EFTA01078984.pdf

V ROCKEFELLER & CO. Rockefeller Financial Services, Inc. and Subsidiary Consolidated Financial Statements for the Years Ended December 31, 2015 and 2014 and Independent Auditors' Report EFTA01078984 This page intentionally left blank. EFTA01078985 ROCKEFELLER FINANCIAL SERVICES, INC. AND SUBSIDIARY TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1 CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014: Balance Sheets 3 Statements of Operations 4 Statements of Comprehensive Income 5 Statements of Changes in Stockholders' Equity 6 Statements of Cash Flows 7 Notes to Financial Statements 9 EFTA01078986  Deloitte & Touche LLP Deloitte INDEPENDENT AUDITORS' REPORT To the Board of Directors of Rockefeller Financial Services, Inc.: We have audited the accompanying consolidated financial statements of Rockefeller Financial Services, Inc. and its subsidiary (the "Company"), which comprise the consolidated balance sheets as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Member of Deloitte Touche Tohmatsu Limited EFTA01078987 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rockefeller Financial Services, Inc. and its subsidiary as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Thsl..111. I I .....Le. t_i_ P March 30, 2016 EFTA01078988 ROCKEFELLER FINANCIAL SERVICES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2015 AND 2014 (Dollars in Thousands, Except Par Values) 2015 2014 ASSETS Cash and cash equivalents $ 65.081 $ 71,312 Restricted cash 600 Held•to•maturity investment securities 21.222 11,591 Trading securities 6.084 3,004 Receivables and accrued revenue 3.159 2,146 Income taxes receivable 486 Investments in partnerships 299 684 Property and equipment, net of accumulated depreciation and amortization of $7,133 in 2015 and $12,073 in 2014 1,771 3,391 Deferred tax assets, net 20,428 72 Other 3,326 2,839 Assets held for sale 2,513 TOTAL ASSETS $ 124.369 S 95,639 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Payables and accrued liabilities $ 16.483 $ 15,665 Income taxes payable 18 Deferred rent expense 1.642 2,855 Accrued postretirement benefits 3,694 4,353 Liabilities held for sale 1.462 Total liabilities 23.281 22,891 COMMITMENTS AND CONTINGENCIES (Note 14) STOCKHOLDERS' EQUITY: Class A common stock. $1 par value; authorized: 50,000 shares; issued and outstanding: 36.800 shares 37 37 Class B common stock. $1 par value; authorized: 100,000 shares; issued: 2015, 75,242 shares; 2014, 74,847 shares; outstanding: 2015, 74,869 shares; 2014. 74,112 shares 75 75 Additional paid•in capital 137,085 135,362 Note receivable from Class A stockholder (1.600) (1,600) Accumulated deficit (35,731) (61,487) Accumulated other comprehensive income 1.847 1,491 Treasury stock, at cost (Class B common): 2015, 373 shares; 2014, 735 shares (625) (1,130) Total stockholders' equity 101.088 72.748 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 124.369 $ 95,639 The accompanying notes are an integral part of these consolidated financial statements. EFTA01078989 ROCKEFELLER FINANCIAL SERVICES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands) 2015 2014 REVENUE Investment management fees $ 49,852 $ 47,890 Professional and administrative services fees 24,082 26,533 Trust and estate services fees 14,984 15,075 Gains on trading securities 73 180 Partnership income 39 52 Interest and other 461 570 Total revenue 89,491 90,300 EXPENSES Employee compensation and benefits 56,693 55,749 Professional fees 6,751 7,167 Occupancy 6,921 7,033 General and administrative 5,153 5,040 Marketing and communication 5,056 4,673 Travel and entertainment 1,177 975 Depreciation and amortization 1,170 1,396 Loss on asset held for sale 989 Total expenses 83,910 82,033 Income before income taxes 5,581 8,267 INCOME TAX (BENEFIT) PROVISION (20,175) 586 NET INCOME $ 25,756 $ 7.681 The accompanying notes are an integral part of these consolidated financial statements. -4 - EFTA01078990 ROCKEFELLER FINANCIAL SERVICES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands) 2015 2014 NET INCOME $ 25,756 $ 7,681 Other comprehensive income (loss): Postretirement benefit plans: Net gain arising during the year 716 80 Amortization of prior service credit (37) Amortization of net gain (122) (166) 594 (123) Deferred income taxes 238 14 OTHER COMPREHENSIVE INCOME (LOSS) 356 (137) TOTAL COMPREHENSIVE INCOME $ 26,112 $ 7,544 The accompanying notes are an integral part of these consolidated financial statements. -5- EFTA01078991 ROCKEFELLER FINANCIAL SERVICES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2015 AND 2014 (Dollars In Thousands) Note Accumulated Class A Class B Additional Receivable Other Treasury Common Common Paid•in From Class A Accumulated Comprehensive Stock, Stock Stock Capital Stockholder Deficit Income at Cost Total BALANCE, JANUARY 1. 2014 $ 37 72 $ 132.359 S (69.168) 1.628 (65) $ 64.863 Distributions of 3.421 Class B shares 3 (603) 662 62 Repurchases of 1.123 Class B shares 82 (1.727) (1.645) Loan made to Class A stockholder (1.600) (1.600) Stock•based compensation expense 3.426 3.426 Tax benefit from exercise of stock options 98 98 Net income 7.681 7.681 Other comprehensive loss (137) (137) BALANCE. DECEMBER 31.2014 37 75 135.362 (1.600) (61.487) 1.491 (1.130) 72.748 Distributions of 1.259 Class B shares (1.304) 1.347 43 Repurchases of 502 Class B shares 54 (842) (788) Stock•based compensation expense 2.973 2.973 Tax benefit from exercise of stock options Net income 25.756 25.756 Other comprehensive income 356 356 BALANCE. DECEMBER 31.2015 $ 37 $ 75 $ 137.085 S (1.600) S (35.731) $ 1.847 5 (625) $ 101.088 The accompanying notes are an integral part of these consolidated financial statements. EFTA01078992 ROCKEFELLER FINANCIAL SERVICES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands) 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 25.756 7.681 Adjustments to reconcile net income to net cash provided by operating activities - Deferred income tax (benefit) expense (20,638) 88 Stock-based compensation expense 2,973 3,426 Depredation and amortization 1,170 1,396 Deferred rent expense (468) (35) Loss on asset held for sale 385 Partnership income (39) (52) Investment management performance fees (15) (317) Other, net (38) (22) Net changes in assets and liabilities - Trading securities (3,080) (1,186) Receivables and accrued revenue (1,047) 242 Income taxes receivable/payable (504) 108 Other assets (814) 771 Payables and accrued liabilities 1,587 (700) Accrued postretirement benefits (65) (124), Total adjustments (20,593) 3,595 Net cash provided by operating activities 5,163 11,276 CASH FLOWS FROM INVESTING ACTIVITIES: Net changes in restricted cash 66 67 Purchases of held-to-maturity investment securities (21,110) (22,988) Maturities of held-to-maturity investment securities 11,500 22,500 Withdrawals and distributions from partnerships 439 783 Purchases of property and equipment (1,050) (182) Net cash (used in) provided by investing activities (10,155) 180 CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of additional Class B common stock shares 43 62 Loan made to Class A stockholder (1,600) Purchases of treasury stock (Class B shares) (788) (1.645) Net cash used in financing activities (745) (3,183) Net (decrease) increase in cash and cash equivalents (5,737) 8,273 CASH AND CASH EQUIVALENTS, JANUARY 1 71.312 63.039 CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 65,575 $ 71,312 Continued on next page. The accompanying notes are an integral part of these consolidated financial statements. EFTA01078993 ROCKEFELLER FINANCIAL SERVICES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands) 2015 2014 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Income taxes paid $ 874 $ 383 Issuance of Class B common stock shares for vested restricted stock units and exercised stock options 2,069 5,200 The accompanying notes are an integral part of these consolidated financial statements. -8- EFTA01078994 ROCKEFELLER FINANCIAL SERVICES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2015 AND 2014 (Dollars in Thousands, Except Par, Unit and Share Values) 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Rockefeller Financial Services, Inc. ("RFS") and its wholly-owned subsidiary, Rockefeller & Co., Inc. ("Rock. & Co." and together, the "Company"), provide individual clients and institutions, including Rockefeller family members, other families and individuals, trusts and estates, foundations, endowments and investment funds, with a broad range of wealth management services. These services include portfolio management, fiduciary and financial advisory, information management, tax and accounting, as well as various administrative services. Rock. & Co. is an investment adviser registered with the United States Securities and Exchange Commission. Rock. & Co. wholly owns Rockit Solutions, LLC ("RSLLC"), the Company's information management business, as well as two limited purpose trust companies, one nationally chartered and one operating in Delaware. On December 24, 2015, Rock. & Co. entered into an agreement to sell RSLLC to an unaffiliated party, and to engage RSLLC subsequently to provide information management services to the Company (see Notes 2, 3 and 15). RFS's sole voting (Class A) stockholder is The Family Trust Established Under Indenture Dated December 21, 1979 (the "Family Trust"), which was established for the benefit of the descendants of the six children of John D. Rockefeller, Jr. and the spouses of such descendants. Nonvoting (Class B) common stock is held by RIT Capital Partners, plc ("RIT"), a London-listed investment trust (see Note 7), as well as by members of the Rockefeller family and various trusts established for their benefit, certain directors of the Company and key employees through vested awards made under the Rockefeller Financial Services, Inc. Stock Incentive Plan (the "SIP") (see Note 8). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") As of December 31, 2015, RSLLC was an asset held for sale and, accordingly, its assets and liabilities were written down to their fair value as of that date, which is the value at which they were sold on February 1, 2016. In addition, the Company recognized, as of December 31, 2015, all direct costs incurred to complete the sale transaction. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates and assumptions and such differences could be material. -9- EFTA01078995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Reclassification A previously reported 2014 amount has been reclassified to conform with the 2015 presentation. This reclassification was limited to the consolidated Balance Sheets and footnote 6 and did not impact the other consolidated financial statements. Specially, the Company reclassified $634 of "Software Applications, net" to "Property and Equipment, net." Principles of Consolidation The Company consolidates all entities that it controls through a majority voting interest. All intercompany transactions and balances have been eliminated in consolidation. The Company's consolidated financial statements do not include the accounts of the investment partnerships for which the Company serves as general partner, since the limited partners hold substantive rights which are sufficient to overcome a presumption of control by the general partner. Accounting standards related to variable interest entities ("VIEs") specify the approach to be taken in identifying VIEs and determining the primary beneficiary, require continuous assessment of the involvement with VIEs and provide a deferral for interests in an entity that meets specific conditions. As required under these standards, the Company performs a consolidation analysis for entities that qualify for such deferral in accordance with previously issued guidance on VIEs. The Company's involvement with its investment partnerships is such that all of the specified conditions for deferral are met. Asset Held for Sale As of December 31, 2015, Management determined that RSLLC was a long-lived asset held for sale. Therefore, as of that date, the subsidiary's assets and liabilities were re- measured at the lower of their carrying amount or fair value less direct costs to sell. As a result, the Company recognized a loss, which is reported as a separate line item in the consolidated Statements of Operations. RSLLC's assets and liabilities have been segregated in the December 31, 2015 consolidated Balance Sheet. Revenue Recognition The Company's fees revenue is generally recognized as services are provided to clients. Investment management fees represent charges to clients' managed accounts, investment partnerships and advised and subadvised mutual funds for portfolio management, asset allocation and related financial advisory services. These fees are most commonly determined as a percentage of the fair value of the assets under management. The Company can earn performance fees from certain of the investment partnerships in accordance with specific investment agreement terms. The Company recognizes performance fee revenue at the point when it is certain that the fee income has been earned. Professional and administrative services fees represent revenue from providing information management, tax and accounting, payroll and employee benefits administration and other administrative services to clients. These fees are based on either fixed fee agreements or billed actual hours expended by the Company's employees in providing the services. Fees -10- EFTA01078996 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) for information management and tax and accounting services provided to investment funds are based on the fair value of the assets administered. Trust and estate services fees encompass charges to the trust subsidiaries' clients for both portfolio management and trust or estate administration. Fees from trusts are generally calculated as a percentage of the fair value of assets under administration. The Company's fees for the administration of estates may be subject to approval by the relevant state surrogate's court, which is granted only following the actual provision of most or all of the services. In such cases, the Company recognizes fee revenue at the point when it becomes fixed and determinable. Cash and Cash Equivalents Cash and cash equivalents consist of interest-bearing and noninterest-bearing unrestricted deposit accounts with banks, and U.S. Treasury money market mutual funds on which there are no withdrawal restrictions and which are carried at their fair value (the net asset value as reported by the fund manager). Restricted Cash Restricted cash represents funds held in a bank savings account as required collateral for a letter of credit. The Company may not draw on this balance (see Note 14). Held-to-Maturity Investment Securities Held-to-maturity investment securities consist of U.S. Treasury Bills and Notes with remaining maturities upon acquisition in excess of three months, which the Company has the positive intent and ability to hold to maturity. These are carried at amortized cost. Trading Securities and Related Gains/Losses Trading securities consist of Company-owned global and U.S. portfolios of exchange traded equity securities, a domestic fixed income portfolio and a mortgage-backed securities mutual fund, each of which are carried at fair value using quoted market prices. Gains/losses on trading securities include all realized and unrealized gains/losses. Investments in Partnerships and Related Income/Losses The Company has general partner interests in limited partnerships in which it serves as Managing Partner. These general partner interests are accounted for using the equity method of accounting, with the results reported in the Company's consolidated statements of operations as partnership income/losses. The limited partnerships invest in marketable securities, which are valued at quoted market prices, as well as in unaffiliated partnerships which invest in unquoted securities, with the latter carried at fair value as estimated by each partnership's general partner in the absence of readily ascertainable market values. Because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values which would have been used had a ready market for the investments existed, and such differences could be material. -11- EFTA01078997 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Property and Equipment, including Depreciation and Amortization Property and equipment are carried at cost less accumulated depreciation and amortization. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful life of the improvement or the remaining term of the lease. Information technology and other equipment, as well as furniture, are depreciated using the straight-line method, over the assets' estimated useful lives, which range from three to eight years. Lease-signing incentives received in the form of leasehold improvements, furniture or equipment are capitalized at their estimated fair value and amortized or depreciated using the same lives and methods as if purchased. Expenditures for the purchase or multi-year licensing of software are capitalized and amortized on a straight-line basis, generally over the license term (if applicable) or periods ranging from 36 — 96 months. For internal-use computer software development projects, which were completed by June 30, 2011, the Company capitalized both external and direct internal costs (employee compensation and benefits) for qualifying processes of the projects' application development stage. There were no such development projects subsequent to that date. Stock-Based Compensation Expense The SIP provides for the issuance of various equity-based incentive awards (see Note 8). Awards made through December 31, 2015 had vesting criteria ranging from immediate vesting to a service-vesting criterion of up to 51 months of continuous service. The compensation cost resulting from these awards is measured using the fair value at the date of grant and is either recognized immediately or amortized on a straight-line basis over the vesting period, depending on each award's terms. This cost is charged to employee compensation and benefits expense and credited to additional paid-in capital, a component of stockholders' equity. Note Receivable from Class A Stockholder On December 1, 2014, RFS made a $1,600 term loan to the Family Trust (see Note 9). The note receivable balance arising from this loan is an element of stockholders' equity, because not all of its terms are comparable to those which would be expected to be available to the borrower from unaffiliated sources of funds. Postretirement Benefits The Company recognizes the underfunded status of its defined benefit postretirement plans — measured as the difference between the benefit obligation and the fair value of plan assets — as a balance sheet liability. In addition, unrecognized actuarial gains and losses and unrecognized prior service costs and credits are recognized as the sole component of accumulated other comprehensive income, an element of stockholders' equity. The changes in these unrecognized amounts are reported, net of deferred income taxes, in the consolidated statements of comprehensive income. Treasury Stock Shares of RFS Class B common stock which, upon repurchase, are deemed likely to be reissued are classified as treasury stock and carried at their cost. Upon reissuance, the - 12 - EFTA01078998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) treasury stock account is relieved at the weighted average cost of all shares held. Gains are credited to additional paid-in capital. Losses are charged to the same account to the extent of prior gains recorded; losses in excess of prior gains are charged to accumulated deficit. Income Taxes Deferred income taxes are provided for the temporary difference between the financial reporting basis and tax basis of the Company's assets and liabilities as well as for net operating loss carryforwards. Deferred tax assets result principally from recording certain expenses and charges in the consolidated financial statements which are not currently deductible for tax purposes. Deferred tax liabilities result principally from items which are currently deductible for tax purposes but have not yet been expensed or charged in the consolidated financial statements. A valuation allowance is recorded to offset the carrying amounts of deferred tax assets unless it is more likely than not such assets will be realized. The Company evaluates uncertain tax positions by monitoring published rulings from federal, state and local taxing authorities for their potential applicability to and impacts upon the tax positions taken in its income tax returns. If the Company considers that a tax position is "more-likely-than-not" to be sustained upon audit, based solely on the technical merits of the position, it recognizes the tax benefit. The Company measures the recognized tax benefit by determining the largest amount that is greater than 50 percent likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. To the extent that the Company's estimates change or the final tax outcome of these matters should be different than the amounts recorded, the differences will impact the income tax provision in the period in which such determinations are made. The Company recognizes any income tax-related penalties and interest as part of its income tax provision in the consolidated statements of operations. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued a new accounting standard in order to clarify the principles for revenue recognition. This new standard requires revenue to be recognized at an amount that reflects the consideration to which the entity expects to be entitled in exchange for contracted goods or services. This accounting standard is effective for the Company in 2018, with early adoption conditionally permitted. Management is currently assessing the impact this accounting standard will have on the Company's consolidated financial statements. In August 2014, the FASB issued a new accounting standard on determining when and how to evaluate and disclose going-concern uncertainties in the financial statements. The new standard requires that Management evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are available to be issued. An entity must then make certain disclosures if conditions or events raise substantial doubt about its ability to continue as a going concern. This new standard is effective for the Company's 2016 consolidated financial statements. Management is currently evaluating the impact of adopting this standard. -13- EFTA01078999 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) In January 2016, the FASB issued a new accounting standard on leases that requires entities recognize on their balance sheet an asset representing the right to use the underlying asset over the lease term and a lease liability representing the obligation to make lease payments. The standard also requires disclosure of qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This new standard will be effective for the Company in 2020, with early adoption permitted. Management is currently assessing the impact this accounting standard will have on the Company's consolidated financial statements. 3. ASSET HELD FOR SALE The terms of Rock. & Co.'s agreement for the sale of RSLLC called for sale proceeds equal to RSLLC's net worth as of January 31, 2016. In total, the Company realized a loss of $989 on the sale, which represented its costs to sell. As part of the sale agreement, Rock. & Co. engaged RSLLC to provide information management services to the Company for a period of five years. As of December 31, 2015, the assets and liabilities of RSLLC, stated at their respective fair value amounts, were as follows: ASSETS Cash and cash equivalents $ 494 Restricted cash 534 Receivables and accrued revenue 25 Property and equipment, net of accumulated depreciation and amortization of $3,662 1,115 Other 345 TOTAL ASSETS HELD FOR SALE $ 2,513 LIABILITIES Payables and accrued liabilities $ 726 Deferred rent expense 736 TOTAL LIABILITIES HELD FOR SALE $ 1,462 RSLLC's future minimum lease commitments, excluding escalation, for its office premises are listed below. These amounts are included in those reported in Note 14. 2016 $ 1,007 2017 1,088 2018 1,095 2019 1,034 2020 900 At December 31, 2015, RSLLC had a $534 letter of credit as required security for an office sublease with a remaining term of five years. The letter of credit has automatic annual extensions and a final expiration date of no later than January 31, 2021. The sublease - 14 - EFTA01079000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) provides for annual $67 reductions in the letter of credit security for the next two years, after which it will remain at $400 for the balance of the sublease term. The letter of credit was collateralized by a restricted cash deposit. 4. HELD-TO-MATURITY INVESTMENT SECURITIES The amortized cost and fair value of the held-to-maturity investment securities as of December 31, 2015 and 2014 were as follows: Gross Unrealized Amortized Cost Gains Losses Fair Value 2015 U.S. Treasury Bills due within one year $ 21,122 $ $ (18) $ 21,104 U.S. Treasury Note due within one year 100 100 $ 21,222 $ - $ (18) $ 21,204 2014 U.S. Treasury Bills due within one year $ 11,490 $ - $ (8) $ 11,482 U.S. Treasury Note due after one year through three years 101 101 $ 11,591 $ - $ (8) $ 11,583 At both dates, the securities' fair values were determined using quoted prices. At both December 31, 2015 and 2014, a $100 (face value) U.S. Treasury Note was pledged to a state Treasurer, as a requirement to provide trust services in that state. 5. FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories, based on inputs: Level I - Assets are valued at unadjusted quoted prices for identical assets in active markets that the Company has the ability to access. Level II - Assets are valued at quoted prices for similar or identical assets in inactive markets. Level III — Inputs to the valuation methodology are unobservable and significant to the fair value measurement. -15- EFTA01079001 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following table sets forth by level, within the fair value hierarchy, the Company's assets at fair value as of December 31, 2015 and 2014: Level I Level II Level Ill Total 2015 Cash equivalents: Registered investment companies - U.S. Treasury money market $ 13,461 $ $ - $ 13,461 Trading securities: Common stock 4,411 4,411 Debt: U.S. corporate 240 240 U.S. government and federal agency 91 91 U.S. state and municipal 96 96 Foreign government and agency 34 34 Registered investment companies: Mortgage-backed securities 1,106 1,106 U.S. government and federal agency 106 106 5,623 461 6,084 $ 19,084 $ 461 $ $ 19,545 2014 Cash equivalents: Registered investment companies - U.S. Treasury money market $ 20,372 $ $ - $ 20,372 Trading securities: Common stock 1,375 - 1,375 Debt: U.S. corporate 243 243 U.S. government and federal agency 139 139 U.S. state and municipal 93 93 Foreign government and agency 34 34 Registered investment companies: Mortgage-backed securities 1,062 1,062 U.S. government and federal agency 58 58 2,495 509 3,004 $ 22,867 $ 509 $ $ 23,376 During the years ended December 31, 2015 and 2014, there were no asset transfers among the Level I, Level II or Level III categories. For cash, restricted cash and receivables, the carrying amounts approximate fair value, because of their short-term nature. - 16 - EFTA01079002 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. PROPERTY AND EQUIPMENT At December 31, 2015 and 2014, property and equipment consisted of the following: 2015 2014 Leasehold improvements $ 5,297 $ 5,174 Software applications 2,497 3,922 Information technology and other equipment 3,804 4,464 Furniture 2,084 1,904 13,682 15,464 Accumulated depreciation and amortization (10,796) (12,073) Property and equipment, net $ 2,886 $ 3,391 7. COMMON STOCK RFS's Certificate of Incorporation provides that, if dividends are declared, any dividend will be divided equally among all shares of RFS, so that each share of its Class A and Class B common stock will receive the same dividend. With the exception of those shares owned by RIT, awardees under the SIP and certain Company directors, all shares of both the RFS Class A (voting) common stock and Class B (nonvoting) common stock are held subject to the terms of a Shareholders' Agreement (the "Agreement"), under which shares may be sold, transferred, pledged or otherwise disposed of or encumbered only to other Rockefeller family members or their closely affiliated entities. The Agreement provides RFS with a right of first refusal in the event of a proposed transfer of any of the Class A or Class B shares, with the exception of certain transfers within a stockholder's family group. The Agreement also gives each stockholder the right to require RFS to repurchase all, but not part, of the stockholder's shares if the stockholder or his/her descendents ceases to be a client of the Company, and to require the repurchase of all or part of the stockholder's shares on January 1 of each year, with the latter being subject to a determination by the Board that cash is available to fund the purchase as well as an overall annual ceiling of ten percent of all outstanding shares of either Class A or Class B stock, as applicable. RFS has the right under the Agreement to repurchase Class A or Class B shares at any time and, in certain specified situations, it may do so on other than a prorata basis. Where RFS has the right or obligation to repurchase its issued shares, the Agreement provides that RFS may assign its position to members of the Rockefeller family or to another entity controlled by the Family Trust. RIT entered into a stockholders agreement with RFS and the Family Trust. This agreement confers upon RIT certain rights, including: the right to designate two directors to the Board, the right to required consent over bot