Realized and Unrealized Gains of $0.8 million in the quarter declined by $4.1 million relative to the prior year, when significant gains were recognized from investments in Trilantic, and were down moderately relative to the prior quarter.

Equity in earnings of affiliates of $0.8 million in the quarter was in line with the first quarter, but increased relative to the prior year reflecting an increased contribution from ABS Investment Management.

Expenses

Expenses for the quarter ended June 30, 2012 of $20.0 million decreased 14% from the same period last year and increased 4% from the previous quarter. The year-over-year decrease primarily reflects lower performance-based compensation expense consistent with the year-over-year decline in revenue. The sequential quarterly increase in expenses primarily reflects an increase in compensation based on the performance of individual business lines.

Other U.S. GAAP Expenses

Evercore’s Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. for the three months ended June 30, 2012 was higher than U.S. GAAP as a result of the exclusion of expenses associated with the vesting of IPO equity awards and awards granted in conjunction with the Lexicon acquisition and certain business acquisition-related costs, including Special Charges. In addition, for Adjusted Pro Forma purposes, client related expenses and expenses associated with revenue-sharing engagements with third parties have been presented as a reduction from Revenues and Non-compensation costs. Further details of these expenses, as well as an explanation of similar expenses for the three months ended June 30, 2011 and the three months ended March 31, 2012, are included in Annex I, pages A-2 to A-11.

Non-controlling Interests

Non-controlling Interests in certain subsidiaries are owned by the principals and strategic investors in these businesses. Evercore’s equity ownership percentages in these businesses range from 51% to 86%. For the periods ended June 30, 2012 and 2011 and March 31, 2012 the gain (loss) allocated to non-controlling interests was as follows:
       
 
Net Gain (Loss) Allocated to Noncontrolling Interests
Three Months Ended     Six Months Ended
June 30, 2012     March 31, 2012   June 30, 2011 June 30, 2012 June 30, 2011

Segment
(dollars in thousands)
Investment Banking (1) $ 15 $ (278 ) $ (973 ) $ (263 ) $ (1,687 )
Investment Management (1)   170   274     866     444     1,795  
Total $ 185 $ (4 ) $ (107 ) $ 181   $ 108  
 

 
(1) The difference between Adjusted Pro Forma and U.S. GAAP Noncontrolling Interests relates primarily to intangible amortization expense for certain acquisitions which we excluded from the Adjusted Pro Forma results.
 
 

Income Taxes

For the three and six months ended June 30, 2012, Evercore’s Adjusted Pro Forma effective tax rate was 38%, compared to 40% for the three and six months ended June 30, 2011.

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