Environmental, Social, and Governance (ESG)
Environmental – (Y)our “E” in ESG
We demonstrated our commitment to promoting a healthier environment by waiving fees and absorbing costs on the initial $100 million in assets in Love Our Planet & People (“LOPP”), the first in a series of semi-transparent exchange traded funds (“ETFs”). LOPP is focused on companies promoting sustainability in areas including renewable power generation and transmission, water purification, and conservation, the reduction and elimination of long-lived wastes and transportation electrification.
Across all products, our bottom-up research process seeks to identify potential environmental liabilities and, often more importantly, opportunities to solve environmental issues with new products, services, or approaches to delivering existing products and services.
Within our own operations we continue to find ways to limit our firm’s environmental footprint, for example, by eliminating duplicative mutual fund mailings.
Giving Back to Society – (Y)our “S” in ESG
We are committed to allow our shareholders to choose the recipients of our charitable contributions. The advantage of our shareholder designated charitable contribution (“SDCC”) program is that each shareholder is able to designate recipients of charitable contributions by our company in proportion to the number of shares of GAMCO that the shareholder owns. Shareholders exercise this benefit that is routinely exercised by the management of widely held corporations, benefitting the corporation directly in an amount commensurate with the amount of the donation.
The Board of Directors of GAMCO approved a $0.25$0.50 per share shareholder-designated charitable contribution (“SDCC”), a 25% increase fromSDCC for all shareholders of record on December 21, 2021, doubling the prior year’s $0.20$0.25 per share designation under the program. We estimate this will totalprogram, totaling approximately $5.4$11.3 million. Since the inception of GAMCO’s SDCC program in 2013, and counting this current amount, shareholders will have designated charitable gifts of close to $37$48 million to more than 280 501(c)(3) institutions.approximately 350 charitable organizations. Since our initial public offering in February 1999, our firm’s combined charitable donations total approximately $74 million.
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Governance (ESG) – (Y)our “G” in ESG
As part of GAMCO’s stewardship of investments on behalf of clients, we have historically viewed governance, active ownership, proxy voting, and engagement as important ways to protect shareholder value. To that end, the Firm has been a leading voice on certain governance matters since May 1988 when it initiatedissued its “Magna Carta of Shareholder Rights.” We actively vote our own proxies and file shareholder proposals on issues that we believe increase shareholder value. Such activity is part of our incorporation ofvalue and incorporate environmental, social, and governance (“ESG”) considerations that we value as long-term investors.
Since its formation in April 1989, the Proxy Voting Committee of the Company has formulated guidelines and reviewed proxy statements for the purpose of determining how to vote proxies related toin reviewing proxy statements of portfolio securities held by our clients. The main driver of these guidelines is to vote in the best economic interest of our clients. As we state in our Magna Carta of Shareholder Rights, we are neither for nor against management. We are for shareholders. We do not consider any issue routine. We take into consideration all of our research on the company, its directors, and their short-term and long-term goals for the company. In cases where issues that we generally do not approvedisapprove of are combined with other issues, the negative aspects of the issues will beare factored into the evaluation of the overall proposals, but willmay not necessitateresult in a vote in opposition to the overall proposals.
Additionally, across various investment products, we use ESG criteria, which include certain sustainable themes such as water scarcity, health and wellness, and renewable energy.
PART I
ITEM 1: BUSINESS
(Y)our Business
GAMCO (New York Stock Exchange (“NYSE”): GBL), a company incorporated under the laws of Delaware, is a widely-recognized provider of investment advisory services to open-end funds, closed-end funds, actively managed non-transparent Exchange Traded Fundssemi-transparent exchange traded funds (“ETFs”), a société d’investissement à capital variable (“SICAV”) and approximately 1,5001,400 institutional and private wealth management (“Institutional and PWM”) investors principally in the United States (“U.S.”). We generally manage assets on a fully discretionary basis and invest in a variety of U.S. and international securities through various investment styles including value, growth, non-market correlated, and convertible securities. Our revenues are based primarily on the Company’s level of assets under management (“AUM”) and fees associated with our various investment products. GAMCO serves a broad client base, including institutions, intermediaries, offshore investors, private wealth, and direct retail investors. In recent years, GAMCO has successfully attracted and integrated new teams of RIAs, by providing a strong combination of corporate culture, reputation, and compensation arrangements.
GAMCO offers a wide range of solutions for clients across Value and Growth Equity, ESG, Convertibles, sector-focused strategies including Gold and Utilities, Merger Arbitrage, and Fixed Income. In 1977, GAMCO startedlaunched its well knownflagship All Cap Value strategy, Gabelli Value, and in 1986 entered the mutual fund business.
As of December 31, 2020,2021, we had $32.6$35.0 billion of AUM. We conduct our investment advisory business principally through two subsidiaries, which are registered investment advisors: Gabelli Funds, LLC (open-end and closed-end funds) (“Gabelli Funds”) and GAMCO Asset Management Inc. (Institutional and PWM) (“GAMCO Asset”). G.distributors, LLC (“G.distributors”), our broker-dealer subsidiary, acts as an underwriter and distributor of our open-end funds and actively managed non-transparentsemi-transparent ETFs.
Our AUM are organized into three groups:
| • | Open and Closed-End Funds: We provide advisory services to 24 open-end funds and |
| • | Institutional and Private Wealth Management: We provide advisory services to a broad range of investors, including corporate retirement plans, foundations, endowments, jointly-trusteed plans and public funds, private wealth clients and also serve as sub-advisor to third party investment funds including registered investment companies. Portfolios may be customized to comply with client-specific guidelines and risk profiles. As of December 31, |
| • | SICAV: We provide advisory services to one SICAV under the GAMCO brand, the GAMCO International SICAV. The SICAV has |
Portfolio managers oversee our AUM and are supported by in-depth analysis across numerous industries by our research analyst teammates.teammates who have accumulated compound knowledge across numerous industries. Our research team, located in the U.S. and abroad, havehas an average of 1517 years of industry experience.
GBL is a holding company incorporated in April 1998 in advance of our initial public offering (“IPO”) in February 1999. GGCP Holdings, LLC, a subsidiary of GGCP, Inc. (“GGCP”), which is majority-owned by Mr. Mario J. Gabelli (“Mr. Gabelli”), owns a majority of the outstanding shares of Class B common stock (“Class B Stock”) of GBL. As of December 31, 2020,2021, such ownership represented approximately 92%93% of the combined voting power of the outstanding common stock and approximately 67%69% of the equity interest. AC, which was spun-off from GBL on November 30, 2015 and is publicly traded on the NYSE under the ticker symbol AC, owns 2,752,8762,424,892 shares of Class A common stock (“Class A Stock”) representing approximately 1% of the combined voting power and approximately 10%9% of the equity interest of GBL as of December 31, 2020.2021. AC is majority-owned by GGCP Holdings, LLC. Accordingly, Mr. Gabelli is deemed to control GBL.
During 2020,2021, we returned $30.7$73.8 million to shareholders through dividends and our stock buyback program. We paid $26.8$2.7 million, or $0.98$0.10 per share, in cash dividends and $54.5 million, or $2.00 per share, in a special dividend in the form of 2-Year subordinated notes due June 15, 2023 to our common shareholders and repurchased 296,296700,722 shares at an average investment of $13.16$23.55 per share, or $3.9$16.5 million.
At the IPO in February 1999, when 6 million GBL shares were soldoffered at $17.50 per share and total shares outstanding were 30 million for a market capitalization of $525 million,million. Since the IPO, we have returned to shareholders $2.0$2.1 billion in total, comprised of which $1.0 billion was in the form of the spin-offs of AC and Teton $505.0Advisors, Inc. (“Teton”), $521.5 million was through our stock buyback program, and $522.4$579.6 million from dividends. In addition, $74 million was from dividends, as well as $62 milliondistributed to charities on their behalf.behalf of shareholders as well.
Business Strategy
Our business strategy targets global growth of the franchise by leveraging our proven asset management strengths, including our brands, long-term performance record, diverse product offerings, and experienced investment, research, and client relationship professionals. To achieve performance and growth in AUM and profitability, we are deploying a strategy which includes several factors:
| • | Gabelli Private Market Value (PMV) with a CatalystTM Investment Approach is at the core of our business. This methodology has evolved from the value investing principles articulated by Graham & Dodd in 1934 and enhanced by Roger Murray and Bruce Greenwald. Mr. |
Private Market Value (PMV) with a CatalystTM investing is a disciplined, research-driven approach based on intensive security analysis. In this process, select stocks are identified with an intrinsic value based on our estimate of current asset value, future growth, and earnings power that is significantly different from the value reflected in the public market. We then calculate the stock’s PMV, defined as the price an informed industrial buyer would likely pay to acquire the business. We then look for a catalyst: a company specific event or industry-wide phenomena, such as a change in regulations that will help realize returns. For the value process we employ which underscores value appeal, in general, our Institutional and PWM AUM are managed to meet the specific needs and objectives of each client by utilizing investment strategies that are within our areas of expertise: “all cap value”, “small cap value”, “small and mid (SMID) cap value”, |
| • | Gabelli Growth Team. Our investment process begins by identifying the most robust secular growth industries globally. Once attractive markets are identified, businesses within those markets are evaluated for two criteria: low penetration of a large addressable market and competitive advantage. The presence of competitive advantage allows us to derive confidence that the business can grow market share and revenue by increasing the penetration of its addressable market. Competitive advantage can take the form of network effects, customer captivity or barriers to entry. |
| We value companies across two dimensions: relative valuation, which is most appropriate for profitable businesses, and discounted cash flow, which is appropriate for companies that are mostly being valued on future expected cash flows. For the latter, we evaluate unit economics, e.g. the ratio of lifetime value to customer acquisition cost, to understand the potential profitability of a business at maturity as its growth investments moderate. At the portfolio construction level, we incorporate business cycle analysis to manage position sizes and sector exposures. |
| • | Growing Convertible Presence. Our convertible team has focused on this unique asset class for decades. Convertibles enable us to invest in companies with an asymmetrical return profile through a combination of equity exposure, income, and seniority in the capital structure. This attractive combination leads to reduced volatility relative to the underlying equity. We work closely with the Gabelli team of analysts and the combination of our strong bottom-up fundamental research culture and convertible expertise creates a differentiated strategy that resonates with investors, benefitting shareholders and clients. AUMs across our convertible products include a number of funds and SMAs. In 2021, we expanded our convertible presence to Europe through a SICAV structure allowing us to meet demand for a global convertible product. |
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| • | Increasing Presence in and Marketing for Private Wealth Management Market. Our private wealth management business focuses, generally, on client relationships of $2.5 million or greater. According to industry estimates, the number of households with over $2.5 million in investable assets will continue to experience rapid growth, subject to ups and downs in the equity and fixed income markets. We believe the firm is well positioned to take advantage of this market opportunity, given its over four decades history of serving the needs of private high net worth clients, with tax sensitive investment management across a breadth of strategies, long performance history, and reputational standing. Our objective is to deepen long-term client relationships and, addressing the holistic needs of new clients over a sole equity management focus. In recent years, GAMCO has successfully attracted and integrated new teams of RIAs, by providing a strong combination of corporate culture, reputation, and compensation arrangements. |
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| • | Expanding Fund Distribution. We continue to expand our distribution network, primarily through national and regional brokerage firms, and have developed additional classes of shares for most of our open-end Funds for sale through these firms and other third party distribution channels. We have increased our wholesale distribution efforts to market the multi-class shares, which have been designed to meet the needs of investors seeking advice through financial consultants. We also seek relationships with financial intermediaries that manage discretionary fund models in order to have our funds placed within such models. |
| • | upon redemption. |
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| • | Hosting of Institutional Investor Symposiums. We have a tradition of sponsoring institutional investor symposiums that bring together prominent portfolio managers, members of academia, and other leading business professionals to present, discuss, and debate current issues and topics in the investment industry. These symposiums have included: |
-2021
We believe that our growth since inception is traceable to the following factors:
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Business Description Our AUM’s are clustered in two groups: Funds and Institutional and PWM. Funds: At December 31, Open-end Funds As of December 31, Closed-end Funds We act as investment advisor to SICAV We provide investment advisory services to the GAMCO International SICAV, which has 9 Institutional and Private Wealth Management: At December 31, The ten largest Institutional and PWM relationships comprised approximately 47% of GAMCO Asset AUM and 18% of our total AUM as of December 31, Investment advisory agreements for our Institutional and PWM clients are 10 Assets Under Management
(a) Includes $183 million and $166 million of 100% U.S. Treasury Fund AUM at December 31, 2021 and 2020, respectively.
The following table sets forth the amounts of distributions to clients in our Funds by year:
Summary of Investment Products We manage assets in the following wide spectrum of investment products and strategies:
Additional Information on Mutual Funds Through Gabelli Funds, we act as the investment advisor to all of the Funds. Shareholders of the open-end Funds are allowed to exchange shares among the same class of shares of the other open-end Funds as economic and market conditions and investor needs change at no additional cost. However, certain open-end Funds impose a 2% redemption fee on shares redeemed within seven days or less after a purchase. We periodically introduce new funds designed to complement and expand our investment product offerings, respond to competitive developments in the financial marketplace, and meet the changing needs of investors. Our marketing efforts for the open-end Funds are In 1998 and 1999, we 13 Multi-class shares are available in In general, distribution through third party programs has greater variable cost components and lower fixed cost components than distribution through We provide investment advisory and management services pursuant to an investment management agreement with each fund (“Fund IMAs”). The Fund IMAs generally provide that we are responsible for the overall investment and administrative services, subject to the oversight of each Our affiliated advisor provides the Funds with administrative services pursuant to the Fund IMAs. Such services include, without limitation, supervision of the calculation of net asset value, preparation of financial reports for shareholders of the Each of our Fund IMAs may continue in effect from year to year only if specifically approved at least annually by (i) the Open-End Fund Distribution G.distributors, a wholly-owned subsidiary of GBL, is a broker-dealer registered under the Exchange Act, and is regulated by the Financial Industry Regulatory Authority (“FINRA”). G.distributors’ revenues are derived primarily from the distribution of our open-end Funds. G.distributors distributes our open-end Funds pursuant to distribution agreements with each Fund. It also distributes funds managed by Teton and its affiliates. Under each distribution agreement with an open-end Fund, G.distributors offers and sells such open-end Fund’s shares on a continuous basis and pays the majority of the costs of marketing and selling the shares, including printing and mailing prospectuses and sales literature, advertising, maintaining sales and customer service teammates and sales and services fulfillment systems, and payments to the sponsors of third party distribution programs, financial intermediaries, and G.distributors’ sales teammates. G.distributors receives fees for such services pursuant to distribution plans adopted under provisions of Rule 12b-1 (“12b-1”) of the Company Act. Distribution fees from the open-end Funds are computed daily based on average net assets. For the years ended December 31, Under the distribution plans, the Class AAA shares of the open-end Funds (except The Gabelli U.S. Treasury Money Market G.distributors’ distribution agreements with each fund may continue in effect from year to year only if specifically approved at least annually by (i) the 14 G.distributors also offers our open-end Fund products through our website, www.gabelli.com, where directly registered investors can access their personal account information and buy, sell, and exchange fund shares. Fund prospectuses, quarterly reports, Competition We compete with other investment management firms and mutual fund companies, insurance companies, banks, brokerage firms, and other financial institutions that offer products that have similar features and investment objectives. Many of these investment management firms are subsidiaries of large diversified financial companies. Many others are much larger in terms of AUM and revenues and, accordingly, have much larger sales organizations and marketing budgets. Historically, we have competed primarily on the basis of the long-term investment performance of many of our investment products in addition to brand recognition of the Firm and market awareness of its founder, Mr. Gabelli. We have taken steps to increase our distribution channels, brand consistency and marketing communications, and thought-leadership efforts. Other trends affecting the investment management business include the widespread popularity of index mutual funds and ETFs, which have tax and cost advantages over traditional investment companies. The market for providing investment management services to Institutional and PWM clients is also highly competitive. Approximately 27% of our investment advisory fee revenue for the year ended December 31, Intellectual Property Service marks and brand name recognition are important to our business. We have rights to the service marks under which our products are offered. We have registered certain service marks in the U.S. and will continue to do so as new trademarks and service marks are developed or acquired. We have rights to use the “Gabelli” name, the “GAMCO” name, and other names. Pursuant to an assignment agreement, Mr. Gabelli has assigned to us all of his rights, title, and interests in and to the “Gabelli” name for use in connection with investment management services, mutual funds and securities brokerage services. However, under the agreement, Mr. Gabelli will retain any and all rights, title, and interests he has or may have in the “Gabelli” name for use in connection with (i) charitable foundations controlled by Mr. Gabelli or members of his family and (ii) entities engaged in private investment activities for Mr. Gabelli or members of his family. In addition, the funds managed by Mr. Gabelli outside GBL have entered into a license agreement with us permitting them to continue limited use of the “Gabelli” name under specified circumstances. Regulation Virtually all aspects of our businesses are subject to various federal, state, and foreign laws and regulations. These laws and regulations are primarily intended to protect investment advisory clients and shareholders of investment funds. Under such laws and regulations, agencies that regulate investment advisors and broker-dealers have broad powers, including the power to limit, restrict or prohibit such an advisor or broker-dealer from carrying on its business in the event that it fails to comply with such laws and regulations. In such an event, the possible sanctions that may be imposed include civil and criminal liability, the suspension of individual employees, injunctions, limitations on engaging in certain lines of business for specified periods of time, revocation of the investment advisor, and other registrations, censures, and fines. Our business is subject to extensive regulation at the federal, state, and foreign level by the SEC and other regulatory bodies. Certain of our subsidiaries are registered with the SEC under the Investment Advisers Act of 1940, as amended (“Advisers Act”), and the The subsidiaries of GBL that are registered with the SEC under the Advisers Act (Gabelli Funds and GAMCO Asset) are regulated by and subject to examination by the SEC. The Advisers Act imposes numerous obligations on registered investment advisors, including fiduciary duties, disclosure obligations, and record keeping, operational, and marketing requirements. The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act, ranging from censure to termination of an investment advisor’s registration. The failure of an advisory subsidiary to comply with the requirements of the SEC could have a material adverse effect on us. 15 We derive a substantial majority of our revenues from investment advisory services through our various investment management agreements. Under the Advisers Act, our investment management agreements may not be assigned without the client’s consent. Under the Company Act, advisory agreements with registered investment companies, such as our Funds, terminate automatically upon assignment. The term “assignment” is broadly defined and includes direct as well as assignments that may be deemed to occur, under certain circumstances, upon the transfer, directly or indirectly, of a controlling interest in GBL. In its capacity as a broker-dealer, G.distributors is required to maintain certain minimum net capital amounts. These requirements also provide that equity capital may not be withdrawn, advances to affiliates may not be made, and cash dividends may not be paid if certain minimum net capital requirements are not met. G.distributors’ net capital, as defined in Rule 15c3-3 promulgated under the Securities Exchange Act of 1934, as amended, met or exceeded all minimum requirements as of December 31, Subsidiaries of GBL are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and to regulations promulgated thereunder, insofar as they are “fiduciaries” under ERISA with respect to certain of their clients. ERISA and applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), impose certain duties on persons who are fiduciaries under ERISA and prohibit certain transactions involving ERISA plan clients. Our failure to comply with these requirements could have a material adverse effect on us. Investments by GBL and on behalf of our Funds and Institutional and PWM clients often represent a significant equity ownership position in an issuer’s class of stock. As of December 31, The USA Patriot Act of 2001 contains anti-money laundering and financial transparency laws and mandates the implementation of various new regulations applicable to broker-dealers, mutual funds and other financial services companies, including standards for verifying client identification at account opening and obligations to monitor client transactions and report suspicious activities. Anti-money laundering laws outside of the U.S. contain some similar provisions. Our failure to comply with these requirements could have a material adverse effect on us. We and certain of our affiliates are subject to the laws of non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies. In connection with our office in London and our plans to market certain products in Europe, we are required to comply with the laws of the United Kingdom and other European countries regarding these activities. Our subsidiary, GAMCO Asset Management (UK) Limited, is regulated by the Financial Conduct Authority. In connection with our registration in the United Kingdom, we have minimum capital requirements that have been consistently met or exceeded. We opened offices in Hong Kong, Shanghai, and Tokyo and, therefore, are subject to national and local laws in those jurisdictions. We are subject to requirements in numerous jurisdictions regarding reporting of beneficial ownership positions in securities issued by companies whose securities are publicly-traded in those countries. Regulatory matters The investment management industry is likely to continue facing a high level of regulatory scrutiny and become subject to additional rules designed to increase disclosure, tighten controls, and reduce potential conflicts of interest. In addition, the SEC has substantially increased its use of focused inquiries, which request information from investment advisors and a number of fund complexes regarding particular practices or provisions of the securities laws. We participate in some of these inquiries in the normal course of our business. Changes in laws, regulations, and administrative practices by regulatory authorities, and the associated compliance costs, have increased our cost structure and could in the future have a material adverse impact. Although we have installed procedures and utilize the services of experienced administrators, accountants, and lawyers to assist us in adhering to regulatory guidelines and satisfying these requirements, and maintain insurance to protect ourselves in the case of client losses, there can be no assurance that the precautions and procedures that we have instituted and installed, or the insurance that we maintain to protect ourselves in case of client losses, will protect us from all potential liabilities. See Legal Proceedings in Part I, Item 3 of this Form 10-K for additional information. Human Capital GAMCO is a dynamic firm that seeks and employs bright and energetic teammates with entrepreneurial attitudes, experience in the financial services industry, and who are guided by the same ESG Teammates We provide a variety of benefits to promote retention and growth of our teammates. We strive to offer competitive compensation packages to our teammates, comprised of base pay, variable compensation, annual bonuses, as well as equity grants to promote a sense of ownership and aligned interests to our public shareholders. We offer a comprehensive benefits package that gives a robust collection of rewards and benefits, including healthcare and other insurance benefits and retirement savings plans. Additionally, we provide annual training and teammate reviews in order to promote growth and self-reflection. As of February 28, Diversity and Inclusion As a company, we are committed to and actively striving to ensure we have a diverse workforce. We recognize our teammates are the most valuable asset we have and we embrace the differences amongst our teammates that make them unique, including race, ethnicity, sexual orientation, gender identity, disability, religion, and socio-economic status. We put this into practice via our diversity initiatives that are guided by our diversity and inclusion policy and applied via our practices and policies on recruitment and selection, compensation and benefits, professional development, training, promotions, and transfers. Status as a Smaller Reporting Company We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K. As a result, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “smaller reporting companies.” Under this rule, we will, in general, remain a smaller reporting company unless the market value of GBL common stock that is held by non-affiliates exceeds $250 million as of the last business day of our most recently completed second fiscal quarter. The market value of GBL common stock held by non-affiliates at December 31, We may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us as long as we qualify as a smaller reporting company.
We caution the reader that the following risks and those risks described elsewhere in this report and in our other SEC filings could have a material adverse effect on our business, prospects, financial condition, results of operations, or cash flows or could cause a decline in the Company’s stock price. Risks Related to Our Industry We earn substantially all of our revenue based on assets under management and, therefore, a reduction in assets under management would reduce our revenues and profitability. Assets under management fluctuate based on many factors including market conditions, investment performance, and terminations of investment contracts. Substantially all of our revenues are directly related to the amount of our AUM. Under our investment advisory contracts with our clients, the investment advisory fees we receive are typically based on the market value of AUM. In addition, we receive asset-based distribution fees with respect to the open-end Funds managed by Gabelli Funds or Teton and its affiliates over time pursuant to distribution plans adopted under provisions of Rule 12b-1 under the Company Act. Rule 12b-1 fees typically are based on the average AUM and represented approximately 17 Changes in laws or regulations or in governmental policies and compliance with existing laws or regulations could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability, and materially and adversely affect our business. Our business is subject to extensive regulation in the U.S., primarily at the federal level, including regulation by the SEC under the Company Act and the Advisers Act as well as other securities laws, by the Department of Labor under ERISA, and regulation by FINRA and state regulators. The Funds managed by Gabelli Funds are registered with the SEC as investment companies under the Company Act. The Advisers Act imposes numerous obligations on investment advisors, including record-keeping, advertising and operating requirements, fiduciary and disclosure obligations, custodial requirements, and prohibitions on fraudulent activities. The Company Act imposes similar obligations, as well as additional detailed operational requirements, on registered investment companies and investment advisors. In addition, our businesses are also subject to regulation by the Financial Services Authority in the United Kingdom, and we are also subject to the laws of other non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies. Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of teammates, or other sanctions, including revocation of our subsidiaries’ registrations as an investment advisor or broker-dealer. Industry regulations are designed to protect our clients and investors in our funds and other third parties who deal with us and to ensure the integrity of the financial markets. Our industry is frequently altered by new laws or regulations and by revisions to, and evolving interpretations of, existing laws and regulations, both in the U.S. and in other nations. Changes in laws or regulations or in governmental policies could limit the sources and amounts of our revenues including but not limited to distribution revenue under the Company Act, increase our costs of doing business, decrease our profitability, and materially and adversely affect our business. Events outside of our control, including public health crises, could negatively affect the portfolios we manage and our results of our operations. Periods of market volatility have occurred and could continue to occur in response to pandemics or other events outside of our control. These types of events have adversely affected and could continue to adversely affect operating results for us and the portfolios that we manage. For example, in December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in China and has since spread To the extent we are forced to compete on the basis of price, we may not be able to maintain our current fee structure. The investment management business is highly competitive and has relatively low barriers to entry. To the extent we are forced to compete on the basis of price, we may not be able to maintain our current fee structure. Although our investment advisory fees vary from product to product, historically we have competed primarily on the performance of our products and not on the level of our investment advisory fees relative to those of our competitors. In recent years, however, there has been a trend toward lower fees in the investment management industry. In order to maintain our fee structure in a competitive environment, we must be able to continue to provide clients with investment returns and service that make investors willing to pay our fees. In addition, the board of directors or trustees of each Fund managed by Gabelli Funds must make certain findings as to the reasonableness of its fees. We cannot be assured that we will succeed in providing investment returns and service that will allow us to maintain our current fee structure. Fee reductions on existing or new business could have an adverse effect on our profit margins and results of operations. 18 We derive a substantial portion of our revenues from investment advisory contracts that may be terminated on short notice or may not be renewed by clients. A substantial majority of our revenues are derived from investment management agreements and distribution arrangements. Investment management agreements and distribution arrangements with the domestic Funds are terminable without penalty on 60 days’ notice (subject to certain additional procedural requirements in the case of termination by a Fund) and must be specifically approved at least annually, as required by law. Such annual renewal requires, among other things, approval by the disinterested members of each Fund’s board of directors or trustees. Investment advisory agreements with our Institutional and PWM clients are typically terminable by the client without penalty on 30 days’ notice or less. Any failure to renew or termination of a significant number of these agreements or arrangements would have a material adverse effect on us. Investors in the open-end Funds can redeem their investments in these Funds at any time without prior notice, which could adversely affect our earnings. Open-end Fund investors may redeem their investments in those Funds at any time without prior notice. Investors may reduce the aggregate amount of AUM for any number of reasons, including investment performance, changes in prevailing interest rates, and financial market performance. In a declining stock market, the pace of mutual fund redemptions could accelerate. Poor performance relative to other asset management firms tends to result in decreased purchases of open-end fund shares and increased redemptions of open-end fund shares. The redemption of investments in the Funds managed by Gabelli Funds would adversely affect our revenues, which are substantially dependent upon the AUM in our Funds. If redemptions of investments in the open-end Funds caused our revenues to decline, it could have a material adverse effect on our earnings. Certain changes in control of our company would automatically terminate our investment management agreements with our clients, unless our Institutional and PWM clients consent and, in the case of Fund clients, the Funds’ boards of directors and shareholders vote to continue the agreements, and could prevent us for a two-year period from increasing the investment advisory fees we are able to charge our mutual fund clients. Under the Company Act, an investment management agreement with a fund must provide for its automatic termination in the event of its assignment. The fund’s board and shareholders must vote to continue the agreement following its assignment, the cost of which ordinarily would be borne by us. Under the Advisers Act, a client’s investment management agreement may not be assigned by the investment advisor without the client’s consent. An investment management agreement is considered to be assigned to another party when a controlling block of the advisor’s ownership is transferred. In our case, an assignment of our investment management agreements may occur if, among other things, we sell or issue a certain number of additional common shares in the future. We cannot be certain that our clients will consent to assignments of our investment management agreements or approve new agreements with us if an assignment occurs. Under the Company Act, if a fund’s investment advisor engages in a transaction that results in the assignment of its investment management agreement with the fund, the advisor may not impose an unfair burden on that fund as a result of the transaction for a two-year period after the transaction is completed. The term “unfair burden” has been interpreted to include certain increases in investment advisory fees. This restriction may discourage potential purchasers from acquiring a controlling interest in our company. Catastrophic and unpredictable events could have a material adverse effect on our business. A terrorist attack, cyber-attack, political unrest, war (whether or not directly involving the U.S.), power failure, We have a disaster recovery plan to address certain contingencies, but it cannot be assured that this plan will be effective or sufficient in responding to, eliminating, or ameliorating the effects of all disaster scenarios. If our teammates or vendors we rely upon for support in a catastrophic event are unable to respond adequately or in a timely manner, we may lose clients resulting in a decrease in AUM, which may have a material adverse effect on revenues and net income. The soundness of other financial institutions could adversely affect our business. Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We and the investments we manage may have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, clearing organizations, mutual and hedge funds, and other institutions. Many of these transactions expose us, or the accounts we manage, to credit risk in the event of the counterparty’s default. There is no assurance that any such losses would not materially and adversely impact the Company’s revenues and earnings. 19 Risks Related to Our Business Control by Mr. Gabelli of a majority of the combined voting power of our common stock may give rise to conflicts of interests. Since our IPO in 1999, Mr. Gabelli, through his control and majority ownership of GGCP, has beneficially owned a majority of our outstanding Class B Stock, currently representing approximately We depend on Mr. Gabelli and other key teammates. We are dependent on the efforts of Mr. Gabelli, our Chairman of the Board, Chief Executive Officer, Co-Chief Investment Officer (“CIO”) of the Value team (along with the two other Value Co-CIOs Christopher Marangi and Kevin Dreyer), and the primary portfolio manager for a significant majority of our AUM. The loss of Mr. Gabelli’s services could have a material adverse effect on On February 6, 2008, Mr. Gabelli entered into an amended and restated employment agreement (as amended, the “2008 Employment Agreement”) with the Company, which was initially approved by the Company’s shareholders on November 30, 2007 and approved again on May 6, 2011, May 5, 2015, and June 5, 2020, and which limits his activities outside of the Company. Under the 2008 Employment Agreement, the manner of computing Mr. Gabelli’s remuneration from GAMCO is unchanged. Mr. Gabelli has agreed that while he is employed by us he will not provide investment management services outside of GAMCO, Teton, AC, and GGCP, except for certain permitted accounts. These permitted accounts, excluding personal accounts, held assets at December 31, Our future success depends to a substantial degree on our ability to retain and attract other qualified teammates to conduct our investment management business, including Messrs. Marangi and Dreyer, the other There may be adverse effects on our business from a decline in the performance of the securities markets. Our results of operations are affected by many economic factors, including the performance of the securities markets. The securities markets in general have experienced significant volatility, and such volatility may continue or increase in the future. At December 31, 20 Since the separation, certain of our directors and officers may have actual or potential conflicts of interest because of their positions or relationships with AC. Since the separation of AC from GAMCO, Also, some of our directors, executive officers, portfolio managers, and teammates own shares of In addition, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between GAMCO and AC regarding the terms of the agreements governing the separation and the relationship thereafter between the companies. The executive officers and other personnel of AC who serve as directors or executive management of GAMCO may interpret these agreements in their capacity as AC employees in a manner that would adversely affect the business of GAMCO. Also, certain subsidiaries of AC are investment advisers. The executive officers and other personnel of AC who also serve as directors or executive management of GAMCO may be confronted with the possibility of making decisions in their AC capacity that would adversely affect the business of GAMCO. Both GAMCO and AC Our reputation is critical to acquiring, maintaining, and developing relationships with our clients, Fund shareholders, and third party intermediaries. Misconduct by our teammates, or even unsubstantiated allegations, could result not only in direct financial harm but also in harm to our reputation, causing injury to the value of our brands and our ability to retain or attract AUM. Moreover, reputational harm may cause us to lose current teammates and we may be unable to attract new teammates with similar qualification or skills. Damage to our reputation could substantially reduce our AUM and impair our ability to maintain or grow our business, which could have a material adverse effect on us. There is a possibility of losses associated with proprietary investment activities. Currently, we maintain Future investment performance could reduce revenues and other income. Success in the investment management and mutual fund businesses is dependent on investment performance as well as distribution and client servicing. Good performance generally stimulates sales of our investment products and tends to keep withdrawals and redemptions low, which generates higher advisory fees (which are based on the amount of AUM). Conversely, poor performance, both in absolute terms and/or relative to peers and industry benchmarks, tends to result in decreased sales, increased withdrawals and redemptions in the case of the open-end Funds, and in the loss of Institutional and PWM clients, with corresponding decreases in revenues to us. Many analysts of the mutual fund industry believe that investment performance is the most important factor for the growth of open-end and closed-end funds, such as those we offer. Failure of our investment products to perform well or failure of the Funds to maintain ratings or rankings could, therefore, have a material adverse effect on us. 21 In addition, when our investment products experience strong results relative to the market or other asset classes, clients’ investments in our products may increase beyond their target levels, and we could, therefore, suffer withdrawals as our clients rebalance their investments to fit their asset allocation preferences. Loss of significant Institutional and PWM accounts could affect our revenues. We had approximately A decline in the market for closed-end funds could reduce our ability to raise future assets to manage. Market conditions may preclude us from increasing the assets we manage in our closed-end Funds. A significant portion of our growth in the assets we manage resulted from public offerings of the common and preferred shares of the closed-end Funds. We raised approximately A significant portion of the assets we manage is attributable to the distribution of our products through third-party intermediaries. Our ability to distribute our products is highly dependent on access to the client bases and The structure and terms of the distribution arrangements with intermediaries, including fees or rebates paid by us or our funds to intermediaries to assist with distribution efforts, and the ability of our funds to participate in these intermediary platforms are subject to changes driven by market competition and regulatory developments. Our existing relationships with third-party intermediaries and access to new intermediaries could be adversely affected by continued consolidation within the financial services industry. Consolidation may result in increased distribution costs, a reduction in the number of third parties distributing our investment products, or increased competition to access third-party distribution channels. There can be no assurance that Operational risks may disrupt our businesses, result in regulatory action against us, or limit our growth. We face operational risk arising from errors made in the execution, confirmation, or settlement of transactions or from transactions not being properly recorded, evaluated, or accounted for. Our business is highly dependent on our ability to process, on a daily basis, transactions across markets in an efficient and accurate manner. Consequently, we rely heavily on our financial, accounting, and other data processing systems. Despite the reliability of these systems, and the training and skill of our teammates and third parties we rely on, it remains likely that errors may occasionally occur due to the extremely large number of transactions we process. In addition, if systems we use are unable to accommodate an increasing volume of transactions, our ability to expand our businesses could be constrained. If any of these systems do not operate properly or are disabled, we could suffer financial loss, a disruption of our businesses, liability to clients, regulatory intervention, or reputational damage. Failure to maintain adequate infrastructure could impede the Company’s productivity and growth. Additionally, failure to implement effective information and cyber security policies, procedures, and capabilities could disrupt operations and cause financial losses that could result in a decrease in the Company’s earnings or stock price. Our infrastructure, including our information systems and technology, is vital to the competitiveness of our business. The failure to maintain an adequate infrastructure commensurate with the size and scope of our business could impede our productivity and growth, which could cause our earnings or stock price to decline. We outsource a significant portion of our information systems operations to third parties who are responsible for providing the management, maintenance, and updating of such systems. Technology is subject to rapid change and we cannot guarantee that our competitors may not implement more advanced technology platforms for their products than we do for ours. In addition, there can be no assurance that the cost of maintaining such outsourcing arrangements will not increase from its current level, which could have a material adverse effect on us. 22 In addition, any inaccuracies, delays, system failures, or security breaches in these and other systems could subject us to client dissatisfaction and losses. Breach of our technology systems could result in the loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by the breach, additional security costs to mitigate against future incidents, and litigation costs resulting from the incident. Moreover, loss of confidential customer identification information could harm our reputation and subject us to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenues. Further, although we take precautions to password protect and encrypt our laptops, tablets, smartphones, and other mobile electronic hardware, if such hardware is stolen, misplaced or left unattended, it may become vulnerable to hacking or other unauthorized use, creating a possible security risk and resulting in potentially costly actions by us. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. We may be the target of cyber-attacks, including denial-of-service attacks, and must continuously monitor and develop our systems to protect our technology infrastructure and data from misappropriation or corruption. Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software, and networks may be vulnerable to unauthorized access, misuse, computer viruses, or other malicious code and other events that could have a security impact. If one or more of such events occur, this potentially could jeopardize our or our clients’ or counterparties’ confidential and other information processed and stored in our, our clients’, our counterparties’, or third parties’ operations, which could impact their ability to transact with us or otherwise result in significant losses or reputational damage. The increased use of mobile technologies can heighten these and other operational risks. We expect to expend additional resources on an ongoing basis to modify our protective measures and to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. We routinely transmit and receive personal, confidential, and proprietary information by email and other electronic means. We have discussed and worked with clients, vendors, service providers, counterparties, and other third parties to develop secure transmission capabilities and protect against cyber-attacks, but we do not have, and may be unable to put in place, secure capabilities with all of our clients, vendors, service providers, counterparties, and other third parties and we may not be able to ensure that these third parties have appropriate controls in place to protect the confidentiality of the information. An interception, misuse, or mishandling of personal, confidential, or proprietary information being sent to or received from a client, vendor, service provider, counterparty, or other third party could result in legal liability, regulatory action, and reputational harm. The failure of one of our vendors to fulfill its obligations to us could have a material adverse effect on the Company and its products. The Company depends on a number of key vendors for various fund administration, accounting, custody, and transfer agent roles and other operational needs. The failure or inability of the Company to diversify its sources for key services or the failure of any key vendors to fulfill their obligations could lead to operational issues for the Company and in certain products, which could result in financial losses for the Company and its clients. Our ability to meet cash needs may be adversely affected by a number of factors. Our ability to meet anticipated cash needs is affected by factors such as the market value of our assets, our operating cash flows, and our creditworthiness as perceived by lenders. Adverse developments in any of these areas could have significantly adverse effects on our business. If we are unable to obtain funds and financing in a timely manner or on acceptable terms, we may be forced to incur unanticipated costs or revise our business plans. Volatility in the U.S., regional, or global financing markets may also impact our ability to access the capital markets should we seek to do so, and we may be forced to incur unanticipated costs or experience other adverse effects on our business. We face exposure to legal actions, including litigation and arbitration claims and regulatory and governmental examinations and/or investigations. Insurance coverage for these matters may be inadequate. The volume of litigation and arbitration claims against financial services firms and the amount of damages claimed has increased over the past several years. The types of claims that we may face are varied. For example, we may face claims against us for purchasing securities that are inconsistent with a client’s investment objectives or guidelines, in connection with the operation of the Funds, or arising from an employment dispute. The risk of litigation is difficult to predict, assess, or quantify, and may occur years after the activities or events at issue. In addition, from time to time we may become the subject of governmental or regulatory investigations and/or examinations. Even if we prevail in a legal or regulatory action, the costs alone of defending against the action or the harm to our reputation could have a material adverse effect on us. The insurance coverage that we maintain with respect to legal and regulatory actions may be inadequate or may not cover certain proceedings. 23 Compliance failures could adversely affect us. Our investment management activities are subject to client guidelines, and our mutual fund business involves compliance with numerous investment, asset valuation, liquidity, distribution, and tax requirements. A failure to comply with these guidelines or contractual requirements could result in damage to the Company’s reputation or in its clients seeking to recover losses, withdrawing their AUM, or terminating their contracts, any of which could cause the Company’s revenues and earnings to decline. There can be no assurance that the precautions and procedures that we have instituted and installed or the insurance we maintain to protect ourselves in case of client losses will protect us from potential liabilities. We face strong competition from numerous and, in many instances, larger companies. The asset management business is intensely competitive. We compete with numerous investment management companies, stock brokerage and investment banking firms, insurance companies, banks, savings and loan associations, and other financial institutions. The periodic establishment of new investment management companies and other competitors increases the competition that we face. At the same time, consolidation in the financial services industry has created stronger competitors with greater financial resources and broader distribution channels than our own. Competition is based on various factors, including, among others, business reputation, investment performance, product mix and offerings, service quality and innovation, distribution relationships, and fees charged. Our competitive success in any or all of these areas cannot be assured. Additionally, competing securities dealers whom we rely upon to distribute our open-end Funds also sell their own proprietary funds and investment products, which could limit the distribution of our investment products. To the extent that existing or potential customers, including securities dealers, decide to invest in or distribute the products of our competitors, the sales of our products as well as our market share, revenues, and net income could decline. Our actively managed investment strategies compete against passive strategies. The trend in market demand for investors towards passive products such as index funds and ETFs, which favor our competitors in the asset management business, reduces opportunities for active managers. Investors are increasingly attracted to these lower fee passive products, which have gained, and may continue to gain, market share at the expense of active products like those managed by us. Fee pressures could reduce our profit margins. There has been a trend toward lower fees in some segments of the investment management industry. In order for us to maintain our fee structure in a competitive environment, we must be able to provide clients with investment returns and service that will encourage them to be willing to pay such fees. Expense limitations and reimbursements have been put in place for certain classes of certain Funds. Accordingly, there can be no assurance that we will be able to maintain our current fee structure. Fee reductions on existing or future new business could have an adverse effect on our profit margins and results of operations. Launch of new strategies and products may negatively impact our results of operations. We may support the development of new investment strategies and products by waiving a portion of the management fees we are entitled to receive or by subsidizing expenses. Additionally, the costs with establishing new strategies and products, including actively managed Risks Related to our Common Stock The disparity in the voting rights among the classes of shares may have a potential adverse effect on the price of our Class A Stock. The holders of Class A Stock and 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. Since our IPO in 1999, Mr. Gabelli, through his control and majority ownership of GGCP, has beneficially owned a majority of our outstanding Class B Stock, currently representing approximately Future sales of our Class A Stock in the public market or sales or distributions of our Class B Stock could lower our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute our stockholders’ ownership in us. We may sell additional shares of Class A Stock in subsequent public offerings. We also may issue additional shares of Class A Stock or convertible debt securities. On March 5, 2018, AC completed a tender offer in which tendering AC shareholders received an aggregate of approximately 660,000 shares of our registered Class A Stock constituting approximately 7% of the Class A Stock outstanding. On October 29, 2018, AC completed another tender offer in which tendering AC shareholders received an aggregate of approximately 710,000 shares of our registered Class A Stock constituting approximately 7% of the Class A Stock outstanding. During 2021 and 2020, AC sold 339,376 shares and 178,525 shares, respectively, of our Class A Stock constituting approximately 4% and 2%, respectively, of the Class A Stock outstanding. The market price of our Class A Stock could decline as a result of sales of Class A Stock by such shareholders. Any such sales, as well as sales by our other current shareholders, could be perceived negatively. No prediction can be made as to the effect, if any, that future sales or distributions of Class B Stock owned by GGCP Holdings LLC will have on the market price of the Class A Stock from time to time. Sales or distributions of substantial amounts of Class A Stock or Class B Stock, or the perception that such sales or distributions are likely to occur, could adversely affect the prevailing market price for the Class A Stock. Our common stock has relatively limited trading volume, and ownership of a large percentage is concentrated with a small number of shareholders, which could increase the volatility in our stock trading and dramatically affect our share price. A large percentage of our common stock is held by a limited number of shareholders. If our larger shareholders decide to liquidate their positions, it could cause significant fluctuation in the share price of our common stock. General Risk Factors The risk factors described above are those that we think may be material with regard to an investment in us that are not applicable generally to all business enterprises. However, we are subject to the many risks that affect all or most business enterprises in the Our principal From time to time, the Company may be named in legal actions and proceedings in the normal course of business. 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 consolidated financial statements in Part II, Item 8 of this Form 10-K 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, if material, makes the necessary disclosures. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. There are currently no such matters pending that the Company believes could have a material adverse effect on its consolidated financial condition, operations, or cash flows at December 31, ITEM 4:MINE SAFETY DISCLOSURES Not applicable. ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Our shares of Class A Stock are traded on the New York Stock Exchange under the symbol GBL. As of February 28, As of December 31, The following table provides information regarding purchases of Class A Stock made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the fourth quarter of
The following table shows information regarding outstanding options and shares reserved for future issuance under our equity compensation plans as of December 31,
The number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column above) is ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto included in Part II, Item 8 of this Form 10-K “Financial Statements and Supplementary Data.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in Part I, Item 1A of this Form 10-K “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking statements due to factors discussed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-K. OVERVIEW GAMCO (New York Stock Exchange (“NYSE”): GBL), a company incorporated under the laws of Delaware, is a widely-recognized provider of investment advisory services to 24 open-end funds, GAMCO offers a wide range of solutions for clients across Value and Growth Equity, ESG, Convertibles, actively managed semi-transparent ETFs, sector-focused strategies including Gold and Utilities, Merger Arbitrage, and Fixed Income. In 1977, GAMCO launched its flagship All Cap Value strategy, Gabelli Value, and in 1986 As of December 31, In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in China and has since spread Organizational Chart This is the current organizational chart of the Company: 
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Giving Back to Society – (Y)our “S” in ESG The Board of Directors approved in When combined with our other charitable contributions, this boosts our total contributions to approximately Shareholder Compensation and Initiatives During 2021, we returned $73.8 million of our earnings to shareholders through dividends and stock repurchases, including a total of $0.10 per share in regular quarterly cash dividends totaling $2.7 million and $2.00 per share in a special dividend to shareholders of Class A Stock and Class B Stock payable in Subordinated Notes totaling $54.5 million. During 2020, we returned $30.7 million of our earnings to shareholders through dividends and stock Through our stock buyback program (the “Stock Repurchase Program”), including routine open market purchases under Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended and opportunistic private transactions, we repurchased 700,722 shares and 296,296 shares in 2021 and Assets Under Management AUM was We earn incentive fees for certain institutional client assets, assets attributable to certain preferred issues for our closed-end Funds, our GDL Fund (NYSE: GDL), the Gabelli Merger Plus+ Trust Plc (LSE: GMP), and the GAMCO Merger Arbitrage Fund. As of December 31,
RESULTS OF OPERATIONS Investment advisory and incentive fees, which are based on the amount and composition of AUM in our Funds and Institutional and PWM accounts, and distribution fees represent our largest source of revenues. In addition to the general level and trends of the stock market, 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. A majority of our cash inflows to mutual fund products have come through third party distribution programs, including no-transaction fee programs. We have also been engaged to act as a sub-advisor for other much larger financial services companies with much larger sales distribution organizations. These sub-advisory clients are subject to business combinations that may result in the termination of the relationship. The loss of a sub-advisory relationship could have a significant impact on our financial results in the future. Advisory fees from the Funds and sub-advisory accounts are computed daily or weekly based on average net assets. Advisory fees from Institutional and PWM clients are generally computed quarterly based on account values as of the end of the preceding quarter. These revenues are based on AUM, which is highly correlated to the stock market and can vary in direct proportion to movements in the stock market and the level of sales compared with redemptions, financial market conditions, and the fee structure for AUM. Revenues derived from the equity-oriented portfolios generally have higher advisory fee rates than fixed income portfolios. We also receive incentive fees from certain Institutional and PWM clients, which are based upon meeting or exceeding a specific benchmark index or indices. These fees are recognized at the end of the stipulated contract period, which may be quarterly or annually, for the respective account. Advisory fees on assets attributable to certain of the closed-end preferred shares are earned at year-end if the total return to common shareholders of the closed-end fund for the calendar year exceeds the dividend rate of the preferred shares. These fees are recognized at the end of the measurement period. Distribution fees and other income primarily include distribution fee revenue earned in accordance with Rule 12b-1 of the Investment Company Act of 1940, as amended (“Company Act”), along with sales charges and underwriting fees associated with the sale of the mutual funds plus other revenues. Distribution fees fluctuate based on the level of AUM and the amount and type of mutual funds sold directly by G.distributors or through various distribution channels. Compensation costs include variable and fixed compensation and related expenses paid to officers, portfolio managers, sales, trading, research, and all other professional teammates. Variable compensation paid to sales teammates and portfolio management generally represents 40% of revenues and is the largest component of total compensation costs. Distribution costs include marketing, product distribution, and promotion costs. The 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. Non-operating income/(loss) includes gain/(loss) from investments, net (which includes both realized and unrealized gains and losses from securities), interest and dividend income, interest expense, and shareholder-designated charitable contribution. The gain/(loss) from investments, net is derived from our proprietary investment portfolio consisting of various public investments. 30 The following table (in thousands, except per share data) and discussion of our results of operations are based upon data derived from the consolidated statements of income contained in our consolidated financial statements and should be read in conjunction with those statements included in Part II, Item 8 of this Form 10-K.
Year Ended December 31, Overview Net income for Revenues Total revenues were
Investment advisory fees excluding incentive fees, which comprised 31 Fund revenues Distribution fees and other income Expenses Total compensation costs, which are largely variable in nature, In Distribution costs, which include marketing, promotion, and distribution costs Other operating expenses were $29.7 million in 2021 compared to $24.0 million in 2020, Operating income Operating income Operating income before management fee was Non-operating income/(loss) Total non-operating loss was 32 The effective tax rate was 29.6% for the year ended December 31, 2021 versus 29.9% for the year ended December 31, Non-GAAP information and reconciliation Operating income before management fee expense is used by management for purposes of evaluating its business operations. We believe this measure is useful in illustrating the operating results of the Company as management fee expense is based on pre-tax income before management fee expense, which includes non-operating items including gain/(loss) from investments, net from our proprietary investment portfolio, interest and dividend income, interest expense, and shareholder-designated charitable contribution. We believe that an investor would find this useful in analyzing our business operations without the impact of the non-operating items such as trading and investment portfolios, interest and dividend income, interest expense, or shareholder-designated charitable contribution. Reconciliation of GAAP financial measures to non-GAAP (in thousands):
DEFERRED COMPENSATION The Company deferred, through The Notwithstanding its ability to settle these agreements in stock, GAMCO made a cash payment to the CEO on
Accordingly, 33 The following tables show the amortization and earnings per share (“EPS”) impact, inclusive of the indexing to the GBL stock price, of the
The following tables (in thousands, except per share data) show a reconciliation of our results for the years ended December 31,
LIQUIDITY AND CAPITAL RESOURCES Our principal assets are highly liquid in nature and consist of cash and cash equivalents, U.S. Treasury Bills, short-term investments, and securities held for investment purposes. Cash and cash equivalents are comprised primarily of U.S Treasury Bills with maturities of three months or less at the time of purchase and a 100% U.S. Treasury money market fund managed by GAMCO (The Gabelli U.S. Treasury Money Market Fund). 34 Summary cash flow data for the years ended December 31,
Cash and liquidity requirements have historically been met through cash generated by operating income and our borrowing capacity. We filed a “shelf” registration statement with the Securities and Exchange Commission (“SEC”) that was declared effective in April 2018. The shelf provides us opportunistic flexibility to sell any combination of senior and subordinate debt securities, convertible debt securities, equity securities (including common and preferred stock), and other securities up to a total amount of $500 million. The shelf On As of December 31, Net cash provided by operating activities was Net cash Net cash used in financing activities in The Company’s principal contractual commitments include repayments of the Subordinated Notes and payments of lease obligations. At December 31, 2021, we had $51.0 million of Subordinated Notes due June 2023, which we expect to satisfy with cash and cash equivalents. Under the terms of the lease of our Rye, New York office, we are obligated to make minimum total payments of 35 We have one broker-dealer subsidiary, G.distributors, which is subject to certain net capital requirements. G.distributors 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, as amended. The requirement was $250,000 for the broker-dealer at December 31, Our subsidiary, GAMCO Asset Management (UK) Limited, is authorized and regulated by the Financial Conduct Authority (“FCA”). At December 31,
CRITICAL ACCOUNTING POLICIES The preparation of the consolidated financial statements in conformity with U.S. 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 dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods presented. We base our estimates on historical experience, when available, and on other various assumptions that are believed to be reasonable under the circumstances. Actual results could differ significantly from those estimates. The critical accounting policies should be read in connection with our “Risk Factors” in Part I, Item 1A of this Form 10-K. Major Revenue-Generating Services and Revenue Recognition The Company’s revenues are derived primarily from investment advisory and incentive fees and distribution fees. Investment advisory and incentive fees are directly influenced by the level and mix of AUM, as fees are derived from a contractually-determined percentage of AUM for each account as well as incentive fees earned on certain accounts. Advisory fees from the Funds and sub-advisory accounts are computed daily or weekly based on average net assets and amounts receivable are included in investment advisory fees receivable on the consolidated statements of financial condition. Advisory fees from Institutional and PWM accounts are generally computed quarterly based on account values as of the end of the preceding quarter, and amounts receivable are included in investment advisory fees receivable on the consolidated statements of financial condition. The Company derived approximately 90% of its total revenues from advisory fees, including incentive fees, for the years ended December 31, For The GDL Fund, there is an incentive fee earned as of the end of the calendar year which varies to the extent the total return of the fund is in excess of the ICE Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index total return. This fee is recognized at the end of the measurement period, which is annually on a calendar year basis. Receivables due on incentive fees relating to The GDL Fund are included in investment advisory fees receivable on the consolidated statements of financial condition and were For the Gabelli Merger Plus+ Trust Plc, there is an incentive fee which is earned and recognized at the end of the measurement period, June 30th and varies to the extent the total return of the fund is in excess of twice the rate of return of the 13 week Treasury Bills over the performance period. There were no incentive fees receivable as of December 31, Advisory fees on certain of the closed-end preferred shares are earned at year-end if the total return to common shareholders of the closed-end fund for the calendar year exceeds the dividend rate of the preferred shares. These fees are recognized at the end of the measurement period, which is 36 For the GAMCO Merger Arbitrage SICAV, there is an incentive fee earned as of the end of the calendar year Distribution fees revenues are derived primarily from the distribution of Gabelli and GAMCO open-end Funds as well as the affiliated TETON Westwood and Keeley open-end funds advised by either a subsidiary of GBL (Gabelli Funds), a subsidiary of GGCP, Inc. (Teton), or a subsidiary of Teton (Keeley-Teton Advisors, Inc.). G.distributors distributes the open-end Funds pursuant to distribution agreements with each Fund. Under each distribution agreement with an open-end Fund, G.distributors offers and sells such open-end Fund shares on a continuous basis and pays all of the costs of marketing and selling the shares, including printing and mailing prospectuses and sales literature, advertising and maintaining sales and customer service teammates and sales and services fulfillment systems, and payments to the sponsors of third party distribution programs, financial intermediaries, and G.distributors’ sales teammates. G.distributors receives fees for such services pursuant to distribution plans adopted under provisions of Rule 12b-1 of the Company Act. G.distributors is the principal underwriter for funds distributed in multiple classes of shares which carry front-end or back-end sales charge or no-load to certain investors. Under the distribution plans, the Class AAA shares of the open-end Funds (except The Gabelli U.S. Treasury Money Market Fund, Gabelli Capital Asset Fund, and The Gabelli ABC Fund) and the Class A and ADV shares of certain Funds pay G.distributors a distribution fee of 0.25% per year on the average daily net assets of the Fund. Class C shares have a 12b-1 distribution plan with a distribution fee totaling 1.00%. Distribution fees from the open-end Funds are computed daily based on average net assets. The amounts receivable for distribution fees are included in receivables from affiliates on the consolidated statements of financial condition. Note 2 to the consolidated financial statements includes additional information on the Company’s revenue recognition policy. Investments in Securities Equity securities owned are recorded at fair value in the statements of financial condition, with any unrealized gains or losses reported in current period earnings in gain/(loss) from investments, net on the consolidated statements of income, in accordance with U.S. GAAP. Management determines the appropriate classification of debt securities at the time of purchase. Government debt with maturities of greater than three months at the time of purchase are considered investments in debt securities. Investments in debt securities are accounted for as either trading, available for sale (“AFS”), or held-to-maturity. The Company does not hold any investments in debt securities accounted for as trading or AFS. The Company’s investments in debt securities are classified as held-to-maturity, as the Company has the intent and ability to hold these securities until maturity, and represent fixed income securities recorded at amortized Securities transactions and any related gains and losses are recorded on a trade date basis. Realized gains and losses from equity and debt securities transactions are recorded on the specific identified cost basis and are included in gain/(loss) from investments, net on the consolidated statements of income. Income Taxes We operate in numerous states and countries through our subsidiaries and therefore must allocate our income, expenses, and earnings to these taxing jurisdictions taking into account the various laws and regulations in each jurisdiction. Each year, we file tax returns in each jurisdiction and settle our tax liabilities, which may be subject to audit by the taxing authorities. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts on the consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in several jurisdictions. In accordance with Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (“ASC 740”), a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. We record a liability for unrecognized tax benefits in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may differ from our current estimate of the liabilities for unrecognized tax benefits. These differences are reflected as increases or decreases in income tax expense in the period in which new information becomes available. The Company recognizes the accrual of interest on uncertain tax positions and penalties in income tax provision on the consolidated statements of income. Seasonality and Inflation We do not believe our operations are subject to significant seasonal fluctuations. We do not believe inflation will significantly affect our compensation costs, as they are substantially variable in nature. However, the rate of inflation may affect our expenses, such as information technology and occupancy costs. To the extent inflation results in rising interest rates and has other effects upon the securities markets, it may adversely affect our financial ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of its business, GAMCO is exposed to the 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 a financial intermediary and advisor for AUM in our affiliated Funds and Institutional and PWM accounts, as well as our proprietary investment and trading activities. At December 31, Market Risk Our primary market risk exposure is to changes in equity prices and interest rates. Since approximately 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 Company’s 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 and incentive fees and distribution fees from affiliated Funds and Institutional and PWM 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 may have a corresponding effect on the Company’s revenues. Related to our proprietary investment activities, we had investments in equity securities of 38 The following table provides a sensitivity analysis for our investments in equity securities as of December 31,
Interest Rate Risk Our exposure to interest rate risk results, principally, from our investment of excess cash either directly in ITEM 8:FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA GAMCO INVESTORS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of GAMCO Investors, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial condition of GAMCO Investors, Inc. and subsidiaries (the "Company") as of December 31, We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Unrecognized Critical Audit Matter Description The Company records liabilities for unrecognized tax benefits in accordance with Accounting Standards Codification Topic 740, Income Taxes (ASC 740) and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may differ from the Company's current estimate of the liabilities for unrecognized tax benefits. These differences are reflected as increases or decreases in income tax expense in the period in which new information becomes available. As of December 31, We identified the evaluation of the Company’s unrecognized tax benefits as a critical audit matter because the calculation of these tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations. In accordance with ASC 740, a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. Auditing management’s analysis of its uncertain tax positions and resulting unrecognized tax benefits required a high degree of auditor judgment and extensive audit effort, including involvement of our How the Critical Audit Matter Was Addressed in the Audit Our audit procedures to evaluate management’s estimates of liabilities for unrecognized tax benefits related to uncertain tax positions included the following, among others: We involved our tax specialists to assist us in obtaining an understanding of management’s methods and assumptions used in the identification, recognition, measurement, and disclosure of uncertain tax We tested the operating effectiveness of the internal controls related to management’s assessment of uncertain tax With the assistance of With the assistance of our /s/ Deloitte & Touche, LLP Stamford, Connecticut March We have served as the Company’s auditor since 2009. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of GAMCO Investors, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of GAMCO Investors, Inc. and subsidiaries (the “Company”) as of December 31, We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche, LLP Stamford, Connecticut March GAMCO INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (in thousands, except per share data)
(a) Includes U.S. Treasury Bills with maturities of three months or less when purchased of See notes to consolidated financial statements. GAMCO INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)
See notes to consolidated financial statements. GAMCO INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands)
See notes to consolidated financial statements. GAMCO INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except per share data)
GAMCO INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued) (in thousands, except per share data)
See notes to consolidated financial statements. GAMCO INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Supplemental disclosure of non-cash activity: For For 2021, the Company issued approximately $52.7 million principal amount of Subordinated Notes due 2023 to shareholders in connection with the special dividend of $2.00 per share. See notes to consolidated financial statements. GAMCO INVESTORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, Organization and Description of Business Unless indicated otherwise, or the context otherwise requires, references in this report to “GAMCO Investors, Inc.,” “GAMCO,” “the Company,” and “GBL” or similar terms are to GAMCO Investors, Inc., its predecessors, and its subsidiaries. GAMCO (New York Stock Exchange (“NYSE”): GBL), a company incorporated under the laws of Delaware, is a widely-recognized provider of investment advisory services to 24 open-end funds, GAMCO offers a wide range of solutions for clients across Value and Growth Equity, ESG, Convertibles, actively managed semi-transparent ETFs, sector-focused strategies including Gold and Utilities, Merger Arbitrage, and Fixed Income. In 1977, GAMCO The investment advisory business is conducted principally through the following subsidiaries: Gabelli Funds, LLC (open-end funds, closed-end funds, and actively managed 1. Significant Accounting Policies Basis of Presentation The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries including: Gabelli Funds, GAMCO Asset, G.distributors, and GAMCO Asset Management (UK) Limited. Intercompany accounts and transactions have been eliminated. Subsidiaries are fully consolidated from the date of acquisition, being the date on which GBL obtains control, and continue to be consolidated until the date that such control ceases. The annual financial statements have been prepared in accordance with U.S. GAAP for annual financial information and pursuant to the requirements for reporting on Form 10-K and Article 6 of Regulation S-X. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the years presented have been included. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Nature of Operations Gabelli Funds and GAMCO Asset are registered investment advisors under the Investment Advisers Act of 1940, as amended. G.distributors is a registered broker-dealer with the Securities and Exchange Commission (“SEC”) and is regulated by the Financial Industry Regulatory Authority (“FINRA”). Refer to Major Revenue-Generating Services and Revenue Recognition below for additional discussion of the Company’s business. Cash and Cash Equivalents and Short-term Investments in U.S. Treasury Bills Cash equivalents primarily consist of U.S Treasury Bills with maturities of three months or less at the time of purchase and an affiliated money market fund (The Gabelli U.S. Treasury Money Market Fund) which is highly liquid. Currency Translation Assets and liabilities of subsidiaries having non-U.S. dollar functional currencies are translated at exchange rates at the dates of the applicable consolidated statements of financial condition. Revenues and expenses of such subsidiaries are translated at the average exchange rates during the period. The gains or losses resulting from translating non-U.S. dollar functional currency into U.S. dollars are included in the consolidated statements of comprehensive income. Transactions in currencies other than the U.S. dollar, including the Company’s investments in U.K. Gilts, are measured on the transaction date in U.S. dollars. Changes in the expected cash flows caused by changes in exchange rates, measured at exchange rates at the dates of the applicable consolidated statements of financial condition, are included in the consolidated statements of income. Investments in Securities Equity securities owned are recorded at fair value in the statements of financial condition, with any unrealized gains or losses reported in current period earnings in gain/(loss) from investments, net on the consolidated statements of income, in accordance with U.S. GAAP. Management determines the appropriate classification of debt securities at the time of purchase. Government debt with maturities of greater than three months at the time of purchase are considered investments in debt securities. Investments in debt securities are accounted for as either trading, available for sale (“AFS”), or held-to-maturity. The Company does not hold any investments in debt securities accounted for as trading or AFS. The Company’s investments in debt securities, consisting of U.S. Treasury Bills, are classified as held-to-maturity, as the Company has the intent and ability to hold these securities until maturity, and represent fixed income securities recorded at amortized Securities transactions and any related gains and losses are recorded on a trade date basis. Realized gains and losses from equity and debt securities transactions are recorded on the specific identified cost basis and are included in gain/(loss) from investments, net on the consolidated statements of income. Major Revenue-Generating Services and Revenue Recognition The Company’s revenues are derived primarily from investment advisory and incentive fees and distribution fees. Investment advisory and incentive fees are directly influenced by the level and mix of assets under management (“AUM”), as fees are derived from a contractually-determined percentage of AUM for each account as well as incentive fees earned on certain accounts. Advisory fees from the open-end funds and closed-end funds (collectively, the “Funds”) and sub-advisory accounts are computed daily or weekly based on average net assets and amounts receivable are included in investment advisory fees receivable on the consolidated statements of financial condition. Advisory fees from Institutional and PWM accounts are generally computed quarterly based on account values as of the end of the preceding quarter, and amounts receivable are included in investment advisory fees receivable on the consolidated statements of financial condition. The Company derived approximately For The GDL Fund, there is an incentive fee earned as of the end of the calendar year which varies to the extent the total return of the fund is in excess of the ICE Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index total return. This fee is recognized at the end of the measurement period. Receivables due on incentive fees relating to The GDL Fund are included in investment advisory fees receivable on the consolidated statements of financial condition and were For the Gabelli Merger Plus+ Trust Plc, there is an incentive fee which is earned and recognized at the end of the measurement period, June 30th and varies to the extent the total return of the fund is in excess of twice the rate of return of the 13 week Treasury Bills over the performance period. There were 0 incentive fees receivable as of December 31, Advisory fees on certain of the closed-end preferred shares are earned at year-end if the total return to common shareholders of the closed-end fund for the calendar year exceeds the dividend rate of the preferred shares. These fees are recognized at the end of the measurement period, which is For the GAMCO Merger Arbitrage SICAV, there is an incentive fee earned as of the end of the calendar year Distribution fees revenues are derived primarily from the distribution of Gabelli and GAMCO open-end Funds as well as the affiliated TETON Westwood and Keeley open-end funds advised by either a subsidiary of GBL (Gabelli Funds), a subsidiary of GGCP, Inc. (“GGCP”) (Teton), or a subsidiary of Teton (Keeley-Teton Advisors, Inc.). G.distributors distributes the open-end Funds pursuant to distribution agreements with each Fund. Under each distribution agreement with an open-end Fund, G.distributors offers and sells such open-end Fund shares on a continuous basis and pays all of the costs of marketing and selling the shares, including printing and mailing prospectuses and sales literature, advertising and maintaining sales and customer service teammates and sales and services fulfillment systems, and payments to the sponsors of third party distribution programs, financial intermediaries, and G.distributors’ sales teammates. G.distributors receives fees for such services pursuant to distribution plans adopted under provisions of Rule 12b-1 (“12b-1”) of the Investment Company Act of 1940, as amended (“Company Act”). G.distributors is the principal underwriter for funds distributed in multiple classes of shares which carry either a front-end or back-end sales charge. Under the distribution plans, the Class AAA shares of the open-end Funds (except The Gabelli U.S. Treasury Money Market Fund, Gabelli Capital Asset Fund, and The Gabelli ABC Fund) and the Class A and ADV shares of certain Funds pay G.distributors a distribution fee of 0.25% per year on the average daily net assets of the fund. Class C shares have a 12b-1 distribution plan with a distribution fee totaling 1.00%. Distribution fees from the open-end Funds are computed daily based on average net assets. The amounts receivable for distribution fees are included in receivables from affiliates on the consolidated statements of financial condition. Note 2 to the consolidated financial statements includes additional information on the Company’s revenue recognition policy. Distribution Costs The Company incurs certain promotion and distribution costs, which are expensed as incurred, principally related to the sale of shares of Funds and after-market support services related to the closed-end Funds. Additionally, Gabelli Funds has agreed to reimburse expenses on certain Dividends and Interest Income and Interest Expense Dividends are recorded on the ex-dividend date. Interest income and interest expense are accrued as earned or incurred. Depreciation and Amortization Fixed assets other than leasehold improvements, with net book value of $ Goodwill and Identifiable Intangible Assets Goodwill and identifiable intangible assets are initially measured as the excess of the cost of the acquired business over the sum of the amounts assigned to assets acquired less the liabilities assumed. Goodwill and identifiable intangible assets are tested for impairment at least annually as of November 30th and whenever certain triggering events are met. In assessing the recoverability of goodwill and identifiable intangible assets, projections regarding estimated future cash flows and other factors are made to determine the fair value of the assets. If the book value exceeds the fair value of the assets, an impairment charge is recorded, corresponding to the amount by which the book value exceeds the fair value. Income Taxes GBL and its operating subsidiaries file a consolidated federal income tax return. Accordingly, the income tax provision represents the aggregate of the amounts provided for all companies. The Company operates in numerous states and countries through its subsidiaries and therefore must allocate income, expenses, and earnings to these taxing jurisdictions taking into account the various laws and regulations in each jurisdiction. Each year, the Company files tax returns in each jurisdiction and settles its tax liabilities, which may be subject to audit by the taxing authorities. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts on the consolidated statements of financial condition using the statutory tax rates in effect for the year when the reported amount of the asset or liability is recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. In accordance with Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting, excess tax benefits or tax deficiencies are recognized against income tax expenses. A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in several jurisdictions. In accordance with Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (“ASC 740”), a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. We record a liability for unrecognized tax benefits in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may differ from our current estimate of the liabilities for unrecognized tax benefits. These differences are reflected as increases or decreases in income tax expense in the period in which new information becomes available. The Company recognizes the accrual of interest on uncertain tax positions and penalties in income tax provision on the consolidated statements of income. Fair Values of Financial Instruments All of the instruments within cash and cash equivalents, The Company’s assets and liabilities are categorized based upon a fair value hierarchy. See Note 4, Fair Value, for further details on the fair value hierarchy. Cash equivalents primarily consist of 53 Investments in securities are generally valued based on quoted prices from an exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in Level 1 of the fair value hierarchy. Securities categorized in Level 2 investments are valued using other observable inputs. Nonpublic and infrequently traded investments are included in Level 3 of the fair value hierarchy because significant inputs to measure fair value are unobservable. Subordinated Notes The Company issued 2-year subordinated notes due June 15, 2023 (“Subordinated Notes”). Interest expense is recorded on an accrual basis and is included in interest expense in the Consolidated Statements of Income. The Subordinated Notes are recorded at face value, net of unamortized issuance costs. Issuance costs include capitalized expenses including arrangement fees and legal costs related to the issuance of the Subordinated Notes. Amortization of issuance costs for the Subordinated Notes is computed on the straight-line basis over the term of the notes. The unamortized balance of such costs is presented as a direct deduction to the carrying amount of the Subordinated Notes in the Consolidated Statements of Financial Condition. The amortization of such costs is included in interest expense in the Consolidated Statements of Income. Earnings Per Share Basic earnings per share is based on the weighted-average number of common shares outstanding during each period less unvested restricted stock. Diluted earnings per share is based on basic shares plus the incremental shares that would be issued upon the assumed exercise of in-the-money stock options and unvested restricted stock using the treasury stock method. Management Fee Management fee expense is incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits before management fee which is paid to Mr. Mario J. Gabelli (“Mr. Gabelli”) or his designee for acting as CEO pursuant to his 2008 Employment Agreement so long as he is an executive of GBL and devotes the substantial majority of his working time to the business. In accordance with his 2008 Employment Agreement, he has allocated $ Stock Based Compensation The Company has granted equity awards, in the form of restricted stock awards (“RSAs”) and phantom RSAs to teammates and stock options to board members, which were recommended by the Company’s Chairman, who did not receive an RSA, phantom RSA, or option award, and approved by a committee of GBL’s board of directors (the “Board of Directors”) responsible for administering the awards (“Compensation Committee”). The Company’s stock-based RSA and option compensation provided to teammates and board members is accounted for as an equity award based on fair value. The Company’s phantom RSA compensation provided to teammates is accounted for as a liability award based on fair value and is adjusted for changes in the Company’s stock price at each reporting date, with mark to market adjustments recognized in the results of operations. The estimated fair value of RSAs and phantom RSAs is determined by using the closing price of Class A Common Stock (“Class A Stock”) on the grant The estimated fair value of option awards on the grant date is determined using the Black Scholes option-pricing model. This sophisticated model utilizes a number of assumptions in arriving at its results, including the estimated life of the option, the risk free interest rate at the date of grant, and the volatility of the underlying common stock. The effects of changing any of the assumptions or factors employed by the Black Scholes model may result in a significantly different valuation for the options. The total expense based on the grant date fair value, which is reduced by estimated forfeitures, is recognized over the vesting period for these awards, which is 75% over three years from the date of grant and 25% over four years from date of grant. The forfeiture rate is determined by reviewing historical forfeiture rates for previous stock-based compensation grants and is reviewed and updated quarterly, if necessary. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains cash and cash equivalents primarily in U.S Treasury Bills with maturities of three months or less at the time of purchase and the Gabelli U.S. Treasury Money Market Fund, which invests in instruments issued by the U.S. government. The concentration of credit risk with respect to advisory fees receivable is generally limited due to the short payment terms extended to clients by the Company. In addition, the credit risk is further limited by virtue of the fact that no single advisory relationship provided over 10% of the total revenue of the Company during 54 Business Segment The Company operates in 1 business segment, the investment advisory and asset management business. The Company conducts its investment advisory business principally through Gabelli Funds (Funds) and GAMCO Asset (Institutional and PWM). The distribution of the open-end Funds and underwriting of those Funds is conducted through G.distributors. Recent Accounting Developments In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which simplifies the process used to test for goodwill impairment by eliminating the requirement to calculate the implied fair value of goodwill, and instead any goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), Leases (Topic 842): Effective Dates (ASU 2019-10), which deferred the effective date of this guidance for smaller reporting companies for three years. This guidance will be effective for the Company on January 1, 2023 using a prospective transition method and early adoption is permitted. The Company is currently evaluating the potential effect of this new guidance on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Accounting for Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), which requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Currently, U.S. GAAP requires an “incurred loss” methodology that delays recognition until it is probable a loss has been incurred. Under ASU 2016-13, the allowance for credit losses must be deducted from the amortized cost of the financial asset to present the net amount expected to be collected. The consolidated statement of income will reflect the measurement of credit losses for newly recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. In November 2019, the FASB issued ASU 2019-10, which deferred the effective date of this guidance for smaller reporting companies for three years. This guidance is effective for the Company on January 1, 2023 and requires a modified retrospective transition method, which will result in a cumulative-effect adjustment in retained earnings upon adoption. Early adoption is permitted. The Company is currently assessing the potential impact of this new guidance on the Company’s consolidated financial statements. 2. Revenue Recognition Significant judgments that affect the amounts and timing of revenue recognition: The Company’s analysis of the timing of revenue recognition for each revenue stream is based upon an analysis of the current terms of each contract. Performance obligations could, however, change from time to time if and when existing contracts are modified or new contracts are entered into. These changes could potentially affect the timing of satisfaction of performance obligations, the determination of the transaction price, and the allocation of the price to performance obligations. In the case of the revenue streams discussed below, the performance obligation is satisfied either at a point in time or over time. For incentive fee revenues, the performance obligation (advising a client portfolio) is satisfied over time, while the recognition of revenues effectively occurs at the end of the measurement period as defined within the contract, as such amounts are subject to reduction to 0 on the date where the measurement period ends even if the performance benchmarks were exceeded during the intervening period. The judgments outlined below, where the determination as to these factors is discussed in detail, are continually reviewed and monitored by the Company when new contracts or contract modifications occur. Transaction price is in all instances formulaic and not subject to significant (or any) judgment at the current time. The allowance for doubtful accounts is subject to judgment. Advisory Fee Revenues Advisory fees for Funds, sub-advisory accounts, and the SICAV are earned based on predetermined percentages of the average net assets of the individual Funds and are recognized as revenues as the related services are performed. Fees for open-end Funds, 1 non-U.S. closed-end Fund, sub-advisory accounts, and the SICAV are computed on a daily basis based on average daily net AUM. Fees for U.S. closed-end Funds are computed on average weekly net AUM and fees for 1 non-U.S. closed-end fund are computed on a daily basis based on daily market value. These fees are received in cash after the end of each monthly period within 30 days. The revenue recognition occurs ratably as the performance obligation (advising the Fund) is met continuously over time. There is a risk of non-payment and, therefore, an impairment loss on these receivables is possible at each reporting date. There were no such impairment losses for the periods presented. Advisory fees for Institutional and PWM accounts are earned based on predetermined percentages of the AUM and are generally computed quarterly based on account values at the end of the preceding quarter. The revenue recognition occurs daily as the performance obligation (advising the client portfolio) is met continuously. These fees are received in cash, typically within 60 days of the client being billed. There is a risk of non-payment and, therefore, an impairment loss on these receivables is possible at each reporting date. There were no such impairment losses for the periods presented. Performance Correlated and Conditional Revenues Investment advisory fees are earned on a portion of some closed-end funds’ preferred shares at year-end if the total return to common shareholders of the respective closed-end fund for the year exceeds the dividend rate of the preferred shares. These fees are recognized at the end of the measurement period, which coincides with the calendar year. These fees would also be earned and the contract period ended at any interim point in time that the respective preferred shares are redeemed. These fees are received in cash after the end of each annual measurement period, within 30 days. NaN closed-end funds charge incentive fees. For The GDL Fund (GDL), there is an incentive fee, which is earned and recognized as of the end of each calendar year and varies to the extent the total return of the fund is in excess of the ICE Bank of America Merrill Lynch 3-month U.S. Treasury Bill Index total return. For the Gabelli Merger Plus+ Trust Plc (GMP), there is an incentive fee, which is earned and recognized as of the end of each measurement period, June 30th, and varies to the extent the total return of the fund is in excess of twice the rate of return of the 13-week Treasury Bills over the performance period. A SICAV sub-fund, the GAMCO Merger Arbitrage SICAV, charges a performance fee. This fee is recognized at the end of the measurement period, which coincides with the calendar year. The fee would also be earned and the measurement period ended at any interim point in time that a client redeemed their respective shares. This fee is received in cash after the end of the measurement period, within 30 days. In all cases of the incentive fees, because of the variable nature of the consideration, revenue recognition is delayed until it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, which is generally when the uncertainty associated with the variable consideration is subsequently resolved (for example, the measurement period has concluded and the hurdle rate has been exceeded). There is a risk of non-payment and, therefore, an impairment loss on these receivables is possible at each reporting date. There were no such impairment losses for the periods presented. Distribution Fees and Other Income Distribution fees and other income primarily includes distribution fee revenue earned in accordance with Rule 12b-1 of the Company Act along with sales charges and underwriting fees associated with the sale of the class A shares of open-end Funds. Distribution fees are computed based on average daily net assets of certain classes of each fund and are Revenue Disaggregated The following table presents the Company’s revenue disaggregated by account type (in thousands):
3. Investments in Securities Investments in equity securities at December 31,
Short-term investments in U.S. Treasury Bills
The maturity dates of all of the Company’s debt securities are less than one year. 57 Securities sold, not yet purchased at December 31,
4. Fair Value All of the instruments within cash and cash equivalents and investments in securities are measured at fair value, except for those investments designated as held-to-maturity. The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with the FASB Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”), guidance on fair value measurement. The levels of the fair value hierarchy and their applicability to the Company are described below:
The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis by the above fair value hierarchy levels as of December 31, Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31,
Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31,
Financial assets disclosed but not carried at fair value The following table presents the carrying value and fair value of the Company’s short-term investments in U.S. Treasury Bills
At December 31,
The carrying value of other financial assets and liabilities approximates their fair value based on the short-term nature of these items. 59 5. Income Taxes The provision for income taxes for the years ended December 31,
A reconciliation of the Federal statutory income tax rate to the effective tax rate is set forth below:
Significant components of the deferred tax assets and liabilities are as follows (in thousands):
As of December 31, 60 A reconciliation of the beginning and ending amount of gross unrecognized tax benefits related to uncertain tax positions is as follows (in millions):
As of December 31, The Company is currently being audited by New York State for years 2007 through 2017 but does not expect that any potential assessments will be material to its results of operations. The Company is subject to future audits by New York State for all years after 2017. The Company’s remaining state income tax returns are subject to future audit for varying years after 2017.6. Earnings per Share Basic earnings per share is calculated by dividing net income by the weighted average shares outstanding. Diluted earnings per share is calculated using the treasury stock method by dividing net income by the total weighted average shares of common stock outstanding and restricted stock awards. The computations of basic and diluted net income per share were as follows (in thousands, except per share amounts):
7. Debt On May 31, 2011, the Company issued 10-year, $100 million 61 Subordinated Notes On During the year ended December 31, 2021, the Company issued $0.5 million of new Subordinated Notes from the reserve of approximately $1.9 million for RSAs that vested. The Company redeemed $1.6 million of Subordinated Notes during the year ending December 31, 2021 relating to put notices received at least 60 days prior to the end of the quarter. As of December 31, 2021, the debt was recorded at its face value, outstanding.8. Equity Shares outstanding were Voting Rights The holders of Stock Award and Incentive Plan The Company maintains a stock award and incentive plan approved by the shareholders (the “Plan”), which is designed to provide incentives which will attract and retain individuals key to the success of GBL through direct or indirect ownership of GBL common stock. A maximum of 7.5 million shares of Class A Stock have been reserved for issuance under the Plan by the Compensation Committee of the Company’s Board of Directors. 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. Under the Plan, the Compensation Committee may grant RSAs, each of which entitles the grantee to one share of Class A Stock subject to restrictions, 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 Compensation Committee may determine, which were recommended by the Company’s Chairman who On As of December 31, On November 15, 2021, the Compensation Committee of GBL accelerated the vesting relating to 483,515 of GBL RSAs outstanding effective December 15, 2021. As a result, GBL recorded an incremental $3.8 million of stock-based compensation expense for 2021 that would have been recognized in future years. For the years ended December 31, The total compensation costs related to non-vested RSA and phantom RSA awards to teammates, excluding the CEO who received none, not yet recognized Stock Repurchase Program In March 1999, the Board of Directors established a stock repurchase program (the “Stock Repurchase Program”) to grant management the authority to repurchase shares of Class A Stock. On March 11, 2020, GAMCO commenced an offer to purchase up to $30 million in aggregate purchase price of its Class A Stock, pursuant to which holders of shares were invited to tender some or all of their shares at a price within the range of $15.00 to $17.00 per share, which would have enabled GAMCO to purchase for cash up to 2,000,000 shares of its Class A common stock (such offer, the “Offer”). The Offer which was due to expire on April 8, 2020, was terminated on March 18, 2020 as a result of the suspension of trading and market index conditions of the Offer not having been satisfied. As a result of this termination, no shares were purchased in the Offer and all shares previously tendered and not withdrawn were promptly returned to tendering holders. Dividends During Shelf Registration In April 2018, the SEC declared effective the Company’s “shelf” registration statement on Form S-3 giving the Company the flexibility to sell any combination of senior and subordinate debt securities, convertible debt securities, and equity securities (including common and preferred securities) up to a total amount of $500 million. The shelf 9. Goodwill and Identifiable Intangible Assets Goodwill is initially measured as the excess of the cost of the acquired business over the sum of the amounts assigned to assets acquired less the liabilities assumed. At December 31, As a result of becoming the advisor to the Gabelli Enterprise Mergers and Acquisitions Fund and the associated consideration paid, the Company maintains an identifiable intangible asset of $1.3 million 63 The Company assesses the recoverability of goodwill and intangible assets at least annually, or more often should events warrant. In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in China and has since spread At November 30, 10. Commitments and Contingencies From time to time, the Company may be named in legal actions and proceedings in the normal course of business. 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. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. There are currently no such matters pending that the Company believes could have a material adverse effect on its consolidated financial condition, operations, or cash flows at December 31, Leases On December 5, 1997, the Company entered into a fifteen-year lease, expiring on April 30, 2013, of office space from an entity controlled by members of the Chairman’s family. On June 11, 2013, the Company modified and extended its lease with M4E, LLC, the Company’s landlord at One Corporate Center, Rye, NY. The lease term was extended to December 31, 2028 and the base rental remained at $18 per square foot, or $1.1 million, for 2014. For each subsequent year through December 31, 2028, the base rental is determined by the change in the consumer price index for the New York Metropolitan Area for November of the immediate prior year with the base period as November 2008 for the New York Metropolitan Area. This lease has been accounted for as a finance lease under FASB ASC Topic 842 (and prior to 2019, as a capital lease under FASB ASC Topic 840, Leases) as it transfers substantially all the benefits and risks of ownership to the Company. The Company has recorded the leased property as an asset and a lease obligation for the present value of the obligation of the leased property. The leased property is amortized on a straight-line basis from the date of the most recent extension to the end of the lease. The lease obligation is amortized over the same term using the interest method of accounting. Finance lease improvements are amortized from the date of expenditure through the end of the lease term or the useful life, whichever is shorter, on a straight-line basis. The lease provides that all operating expenses relating to the property (such as property taxes, utilities, and maintenance) are to be paid by the lessee, GAMCO. These are recognized as expenses in the periods in which they are incurred. Accumulated amortization on the leased property at December 31, The Company also rents office space under operating leases which expire at various dates through 64 The following table summarizes the Company’s leases for the years presented (in thousands, except lease term and discount rate):
The finance lease right-of-use asset, net of amortization, at December 31, 2021 and 2020 The following table summarizes the maturities of lease liabilities at December 31,
The finance lease contains an escalation clause tied to the change in the New York Metropolitan Area Consumer Price Index which may cause the future minimum payments to exceed the amounts shown above. Future minimum lease payments have not been reduced by related minimum future sublease rentals of approximately 11. Shareholder-Designated Charitable Contributions During 2013, 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 based upon the actual number of shares registered in the shareholder’s name. Shares held in nominee or street name are not eligible to participate. During 12. Related Party Transactions The following is a summary of certain related party transactions. 65 GGCP Holdings, LLC, a subsidiary of GGCP, which is majority-owned by Mr. Gabelli, owns a majority of the outstanding shares of the Company’s Class B Stock. As of both December 31, Leases The Company leases an approximately 60,000 square foot building located at One Corporate Center, Rye, New York as one of its principal offices (the “Building”) from an entity controlled by members of the Chairman’s family. See Leases within Note 10 for further details. The Company sub-leases approximately 3,300 square feet in the Building to LICT Corporation, a company for which Mr. Gabelli serves as Chairman and CEO, which pays rent at the base rate of $28 per square foot plus $3 per square foot for electricity, subject to adjustment for increases in taxes and other operating expenses. The total amounts received in Effective January 1, 2021, the Company leases office space located at 3 St. James’s Place, London from AC. During 2021, the Company paid AC £0.2 million in rent. Investment GAMCO has entered into agreements to provide advisory and administrative services to MJG Associates, Inc., which is wholly-owned by Mr. Gabelli, with respect to the private investment funds managed by them. Pursuant to such agreements, MJG Associates, Inc. paid GAMCO The Company serves as the investment advisor for the Funds and earns advisory fees based on predetermined percentages of the average net assets of the Pursuant to an agreement between Gabelli & Company Investment Advisers, Inc. (“GCI”) (formerly called Gabelli Securities, Inc.) and Gabelli Funds, Gabelli Funds pays to GCI 90% of the net revenues received by Gabelli Funds related to being the advisor to the SICAV. Net revenues are defined as gross advisory fees less expenses related to payouts and expenses of the SICAV paid by Gabelli Funds. The amounts paid by Gabelli Funds to GCI for 2021 and 2020 66 Compensation Immediately preceding the initial public offering in February 1999, GBL and the Company’s Chairman and CEO, Mr. Gabelli, entered into an employment agreement. On February 6, 2008, Mr. Gabelli entered into an amended and restated employment agreement (as amended, the “2008 Employment Agreement”) with the Company, which was initially approved by the Company’s shareholders on November 30, 2007 and approved again on May 6, 2011, May 5, 2015, and June 5, 2020. Under the terms of this agreement and consistent with the Firm’s practice since its inception in 1977, Mr. Gabelli is entitled to receive a percentage of revenues or net operating contribution, which are substantially derived from AUM, as compensation relating to or generated by the following activities: (i) managing or overseeing the management of various investment companies, (ii) attracting mutual fund shareholders, (iii) attracting and managing Institutional and PWM clients, and (iv) otherwise generating revenues for the Company. Such payments are made in a manner and at rates as agreed to from time to time by GAMCO, which rates have been and generally will be the same as those received by other professionals at GAMCO performing similar services. With respect to the Institutional and PWM and Funds advisory businesses, the Company pays out up to 40% of the revenues or net operating contribution to the portfolio managers and marketing teammates who introduce, service, or generate such business, with payments involving the Institutional and PWM accounts being typically based on revenues and payments involving the Funds being typically based on net operating contribution. Mr. Gabelli has agreed that while he is employed by the Company, he will not provide investment management services outside of GAMCO, except for certain permitted accounts as defined under the agreement. The 2008 Employment Agreement may not be amended without the approval of the Compensation Committee and Mr. Gabelli. Mr. Gabelli receives compensation in the form of a management fee for managing the Company. The 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 CEO pursuant to his 2008 Employment Agreement so long as he is an executive of GBL and devotes the substantial majority of his working time to the business. During 2021, Mr. Gabelli elected to waive $20.8 million in compensation that he would otherwise have been entitled to under his 2008 Employment Agreement relating to the period of July 1, 2021 to November 30, 2021. During 2020, Mr. Gabelli elected to waive $14.7 million in compensation that he would otherwise have been entitled to under his 2008 Employment Agreement relating to the period of July 1, 2020 to November 10, 2020. Other For GBL and Teton entered into a transitional administrative and management service agreement in connection with the spin-off of Teton from GBL that formalized certain arrangements. Effective January 1, 2011, Teton and GBL renegotiated the terms of the sub-administration agreement from a flat 0.20% on the average net assets of the mutual funds managed by Teton to 0.20% on the first $370 million in average net assets, 0.12% on the next $630 million in average net assets, and 0.10% on average net assets in excess of $1 billion, as compensation for providing mutual fund administration services. Additionally, Teton paid to GBL an administrative services fee of $4,167 per month. During GBL and AC entered into a transitional administrative and management services agreement in connection with the spin-off of AC from GBL on November 30, 2015. The agreement calls for GBL to provide to AC certain administrative services including but not limited to: human resources, compliance, legal, payroll, information technology, and operations. All services provided under the agreement by GBL to AC or by AC to GBL are charged at cost. The agreement is terminable by either party on 30 days’ prior written notice to the other party and has a term of twelve months. 67 13. Regulatory Requirements The Company’s broker-dealer subsidiary, G.distributors, is subject to certain net capital requirements. G.distributors 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, as amended. The requirement was $250,000 for the broker-dealer at December 31, The Company’s subsidiary, GAMCO Asset Management (UK) Limited is authorized and regulated by the Financial Conduct Authority (“FCA”). In February 2011, GAMCO Asset Management (UK) Limited increased its permitted license with the FCA’s predecessor, the Financial Services Authority. At December 31, 14. Administration Fees The Company has entered into administration agreements with other companies (the “Administrators”), whereby the Administrators provide certain services on behalf of several of the Funds. Such services do not include the investment advisory and portfolio management services provided by GBL. The fees were negotiated and based on predetermined percentages of the net assets of each of the Funds. 15. Profit Sharing Plan and Incentive Savings Plan The Company has a qualified contributory employee profit sharing plan and incentive savings plan covering substantially all teammates. Company contributions to the plans are determined annually by the Board of Directors, but may not exceed the amount permitted as a deductible expense under the Internal Revenue Code. For the years ended December 31, 16. Subsequent Events Subsequent events have been evaluated through the date the consolidated financial statements were issued. There have been no subsequent events that require recognition or disclosure through the date the consolidated financial statements were issued, except as disclosed below. On February On February 15, 2022, Mr. Gabelli elected to waive the compensation that he would otherwise have been entitled to under his 2008 Employment Agreement relating to the period of March 1, 2022 to May 31, 2022. From January 1, ITEM 9:CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. (a) Evaluation of Disclosure Controls and Procedures The Company maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be timely disclosed, is recorded, processed, summarized, and reported to management within the time periods specified in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s Chief Executive Officer and Chief Accounting Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in the Exchange Act) as of the end of the period covered by this report, have concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. (b) Management’s Report on Internal Control Over Financial Reporting GBL’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Management, with the participation of the principal executive officer and under the supervision of the principal financial officers, of the Company conducted an evaluation of the effectiveness of GBL's internal control over financial reporting as of December 31, Based on its evaluation, management concluded that, as of December 31, (c) Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting during the quarter ended December 31, None. ITEM 9C: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 69 PART III Information regarding the Directors and Executive Officers of GBL and compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, is incorporated herein by reference from our definitive proxy statement for our GBL has adopted a Code of Business Conduct that applies to all of our officers, directors, and full-time and part-time teammates and a Code of Conduct that sets forth additional requirements for our principal executive officer, principal financial officers, principal accounting officers or controller, or persons performing similar functions (together, the “Codes of Conduct”). The Codes of Conduct are posted on our website (www.gabelli.com) and are available in print free of charge to anyone who requests a copy. Interested parties may address a written request for a printed copy of the Codes of Conduct to: Secretary, GAMCO Investors, Inc., One Corporate Center, Rye, New York 10580-1422. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver of, a provision of the Codes of Conduct by posting such information on our website. In addition to the certifications attached as Exhibits to this Form 10-K, following its Information in response to this item is incorporated by reference from our Proxy Statement relating to our ITEM 12:SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information in response to this item is incorporated by reference from our Proxy Statement relating to our Information in response to this item is incorporated by reference from our Proxy Statement relating to our Information in response to this item is incorporated by reference from our Proxy Statement relating to our PART IV (a) List of documents filed as part of this report: (1) Consolidated financial statements and the reports of the independent registered public accounting See index on page (2) List of exhibits: The agreements included or incorporated by reference as exhibits to this annual report on Form 10-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement. The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading.
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* Compensatory agreements. ITEM 16:FORM 10-K SUMMARY None. 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 in the City of Rye, State of New York, on March GAMCO INVESTORS, INC.
74 POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Maximilian Caldwell, Kieran Caterina, and Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
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