The following tables summarize financial assets and liabilities measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy at July 31, 2012 and October 31, 2011:

July 31, 2012
(in thousands)		Level 1		Level 2		Level 3			Other Assets Not Held at Fair Value		Total

Financial assets:
Cash equivalents	$	7,002	$	210,059	$	-		$	-	$	217,061
Investments:
Investment securities, trading – debt		4,529		60,986			-		-		65,515
Investment securities, trading – equity		122,520		18,191			-		-		140,711
Investment securities, available-for-sale		29,847		4,309		-			-		34,156
Investment in non-consolidated CLO
entity⁽¹⁾		-		-		-			349		349
Investments in equity method investees⁽²⁾		-		-		-			37,748		37,748
Investments, other⁽³⁾		-		37		-			7,470		7,507
Derivative instruments		-		316		-			-		316
Assets of consolidated CLO entity:
Cash equivalents		31,156		-		-			-		31,156
Bank loans and other investments		69		456,205		2,118			-		458,392
Total financial assets	$	195,123	$	750,103	$	2,118		$	45,567	$	992,911

July 31, 2012
(in thousands)		Level 1		Level 2		Level 3		Other Assets Not Held at Fair Value		Total

Financial liabilities:
Derivative instruments	$	-	$	3,435	$	-	$	-	$	3,435
Securities sold, not yet purchased		-		26,018		-		-		26,018
Liabilities of consolidated CLO entity:
Senior and subordinated note obligations		-		2,633		474,463		-		477,096
Total financial liabilities	$	-	$	32,086	$	474,463	$	-	$	506,549

October 31, 2011
(in thousands)			Level 1		Level 2		Level 3			Other Assets Not Held at Fair Value		Total

Financial assets:
Cash equivalents		$	6,691	$	360,676	$	-		$	-	$	367,367
Investments:
Investment securities, trading – debt			11,308		73,914			-		-		85,222
Investment securities, trading – equity			102,790		5,197			-		-		107,987
Investment securities, available-for-sale			36,128		3,713		-			-		39,841
Investment in non-consolidated CLO
entity⁽¹⁾			-		-		-			278		278
Investments in equity method investees⁽²⁾			-		-		-			46,900		46,900
Investments, other⁽³⁾			-		37		-			7,470		7,507
Derivative instruments			-		1,060		-			-		1,060
Assets of consolidated CLO entity:
Cash equivalents			15,829		-		-			-		15,829
Bank loans and other investments			85		456,591		5,910			-		462,586
Total financial assets		$	172,831	$	901,188	$	5,910		$	54,648	$	1,134,577

Financial liabilities:
Derivative instruments		$	-	$	6,654	$	-		$	-	$	6,654
Securities sold, not yet purchased			-		6,270		-			-		6,270
Liabilities of consolidated CLO entity:
Senior and subordinated note obligations			-		-		477,699			-		477,699
Total financial liabilities		$	-	$	12,924	$	477,699		$	-	$	490,623




⁽¹⁾	The Company’s investment in this CLO entity is measured at fair value on a non-recurring basis using Level 3 inputs.
	The investment is carried at amortized cost unless facts and circumstances indicate that the investment has been
	impaired, at which time the investment is written down to fair value. There was no re-measurement of this asset during
	the nine month period ended July 31, 2012 or the twelve month period ended October 31, 2011.

⁽²⁾	Investments in equity method investees are not measured at fair value in accordance with GAAP.

⁽³⁾	Investments, other include investments carried at cost which are not measured at fair value in accordance with GAAP.

The following is a description of the valuation methodologies used for financial assets and liabilities measured at fair value on a recurring basis as well as the general classification of those assets and liabilities pursuant to the valuation hierarchy:

Cash equivalents consist of investments in money market funds and agency securities. Money market funds are valued using published net asset values and are classified as Level 1 within the valuation hierarchy. Agency securities are valued based upon quoted market prices for similar assets in active markets, quoted prices for identical or similar assets that are not active, and inputs other than quoted prices that are observable or corroborated by observable market data. Depending on the nature of the inputs, these assets are generally classified as Level 1 or 2 within the valuation hierarchy.

Investment securities, trading, consist of debt and equity securities held in the portfolios of consolidated sponsored funds and separately managed accounts. In certain instances, fair value is determined using unadjusted quoted market prices. If unadjusted quoted market prices are unavailable, fair value is determined using quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets that are not active, or inputs other than quoted prices that are observable or corroborated by observable market data. If events occur after the close of the primary market, the quoted market prices may be adjusted for the observable price movements of country-specific market proxies. Depending upon the nature of the inputs, investment securities, trading are generally classified as Level 1 or 2 within the valuation hierarchy.

Investment securities, available-for-sale, consist of investments in sponsored mutual funds and privately offered equity funds. Sponsored mutual funds that are listed on an active exchange are valued using published net asset values and are classified as Level 1 within the valuation hierarchy. Investments in sponsored privately offered equity funds and portfolios that are not listed on an active exchange but have net asset values that are comparable to mutual funds and have no redemption restrictions are classified as Level 2 within the valuation hierarchy.

Derivative instruments, which include foreign exchange contracts, stock index futures contracts and commodity futures contracts, are recorded as either other assets or other liabilities on the Company's Consolidated Balance Sheets. Foreign exchange contracts are valued by interpolating a value using the spot foreign exchange rate and forward points, which are based on spot rate and currency interest rate differentials. Index futures contracts and commodity futures contracts are valued using a third-party pricing service that determines fair value based on bid and ask prices. Derivative instruments are generally classified as Level 2 within the valuation hierarchy.

Assets of the consolidated CLO entity include investments in money market funds, equity securities, debt securities, bank loans and warrants. Fair value is determined utilizing unadjusted quoted market prices when available. Fair value may also be based upon valuations obtained from independent third-party broker or dealers utilizing matrix pricing models that consider information regarding securities with similar characteristics. In certain instances, fair value has been determined utilizing discounted cash flow analyses or single broker non-binding quotes. Depending on the nature of the inputs, these assets are classified as Level 1, 2 or 3 within the valuation hierarchy.

Securities sold, not yet purchased, are recorded as other liabilities on the Company's Consolidated Balance Sheets and are valued by a third-party pricing service that determines fair value based on bid and ask prices. Securities sold, not yet purchased, are generally classified as Level 2 within the valuation hierarchy.

Liabilities of the consolidated CLO entity include debt securities and senior and subordinated note obligations of the consolidated CLO entity. The liabilities are valued based upon quoted prices for identical or similar liabilities that are not active and inputs other than quoted prices that are observable or corroborated by observable market data. Fair value may also be based upon model-based valuation techniques in which one or more significant inputs are unobservable in the market. Depending on the nature of the inputs, these liabilities are classified as Level 2 or 3 within the valuation hierarchy.

The following table summarizes fair value transfers between Level 1 and Level 2 for the three and nine months ended July 31, 2012:

		Three Months Ended		Nine Months Ended
(in thousands)		July 31, 2012		July 31, 2012
Transfers from Level 1 into Level 2^(a)		$	7,861	$	18,104
Transfers from Level 2 into Level 1			-		-

^(a)	Transfers from Level 1 into Level 2 primarily represent debt and equity securities which were valued based on prices of similar
	securities because unadjusted quoted market prices were not available in the current period.

There were no significant transfers between Level 1 and Level 2 during the three and nine months ended July 31, 2011.

The following table shows a reconciliation of the beginning and ending fair value measurements of assets and liabilities that are valued on a recurring basis and classified as Level 3 for the three and nine months ended July 31, 2012 and 2011:

			Three Months Ended				Three Months Ended
			July 31, 2012				July 31, 2011
(in thousands)			Bank loans and other investments of consolidated CLO entity		Senior and subordinated note obligations of consolidated CLO entity		Bank loans and other investments of consolidated CLO entity		Senior and subordinated note obligations of consolidated CLO entity

Beginning balance		$	2,150	$	483,062	$	4,170	$	479,277
Net gains (losses) on investments and
	note obligations included in net
	income⁽¹⁾		(139)		(8,599)		337		1,189
Purchases, sales and settlements, net			0		-		(39)		-
Transfers into Level 3⁽²⁾			122		-		-		-
Transfers out of Level 3⁽³⁾			(15)		-		-		-
Net transfers in and/or out of Level 3			-		-		49		-
Ending balance		$	2,118	$	474,463	$	4,517	$	480,466
Change in unrealized (losses) gains
	included in net income relating to
	assets and liabilities held	$	(139)	$	(8,599)	$	337	$	1,189

				Nine Months Ended				Nine Months Ended
				July 31, 2012				July 31, 2011
(in thousands)				Bank loans and other investments of consolidated CLO entity		Senior and subordinated note obligations of consolidated CLO entity		Bank loans and other investments of consolidated CLO entity		Senior and subordinated note obligations of consolidated CLO entity

Beginning balance			$	5,910	$	477,699	$	-	$	-
Adjustment for adoption of new
	consolidation guidance			-		-		5,265		444,087
Net gains (losses) on investments and
	note obligations included in net
	income⁽¹⁾			(139)		(603)		1,162		36,379
Purchases, sales and settlements, net				0		-		(1,354)		-
Transfers into Level 3⁽²⁾				137		-		-		-
Transfers out of Level 3⁽³⁾				(3,790)		(2,633)		-		-
Net transfers in and/or out of Level 3				-		-		(556)		-
Ending balance			$	2,118	$	474,463	$	4,517	$	480,466
Change in unrealized (losses) gains
	included in net income relating to
	assets and liabilities held		$	(139)	$	(603)	$	1,162	$	36,379



(1)		Substantially all net gains and losses on investments and note obligations attributable to the assets and borrowings of the Company's
		consolidated CLO entity are allocated to non-controlling and other beneficial interests on the Company's Consolidated Statements of Income.

(2)		Transfers into Level 3 were the result of a reduction in the availability of significant observable inputs used in determining the fair value of
		a second lien bank loan that defaulted during the period. Fair value was determined utilizing a discounted cash flow analysis.

(3)		Transfers out of Level 3 into Level 2 were due to an increase in the observability of the inputs used in determining the fair value of certain
		instruments attributable to an increase in the number of price quotes received.

The following table shows the valuation technique and significant unobservable inputs utilized in the fair value measurement of Level 3 liabilities at July 31, 2012:

			Fair Value at	Valuation	Unobservable
	($ in thousands)		July 31, 2012	Technique	Inputs^*	Range

	Liabilities of consolidated CLO entity:
	Senior and subordinated				Default rate	200 bps
	note obligations	$	474,463	Income approach	Discount Rate	145-1000 bps

^*	Discount rate refers to spread over LIBOR. Lower spreads relate to the more senior tranches in the CLO note structure;
	higher spreads relate to the less senior tranches. The default rate refers to the constant annual default rate.

The Company elected the fair value option for both the collateral assets held and senior and subordinated notes issued by its consolidated CLO entity upon consolidation to mitigate any accounting inconsistencies between the carrying value of the assets held to provide cash flows for the note obligations and the carrying value of those note obligations.

Senior and subordinated note obligations issued by the Company's consolidated CLO entity are issued in various tranches with different risk profiles. The notes are valued on a quarterly basis by the Company's bank loan investment team utilizing an income approach that projects the cash flows of the collateral assets using the team's assumptions about market yields, collateral reimbursement assumptions, prepayment speeds, forecasted default and recovery rates, callability and other market factors that vary based on the nature of the investments in the underlying collateral pool. Once the undiscounted cash flows of the collateral assets have been determined, the bank loan team applies appropriate discount rates that it believes a reasonable market participant would use to determine the discounted cash flow valuation of the notes. The bank loan team routinely monitors market conditions and model inputs for cyclical and secular changes in order to identify any material factors that could influence the Company's valuation method.

For senior and subordinated notes issued by the Company's consolidated CLO entity, a change in the assumption used for the probability of default is generally accompanied by a directionally similar change in the assumption used for discount rates. Significant increases in either of these inputs would result in a significantly lower measurement of fair value.

Although the Company believes the valuation methods described above are appropriate, the use of different methodologies or assumptions to determine fair value could result in a different estimate of fair value at the reporting date.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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