Note 4. Equity Investments in Unconsolidated Subsidiaries

Our equity investments in unconsolidated subsidiaries consist of our co-investments in investment management vehicles that we sponsor and manage. As of September 30, 2012, we had a co-investment in two such vehicles, CT Opportunity Partners I, LP, or CTOPI, and CT High Grade Partners II, LLC, or CT High Grade II.

In December 2007, we made a commitment to invest up to $25.0 million in CTOPI, or 4.6% of CTOPI’s total capital commitments. We have funded $17.1 million of our commitment as of September 30, 2012 and received $6.9 million as a return of capital, resulting in a $10.2 million funded and a $14.8 million unfunded commitment balance. Subsequent to the expiration of CTOPI’s investment period in September 2012, our obligation to fund additional capital to CTOPI is limited.

In accordance with the CTOPI management agreement, CTIMCO may earn incentive compensation in an amount equal to 17.7% of the fund’s profits, after a 9% preferred return and 100% return of capital to the CTOPI partners. While we have not yet received any incentive distributions from CTOPI, we have been allocated $5.9 million of incentive compensation based on a hypothetical liquidation of the fund at its net asset value as of September 30, 2012. Accordingly, we have recognized this allocation as part of our equity investment in CTOPI, however we have deferred the recognition of income until cash is collected or appropriate contingencies have been eliminated.

In April 2012, we purchased a 0.44% interest in CT High Grade II from an existing investor for $2.8 million, representing our initial co-investment in CT High Grade II. Our co-investment represents a $2.9 million total capital commitment to CT High Grade II, of which our unfunded commitment is $480,000 as of September 30, 2012. As CT High Grade II’s investment period expired in May 2011, our obligation to fund additional capital to CT High Grade II is limited.

Activity relating to our equity investments in unconsolidated subsidiaries for the nine months ended September 30, 2012 was as follows (in thousands):

	CTOPI			CT High Grade II		Total

December 31, 2011		$10,399			$—		$10,399

Contributions		1,241			2,789		4,030
Income from equity investments in unconsolidated subsidiaries (1)		7,068			153		7,221
Distributions		(2,940	)		—		(2,940	)

September 30, 2012		$15,768			$2,942		$18,710


(1)	Includes $5.9 million of incentive income allocated to us from CTOPI under the equity method of accounting. This incentive income has not been recognized into earnings, but recorded as a deferred incentive income liability under accounts payable, accrued expenses and other liabilities on our consolidated balance sheet.

As of September 30, 2012, our maximum exposure to loss from CTOPI and CT High Grade II was $7.7 million and $2.8 million, respectively.