidated financial statements in the quarter ended March 31, 2017.

For those entities where consolidation is not deemed to be appropriate, we report them in our condensed consolidated statements of financial condition under the caption “Investments in partnerships”. This caption includes those investments, in both affiliated and unaffiliated entities, which the Company accounts for under the equity method of accounting, as well as certain investments that the feeder funds hold that are carried at fair value, as described in Note C. The Company reflects the equity in earnings of these equity method investees and the change in fair value of the consolidated feeder funds (“CFFs”) under the caption Net gain/(loss) from investments on the condensed consolidated statements of income.

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

Entities consolidated	CFFs				Partnerships				Offshore Funds				Total
	VIEs		VOEs		VIEs		VOEs		VIEs		VOEs		VIEs		VOEs
Entities consolidated at December 31, 2015		1		2		-		2		1		-		2		4
Additional consolidated entities		-		-		1		-		-		-		1		-
Deconsolidated entities		(1)		(1)		-		(2)		(1)		-		(2)		(3)
Entities consolidated at March 31, 2016		-		1		1		-		-		-		1		1
Additional consolidated entities		-		-		-		-		-		-		-		-
Deconsolidated entities		-		-		-		-		-		-		-		-
Entities consolidated at December 31, 2016		-		1		1		-		-		-		1		1
Additional consolidated entities		-		-		-		-		-		-		-		-
Deconsolidated entities		-		-		-		-		-		-		-		-
Entities consolidated at March 31, 2017		-		1		1		-		-		-		1		1

At and for the three months ended March 31, 2017 and March 31, 2016, one CFF VOE is consolidated, as the Company owns a majority of the interests in the CFF. At and for the three months ended March 31, 2017 and March 31, 2016, one Partnership VIE is consolidated, as it is a VIE because the unaffiliated partners or shareholders lack substantive kick-out rights and the Company has been determined to be the primary beneficiary because it has an equity interest and absorbs the majority of the expected losses and/or expected gains.

The following table breaks down the investments in partnerships line by accounting method, either fair value or equity method, and investment type (in thousands):

	March 31, 2017
	Investment Type
	Affiliated						Unaffiliated
	Consolidated
Accounting method	Feeder Funds		Partnerships		Offshore Funds		Partnerships		Offshore Funds		Total

Fair Value	$	8,195	$	-	$	-	$	-	$	-	$	8,195
Equity Method		-		31,982		72,263		6,873		10,745		121,863

Total	$	8,195	$	31,982	$	72,263	$	6,873	$	10,745	$	130,058

	December 31, 2016
	Investment Type
	Affiliated						Unaffiliated
	Consolidated
Accounting method	Feeder Funds		Partnerships		Offshore Funds		Partnerships		Offshore Funds		Total

Fair Value	$	8,343	$	-	$	-	$	-	$	-	$	8,343
Equity Method		-		33,202		70,745		6,761		10,347		121,055

Total	$	8,343	$	33,202	$	70,745	$	6,761	$	10,347	$	129,398

	March 31, 2016
	Investment Type
	Affiliated						Unaffiliated
	Consolidated
Accounting method	Feeder Funds		Partnerships		Offshore Funds		Partnerships		Offshore Funds		Total

Fair Value	$	7,581	$	-	$	-	$	-	$	-	$	7,581
Equity Method		-		36,168		53,099		8,007		8,292		105,566

Total	$	7,581	$	36,168	$	53,099	$	8,007	$	8,292	$	113,147

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

	March 31, 2017
	Prior to								Offshore
	Consolidation		CFFs			Partnerships			Funds		As Reported
Assets
Cash and cash equivalents	$	307,505	$	-		$	146		$	-	$	307,651
Investments in securities (including GBL stock)		316,424		-			6,686			-		323,110
Investments in affiliated investment companies		136,284		-			-			-		136,284
Investments in partnerships		135,129		3,764			(8,835	)		-		130,058
Receivable from brokers		9,666		-			2,355			-		12,021
Investment advisory fees receivable		1,361		(5	)		(7	)		-		1,349
Other assets		7,160		-			-			-		7,160
Total assets	$	913,529	$	3,759		$	345		$	-	$	917,633
Liabilities and equity
Securities sold, not yet purchased	$	7,519	$	-		$	-		$	-	$	7,519
Accrued expenses and other liabilities		24,179		19			35			-		24,233
Redeemable noncontrolling interests		-		3,740			310			-		4,050
Total equity		881,831		-			-			-		881,831
Total liabilities and equity	$	913,529	$	3,759		$	345		$	-	$	917,633

	December 31, 2016
	Prior to								Offshore
	Consolidation		CFFs			Partnerships			Funds		As Reported
Assets
Cash and cash equivalents	$	313,785	$	-		$	308		$	-	$	314,093
Investments in securities (including GBL stock)		336,459		-			6,338			-		342,797
Investments in affiliated investment companies		131,645		-			-			-		131,645
Investments in partnerships		133,794		3,964			(8,360	)		-		129,398
Receivable from brokers		10,542		-			2,046			-		12,588
Investment advisory fees receivable		9,800		(8	)		(8	)		-		9,784
Other assets		12,298		-			-			-		12,298
Total assets	$	948,323	$	3,956		$	324		$	-	$	952,603
Liabilities and equity
Securities sold, not yet purchased	$	9,984	$	-		$	-		$	-	$	9,984
Accrued expenses and other liabilities		64,317		13			37			-		64,367
Redeemable noncontrolling interests		-		3,943			287			-		4,230
Total equity		874,022		-			-			-		874,022
Total liabilities and equity	$	948,323	$	3,956		$	324		$	-	$	952,603

	March 31, 2016
	Prior to								Offshore
	Consolidation		CFFs			Partnerships			Funds		As Reported
Assets
Cash and cash equivalents	$	203,204	$	-		$	35		$	-	$	203,239
Investments in securities		341,730		-			5,896			-		347,626
Investments in affiliated investment companies		115,916		-			-			-		115,916
Investments in partnerships		117,589		3,487			(7,929	)		-		113,147
Receivable from brokers		20,958		-			2,320			-		23,278
Investment advisory fees receivable		1,471		(4	)		(4	)		-		1,463
Other assets		8,031		-			-			-		8,031
Total assets	$	808,899	$	3,483		$	318		$	-	$	812,700
Liabilities and equity
Securities sold, not yet purchased	$	8,014	$	-		$	-		$	-	$	8,014
Accrued expenses and other liabilities		36,618		16			33			-		36,667
Redeemable noncontrolling interests		-		3,467			285			-		3,752
Total equity		764,267		-			-			-		764,267
Total liabilities and equity	$	808,899	$	3,483		$	318		$	-	$	812,700

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

	Three Months Ended March 31, 2017
	Prior to									Offshore
	Consolidation			CFFs			Partnerships			Funds		As Reported
Total revenues	$	4,993		$	(5	)	$	(1	)	$	-	$	4,987
Total expenses		9,277			32			10			-		9,319
Operating loss		(4,284	)		(37	)		(11	)		-		(4,332	)
Total other income/(expense), net		(17,218	)		75			34			-		(17,109	)
Income/(loss) before income taxes		(21,502	)		38			23			-		(21,441	)
Income tax provision		(8,424	)		-			-			-		(8,424	)
Net income/(loss)		(13,078	)		38			23			-		(13,017	)
Net income attributable to noncontrolling interests		-			38			23			-		61
Net loss attributable to AC Group	$	(13,078	)	$	-		$	-		$	-	$	(13,078	)

	Three Months Ended March 31, 2016
	Prior to									Offshore
	Consolidation			CFFs			Partnerships			Funds		As Reported
Total revenues	$	4,522		$	(4	)	$	(1	)	$	-	$	4,517
Total expenses		8,985			33			14			-		9,032
Operating loss		(4,463	)		(37	)		(15	)		-		(4,515	)
Total other income/(expense), net		6,638			93			(8	)		-		6,723
Income/(loss) before income taxes		2,175			56			(23	)		-		2,208
Income tax provision		661			-			-			-		661
Net income/(loss)		1,514			56			(23	)		-		1,547
Net income/(loss) attributable to noncontrolling interests		(79	)		56			(23	)		-		(46	)
Net income attributable to AC Group	$	1,593		$	-		$	-		$	-	$	1,593

Variable Interest Entities

We sponsor a number of investment vehicles where we are the general partner or investment manager. At March 31, 2017, December 31, 2016 and March 31, 2016 we consolidated the only VIE. We consolidated VIEs where we are the primary beneficiary. The Company has not provided any financial or other support to those VIEs where we are not the primary beneficiary.

The assets of the VIEs may only be used to satisfy obligations of the VIEs. The following table presents the balances related to the VIE that is consolidated and is included on the condensed consolidated statements of financial condition as well as AC Group’s net interest in the VIE. There is one VIE consolidated at March 31, 2017, December 31, 2016 and March 31, 2016:

	March 31,			December 31,			March 31,
	2017			2016			2016
(In thousands)
Cash and cash equivalents	$	146		$	308		$	35
Investments in securities		6,686			6,338			5,896
Receivable from broker		2,355			2,046			2,320
Other assets		(7	)		(8	)		(4	)
Accrued expenses and other liabilities		(35	)		(37	)		(33	)
Redeemable noncontrolling interests		(310	)		(287	)		(285	)
AC Group's net interests in consolidated VIE	$	8,835		$	8,360		$	7,929

E. Income Taxes

The effective tax rate ("ETR") for the three months ended March 31, 2017 and March 31, 2016 was 39.3% and 29.9%, respectively. The differences in ETR primarily reflect the benefit of the dividends received deduction and appreciated donated securities in the first quarter of 2017 compared to the benefit of dividends received deduction in the first quarter of 2016 relative to the respective period’s net income/(loss) versus the standard corporate tax rate of 34%.

ASU 2016-09, which was issued in March 2016 and became effective for interim and annual reporting periods beginning after December 15, 2016, simplifies several aspects of accounting for employee share-based payment transactions. Upon adoption of ASU 2016-09 on January 1, 2017, our accounting for excess tax benefits has changed and we have adopted prospectively, resulting in recognition of excess tax benefits against income tax expenses rather than additional paid-in capital.

F. Earnings Per Share

Basic earnings per share is computed by dividing net income/(loss) per share 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) per share attributable to our shareholders by the weighted average number of shares outstanding during the period, adjusted for the dilutive effect of restricted stock awards.

The computations of basic and diluted net income/(loss) per share are as follows:

	Three Months Ended March 31,
(in thousands, except per share amounts)	2017			2016
Basic:
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders	$	(13,078	)	$	1,593
Weighted average shares outstanding		23,829			24,863
Basic net income/(loss) attributable to Associated Capital Group, Inc.'s
shareholders per share	$	(0.55	)	$	0.06
Diluted:
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders	$	(13,078	)	$	1,593

Weighted average share outstanding		23,829			24,863
Dilutive restricted stock awards		-			314
Total		23,829			25,177
Diluted net income/(loss) attributable to Associated Capital Group, Inc.'s
shareholders per share	$	(0.55	)	$	0.06

Diluted weighted average shares outstanding for the first quarter 2017 exclude potential restricted stock awards as we have a net loss for that period and their inclusion would be anti-dilutive.

G. Stockholders’ Equity

Shares outstanding were 24.2 million, 24.3 million and 25.4 million on March 31, 2017, December 31, 2016, and March 31, 2016, respectively.

Dividends

During three months ended March 31, 2017 and 2016, the Company declared dividends of $0.00 and $0.10 per share to class A and class B shareholders, respectively.

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 (i) 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, and (ii) holders of Class A Stock are not eligible to vote on matters relating exclusively to Class B Stock and vice versa.

Stock Award and Incentive Plan

The Company maintains one Plan approved by the shareholders, which is designed to provide incentives which will 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 2.0 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. Under the Plan, the 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 the committee may determine.

On November 30, 2015, in connection with the spin-off of the Company from GAMCO on a one for one basis, the Company issued 554,100 AC RSA shares to employees who held 554,100 GAMCO RSA shares. As of March 31, 2017, December 31, 2016 and March 31, 2016, there were 420,240 RSA shares, 424,340 RSA shares and 553,100 RSA shares outstanding, respectively, that were previously issued at an average weighted GAMCO grant price of $65.59, $65.74 and $64.02, respectively. These RSA grants occurred prior to the spin-off of Associated Capital. On November 30, 2015, pursuant to the spin-off, all RSA grant holders received shares of Associated Capital’s Class A common stock as a result of their ownership of their GAMCO unvested RSAs (one share of Associated Capital for each share of GBL). All grants of the RSA shares were recommended by the Company's Chairman, who did not receive any RSAs, and approved by the Compensation Committee of the Board of Directors (the "Compensation Committee"). This expense, net of estimated forfeitures, is recognized over the vesting period for these awards which is either (1) 30% over three years from the date of grant and 70% over five years from the date of grant or (2) 30% over three years from the date of grant and 10% each year over years four through ten from the date of grant. During the vesting period, dividends to RSA holders are held for them until the RSA vesting dates and are forfeited if the grantee is no longer employed by the Company on the vesting dates. Dividends declared on these RSAs, less estimated forfeitures, are charged to retained earnings on the declaration date.

For the three months ended March 31, 2017 and March 31, 2016, we recognized stock-based compensation expense of $0.4 million and $0.6 million, respectively. Actual and projected stock-based compensation expense for RSA shares for the years ended December 31, 2016 through December 31, 2024 (based on awards currently issued or granted) is as follows (in thousands):

		2016		2017		2018		2019		2020		2021		2022		2023		2024
	Q1	$	644	$	444	$	297	$	239	$	127	$	80	$	52	$	27	$	5
	Q2		644		446		287		239		113		80		52		27		5
	Q3		727		399		259		216		93		63		37		14		3
	Q4		449		351		239		200		80		52		27		5		-
Full Year		$	2,464	$	1,640	$	1,082	$	894	$	413	$	275	$	168	$	73	$	13

The total compensation cost related to non-vested RSAs not yet recognized is approximately $4.1 million as of March 31, 2017.

H. Goodwill and Identifiable Intangible Assets

At March 31, 2017, $3.4 million of goodwill related to Gabelli & Company Investment Advisers, Inc. is separately disclosed on the condensed consolidated statements of financial condition. The Company assesses the recoverability of goodwill at least annually, or more often should events warrant, using a qualitative assessment of whether it is more likely than not that an impairment has occurred to determine if a quantitative analysis is required. There were no indicators of impairment for the three months ended March 31, 2017 or March 31, 2016, and as such there was no impairment analysis performed or charge recorded.

I. Commitments and Contingencies

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. The Company is 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 condensed consolidated financial statements include the necessary provisions for losses that the Company believes are probable and estimable. Furthermore, the Company evaluates whether there exist losses which may be reasonably possible and will, 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 financial condition, operations or cash flows at March 31, 2017.

The Company indemnifies the clearing brokers of G.research, LLC, our broker-dealer subsidiary, for losses they may sustain from the customer accounts that trade on margin introduced by it. At March 31, 2017, the total amount of customer balances subject to indemnification (i.e. unsecured margin debits) was immaterial. The Company also has 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. The Company’s estimate of the value of such agreements is de minimis, and therefore an accrual has not been made on the condensed consolidated financial statements.

J. Shareholder-Designated Contribution Plan

During 2016, the Company established a Shareholder Designated Charitable Contribution program. Under the program, each shareholder is eligible to designate a charity to which the Company would make a donation at a rate of twenty-five cents per share based upon the actual number of shares registered in the shareholder’s name. Shares held in nominee or street name were not eligible to participate. On February 8, 2017, the Company announced it had again adopted a Shareholder Designated Charitable Contribution program for all registered Class A and Class B shareholders. The Company recorded a cost of $4.9 million related to this contribution which was included in shareholder-designated contribution in the condensed consolidated statements of income.

K. Contractual Obligations

In June 2016, AC entered into a sublease agreement with GAMCO effective from April 1, 2016 through March 31, 2017. The Company renewed the sublease agreement with GAMCO in March 2017 which extended the lease through March 31, 2018. Future minimum lease commitment under this operating lease as of March 31, 2017 is as follows:

	(In thousands)
2017	$	282
2018		94
Total	$	376

L. Subsequent Events

From April 1, 2017 to May 2, 2017, the Company repurchased 26,909 shares at $33.88 per share.

On May 1, 2017, GAMCO prepaid an additional $10 million of the GAMCO Note, reducing the principal outstanding to $80 million.

In addition, the Board of Directors declared a $0.10 dividend per share payable on July 11, 2017 to its shareholders of record on June 27, 2017.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INCLUDING QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK)

Introduction

MD&A is provided as a supplement to, and should be read in conjunction with, the Company's unaudited Financial Statements and accompanying notes thereto included in this Quarterly Report on Form 10-Q, as well as the Company's audited annual financial statements included in our Form 10-K filed with the SEC on March 14, 2017 to help provide an understanding of our financial condition, changes in financial condition and results of operations. Unless the context otherwise requires, all references to “we,” “us,” “our,” “AC Group” or the “Company” refer collectively to Associated Capital Group, Inc., a holding company, and its subsidiaries through which our operations are actually conducted.

Overview

We are a Delaware corporation that operates alternative investment management vehicles, provides institutional research services and manages certain cash and other assets.

On November 30, 2015, GAMCO Investors, Inc. ("GAMCO") distributed all the outstanding shares of each class of common stock of AC Group on a pro rata one-for-one basis to the holders of each class of GAMCO’s common stock. Prior to the distribution, GAMCO contributed the 93.9% interest it held in Gabelli Securities, Inc. (“GCIA”) and certain cash and other assets to AC Group. GCIA is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended. 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 business earns fees from its advisory assets, and income (loss) from trading and investment portfolio activities. The advisory fees include management and incentive fees. Management fees are largely based on a percentage of the portfolios' levels of assets under management. Incentive fees are based on the percentage of profits derived from the investment performance delivered to clients' invested assets. GCIA is now a wholly owned subsidiary of AC.

In addition, the following transactions were also undertaken in connection with the spin-off:

GAMCO issued a promissory note (the "GAMCO Note") to AC Group in the original principal amount of $250.0 million used to partially capitalize the Company in connection with the spin-off. The GAMCO Note bears interest at 4.0% per annum and has a maturity date of November 30, 2020 with respect to the original principal amount of the GAMCO Note. Interest on the GAMCO Note will accrue from the most recent date for which interest has been paid, or if no interest has been paid, from the effective date of the GAMCO Note; provided, however, that at the election of GAMCO, payment of interest on the GAMCO Note may, in lieu of being paid in cash, be paid, in whole or in part, in kind on the then-outstanding principal amount (a "PIK Amount"). GAMCO will repay all PIK Amounts added to the outstanding principal amount of the GAMCO Note, in cash, on the fifth anniversary of the date on which each such PIK Amount was added to the outstanding principal amount of the GAMCO Note. In no event may any interest be paid in kind subsequent to November 30, 2019. GAMCO may prepay the GAMCO Note prior to maturity without penalty.

As part of the spin-off from GAMCO, on November 27, 2015 GCIA purchased from GAMCO 4,393,055 shares of GAMCO class A common stock at a price of $34.1448 per share, based on the average of the volume weighted average price for GAMCO class A stock on an “ex-Distribution” basis from November 9, 2015 through and including November 27, 2015. GCIA paid for the purchase by issuing a note to GAMCO in the principal amount of $150.0 million (the “GCIA Note”). The GCIA Note was then contributed by GAMCO to AC and GCIA became a majority-owned subsidiary of AC on November 30, 2015 in connection with the completion of the spin-off. GCIA is a wholly owned subsidiary of AC.

Organizational Chart

Condensed 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 facilitates the ability to attract additional investors while maintaining current fee levels. Growth in AUM is also dependent on being able to access various distribution channels, which is usually based on several factors, including performance and service.

Incentive fees generally consist of an incentive allocation on the absolute gain in a portfolio or a fee of 20% of the economic profit, as defined in the agreements governing the investment vehicle. We recognize revenue only when the measurement period has been completed or at the time of an investor redemption.

Institutional research services revenues consist of brokerage commissions derived from securities transactions executed on an agency basis or direct payments on behalf of institutional clients. Commission revenues vary directly with the perceived value of the research, as well as account trading activity and new account generation.

Compensation costs include variable and fixed compensation and related expenses paid to officers, portfolio managers, sales, trading, research and all other professional staff. Variable compensation paid to sales personnel and portfolio management generally represents 40% of revenues and is the largest component of total compensation costs.

Management fee is incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits which is paid to Mr. Gabelli or his designee for acting as Executive Chairman pursuant to his Employment Agreement so long as he is an executive of AC.

Other operating expenses include general and administrative operating costs and clearing charges and fees incurred by the brokerage business.

Other income and expenses include net gains from investments (which include both realized and unrealized gains and losses from trading securities and equity in earnings of investments in partnerships), interest and dividend income, and interest expense. Net gains (losses) from investments are derived from our proprietary investment portfolio consisting of various public and private investments.

Net income (loss) attributable to non-controlling interests represents the share of net income (loss) attributable to the minority stockholders, as reported on a separate company basis, of our consolidated majority-owned subsidiary and net income (loss) attributable to third party limited partners of certain partnerships and investors of offshore funds we consolidate. Please refer to Notes A and D in our consolidated financial statements included elsewhere in this report.

Consolidated Statement of Financial Condition

We ended the first quarter 2017 with approximately $890 million in cash and investments, net of securities sold, not yet purchased of $8 million. This includes $407 million of cash and short term US treasuries; $217 million of securities, net, including 4.4 million shares of GAMCO stock; and $266 million invested in affiliated and third party funds and partnerships. Our financial resources underpin our 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 repurchase and dividends.

Total shareholders’ equity was $882 million or $36.37 per share at March 31, 2017 compared to $874 million or $36.04 per share on December 31, 2016. The increase in equity from the end of 2016 is driven primarily by a $10 million prepayment of the GAMCO Note.

Adjusted Economic book value – a Non-GAAP measure

The Company also reviews an analysis of Adjusted Economic book value (“AEBV”), and AEBV per share, a non-GAAP financial measure that management believes is useful for analyzing AC’s financial condition because it reflects the impact on book value if and when the GAMCO Note is paid down. The GAMCO Note that was issued as part of the spin-off transaction is not treated as an asset for GAAP purposes, but as a reduction in equity, and will continue to be reflected as a reduction in equity in future periods in the amount of the principal then outstanding. As the GAMCO Note pays down, the Company's total equity will increase, and once the GAMCO Note is fully paid off by GAMCO, the Company's total equity and AEBV will be the same. AEBV and AEBV per share represent book value and book value per share, respectively, without reducing equity for the period all or any portion of the GAMCO Note is outstanding.

AC has received principal repayments totaling $160 million on the GAMCO Note, of which $10 million was received during the first quarter of 2017. A prepayment of $50 million was applied against the principal amount due on November 30, 2016, $50 million against the principal amount due on November 30, 2017, $30 million against the principal amount due on November 30, 2018, and $30 million against the principal amount due on November 30, 2019. Of the $90 million principal amount outstanding, $20 million is due on November 30, 2018, $20 million is due on November 30, 2019, and $50 million is due on November 30, 2020.

At March 31, 2017, December 31, 2016 and March 31, 2016, AEBV for the Company was $972 million, $974 million and $1.014 billion, respectively, and the AEBV per diluted share was $40.08, $40.16 and $40.01, respectively, calculated as follows:

Reconciliation of Total Equity to Adjusted Economic Book Value

	March 31, 2017				December 31, 2016				March 31, 2016
	Total		Per Share		Total		Per Share		Total		Per Share
Total equity as reported	$	881,831	$	36.37	$	874,022	$	36.04	$	764,267	$	30.15
Add: GAMCO Note		90,000		3.71		100,000		4.12		250,000		9.86
Adjusted Economic book value	$	971,831	$	40.08	$	974,022	$	40.16	$	1,014,267	$	40.01

RESULTS OF OPERATIONS

Three Months Ended March 31, 2017 Compared To Three Months Ended March 31, 2016

(Unaudited; in thousands, except per share data)
	2017			2016
Revenues
Investment advisory and incentive fees	$	2,401		$	2,068
Institutional research services		2,582			2,438
Other		4			11
Total revenues		4,987			4,517
Expenses
Compensation		6,783			6,312
Management fee		-			274
Stock based compensation		444			644
Other operating expenses		2,092			1,802
Total expenses		9,319			9,032
Operating loss		(4,332	)		(4,515	)
Other income (expense)
Net gain/(loss) from trading securities		(14,401	)		3,709
Interest and dividend income		2,257			3,434
Interest expense		(70	)		(420	)
Shareholder-designated contribution		(4,895	)		-
Total other income/(expense), net		(17,109	)		6,723
Income/(loss) before income taxes		(21,441	)		2,208
Income tax provision		(8,424	)		661
Net income/(loss)		(13,017	)		1,547
Net income/(loss) attributable to noncontrolling interests		61			(46	)
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders	$	(13,078	)	$	1,593

Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders per share:
Basic	$	(0.55	)	$	0.06
Diluted	$	(0.55	)	$	0.06

Overview

First quarter operating revenues increased to $5.0 million from $4.5 million in the year ago quarter, primarily due to higher fees on assets under management.

However, earnings were crimped by a $23.8 million negative swing in our first quarter investment and other non-operating income/(loss), with a $17.1 million loss in the first quarter of 2017 versus a $6.7 million gain in the first quarter 2016.

This unfavorable swing is mostly traceable to two items: (a) a non-cash mark-to-market loss (since inception) of $19.1 million on shares of GAMCO that was recognized entirely through net income in the first quarter of 2017, and (b) an expense of $4.9 million for AC’s second Shareholder Designated Charitable Contribution Program.

These two items plus our net operating loss resulted in a net loss of $13.1 million, or $0.55 per diluted share, compared to net income of $1.6 million, or $0.06 per diluted share in the first quarter of 2016.

Revenues

Total revenues were $5.0 million for the quarter ended March 31, 2017, $0.5 million, or 11.1%, higher than total revenues of $4.5 million for the quarter ended March 31, 2016.

Investment advisory income is directly influenced by the level and mix of average AUM. We earn advisory fees based on the level of average AUM in our products. Advisory fees, excluding incentive fees, were $2.4 million for the 2017 quarter compared to $2.1 million for the prior year quarter, an increase of $0.3 million. This increase is due to the increase in AUM to $1.349 billion in the first quarter of 2017 from $1.128 billion in the first quarter of 2016. Incentive fees are not recognized until the measurement period ends or at the time of an investor redemption and the fee is crystalized (typically in the fourth quarter, based on results for the calendar year). If the measurement period had instead ended on March 31, we would have recognized $0.04 million and $3.0 million for the quarters ended March 31, 2017 and 2016, respectively. Institutional research services revenues in the current year’s first quarter was increased to $2.6 million, $0.2 million higher than the prior year’s period of $2.4 million primarily due to renegotiation of the research services fee agreements with affiliates.

Expenses

Compensation costs, which include variable compensation, salaries, bonuses and benefits, were $6.8 million for the quarter ended March 31, 2017, versus $6.3 million for the quarter ended March 31, 2016. Fixed compensation costs, which include salaries and benefits, were $4.0 million for the first quarter 2017 in line with the 2016 period. Discretionary bonus accruals were $0.9 in the first quarter of 2017 and 2016. The remainder of the compensation expense represents variable compensation that fluctuates with management fee and incentive allocation revenues and gains on investment portfolios. Variable payouts as a percent of revenues are impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs.

For the three months ended March 31, 2017 and 2016, stock based compensation was $0.4 million and $0.6 million, respectively.

Management fee expense is incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits which is paid to Mario J. Gabelli pursuant to his employment agreement. In the first quarter of 2017 and 2016, AC recorded management fee expense of $0 and $0.3 million, respectively.

Other operating expenses were $2.1 million during the first quarter of 2017 compared to $1.8 million in prior year first quarter, an increase of $0.3 million due to small increases across various expense categories.

Other

Net gain/(loss) from investments is directly related to the performance of our proprietary investment portfolio. Investment losses were $14.4 million in the 2017 quarter primarily due to a mark-to-market loss of $19.1 million on our shares of GAMCO recognized through net income in the 2017 period. Absent the GAMCO loss, we had a $4.7 million gain on our investments in the first quarter of 2017 versus a gain of $3.7 million in the comparable 2016 quarter.

Interest and dividend income decreased to $2.3 million in the 2017 quarter from $3.4 million in the 2016 quarter due to interest earned on the initial principal amount of the GAMCO Note in the prior year. Interest expense decreased to $0.1 million in the first quarter of 2017 from $0.4 million in the prior year’s period.

ASSETS UNDER MANAGEMENT

Our revenues are highly correlated to the level of assets under management and fees associated with our various investment products, rather than our own corporate assets. Assets under management, which are directly influenced by the level and changes of the overall equity markets, can also fluctuate through acquisitions, the creation of new products, the addition of new accounts or the loss of existing accounts. Since various equity products have different fees, changes in our business mix may also affect revenues. At times, the performance of our equity products may differ markedly from popular market indices, and this can also impact our revenues.

Assets under management (“AUM”) were $1.349 billion as of March 31, 2017, an increase of 6.1% from AUM of $1.272 billion at December 31, 2016 and increased 19.6% from the March 31, 2016 AUM of $1.128 billion. The increases were attributable both to market appreciation and increased investments, net of redemptions, by investors.

Table I: Fund Flows - 1st Quarter 2017

			Market
	December 31,		appreciation/		Net cash		March 31,
	2016		(depreciation)		flows		2017

Event Merger Arbitrage	$	1,076	$	-	$	68	$	1,144
Event-Driven Value		133		3		5		141
Other		63		1		-		64
Total AUM	$	1,272	$	4	$	73	$	1,349

Table II: Assets Under Management by Quarter

							% Change From
	March 31,		December 31,		March 31,		December 31,		March 31,
	2017		2016		2016		2016		2016

Event Merger Arbitrage	$	1,144	$	1,076	$	924		6.3		23.8
Event-Driven Value		141		133		143		6.0		(1.4	)
Other		64		63		61		1.6		4.9
Total AUM	$	1,349	$	1,272	$	1,128		6.1		19.6

LIQUIDITY AND CAPITAL RESOURCES

Our principal assets are highly liquid in nature and consist of cash and cash equivalents, short-term investments, securities held for investment purposes, investments in funds, and investment partnerships. Cash and cash equivalents are comprised primarily of U.S. Treasury money market funds. Although investments in partnerships and offshore funds are subject to restrictions as to the timing of distributions, the underlying investments of such partnerships or funds are, for the most part, liquid, and the valuations of these products reflect that underlying liquidity.

Summary cash flow data is as follows:

	Three months ended
	March 31,
	2017			2016
Cash flows provided by (used in):	(in thousands)
Operating activities	$	(14,418	)	$	75
Investing activities		(1,657	)		44
Financing activities		9,633			(2,628	)
Net decrease		(6,442	)		(2,509	)
Cash and cash equivalents at beginning of period		314,093			205,750
Decrease in cash from deconsolidation		-			(2	)
Cash and cash equivalents at end of period	$	307,651		$	203,239

We require relatively low levels of capital expenditures and have a highly variable cost structure where costs increase and decrease based on the level of revenues we receive. Our revenues, in turn, are highly correlated to the level of AUM and to their investment performance. We anticipate that our available liquid assets should be more than sufficient to meet our cash requirements as we build out our operating businesses. At March 31, 2017, we had total cash and cash equivalents of $307.7 million and $203.2 million in investments. Cash and cash equivalents of $0.1 million and investments in securities of $6.7 million held by a consolidated investment partnership may not be readily available for the Company to access.

For the three months ended March 31, 2017, cash used in operating activities was $14.4 million. In the first three months of 2017, our sources of cash included a $42.1 million increase in payable to brokers, an other than temporary loss on available for sale securities of $19.1 million, a $12.7 million reduction in contributions to partnerships, $5.0 million from a decrease in investment advisory fees receivable and a $4.5 million decrease in other assets. Cash uses included a $32.0 million increase in receivable from brokers, decreased accrued expenses and other liabilities of $29.0 million, a decline in net income/(loss) of $14.6 million, $7.4 million decrease for income taxes payables and deferred tax liabilities, $6.7 million of decreases in distributions from partnerships, $5.7 million from a decrease in compensation payable, and a $4.0 million increase in receivable from affiliates. Cash used in investing activities, related to purchases and return of capital of available for sale securities, was $1.7 million in the first three months of 2017. Cash provided by financing activities in the first three months of 2017 was $9.6 million primarily due to $10.0 million of proceeds from payment of GBL 4% PIK Note.

For the three months ended March 31, 2016, cash provided by operating activities was $0.1 million. Cash provided by investing activities, related to purchases and return of capital of available for sale securities, was $0.044 million in the first three months of 2016. Cash used in financing activities in the first three months of 2016 was $2.6 million.

G.research is subject to certain net capital requirements. G.research computes its net capital under the alternative method permitted, which requires minimum net capital of the greater of $250,000 or 2% of the aggregate debit items in the reserve formula for those broker-dealers subject to Rule 15c3-3 promulgated under the Securities Exchange Act of 1934. The requirement was $250,000 for the broker-dealer at March 31, 2017. At March 31, 2017, G.research had net capital, as defined, of approximately $12.2 million, exceeding the regulatory requirement by approximately $12.0 million. Net capital requirements for our affiliated broker-dealer may increase in accordance with rules and regulations to the extent it engages in other business activities.

Market Risk

Our primary market risk exposure is to changes in equity prices and interest rates. Since a majority of our AUM are equities, our financial results are subject to equity market risk as revenues from our investment management services are sensitive to stock market dynamics. In addition, returns from our proprietary investment portfolio are exposed to interest rate and equity market risk.

The Company’s Chief Investment Officer oversees the proprietary investment portfolios and allocations of proprietary capital among the various strategies. The Chief Investment Officer and the Board of Directors review the proprietary investment portfolios throughout the year. Additionally, the Company monitors its proprietary investment portfolios to ensure that they are in compliance with the Company’s guidelines.

Equity Price Risk

The Company earns substantially all of its revenue as advisory from investment partnership and separate account assets. Such fees represent a percentage of AUM, and the majority of these assets are in equity investments. Accordingly, since revenues are proportionate to the value of those investments, a substantial increase or decrease in equity markets overall will have a corresponding effect on the Company's revenues.

With respect to our proprietary investment activities, included in investments in securities (including GBL stock) of $323.1 million and $342.8 million and investments in affiliated registered investment companies of $136.3 million and $131.6 at March 31, 2017 and December 31, 2016, respectively, were investments in United States Treasury Bills of $99.8 million and $119.8 million, open-end funds and closed-end funds, largely invested in equity products, of $140.1 million and $135.2 million, a selection of common and preferred stocks totaling $215.8 million and $217.9 million, and other investments of approximately $3.7 million and $1.5 million. In addition, we may alter our investment holdings from time to time in response to changes in market risks and other factors considered appropriate by management. Of the approximately $215.8 million and $217.9 million invested in common and preferred stocks at March 31, 2017 and December 31, 2016, respectively, $130.0 million and $135.7 million represented our investment in GBL, and $33.4 million and $31.0 million was invested by the Company in risk arbitrage opportunities in connection with mergers, consolidations, acquisitions, tender offers or other similar transactions. Risk arbitrage generally involves announced deals with agreed upon terms and conditions, including pricing, which typically involve less market risk than common stocks held in a trading portfolio. The principal risk associated with risk arbitrage transactions is the inability of the companies involved to complete the transaction. Securities sold, not yet purchased are stated at fair value and are subject to market risks resulting from changes in price and volatility. Of the investments in affiliated registered investment companies of $136.3 million and $131.6 at March 31, 2017 and December 31, 2016, respectively, $56.4 million and $56.4 million consisted of investment companies which invest in risk arbitrage opportunities. At March 31, 2017 and December 31, 2016, the fair value of securities sold, not yet purchased was $7.5 million and $10.0 million, respectively. Investments in partnerships totaled $130.1 million and $129.4 million at March 31, 2017 and December 31, 2016, respectively, $91.8 million and $91.8 million of which consisted of investment partnerships and offshore funds which invest in risk arbitrage opportunities.

The following table provides a sensitivity analysis for our investments in equity securities and partnerships and affiliates which invest primarily in equity securities, excluding arbitrage products for which the principal exposure is to deal closure and not overall market conditions, as of March 31, 2017 and December 31, 2016. The sensitivity analysis assumes a 10% increase or decrease in the value of these investments (in thousands):

			Fair Value		Fair Value
			assuming		assuming
			10% decrease in		10% increase in
(unaudited)	Fair Value		equity prices		equity prices
At March 31, 2017:
Equity price sensitive investments, at fair value	$	308,125	$	277,313	$	338,938
At December 31, 2016:
Equity price sensitive investments, at fair value	$	304,836	$	274,352	$	335,320

Interest Rate Risk

Our exposure to interest rate risk results, principally, from our investment of excess cash in a sponsored money market fund that holds U.S. Government securities. These investments are primarily short term in nature, and the carrying value of these investments generally approximates fair value. Based on March 31, 2017, cash and cash equivalent balance of $307.7 million, a 1% increase in interest rates would increase our interest income by $3.1 million annually. Given that our current return on these cash equivalent investments in this low interest rate environment is approximately 0.57% annually, an analysis of a 1% decrease is not meaningful.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates. See Note A and the Company’s Critical Accounting Policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations in AC’s 2016 Annual Report on Form 10-K filed with the SEC on March 14, 2017 for details on Critical Accounting Policies.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

In the normal course of its business, AC is exposed to risk of loss due to fluctuations in the securities market and general economy. Management is responsible for identifying, assessing and managing market and other risks.

Our exposure to pricing risk in equity securities is directly related to our role as financial intermediary and advisor for AUM in our investment partnerships and separate accounts as well as our proprietary investment and trading activities. At March 31, 2017, we had equity investments, including open-end funds and closed-end funds largely invested in equity products, of $359.6 million. Investments in open-end funds and closed-end funds, $140.1 million, usually generate lower market risk through the diversification of financial instruments within their portfolios. In addition, we may alter our investment holdings from time to time in response to changes in market risks and other factors considered appropriate by management. We also hold investments in partnerships which invest primarily in equity securities and which are subject to changes in equity prices. Investments in partnerships totaled $130.1 million, of which $91.8 million were invested in partnerships which invest in risk arbitrage. Risk arbitrage is primarily dependent upon deal closure rather than the overall market environment. The equity investment portfolio is at fair value and will move in line with the equity markets. The trading portfolio changes are recorded as net gain/(loss) from investments in the condensed consolidated statements of income while the available for sale portfolio changes are recorded in other comprehensive income in the condensed consolidated statements of financial condition.

Item 4.

Controls and Procedures

We evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2017. Disclosure controls and procedures as defined under the Exchange Act Rule 13a-15(e), are designed to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in SEC rules and regulations. Disclosure controls and procedures include, without limitation, controls and procedures accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure. Our CEO and CFO participated in this evaluation and concluded that, as of the date of March 31, 2017, our disclosure controls and procedures were effective.

There have been no changes in our internal control over financial reporting as defined by Rule 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Forward-Looking Information

Our disclosure and analysis in this report contain some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements because they do not relate strictly to historical or current facts. 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

•

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 Form 10-Q and other public filings. 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.

Part II: Other Information

Item 1.

Legal Proceedings

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. The Company is 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 condensed consolidated financial statements include the necessary provisions for losses that the Company believes are probable and estimable. Furthermore, the Company evaluates whether there exist losses which may be reasonably possible and will, if material, make the necessary disclosures. However, management believes such amounts, both those that would be probable and those that would be reasonably possible, are not material to the Company’s financial condition, operations or cash flows at March 31, 2017.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to the repurchase of Class A Common Stock of AC during the three months ended March 31, 2017:

					(c) Total Number of		(d) Maximum
	(a) Total		(b) Average		Shares Repurchased as		Number of Shares
	Number of		Price Paid Per		Part of Publicly		That May Yet be
	Shares		Shares, net of		Announced Plans		Purchased Under
Period	Repurchased		Commissions		or Programs		the Plans or Programs
1/01/17 - 1/31/17		3,762	$	33.45		3,762		82,651
2/01/17 - 2/28/17		-		-		-		500,000
3/01/17 - 3/31/17		-		-		-		500,000
Totals		3,762	$	33.45		3,762

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.

Item 6.

(a) Exhibits

31.1

Certification of CEO pursuant to Rule 13a-14(a).

31.2

Certification of CFO pursuant to Rule 13a-14(a).

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.

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.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ASSOCIATED CAPITAL GROUP, INC.

(Registrant)

By: /s/ Patrick Dennis
Name: Patrick Dennis
Title: Chief Financial Officer

Date: May 2, 2017