Investments of Operating Entities and Consolidated Funds


a.	Operating Entities

Securities owned, at fair value

Securities owned, at fair value are held by the Company and are considered held for trading. Substantially all equity securities are pledged to the clearing broker under terms which permit the clearing broker to sell or re-pledge the securities to others subject to certain limitations.

As of June 30, 2014 and December 31, 2013, securities owned, at fair value consisted of the following:



	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
U.S. Government securities (a)	$	2,509	$	9
Preferred stock	2,324		324
Common stocks	343,867		176,939
Convertible bonds (b)	11,283		5,958
Corporate bonds (c)	199,985		121,372
Warrants and rights	4,231		5,912
Mutual funds	16,764		525
	$	580,963	$	311,039


(a)	As of June 30, 2014, maturities ranged from August 2014 to April 2016 and an interest rates ranged between 0% to 5.95%. As of December 31, 2013, the maturity was April 2016 with an interest rate of 5.95%.


(b)	As of June 30, 2014, maturities ranged from July 2014 to November 2014 and interest rates ranged between 4.00% to 10.00%. As of December 31, 2013, maturities ranged from May 2014 to October 2014 and interest rates ranged between 5.00% to 10.00% .


(c)	As of June 30, 2014, maturities ranged from September 2014 to February 2046 and interest rates ranged between 5.38% to 11.54%. As of December 31, 2013, maturities ranged from January 2014 to February 2046 and interest rates ranged between 3.38% to 11.75%.

Receivable on and Payable for derivative contracts, at fair value

The Company's direct involvement with derivative financial instruments includes futures, currency forwards, equity swaps, options and warrants and rights. Open equity positions in futures transactions are recorded as receivables from and payables to broker-dealers or clearing brokers, as applicable. The Company's derivatives trading activities exposes the Company to certain risks, such as price and interest rate fluctuations, volatility risk, credit risk, counterparty risk, foreign currency movements and changes in the liquidity of markets.

On the date of issuance of the Company's cash convertible unsecured senior notes ("Convertible Notes") (see Note 14), the Company recognized the embedded cash conversion option of $35.7 million which is valued as of June 30, 2014 at $37.7 million and is included in payable for derivative contracts in the accompanying condensed consolidated statement of financial condition. Also, on the date of issuance of the Convertible Notes, the Company entered into a separate cash convertible note economic hedge transaction (the "Hedge Transaction") with a counterparty (the “Option Counterparty”) whereby, the Company purchased a cash settled option contract with terms identical to the conversion option embedded in the Convertible Notes and simultaneously sold an equity settled warrant with a higher strike price. The Hedge Transaction is expected to reduce the Company’s exposure to potential cash payments in excess of the principal amount of converted notes that the Company may be required to make upon conversion of the Convertible Notes. On the date of issuance of the Convertible Notes, the Company paid a premium of $35.7 million for the option under the Hedge Transaction and received a premium of $15.2 million for the equity settled warrant transaction, for a net cost of $20.5 million. The Hedge Transaction is valued at $37.7 million as of June 30, 2014 and is included in receivable on derivative contracts in the accompanying condensed consolidated statement of financial condition. Aside from the initial premium paid, the Company will not be required to make any cash payments under the Hedge Transaction and could be entitled to receive an amount of cash from the Option Counterparty generally equal to the amount by which the market price per share of common stock exceeds the strike price of the Hedge Transaction during the relevant valuation period. The warrants cover 28,048,786 shares of the Company's Class A common stock and have an initial exercise price of $7.18 per share. The warrants expire over a period of 80 trading days beginning on November 14, 2018. The warrant transaction could have a dilutive effect to the extent that the market value per share of the Company’s Class A common stock exceeds the applicable strike price of the warrants.

The Company's long and short exposure to derivatives is as follows:



Receivable on derivative contracts	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
Commodity Future	$	92	$	285
Cross Rate	—		22
Equity Swap (b)	55		70
Options (a)	44,896		9,698
	$	45,043	$	10,075

(a) As of June 30, 2014 and December 31, 2013, the Company had 58,555 and 71,129 contracts held, respectively.



Payable for derivative contracts	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
Futures	$	11	$	275
Currency forwards	156		301
Equity and credit default swaps (b)	2,280		525
Options (a)	50,906		6,573
	$	53,353	$	7,674

(a) As of June 30, 2014 and December 31, 2013, the Company had 28,483 and 38,221 contracts held, respectively.

(b) The notional values of equity swaps classified as receivable on derivative contracts are $0.6 million and $0.2 million as of June 30, 2014 and December 31, 2013, respectively. The notional values of equity and credit default swaps classified as payable for derivative contracts are $23.0 million and $0.1 million as of June 30, 2014 and December 31, 2013, respectively.

The following tables present the gross and net derivative positions and the related offsetting amount, as of June 30, 2014 and December 31, 2013.



	Gross amounts recognized		Gross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)		Net amounts included on the Condensed Consolidated Statements of Financial Condition		Amounts not offset on the condensed consolidated balance sheet but eligible for offsetting upon counterparty default (b)		Net amounts
	(dollars in thousands)
As of June 30, 2014
Receivable on derivative contracts, at fair value	$	45,043	$	—	$	45,043	$	45,043	$	—
Payable for derivative contracts, at fair value	53,353		—		53,353		53,353		—

As of December 31, 2013
Receivable on derivative contracts, at fair value	10,075		—		10,075		10,075		—
Payable for derivative contracts, at fair value	7,674		—		7,674		7,674		—


(a)	Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.


(b)	Includes the amount of collateral held or posted.

The realized and unrealized gains/(losses) related to derivatives trading activities were $(1.8) million and $0.8 million for the three months ended June 30, 2014 and 2013 and $(3.7) million and $(4.4) million for the six months ended June 30, 2014 and 2013, respectively, and are included in other income in the accompanying condensed consolidated statements of operations.

Pursuant to the various derivatives transactions discussed above, the Company is required to post collateral for its obligations or potential obligations. As of June 30, 2014 and December 31, 2013, collateral consisting of $19.2 million and $10.0 million of cash, respectively, is included in receivable from brokers on the accompanying condensed consolidated statements of financial condition. As of June 30, 2014 and December 31, 2013 all derivative contracts were with multiple major financial institutions.

Other investments

As of June 30, 2014 and December 31, 2013, other investments included the following:



	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
(1) Portfolio Funds, at fair value	$	83,967	$	71,051
(2) Real estate investments, at fair value	2,262		2,088
(3) Equity method investments	27,904		25,966
(4) Lehman claims, at fair value	418		378
	$	114,551	$	99,483


(1)	Portfolio Funds, at fair value

The Portfolio Funds, at fair value as of June 30, 2014 and December 31, 2013, included the following:



	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
HealthCare Royalty Partners (a)(*)	$	10,947	$	9,741
HealthCare Royalty Partners II (a)(*)	6,578		4,961
Orchard Square Partners Credit Fund LP (b)(*)	14,093		12,674
Starboard Value and Opportunity Fund LP (c)(*)	18,888		17,495
Formation 8 Partners Fund I (d)	6,962		2,788
RCG LV Park Lane LLC (e)	707		678
RCGL 12E13th LLC (f)	611		558
RCG Longview Debt Fund V, L.P. (f)	14,560		11,979
Other private investment (g)	7,737		7,772
Other affiliated funds (h)(*)	2,884		2,405
	$	83,967	$	71,051

* These portfolio funds are affiliates of the Company.

The Company has no unfunded commitments regarding the portfolio funds held by the Company except as noted in Note 13.


(a)	HealthCare Royalty Partners, L.P. and HealthCare Royalty Partners II, L.P. are private equity funds and therefore distributions will be made when cash flows are received from the underlying investments, typically on a quarterly basis.


(b)	Orchard Square Partners Credit Fund LP (formerly known as Ramius Global Credit Fund LP) has a quarterly redemption policy with a 60 day notice period and a 4% penalty on redemptions of investments of less than a year in duration.


(c)	Starboard Value and Opportunity Fund LP permits quarterly withdrawals upon 90 days notice.


(d)	Formation 8 Partners Fund I is a private equity fund which invests in equity of early stage and growth transformational information and energy technology companies. Distributions will be made when the underlying investments are liquidated.


(e)	RCG LV Park Lane LLC is a single purpose entity formed to participate in a joint venture which acquired, at a discount, the mortgage notes on a portfolio of multifamily real estate properties located in Birmingham, Alabama. RCG LV Park Lane LLC is a private equity structure and therefore distributions will be made when the underlying investments are liquidated.


(f)	RCGL 12E13th LLC and RCG Longview Debt Fund V, L.P. are real estate private equity structures and therefore distributions will be made when the underlying investments are liquidated.


(g)	Other private investment represents the Company's closed end investment in a portfolio fund that invests in a wireless broadband communication provider in Italy.


(h)	The majority of these funds are affiliates of the Company or are managed by the Company and the investors can redeem from these funds as investments are liquidated.


(2)	Real estate investments, at fair value

Real estate investments as of June 30, 2014 and December 31, 2013 are carried at fair value and include real estate equity investments held by RCG RE Manager, LLC (“RE Manager”), a real estate operating subsidiary of the Company, of $2.3 million and $2.1 million, respectively.


(3)	Equity method investments

Equity method investments include investments held by the Company in several operating companies whose operations primarily include the day to day management of a number of real estate funds, including the portfolio management and administrative services related to the acquisition, disposition, and active monitoring of the real estate funds' underlying debt and equity investments. The Company's ownership interests in these equity method investments range from 20% to 55%. The Company holds a majority of the outstanding ownership interest (i.e., more than 50%) in three of these entities: RCG Longview Debt Fund IV Management, LLC, RCG Longview Debt Fund IV Partners, LLC and RCG Longview Partners II, LLC. The operating agreements that govern the management of day-to-day operations and affairs of each of these three entities stipulate that certain decisions require support and approval from other members in addition to the support and approval of the Company. As a result, all operating decisions made in these three entities require the support of both the Company and an affirmative vote of a majority of the other managing members who are not affiliates of the Company. As the Company does not possess control over any of these entities, the presumption of consolidation has been overcome pursuant to current accounting standards and the Company accounts for these investments under the equity method of accounting. Also included in equity method investments is the investment in (a) HealthCare Royalty Partners General Partners (b) an investment in the CBOE (Chicago Board Options Exchange) Stock Exchange LLC ("CBOE SE") representing a 9.5% stake in the exchange service provider for which the Company exercises significant influence over through representation on the CBOE Board of Directors, and (c) Starboard Value (and certain related parties) which serves as an operating company whose operations primarily include the day to day management (including portfolio management) of a deep value small cap hedge fund and related managed accounts.

During the quarter, CBOE SE initiated a plan to wind down its operations and liquidate its assets and liabilities. As a result, the Company determined that the carrying value of its investment in CBOE SE was no longer recoverable and reassessed it for impairment. As a result, the Company recognized an impairment loss of $.8 million which was deemed to be other than temporary. The impairment loss was measured based on the estimated recovery under the liquidation plan submitted to the creditors and the regulators and potential sale to a third party and is included in other income (loss) on the condensed consolidated statement of operations. The Company recorded no impairment charges in relation to its equity method investments for the three and six months ended June 30, 2013.

The following table summarizes equity method investments held by the Company:



	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
RCG Longview Debt Fund IV Management, LLC	$	659	$	1,533
RCG Longview Debt Fund V Partners, LLC	1,827		1,497
HealthCare Royalty GP, LLC	892		794
HealthCare Royalty GP II, LLC	1,114		840
HealthCare Royalty GP III, LLC	48		47
CBOE Stock Exchange, LLC	582		1,351
Starboard Value LP	15,783		14,263
RCG Longview Partners, LLC	2,438		1,839
RCG Urban American, LLC	369		316
RCG Urban American Management, LLC	309		238
RCG Longview Equity Management, LLC	160		292
Urban American Real Estate Fund II, LLC	2,110		1,785
RCG Kennedy House, LLC	532		502
Other	1,081		669
	$	27,904	$	25,966

For the period ended June 30, 2014, an equity method investment held by the Company has met the significance criteria as defined under SEC guidance. As such, the Company is required to present summarized financial information for this significant investee for the three and six months ended June 30, 2014 and 2013. The summarized income statement information for the Company's investment in the individually significant investee is as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		203
	(dollars in thousands)
Revenues	$	4,985	$	2,948	$	6,739	$	9,522
Expenses	—		—		—		—
Net realized and unrealized gains (losses)	49		109		54		191
Net Income	$	5,034	$	3,057	$	6,793	$	9,713

As of June 30, 2014 and December 31, 2013, the Company's share of losses in its equity method investment in RCG Longview Partners II, LLC has exceeded the carrying amount recorded in this investee. These amounts are included in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated statements of financial condition. RCG Longview Partners II, LLC, as general partner to a real estate fund, has reversed previously recorded incentive income allocations and has recorded a current clawback obligation to the limited partners in the fund. This obligation is due to a change in unrealized value of the fund on which there have previously been distributed carried interest realizations; however, the settlement of a potential obligation is not due until the end of the life of the respective fund. As the Company is obligated to return previous distributions it received from RCG Longview Partners II, LLC, it has continued to record its share of gains/losses in the investee including reflecting its share of the clawback obligation in the amount of $6.2 million.

The Company's income (loss) from equity method investments was $3.7 million and $3.2 million for the three months ended June 30, 2014 and 2013 and $10.2 million and $7.4 million for the six months ended June 30, 2014 and 2013, respectively, and is included in net gains (losses) on securities, derivatives and other investments on the accompanying condensed consolidated statements of operations.


(4)	Lehman Claims, at fair value

Lehman Brothers International (Europe) (“LBIE”), through certain affiliates, was a prime broker to the Company, and the Company held cash and cash equivalent balances with LBIE. On September 15, 2008, LBIE was placed into administration (the “Administration”) in the United Kingdom and, as a result, the assets held by the Company in its LBIE accounts were frozen at LBIE. The assets which the Company believed were held at LBIE at the time of Administration (the “Total Net Equity Claim”) consisted of $1.0 million, which the Company believed would represent an unsecured claim against LBIE. On November 2, 2012, the Company executed a Claims Determination Deed with respect to this claim. By entering into this deed, the Company and LBIE reached agreement on the amount of the Company's unsecured claim, which was agreed to be approximately $0.9 million. As a result of entering into this deed, the Company is entitled to participate in dividends to unsecured creditors of LBIE. At the end of November 2012 the Company received its first dividend in an amount equal to 25.2% of its agreed claim, or approximately $0.2 million, at the end of June 2013 the Company received its second dividend in an amount equal to 43.3% of its agreed claim, or approximately $0.4 million, at the end of November 2013 the Company received its third dividend in an amount equal to 23.7% of its agreed claim, or approximately $0.2 million, and at the end of April 2014 the Company received its fourth dividend in an amount equal to 7.8% of its agreed claim, or approximately $0.1 million. The total amounts received to date in respect of the Company’s unsecured claim against LBIE are approximately $1.0 million, representing 100.0% of its agreed claim. LBIE also indicated that no further distributions will be possible until such time as matters concerning how the surplus remaining in the estate will be distributed are resolved. Accordingly, the Company does not know the timing with respect to future dividends to unsecured creditors or the ultimate value that will be received, with respect to its claim. The claim described above does not include claims held by the Company against LBIE through its investment in Enterprise Master discussed in Note 5b(2).

Given the fact that LBIE has made multiple distributions to unsecured creditors and the increased trading levels for unsecured claims of LBIE, the Company decided to record the estimated fair value of the Total Net Equity Claim at 142.0% and 131.5% as of June 30, 2014 and December 31, 2013, respectively, which represented management's best estimate at the respective dates of the value that ultimately may be recovered with respect to the Total Net Equity Claim (the “Estimated Recoverable Lehman Claim”). The Estimated Recoverable Lehman Claim was recorded at estimated fair value considering a number of factors including the status of the assets under U.K. insolvency laws and the trading levels of LBIE unsecured debt. In determining the estimated value of the Total Net Equity Claim, the Company was required to use considerable judgment and is based on the facts currently available. As additional information on the LBIE proceeding becomes available, the Company may need to adjust the valuation of the Estimated Recoverable Lehman Claim. The actual recovery that may ultimately be received by the Company with respect to the pending LBIE claim is not known and could be different from the estimated value assigned by the Company. (See Note 5b(2)).

Securities sold, not yet purchased, at fair value

Securities sold, not yet purchased, at fair value represent obligations of the Company to deliver a specified security at a contracted price and, thereby, create a liability to purchase that security at prevailing prices. The Company's liability for securities to be delivered is measured at their fair value as of the date of the condensed consolidated financial statements. However, these transactions result in off-balance sheet risk, as the Company's ultimate cost to satisfy the delivery of securities sold, not yet purchased, at fair value may exceed the amount reflected in the accompanying condensed consolidated statements of financial condition. Substantially all equity securities and options are pledged to the clearing broker under terms which permit the clearing broker to sell or re-pledge the securities to others subject to certain limitations. As of June 30, 2014 and December 31, 2013, securities sold, not yet purchased, at fair value consisted of the following:



	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
Common stocks	$	235,534	$	130,899
Corporate bonds (a)	58		55
	$	235,592	$	130,954


(a)	As of June 30, 2014 and December 31, 2013, the maturity was January 2026 with an interest rate of 5.55%.

Securities purchased under agreements to resell and securities sold under agreements to repurchase

The Company held no securities purchased under agreements to resell or securities sold under agreements to repurchase as of June 30, 2014. The following table represents the Company's securities sold under agreements to repurchase as of December 31, 2013:



	As of December 31, 2013
	(dollars in thousands)
Securities sold under agreements to repurchase
Agreements with Royal Bank of Canada bearing interest of 1.75% due June 2015 to November 2015	$	3,657
	$	3,657

The following tables present the gross and net repurchase agreements and the related offsetting amount, as of December 31, 2013.



As of December 31, 2013
	Gross amounts recognized		Gross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)		Net amounts included on the Condensed Consolidated Statements of Financial Condition		Amounts not offset on the condensed consolidated balance sheet but eligible for offsetting upon counterparty default (b)		Net amounts
	(dollars in thousands)
Securities sold under agreements to repurchase	$	3,657	$	—	$	3,657	$	3,657	$	—


(a)	Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.


(b)	Includes the amount of collateral held or posted.

For all of the Company's holdings of repurchase agreements as of December 31, 2013, the repurchase dates were open and the agreement could be terminated by either party at any time. The agreements rolls over on a day-to-day basis.

Transactions involving the purchase or sale of securities under repurchase/resell agreements are carried at their contract value, which approximates fair value, and are accounted for as collateralized financings. In connection with these financings, as of December 31, 2013, the Company had pledged collateral of $4.6 million (consisting of corporate bonds), which is included in securities owned, at fair value in the accompanying condensed consolidated statements of financial condition.

Securities lending and borrowing transactions

As of June 30, 2014 and December 31, 2013, the Company has loaned to brokers and dealers, securities having a market value of $2.2 billion and $881.7 million, respectively. In addition, the Company has borrowed from brokers and dealers, securities having a market value of $2.2 billion and $892.8 million as of June 30, 2014 and December 31, 2013, respectively.

The following tables present the contractual gross and net securities borrowing and lending agreements and the related offsetting amount, as of June 30, 2014 and December 31, 2013.



	Gross amounts recognized		Gross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)		Net amounts included on the Condensed Consolidated Statements of Financial Condition		Amounts not offset on the condensed consolidated balance sheet but eligible for offsetting upon counterparty default (b)		Net amounts

As of June 30, 2014
Securities borrowed	$	2,252,521	$	—	$	2,252,521	$	2,252,521	$	—
Securities loaned	2,250,562		—		2,250,562		2,250,562		—

As of December 31, 2013
Securities borrowed	927,773		—		927,773		927,773		—
Securities loaned	918,577		—		918,577		918,577		—


(a)	Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.


(b)	Includes the amount of cash collateral held/posted.

Variable Interest Entities

The total assets and liabilities of the variable interest entities for which the Company has concluded that it holds a variable interest, but for which it is not the primary beneficiary, are $2.2 billion and $225.5 million as of June 30, 2014 and $1.7 billion and $242.5 million as of December 31, 2013, respectively. In addition, the maximum exposure relating to these variable interest entities as of June 30, 2014 was $182.1 million, and as of December 31, 2013 was $193.9 million, all of which is included in other investments, at fair value in the Company's condensed consolidated statements of financial condition. The exposure to loss primarily relates to the Consolidated Feeder Funds' investment in their Unconsolidated Master Funds as of June 30, 2014 and December 31, 2013.


b.	Consolidated Funds

Other investments, at fair value

As of June 30, 2014 and December 31, 2013 other investments, at fair value, held by the Consolidated Funds are comprised of:



	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
(1) Portfolio Funds	$	194,474	$	182,638
(2) Lehman claims	4,090		4,842
	$	198,564	$	187,480


(1)	Investments in Portfolio Funds, at fair value

As of June 30, 2014 and December 31, 2013, investments in Portfolio Funds, at fair value, included the following:



	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
Investments of Enterprise LP	$	145,371	$	155,530
Investments of Merger Fund	49,103		26,963
Investments of consolidated fund of funds	—		145
	$	194,474	$	182,638

Consolidated investments of Enterprise LP

Enterprise LP operates under a “master-feeder” structure, whereby Enterprise Master's shareholders are Enterprise LP and RCG II Intermediate Fund, L.P. The consolidated investments in Portfolio Funds include Enterprise LP's investment of $145.4 million and $155.5 million in Enterprise Master as of June 30, 2014 and December 31, 2013, respectively. On May 12, 2010, the Company announced its intention to close Enterprise Master. Prior to this announcement, strategies utilized by Enterprise Master included merger arbitrage and activist investing, investments in distressed securities, convertible hedging, capital structure arbitrage, equity market neutral, investments in private placements of convertible securities, proprietary mortgages, structured credit investments, investments in mortgage backed securities and other structured finance products, investments in real estate and real property interests, structured private placements and other relative value strategies. Enterprise Master had broad investment powers and maximum flexibility in seeking to achieve its investment objective. Enterprise Master was permitted to invest in equity securities, debt instruments, options, futures, swaps, credit default swaps and other derivatives. Enterprise Master has been selling, and will continue to sell, its positions and return capital to its investors. There are no unfunded commitments at Enterprise LP.

Consolidated investments of Merger Fund

The Merger Fund operates under a “master-feeder” structure, whereby Ramius Merger Master Ltd's ("Merger Master") shareholders are Merger Fund and Ramius Merger Fund Ltd. The consolidated investments in Portfolio Funds include Merger Fund's investment of $49.1 million and $27.0 million in Merger Master as of June 30, 2014 and December 31, 2013, respectively. The Merger Master’s investment objective is to achieve consistent absolute returns while emphasizing the preservation of investor capital. The Merger Master seeks to achieve these objectives by taking a fundamental, research-driven approach to investing, primarily in the securities of issuers engaged in, or subject to, announced (or unannounced but otherwise anticipated) extraordinary corporate transactions, which may include, but are not limited to, mergers, acquisitions, leveraged buyouts, tender offers, hostile takeover bids, sale processes, exchange offers, and recapitalizations. Merger Master invests in the securities of one or more issuers engaged in or subject to such extraordinary corporate transactions. Merger Master typically seeks to derive a profit by realizing the price differential, or “spread,” between the market price of securities purchased or sold short and the market price or value of securities realized in connection with the completion or termination of the extraordinary corporate transaction, or in connection with the adjustment of market prices in anticipation thereof, while seeking to minimize the market risk associated with the aforementioned investment activities. Merger Master will, depending on markets conditions, generally focus the majority of its investment program on announced transactions. If the investment manager of Merger Master considers it necessary, it may either alone or as part of a group, also initiate shareholder actions seeking to maximize value. Such shareholder actions may include, but are not limited to, re-orienting management’s focus or initiating the sale of the company (or one or more of its divisions) to a third party. There are no unfunded commitments at Merger Fund.

Investment of a consolidated fund of funds investment company

The investment of the consolidated fund of fund investment company was $0.1 million as of December 31, 2013, which was the remaining investment of Vintage Master FOF that was transferred to a third party during the three months ended March 31, 2014. Vintage Master FOF's investment objective was to allocate its capital among portfolio managers that invest through investment pools or managed accounts thereby forming concentrated investments in high conviction managers designed to achieve attractive risk adjusted returns with moderate relative volatility. The investment held at December 31, 2013 was a hedged equity strategy held in an externally managed portfolio fund. The hedged equity strategy focused on equity strategies with some directional market exposure. The strategy attempted to profit from market efficiencies and direction. There are no fund of fund investment companies consolidated as of June 30, 2014.


(2)	Lehman Claims, at fair value

With respect to the aforementioned Lehman claims, the Total Net Equity Claim of Enterprise Master based on the value of assets at the time of Lehman's insolvency held directly by Enterprise Master and through Enterprise Master's ownership interest in affiliated funds consisted of $24.3 million. Included in this claim were assets with a value of $9.5 million at the time LBIE entered Administration that were returned to Enterprise Master and its affiliated funds in June 2010. Enterprise Master and its affiliated funds sold the returned assets for an aggregate $10.7 million, and distributed this amount to Enterprise Master's investors in July 2010. In December 2011, Enterprise Master received an aggregate of approximately $2.4 million relating to securities, interest and dividends earned with respect to securities held by LBIE on behalf of Enterprise Master and its affiliated funds. A distribution of $2.9 million occurred in February of 2012. On November 2, 2012, Enterprise Master executed a Claims Determination Deed with respect to the unsecured portion of its direct claim against LBIE. By entering into this deed, Enterprise Master and LBIE reached agreement on the amount of Enterprise Master's unsecured claim, which was agreed to be approximately $1.3 million. As a result of entering into this deed, Enterprise Master was entitled to participate in dividends to unsecured creditors of LBIE and at the end of November 2012 Enterprise Master received its first dividend in an amount equal to 25.2% of its agreed claim, or approximately $0.3 million. In February 2013, Enterprise Master sold its unsecured claim, including the amount received in connection with the first dividend, for $1.3 million, or par. Enterprise Master distributed the proceeds of the sale to the Company in March 2013. Of the original remaining net equity claim, $10.6 million represented claims to trust assets that the Company believes were held by LBIE through Lehman Brothers, Inc. (“LBI”). LBIE made a corresponding claim for these assets and other trust assets held at LBI by LBIE on behalf of other prime brokerage clients pursuant to an omnibus customer claim (the “LBIE Omnibus Customer Claim”). LBIE was only going to be able to return trust assets held at LBI to Enterprise Master once LBIE received a distribution from LBI in respect of the LBIE Omnibus Customer Claim. In February 2013, LBIE, Lehman Brothers Holdings, Inc. and LBI announced that they entered into two separate agreements settling all intercompany claims between LBI on the one part, and LBHI and LBIE on the other part. The settlement agreements were subject to the approval by the U.S. Bankruptcy Judge in the LBI Securities Investor Protection Act (SIPA) proceeding and, in the case of the agreement between LBI and LBIE, an order of the English High Court. The U.S. Banking Judge approved the settlement agreement in April 2013 and the English High Court issued an order approving the settlement in May 2013. The settlements allowed the trustee appointed under SIPA (the “SIPA Trustee”) to proceed with plans to allocate and distribute sufficient cash and securities to LBI's customer claimants, including LBIE with respect to the LBIE Omnibus Customer Claim, to enable the SIPA Trustee to satisfy valid customer claims in full. In March 2013, LBIE made a consensual proposal to the clients holding trust assets pursuant to the LBIE Omnibus Customer Claim to facilitate the return of the amounts recovered from LBI with respect to the LBIE Omnibus Customer Claim. Under the consensual proposal, LBIE indicated that it intended to liquidate any securities received from LBI with respect to the LBIE Omnibus Customer Claim and then allocate the value received from LBI among all of the LBIE clients who had trust assets held at LBI under the LBIE Omnibus Customer Claim. In allocating the amounts received from LBI, LBIE indicated that it intended to allow clients to determine their entitlements on a portfolio basis based on the higher of (i) the market value of the portfolio as of September 19, 2008 or (ii) the market value of the portfolio together with accrued income thereon as of November 30, 2012 (the “Best Claim”). LBIE's purpose in seeking a consensual arrangement with its clients relating to the liquidation and allocation described above was to ensure that a distribution could be made without having to seek UK court direction on these issues, which would otherwise have substantially delayed any distribution. On April 2, 2013, LBIE announced that the consensual proposal had been accepted by a sufficient number of clients to satisfy the acceptance threshold and would therefore become effective. The settlement agreement between LBI and LBIE also became effective and LBIE announced in June 2013 that it had recovered the majority of the cash and securities from LBI and that it had liquidated approximately 90% of the aggregate value of securities received or to be received from LBI and that it intended to make its first distribution to trust asset claimants at the end of September 2013. On September 26, 2013, LBIE announced that it had made a first interim distribution to trust claimants of 100% of the claimant's Best Claim amount. As previously announced by LBIE, LBIE requested guidance from the US Internal Revenue Service ("IRS") with regard to the character and source of the settlement payments. In order to balance LBIE's objective of making a significant distribution to claimants with the requirement to pay the appropriate US withholding tax in respect of distributions, as an interim solution LBIE deposited 30% of the gross distribution to claimants with the IRS as a reserve, except with respect to claimants who provided LBIE with a validly executed Form W-9. Once the appropriate US withholding tax treatment of the distributions is finally determined by the IRS, LBIE expects to be in a position to promptly receive back funds and release any excess reserves back to the appropriate claimants. On June 12, 2014, LBIE made a distribution to trust claimants in order to release excess reserves from the amounts withheld with respect to the September 26, 2013 distribution back to the appropriate claimants. The amount of the distribution received by Enterprise Master on September 26, 2013 was $14.9 million and the amount reserved by LBIE with respect to this distribution was $1.0 million. The amount received by Enterprise Master on June 12, 2014 as a release of excess reserves was $1.0 million. On January 30, 2014, LBIE made a second distribution to trust claimants of 6% of the claimant’s Best Claim amount. LBIE has also requested guidance from the IRS with respect to the character and source of this settlement payment and as an interim solution the withholding agent has reserved 30% of the distribution amount paid, except with respect to claimants who provided LBIE with a validly executed Form W-9. As of June 30, 2014, after giving effect to the receipt of the distributions described above, the Company is valuing Enterprise Master's remaining trust asset claim at 101.5% of its Best Claim, or $0.2 million. In June 2014, Enterprise Master received a distribution with respect to certain foreign denominated trust assets that were not within the control of LBIE. In this distribution, Enterprise Master received assets that Enterprise Master had valued at $0.8 million. Enterprise Master and its affiliated funds sold the returned assets for an aggregate $0.8 million. After giving effect to all of these distributions, the remaining Net Equity Claim for Enterprise Master held directly and through its ownership interest in affiliated funds was $6.2 million as of June 30, 2014, most of which is represented by cash held by Enterprise Master that is expected to be distributed to investors. Of the $6.2 million current valuation of Enterprise Master's claim, $4.1 million was attributable to Enterprise LP based on its ownership percentage in Enterprise Master at the time of the Administration.

In addition to Enterprise Master's claims against LBIE, LBI was a prime broker to Enterprise Master and Enterprise Master held cash balances of $4.9 million at LBI. These are not part of the LBIE Omnibus Customer Claim. On September 19, 2008, LBI was placed in a Securities Investor Protection Corporation (“SIPC”) liquidation proceeding after the filing for bankruptcy of its parent Lehman Brothers Holdings, Inc. The settlement agreements between LBI, LBHI and LBIE discussed above have permitted the trustee appointed under the Securities Investor Protection Act (the “SIPA Trustee”) to make distributions to LBI customers and the SIPA Trustee announced that it expected to be able to make 100% distributions to its customers. In July 2013, Enterprise Master received a distribution of $4.9 million from LBI in respect of this claim.

As a result of Enterprise Master and certain of the funds managed by the Company having assets held at LBIE frozen in their LBIE prime brokerage account and the degree of uncertainty as to the status of those assets and the process and prospects of the return of those assets, Enterprise Master and the funds managed by the Company decided that only the investors who were invested at the time of the Administration should participate in any profit or loss relating to the Estimated Recoverable Lehman Claim. As a result, Enterprise Master and certain of the funds managed by the Company with assets held at LBIE granted a 100% participation in the Estimated Recoverable Lehman Claims to Special Purpose Vehicles (the “SPVs” or “Lehman Segregated Funds”) incorporated under the laws of the Cayman Islands on September 29, 2008, whose shares were distributed to each of their investor funds. Fully redeeming investors of Enterprise LP will not be paid out on the balance invested in the SPV until the claim with LBIE is settled and assets are returned by LBIE.

Indirect Concentration of the Underlying Investments Held by Consolidated Funds

From time to time, through its investments in the Consolidated Funds, the Company may indirectly maintain exposure to a particular issue or issuer (both long and/or short) which may account for 5% or more of the Consolidated Funds' net assets (on an aggregated basis). Based on information that is available to the Company as of June 30, 2014 and December 31, 2013, the Company assessed whether or not its Consolidated Funds had interests in an issuer for which the Company's pro-rata share exceeds 5% of the Consolidated Funds' net assets (on an aggregated basis). There were no indirect concentrations that exceed 5% of the Consolidated Funds' net assets held by the Company as of June 30, 2014 or December 31, 2013.

Underlying Investments of Unconsolidated Funds Held by Consolidated Funds

Enterprise Master and Merger Master

Enterprise LP's investment in Enterprise Master represents Enterprise LP's proportionate share of Enterprise Master's net assets; as a result, the investment balances of Enterprise Master reflected below may exceed the net investment which Enterprise LP has recorded. Merger Fund's investment in Merger Master represents Merger Fund's proportionate share of Merger Master's net assets; as a result, the investment balances of Merger Master reflected below may exceed the net investment which Merger Fund has recorded.The following tables present summarized investment information for the underlying investments and derivatives held by Enterprise Master and Merger Master as of June 30, 2014 and December 31, 2013:

Securities owned by Enterprise Master, at fair value



	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
Bank debt	$	6	$	5
Common stock	2,515		2,677
Preferred stock	973		973
Private equity	409		406
Restricted stock	124		124
Rights	2,516		2,528
Trade claims	128		128
	$	6,671	$	6,841

Derivative contracts, at fair value, owned by Enterprise Master, net



	As of June 30, 2014		As of December 31, 2013
Description	(dollars in thousands)
Currency forwards	$	—	$	(21	)
	$	—	$	(21	)

Portfolio Funds, owned by Enterprise Master, at fair value



		As of June 30, 2014		As of December 31, 2013
	Strategy	(dollars in thousands)
RCG Longview Equity Fund, LP*	Real Estate	$	9,031	$	8,470
RCG Longview II, LP*	Real Estate	760		800
RCG Longview Debt Fund IV, LP*	Real Estate	9,360		17,641
RCG Longview, LP*	Real Estate	423		319
RCG Soundview, LLC*	Real Estate	442		442
RCG Urban American Real Estate Fund, L.P.*	Real Estate	1,128		1,812
RCG International Sarl*	Multi-Strategy	1,643		1,795
RCG Special Opportunities Fund, Ltd*	Multi-Strategy	85,924		82,119
RCG Endeavour, LLC*	Multi-Strategy	4		6
RCG Energy, LLC *	Energy	3,281		2,842
RCG Renergys, LLC*	Energy	1		1
Other Private Investments	Various	13,113		12,952
Real Estate Investments	Real Estate	16,228		15,024
		$	141,338	$	144,223


*	Affiliates of the Company.

Merger Master

Securities owned by Merger Master, at fair value



	As of June 30, 2014		As of December 31, 2013
	(dollars in thousands)
Common stocks	$	81,667	$	33,901
Corporate bond (a)	16,059		14,444
Options	1,411		200
	$	99,137	$	48,545


(a)	As of June 30, 2014, maturities ranged from February 2017 to October 2022 and interest rates ranged between 5.38% and 9.75%. As of December 31, 2013, maturities ranged from April 2016 to October 2020 and interest rates ranged between 7.00% and 10.88%.

Securities sold, not yet purchased, by Merger Master, at fair value

As of June 30, 2014 and December 31, 2013, Merger Master held common stock, sold not yet purchased, of $48.1 million and $19.5 million, respectively.

Derivative contracts, at fair value, owned by Merger Master, net



	As of June 30, 2014			As of December 31, 2013
Description	(dollars in thousands)
Currency forwards	$	(22	)	$	(10	)
Options	(473		)	(54		)
Equity swaps	(585		)	(92		)
	$	(1,080	)	$	(156	)