**SECURITIES
      & EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q/A**





(Mark
      One)





[X]
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      quarterly period ended June 30, 2007


or





[
                ]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      transition period from ________ to





Commission
      File No. 1-106





**GAMCO
                INVESTORS, INC.**(Exact
                name of Registrant as specified in its charter)New
                York
            
            
            13-4007862(State
                of other jurisdiction of incorporation or organization)
            
            
            (I.R.S.
                Employer Identification No.)One
                Corporate Center, Rye, NY
            
            
            10580-1422(Address
                of principle executive offices)
            
            
            (Zip
                Code)(914)
                921-5100Registrant’s
                telephone number, including area
                code





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.   Yes   x   No    ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act. (Check one):





Large
                accelerated filer  ̈
            Accelerated
                filer x
            Non-accelerated
                filer  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Exchange
      Act Rule 12b-2).   Yes    ̈   No   x





Indicate
      the number of shares outstanding of each of the Registrant’s classes of Common
      Stock, as of the latest practical date.




Class
            
            Outstanding
                at July 31, 2007Class
                A Common Stock, .001 par value
            
            7,489,369Class
                B Common Stock, .001 par value
            
            20,645,816








1




Explanatory
      Note




This
        Form 10-Q/A of GAMCO Investors,
        Inc. (the "Company") constitutes Amendment No. 1 to the Company's Quarterly
        Report on Form 10-Q for the quarter ended June 30, 2007, which was initially
        filed with the Securities and Exchange Commission on August 9, 2007. The
        purpose
        of this filing is (1) enhancement of the following disclosures within the
        notes
        to the condensed consolidated financial statements: additional descriptions
        of the restatement to the Company's condensed consolidated financial statements
        (Note A), additional disclosures regarding available for sale
        securities and the Company's accounting policy for other than temporary
        impairments of available for sale securities (Note C), enhancement of the
        definition of investments in partnerships and affiliates (Note D), background
        for the usage of, business purpose of, and economic impact of kickout
        rights within the Company's investments in partnerships and affiliates (Note
        D),
        and changes to controls and procedures described within Item 4, (2) revision
        of the Company's definition of disclosure controls and procedures within
        Item 4 - Controls and Procedures of the Form 10-Q/A and (3) inclusion of
        section
        302 and section 906 certifications as exhibits that were not included within
        the
        original filing on August 9, 2007 due to personnel and software changes in
        the
        EDGAR filing of its forms with the Securities and Exchange Commission.
        These exhibits are:
  31.1
              Certification
                  by the Chief Executive Officer Pursuant to Rule 13a-14 (a) and
                  15d-14 (a)
                  as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  200231.2
              Certification
                  by the Acting Co-Chief Financial Officer Pursuant to Rule 13a-14
                  (a) and
                  15d-14 (a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of
                  200231.3
              Certification
                  by the Acting Co-Chief Financial Officer Pursuant to Rule 13a-14
                  (a) and
                  15d-14 (a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of
                  200232.1
              Certification
                  by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                  200232.2
              Certifications
                  by the Acting Co-Chief Financial Officers pursuant to 18 U.S.C.
                  Section
                  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                  Act of
                  2002


2


INDEXGAMCO
                INVESTORS, INC. AND SUBSIDIARIESPART
                I.
            FINANCIAL
                INFORMATIONItem
                1.
            Financial
                Statements (Unaudited)Condensed
                Consolidated Statements of Income:-    Three
                months ended June 30, 2006 and 2007
              -    Six
                months ended June 30, 2006 and 2007Condensed
                Consolidated Statements of Financial Condition:-    December
                31, 2006 (Audited)-    June
                30, 2006-    June
                30, 2007Condensed
                Consolidated Statements of Stockholders’ Equity and Comprehensive
                Income:-    Three
                months ended June 30, 2006 and 2007
              -    Six
                months ended June 30, 2006 and 2007Condensed
                Consolidated Statements of Cash Flows:-    Three
                months ended June 30, 2006 and 2007
              -    Six
                months ended June 30, 2006 and 2007Notes
                to Condensed Consolidated Financial StatementsItem
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of Operations
                (Including Quantitative and Qualitative Disclosure about Market
                Risk)Item
                4.
            Controls
                and ProceduresPART
                II.
            OTHER
                INFORMATIONItem
                2.
            Changes
                in Securities, Use of Proceeds and Issuer Purchases of Equity
                SecuritiesItem
                4.
            Submission
                of Matters to a Vote of Security HoldersItem
                6.
            ExhibitsSIGNATURES








3











GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME


UNAUDITED


(In
      thousands, except per share data)





**Three
                Months Ended**
            
            
            **Six
                Months Ended****June
                30,**
            
            
            **June
                30,****2007**
            
            
            **2006
                (a)**
            
            
            **2007**
            
            
            **2006
                (a)****Revenues**Investment
                advisory and incentive fees
            
            $
            57,654
            
            
            $
            53,586
            
            
            $
            114,214
            
            
            $
            103,984Commission
                revenue
            
            
            4,036
            
            
            
            2,829
            
            
            
            8,056
            
            
            
            6,380Distribution
                fees and other income
            
            
            6,587
            
            
            
            5,244
            
            
            
            12,613
            
            
            
            10,579Total
                revenues
            
            
            68,277
            
            
            
            61,659
            
            
            
            134,883
            
            
            
            120,943**Expenses**Compensation
                and related costs
            
            
            29,905
            
            
            
            25,436
            
            
            
            58,279
            
            
            
            50,212Management
                fee
            
            
            3,449
            
            
            
            1,818
            
            
            
            6,850
            
            
            
            5,235Distribution
                costs
            
            
            10,161
            
            
            
            5,329
            
            
            
            16,047
            
            
            
            10,544Other
                operating expenses
            
            
            7,594
            
            
            
            7,713
            
            
            
            16,028
            
            
            
            15,104Reserve
                for settlement
            
            
            -
            
            
            
            11,900
            
            
            
            -
            
            
            
            11,900Total
                expenses
            
            
            51,109
            
            
            
            52,196
            
            
            
            97,204
            
            
            
            92,995Operating
                income
            
            
            17,168
            
            
            
            9,463
            
            
            
            37,679
            
            
            
            27,948**Other
                income (expense)**Net
                gain from investments
            
            
            11,193
            
            
            
            4,244
            
            
            
            16,763
            
            
            
            27,369Interest
                and dividend income
            
            
            6,166
            
            
            
            6,111
            
            
            
            14,168
            
            
            
            12,484Interest
                expense
            
            
            (3,329
            )
            
            
            (3,394
            )
            
            
            (6,709
            )
            
            
            (7,269
            )Total
                other income, net
            
            
            14,030
            
            
            
            6,961
            
            
            
            24,222
            
            
            
            32,584Income
                before income taxes and minority interest
            
            
            31,198
            
            
            
            16,424
            
            
            
            61,901
            
            
            
            60,532Income
                tax provision
            
            
            12,856
            
            
            
            7,360
            
            
            
            24,063
            
            
            
            23,901Minority
                interest
            
            
            345
            
            
            
            119
            
            
            
            677
            
            
            
            8,727Net
                income
            
            $
            17,997
            
            
            $
            8,945
            
            
            $
            37,161
            
            
            $
            27,904Net
                income per share:Basic
            
            $
            0.64
            
            
            $
            0.31
            
            
            $
            1.32
            
            
            $
            0.97Diluted
            
            $
            0.63
            
            
            $
            0.31
            
            
            $
            1.30
            
            
            $
            0.96Weighted
                average shares outstanding:Basic
            
            
            28,160
            
            
            
            28,507
            
            
            
            28,194
            
            
            
            28,842Diluted
            
            
            29,147
            
            
            
            29,496
            
            
            
            29,172
            
            
            
            29,838Dividends
                declared:
            
            $
            0.03
            
            
            $
            0.03
            
            
            $
            0.06
            
            
            $
            0.06





(a)
      As
      restated to reflect the reversal of certain previously-accrued expenses for
      investment partnership compensation as described in Note A of this report on
      Form 10-Q.





See
      accompanying notes.








4





GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


(In
      thousands, except share data)





**December
                31,**
            
            
            **June
                30,**
            
            
            **June
                30,****2006
                (a)**
            
            
            **2006
                (a)**
            
            
            **2007****ASSETS**
            
            
            
            
            (Unaudited)
            
            
            (Unaudited)Cash
                and cash equivalents, including restricted cash of $2,079, $730 and
                $443.
            
            $
            138,113
            
            
            $
            116,852
            
            
            $
            104,726Investments
                in securities, including restricted securities of $52,116, $52,141
                and
                $52,117.
            
            
            507,595
            
            
            
            466,056
            
            
            
            550,273Investments
                in partnerships and affiliates
            
            
            81,884
            
            
            
            83,752
            
            
            
            69,869Receivable
                from brokers
            
            
            53,682
            
            
            
            41,326
            
            
            
            43,187Investment
                advisory fees receivable
            
            
            31,093
            
            
            
            15,874
            
            
            
            18,439Other
                assets
            
            
            24,866
            
            
            
            16,426
            
            
            
            19,577Total
                assets
            
            $
            837,231
            
            
            $
            740,286
            
            
            $
            806,071**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Payable
                to brokers
            
            $
            36,346
            
            
            $
            9,228
            
            
            $
            30,973Income
                taxes payable, including deferred taxes of $363, $4,323, and
                $10,012.
            
            
            13,922
            
            
            
            2,556
            
            
            
            14,951Compensation
                payable
            
            
            30,174
            
            
            
            34,366
            
            
            
            46,075Capital
                lease obligation
            
            
            2,781
            
            
            
            2,891
            
            
            
            2,659Securities
                sold, not yet purchased
            
            
            8,244
            
            
            
            7,621
            
            
            
            21,021Accrued
                expenses and other liabilities
            
            
            41,052
            
            
            
            29,150
            
            
            
            35,597Total
                operating liabilities
            
            
            132,519
            
            
            
            85,812
            
            
            
            151,2765.5%
                Senior notes (due May 15, 2013)
            
            
            100,000
            
            
            
            100,000
            
            
            
            100,0006%
                Convertible note, $50 million outstanding (due August 14, 2011)
                (b)
            
            
            49,504
            
            
            
            50,000
            
            
            
            49,5615.22%
                Senior notes (due February 17, 2007)
            
            
            82,308
            
            
            
            82,308
            
            
            
            -Total
                liabilities
            
            
            364,331
            
            
            
            318,120
            
            
            
            300,837Minority
                interest
            
            
            21,324
            
            
            
            19,724
            
            
            
            14,441Stockholders’
                equityClass
                A Common Stock, $0.001 par value; 100,000,000shares authorized;
              12,055,872, 12,010,812 and 12,172,423  issued, respectively;
                7,487,018, 7,509,058
              and 7,489,369 outstanding, respectively
            
            
            12
            
            
            
            10
            
            
            
            12Class
                B Common Stock, $0.001 par value; 100,000,000 shares authorized;
              24,000,000 shares issued, 20,754,217, 20,781,027 and 20,645,816 shares
                outstanding,
              respectively
            
            
            21
            
            
            
            23
            
            
            
            21Additional
                paid-in capital
            
            
            229,699
            
            
            
            228,573
            
            
            
            230,010Retained
                earnings
            
            
            397,893
            
            
            
            355,565
            
            
            
            432,542Accumulated
                comprehensive gain
            
            
            10,427
            
            
            
            2,423
            
            
            
            19,791Treasury
                stock, at cost (4,501,754, 4,012,354 and 4,683,054 shares,
                respectively)
            
            
            (186,476
            )
            
            
            (184,152
            )
            
            
            (191,583
            )Total
                stockholders' equity
            
            
            451,576
            
            
            
            402,442
            
            
            
            490,793Total
                liabilities and stockholders' equity
            
            $
            837,231
            
            
            $
            740,286
            
            
            $
            806,071





(a) As
                restated to reflect the
                reversal of certain previously-accrued expenses for investment partnership
                compensation as described in Note A of this report on Form
                10-Q.(b) At
                June 30, 2007 and December 31,
                2006, the $50 million note conversion price was $53 per share. At
                June 30,
                2006, the convertible note was 5% with a conversion price of $52
                per
                share.


See
      accompanying notes.





5





GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
      INCOME


UNAUDITED


(In
      thousands)





**Three
                Months Ended**
            
            
            **Six
                Months Ended****June
                30,**
            
            
            **June
                30,****2007**
            
            
            **2006
                (a)**
            
            
            **2007**
            
            
            **2006
                (a)**Stockholders’
                equity – beginning of period
            
            $
            467,488
            
            
            $
            412,828
            
            
            $
            451,576
            
            
            $
            424,502Cumulative
                effect of applying the provisions of FIN 48
              at
                January 1, 2007
            
            
            -
            
            
            
            -
            
            
            
            (822
            )
            
            
            -Comprehensive
                income:Net
                income
            
            
            17,997
            
            
            
            8,945
            
            
            
            37,161
            
            
            
            27,904Foreign
                currency translation adjustments
            
            
            12
            
            
            
            (129
            )
            
            
            13
            
            
            
            (54
            )Net
                unrealized gain on securities available for sale
            
            
            8,666
            
            
            
            (589
            )
            
            
            9,352
            
            
            
            1,867Total
                comprehensive income
            
            
            26,675
            
            
            
            8,227
            
            
            
            46,526
            
            
            
            29,717Dividends
                declared
            
            
            (844
            )
            
            
            (851
            )
            
            
            (1,691
            )
            
            
            (1,718
            )Excess
                tax benefit for exercised stock options
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,782Stock
                based compensation expense
            
            
            24
            
            
            
            14
            
            
            
            45
            
            
            
            20Exercise
                of stock options including tax benefit
            
            
            194
            
            
            
            137
            
            
            
            266
            
            
            
            418Purchase
                of treasury stock
            
            
            (2,744
            )
            
            
            (17,913
            )
            
            
            (5,107
            )
            
            
            (52,279
            )Stockholders’
                equity – end of period
            
            $
            490,793
            
            
            $
            402,442
            
            
            $
            490,793
            
            
            $
            402,442








(a)
                As restated to reflect the reversal of certain previously-accrued
                expenses
                for investment partnership compensation as described in Note A of
                this
                report on Form 10-Q.





See
                accompanying notes.







6





GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


UNAUDITED


(In
      thousands)





**Three
                Months Ended**
            
            
            **Six
                Months Ended****June
                30,**
            
            
            **June
                30,****2007**
            
            
            **2006
                (a)**
            
            
            **2007**
            
            
            **2006
                (a)****Operating
                activities**Net
                income
            
            $
            17,997
            
            
            $
            8,945
            
            
            $
            37,161
            
            
            $
            27,904Adjustments
                to reconcile net income to net cashprovided
                by (used in) operating activities:Cumulative
                effect of applying the provisions of FIN 48
            
            
            -
            
            
            
            -
            
            
            
            (822
            )
            
            
            -Equity
                in gains from partnerships and affiliates
            
            
            (2,498
            )
            
            
            (474
            )
            
            
            (4,744
            )
            
            
            (3,338
            )Depreciation
                and amortization
            
            
            216
            
            
            
            220
            
            
            
            522
            
            
            
            444Stock
                based compensation expense
            
            
            24
            
            
            
            14
            
            
            
            45
            
            
            
            20Tax
                benefit from exercise of stock options
            
            
            32
            
            
            
            21
            
            
            
            57
            
            
            
            87Foreign
                currency loss
            
            
            12
            
            
            
            30
            
            
            
            13
            
            
            
            30Other-than-temporary
                loss on available for sale securities
            
            
            -
            
            
            
            56
            
            
            
            -
            
            
            
            56Market
                value of donated securities
            
            
            -
            
            
            
            -
            
            
            
            122
            
            
            
            -Impairment
                of goodwill
            
            
            -
            
            
            
            -
            
            
            
            56
            
            
            
            -Amortization
                of debt discount
            
            
            23
            
            
            
            -
            
            
            
            56
            
            
            
            -Minority
                interest in net income of consolidated subsidiaries
            
            
            244
            
            
            
            81
            
            
            
            520
            
            
            
            343Realized
                gains on sales of available for sale securities, net
            
            
            (316
            )
            
            
            -
            
            
            
            (473
            )
            
            
            (442
            )Realized
                gains on sales of trading investments in securities, net
            
            
            (4,406
            )
            
            
            (3,389
            )
            
            
            (10,875
            )
            
            
            (9,974
            )Change
                in unrealized value of investments in securities, net
            
            
            (5,022
            )
            
            
            (2,318
            )
            
            
            (2,498
            )
            
            
            (3,336
            )Excess
                tax benefit adjustment
            
            
            -
            
            
            
            1,782
            
            
            
            -
            
            
            
            1,782(Increase)
                decrease in operating assets:Purchases
                of trading investments in securities
            
            
            (417,321
            )
            
            
            (250,014
            )
            
            
            (852,789
            )
            
            
            (537,616
            )Proceeds
                from sales of trading investments in securities
            
            
            425,979
            
            
            
            205,993
            
            
            
            875,850
            
            
            
            527,522Investments
                in partnerships and affiliates
            
            
            (978
            )
            
            
            (2,823
            )
            
            
            (4,050
            )
            
            
            (4,048
            )Distributions
                from partnerships and affiliates
            
            
            1,664
            
            
            
            7,065
            
            
            
            13,149
            
            
            
            7,913Investment
                advisory fees receivable
            
            
            1,917
            
            
            
            696
            
            
            
            12,681
            
            
            
            6,126Other
                receivables from affiliates
            
            
            302
            
            
            
            3,423
            
            
            
            5,106
            
            
            
            10,092Receivable
                from brokers
            
            
            (20,171
            )
            
            
            35,314
            
            
            
            10,022
            
            
            
            (27,559
            )Other
                assets
            
            
            201
            
            
            
            764
            
            
            
            (153
            )
            
            
            (120
            )Increase
                (decrease) in operating liabilities:Payable
                to brokers
            
            
            (6,917
            )
            
            
            3,975
            
            
            
            (3,957
            )
            
            
            3,444Income
                taxes payable
            
            
            2,160
            
            
            
            (12,062
            )
            
            
            (3,835
            )
            
            
            (9,009
            )Compensation
                payable
            
            
            6,066
            
            
            
            1,364
            
            
            
            14,289
            
            
            
            6,953Accrued
                expenses and other liabilities
            
            
            3,603
            
            
            
            10,362
            
            
            
            (5,050
            )
            
            
            10,578Effects
                of consolidation of investment partnerships and offshore funds
                consolidated under FIN 46R and EITF 04-5:Realized
                gains on sales of investments in securities and securities sold short,
                net
            
            
            (330
            )
            
            
            (163
            )
            
            
            (607
            )
            
            
            (12,080
            )Change
                in unrealized value of investments in securities and securities sold
                short, net
            
            
            (115
            )
            
            
            (2,839
            )
            
            
            85
            
            
            
            (4,269
            )Purchases
                of trading investments in securities and securities sold
                short
            
            
            (19,885
            )
            
            
            (8,882
            )
            
            
            (34,436
            )
            
            
            (650,941
            )Proceeds
                from sales of trading investments in securities and securities sold
                short
            
            
            22,467
            
            
            
            9,517
            
            
            
            34,551
            
            
            
            629,221Investments
                in partnerships and affiliates
            
            
            -
            
            
            
            (336
            )
            
            
            (2,000)
            
            
            
            (1,318
            )Distributions
                from partnerships and affiliates
            
            
            325
            
            
            
            -
            
            
            
            825
            
            
            
            380Equity
                in earnings of partnerships and affiliates
            
            
            25
            
            
            
            (103
            )
            
            
            (733)
            
            
            
            (528
            )Decrease
                in advisory fees receivable
            
            
            19
            
            
            
            98
            
            
            
            (26
            )
            
            
            98(Increase)
                decrease in receivable from brokers
            
            
            (222
            )
            
            
            1,042
            
            
            
            473
            
            
            
            (11,427
            )Decrease
                (increase) in other assets
            
            
            (186
            )
            
            
            (21
            )
            
            
            (244
            )
            
            
            333Increase
                in payable to brokers
            
            
            (2,551
            )
            
            
            1,847
            
            
            
            (1,416
            )
            
            
            7,630(Decrease)
                increase in accrued expenses and other liabilities
            
            
            266
            
            
            
            (1,892
            )
            
            
            315
            
            
            
            (11,678
            )Income
                related to investment partnerships and offshore funds consolidated
                under
                FIN 46R and EITF 04-5, net
            
            
            506
            
            
            
            207
            
            
            
            996
            
            
            
            14,637Total
                adjustments
            
            
            (14,867
            )
            
            
            (1,445
            )
            
            
            41,025
            
            
            
            (59,994
            )Net
                cash provided by (used in) operating activities
            
            
            3,130
            
            
            
            7,500
            
            
            
            78,186
            
            
            
            (32,090
            )








7




GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


UNAUDITED


(In
      thousands)





**Three
                Months Ended**
            
            
            **Six
                Months Ended****June
                30,**
            
            
            **June
                30,****2007**
            
            
            **2006
                (a)**
            
            
            **2007**
            
            
            **2006
                (a)****Investing
                activities**Purchases
                of available for sale securities
            
            
            (223
            )
            
            
            (247
            )
            
            
            (25,254
            )
            
            
            (3,253
            )Proceeds
                from sales of available for sale securities
            
            
            1,353
            
            
            
            -
            
            
            
            2,292
            
            
            
            1,486Net
                cash provided by (used in) investing activities
            
            
            1,130
            
            
            
            (247
            )
            
            
            (22,962
            )
            
            
            (1,767
            )**Financing
                activities**Contributions
                related to investment partnerships and offshore funds
              consolidated
                under FIN 46R and EITF 04-5, net
            
            
            (5
            )
            
            
            1,537
            
            
            
            511
            
            
            
            29,727Retirement
                of 5.22% senior notes
            
            
            -
            
            
            
            -
            
            
            
            (82,308
            )
            
            
            -Proceeds
                from exercise of stock options
            
            
            162
            
            
            
            116
            
            
            
            209
            
            
            
            332Dividends
                paid
            
            
            (844
            )
            
            
            (851
            )
            
            
            (1,691
            )
            
            
            (1,718
            )Subsidiary
                stock repurchased from minority shareholders
            
            
            -
            
            
            
            -
            
            
            
            (241
            )
            
            
            -Purchase
                of treasury stock
            
            
            (2,744
            )
            
            
            (17,913
            )
            
            
            (5,107
            )
            
            
            (52,279
            )Net
                cash used in financing activities
            
            
            (3,431
            )
            
            
            (17,111
            )
            
            
            (88,627
            )
            
            
            (23,938
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            829
            
            
            
            (9,858
            )
            
            
            (33,403
            )
            
            
            (57,795
            )Effect
                of exchange rates on cash and cash equivalents
            
            
            15
            
            
            
            (132
            )
            
            
            16
            
            
            
            (64
            )Net
                increase in cash from partnerships and offshore funds consolidated
                under
                FIN 46R and EITF 04-5
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,550Cash
                and cash equivalents at beginning of period
            
            
            103,882
            
            
            
            126,842
            
            
            
            138,113
            
            
            
            173,161Cash
                and cash equivalents at end of period
            
            $
            104,726
            
            
            $
            116,852
            
            
            $
            104,726
            
            
            $
            116,852








(a) As
                restated to reflect the
                reversal of certain previously-accrued expenses for investment partnership
                compensation as described in Note A of this report on Form
                10-Q.





See
      accompanying notes.




8


**GAMCO
      INVESTORS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2007**


**(Unaudited)**





**A.  Basis
      of Presentation**





Unless
      we
      have indicated otherwise, or the context otherwise requires, references in
      this
      report to “GAMCO Investors, Inc.,” “GAMCO,” “the Company,” “we,” “us” and “our”
or similar terms are to GAMCO Investors, Inc. (formerly Gabelli Asset Management
      Inc.), its predecessors and its subsidiaries.





The
      unaudited interim Condensed Consolidated Financial Statements of GAMCO
      Investors, Inc. included herein have been prepared in conformity with generally
      accepted accounting principles in the United States for interim financial
      information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
      S-X. Accordingly, they do not include all the information and footnotes required
      by generally accepted accounting principles in the United States for complete
      financial statements.  In the opinion of management, the unaudited
      interim condensed consolidated financial statements reflect all adjustments,
      which are of a normal recurring and non-recurring nature, necessary for a fair
      presentation of financial position, results of operations and cash flows of
      GAMCO for the interim periods presented and are not necessarily indicative
      of a
      full year’s results.





In
      preparing the unaudited interim condensed consolidated financial statements,
      management is required to make estimates and assumptions that affect the amounts
      reported in the financial statements.  Actual results could differ
      from those estimates.





The
      condensed consolidated financial statements include the accounts of GAMCO and
      its subsidiaries.  All material intercompany accounts and transactions
      are eliminated.





These
      financial statements should be read in conjunction with our audited consolidated
      financial statements included in our Annual Report on Form 10-K/A for the year
      ended December 31, 2006, from which the accompanying Condensed Consolidated
      Statement of Financial Condition was derived.





Certain
      items previously reported have been reclassified to conform to the current
      period’s financial statement presentation.





*Changes
      in Accounting Policy*




GAMCO
      has
      changed its accounting policy to reflect the adoption of FASB-issued
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”),
      which is an interpretation of FASB Statement No. 109, “Accounting for Income
      Taxes” (“FAS 109”). This interpretation prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return. This
      interpretation is effective for fiscal years beginning after December 15, 2006.
      The Company adopted this interpretation on January 1, 2007.   In
      accordance with the method of adoption prescribed in the Interpretation, FIN
      48
      has been applied prospectively as of the date of adoption, and periods prior
      to
      adoption have not been retroactively restated or reclassified.  See
      Note F for further details.





*Restatement*





On
      August
      9, 2007, GAMCO filed a Form 10-K/A restating 2006 results to reflect the
      reversal of certain previously accrued expenses for investment partnership
      compensation. It
      is the
      policy of GBL to accrue Investment Partnership compensation expense on a monthly
      basis during the course of the year using the formula-based payout rate on
      net
      revenues and to specifically allocate to individuals at year-end.  It
      was determined that the amount accrued during 2006 and some accruals relating
      to
      2005 were no longer appropriate following the departure of marketing staff,
      the
      reassignment of management staff, and the reduction of rates for certain
      payouts.  This determination was made subsequent to our issuance of
      the 2006 Form 10-K after an analysis was performed.  The information
      used in management’s analysis was available prior to the issuance of the 2006
      Form 10-K. Management determined that this was an error and not a change in
      an
      accounting estimate.  Because it was deemed an error and the amounts
      were material to interim and full year periods in 2006, GBL amended its Form
      10-K for the year ended 2006 and 2005 to reflect the reversals.  None
      of the accruals relate to periods prior to 2005.


Quarterly
      financial information for the year ended December 31, 2006, as restated, is
      presented below.




**2006**(in
                thousands, except per share data)
            
            **1st**
            
            
            **2nd**
            
            
            **3rd**
            
            
            **4th**
            
            
            **Full
                Year**Revenues
            
            $
            59,284
            
            
            $
            61,659
            
            
            $
            57,994
            
            
            $
            82,526
            
            
            $
            261,463Operating
                income
            
            
            18,485
            
            
            
            9,463
            
            
            
            18,498
            
            
            
            29,901
            
            
            
            76,347Net
                income
            
            
            18,960
            
            
            
            8,944
            
            
            
            17,043
            
            
            
            26,980
            
            
            
            71,927Net
                income per share:Basic
            
            
            0.65
            
            
            
            0.31
            
            
            
            0.60
            
            
            
            0.96
            
            
            
            2.52Diluted
            
            
            0.64
            
            
            
            0.31
            
            
            
            0.60
            
            
            
            0.94
            
            
            
            2.49





Quarterly
      financial information for the year ended December 31, 2006, as originally
      reported, is presented below.





**2006**(in
                thousands, except per share data)
            
            **1st**
            
            
            **2nd**
            
            
            **3rd**
            
            
            **4th**
            
            
            **Full
                Year**Revenues
            
            $
            59,284
            
            
            $
            61,659
            
            
            $
            57,994
            
            
            $
            82,526
            
            
            $
            261,463Operating
                income
            
            
            18,034
            
            
            
            8,936
            
            
            
            18,220
            
            
            
            26,971
            
            
            
            72,161Net
                income
            
            
            18,700
            
            
            
            8,641
            
            
            
            16,884
            
            
            
            25,293
            
            
            
            69,518Net
                income per share:Basic
            
            
            0.64
            
            
            
            0.30
            
            
            
            0.60
            
            
            
            0.90
            
            
            
            2.44Diluted
            
            
            0.63
            
            
            
            0.30
            
            
            
            0.59
            
            
            
            0.88
            
            
            
            2.40





**B.  Recent
      Accounting Developments**





In
      February 2006, the FASB issued FASB Statement No. 155, “Accounting for Certain
      Hybrid Financial Instruments – an amendment of FASB Statement No. 133 and 140,”
(“Statement 155”) that amends FASB Statements No. 133 “Accounting for Derivative
      Instruments and Hedging Activities,” (“Statement 133”) and No. 140 “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities a replacement of FASB Statement 125” (“Statement
      140”).  The statement permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation; clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of Statement 133; establishes a
      requirement to evaluate interests in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation; clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives; amends Statement 140 to eliminate the prohibition on a qualifying
      special-purpose entity from holding a derivative financial instrument that
      pertains to a beneficial interest other than another derivative financial
      instrument.  Statement 155 does not permit prior period
      restatement.  The statement is effective for all financial instruments
      acquired or issued after the beginning of an entity’s first fiscal year that
      begins after September 15, 2006.  The Company adopted this statement
      on January 1, 2007.  The impact of adopting this statement has been
      immaterial to the Company’s consolidated financial statements.





In
      April
      2006, the FASB issued FSP FIN 46R-6 “Determining the Variability to be
      Considered in Applying FASB Interpretation No. 46(R)” (“FSP”).  The
      FSP addresses certain major implementation issues related to FIN 46R,
      specifically how a reporting enterprise should determine the variability to
      be
      considered in applying FIN 46R. The FSP is effective as of the beginning of
      the
      first day of the first reporting period beginning after September 15, 2006.
      The
      Company adopted this Statement on January 1, 2007.  The impact of
      adopting this statement has been immaterial to the Company’s consolidated
      financial statements.


9


In
      September 2006, the FASB issued FASB Statement No. 157, “Fair Value
      Measurements” (“Statement 157”). The statement provides guidance for using fair
      value to measure assets and liabilities. The statement provides guidance to
      companies about the extent of which to measure assets and liabilities at fair
      value, the information used to measure fair value, and the effect of fair value
      measurements on earnings. The statement applies whenever other standards require
      (or permit) assets or liabilities to be measured at fair value. The statement
      does not expand the use of fair value in any new circumstances. The statement
      is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007 and for interim periods within those fiscal years. The Company
      plans to adopt this statement on January 1, 2008. The impact of adopting
      Statement 157 is expected to be immaterial to the Company’s consolidated
      financial statements.




In
      September 2006, the SEC released Staff Accounting Bulletin No. 108, "Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements" (the “SAB”). The SAB addresses diversity in
      how companies consider and resolve the quantitative effect of financial
      statement misstatements. The SAB is effective as of the beginning of the first
      day of the first reporting period beginning after November 15,
      2006.  The Company adopted this SAB on January 1, 2007.  The
      impact of adopting this SAB has been immaterial to the Company’s consolidated
      financial statements.




In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
      115,” (“Statement 159”), which provides companies with an option to report
      selected financial assets and liabilities at fair value. The standard’s
      objective is to reduce both the complexity in accounting for financial
      instruments and the volatility in earnings caused by measuring related assets
      and liabilities differently. Statement 159 also establishes presentation and
      disclosure requirements designed to facilitate comparisons between companies
      that choose different measurement attributes for similar types of assets and
      liabilities.  This statement is effective as of the beginning of an
      entity’s first fiscal year beginning after November 15, 2007. Early adoption is
      permitted as of the beginning of the previous fiscal year provided that the
      entity makes that choice in the first 120 days of that fiscal year and also
      elects to apply the provisions of Statement 157.  The Company plans to
      adopt this statement on January 1, 2008.  The impact of adopting
      Statement 159 is expected to be immaterial to the Company’s consolidated
      financial statements.




The
      American Institute of Certified Public Accountants has finalized Statement
      of
      Position (“SOP”) 07-01, Clarification of the Scope of the Audit and Accounting
      Guide Investment Companies and Accounting by Parent Companies and Equity Method
      Investors for Investments in Investment Companies. SOP 07-01 provides criteria
      for determining whether an entity is within the scope of the Guide. The
      statement is effective for financial statements issued for fiscal years
      beginning after December 15, 2007. The Company plans to adopt this statement
      on
      January 1, 2008. The Company is currently evaluating the potential impact of
      adopting SOP 07-01 on its consolidated financial statements.




In
      May
      2007, the FASB issued FSP No. FIN 46(R)-7, “Application of FASB Interpretation
      No. 46(R) to Investment Companies”. This FSP amends Interpretation FIN 46(R) to
      provide an exception to the scope of FIN 46(R) for companies within the scope
      of
      the revised Audit and Accounting Guide Investment Companies. The Company is
      currently evaluating the potential impact of adopting FIN 46(r)-7 on its
      consolidated financial statements.




**C.  Investment
      in Securities**




Management
      determines the appropriate classification of debt and equity securities at
      the
      time of purchase and reevaluates such designation as of each condensed
      consolidated statement of financial condition date.  Investments in
      Treasury Bills and Notes with maturities of greater than three months at the
      time of purchase are classified as investments in securities and with maturities
      of three months or less at time of purchase are classified as cash and cash
      equivalents. Investments in securities are accounted for as either “trading
      securities” or “available for sale” (“AFS”) and are stated at quoted market
      values. Securities that are not readily marketable are stated at their estimated
      fair values as determined by our management. The resulting unrealized gains
      and
      losses for trading securities are included in net gain from investments, and
      the
      unrealized gains and losses for available for sale securities, net of management
      fees and tax, are reported as a separate component of stockholders’ equity
      except for losses deemed to be other than temporary, which are recorded as
      realized losses in the condensed consolidated statements of income.




The
      Company has an established accounting policy and methodology to determine
      other-than-temporary impairment.  Under this policy, a holding must
      generally be impaired for nine consecutive months in order to be considered
      other-than-temporarily impaired.  Once the nine month threshold is
      met, the investment is considered other-than-temporarily impaired and the
      appropriate writedown is taken in accordance with SFAS 115.  However,
      the determination of temporary versus other-than-temporary impairment for
      investments where the impairment is less than nine consecutive months are
      subject to further scrutiny.  The Company augments the general
      systematic “nine month” methodology by identifying both issuer-specific declines
      and market/industry related declines, which might indicate other-than-temporary
      impairment in instances where the nine consecutive month threshold has not
      yet
      been met. For
      the
      three and six months ended June 30, 2007, there was no impairment of AFS
      securities.  For the three and six month periods ended June 30, 2006,
      there were $0.1 million in losses on AFS securities deemed to be other than
      temporary which were recorded in the condensed consolidated statements of
      income.




Securities
      sold, not yet purchased are financial instruments purchased under agreements
      to
      resell and financial instruments sold under agreements to
      repurchase.  These financial instruments are stated at fair value and
      are subject to market risks resulting from changes in price and volatility.
      At
      June 30, 2007 and 2006, the market value of securities sold, not yet purchased
      was $21.0 million and $7.6 million, respectively.




The
      Company accounts for derivative financial instruments in accordance with
      Statement of Financial Accounting Standards (“FAS”) No. 133 (“Statement No.
      133”), Accounting for Derivative Instruments and Hedging Activities, as amended.
      Statement No. 133 requires that an entity recognize all derivatives, as defined,
      as either assets or liabilities measured at fair value. The Company uses swaps
      and treasury futures to manage its exposure to market and credit risks from
      changes in certain equity prices, interest rates, and volatility and does not
      hold or issue swaps and treasury futures for speculative or trading purposes.
      These swaps and treasury futures are not designated as hedges, and changes
      in
      fair values of these derivatives are recognized in earnings as gains (losses)
      on
      derivative contracts. The fair value of swaps and treasury futures are included
      in investments in securities in the condensed consolidated statements of
      financial condition, and gains and losses from the swaps are included in the
      condensed consolidated statements of income at June 30, 2007 and 2006, the
      market value of derivatives was $26.9 million and $13.0 million,
      respectively.




At
      June
      30, 2007 and 2006, the market value of investments available for sale was $140.4
      million and $86.7 million, respectively.  For the six months ended
      June 30, 2007 and 2006, the total gains for securities with net gains were
      $36.5
      million and $5.7 million, respectively, while total losses for securities with
      net losses were $0.8 million and $0.3 million, respectively. Unrealized
      gains in market value, net of management fee and taxes, of $19.8 million and
      $2.4 million have been included in stockholders’ equity as at June 30, 2007 and
      2006, respectively.




Proceeds
      from sales of investments available for sale were approximately $1.4 million
      for
      the three-month period ended June 30, 2007.  There were no sales of
      investments available for sale during the three months ended June 30, 2006.
      Proceeds from sales of investments available for sale were approximately $2.3
      million and $1.5 million for the six-month periods ended June 30, 2007 and
      2006,
      respectively.  For the three months ended June 30, 2007, gross gains
      on the sale of investments available for sale amounted to $316,000; there were
      no gross losses on the sale of investments available for sale. For the first
      six
      months of 2007 and 2006, gross gains on the sale of investments available for
      sale amounted to $473,000 and $442,000, respectively; there were no gross losses
      on the sale of investments available for sale.




**D.
      Investments in Partnerships and Affiliates**




Beginning
          January 1, 2006, the provisions of FIN 46R and EITF 04-5 required consolidation
          of the majority of our investment partnerships and offshore funds managed
          by our
          subsidiaries into our consolidated financial statements.  However,
          since we amended the agreements of certain investment partnerships and
          an
          offshore fund on March 31, 2006, FIN 46R and EITF 04-5 only required us
          to
          consolidate these entities on our condensed consolidated statement of income
          and
          condensed consolidated statement of cash flows for the first quarter 2006.
          The
          business purpose of amending the agreements was to avoid having to consolidate
          them.  There was no economic impact of giving up presumptive control
          of these entities. We were not required to consolidate these entities on
          our
          condensed consolidated statement of financial condition at March 31,
          2006.  In addition, these partnerships and offshore funds, for which
          the agreements were amended, were not required to be consolidated within
          our
          condensed consolidated statement of income and condensed consolidated statement
          of cash flows or on our condensed consolidated statement of financial condition
          for any period subsequent to the first quarter 2006 and will continue to
          not be
          required as long as GAMCO does not maintain direct or indirect control
          over the
          investment partnerships and offshore funds, which remains the case at and
          for
          the three and six months ended June 30, 2007.  For the six months
          ended June 30, 2006, the consolidation of these entities had no effect
          on net
          income but did affect the classification of income between operating and
          other
          income.
  The
          consolidation of the entities whose agreements were amended to add the
          substantive kickout rights and were not consolidated at and after March
          31, 2006
          but whose results of operations were consolidated for the three months
          ended
          March 31, 2006 had the following impact on our condensed consolidated statement
          of income for the three months ended March 31, 2006: decrease to distribution
          fees and other income revenues of $0.9 million, increase to other operating
          expenses of $0.2 million, decrease in operating income of $1.0 million,
          increase
          to net gain from investments of $13.6 million, increase to interest and
          dividend
          income of $1.3 million, increase to interest expense of $0.6 million, increase
          to income taxes of $4.9 million and an increase to minority interest of
          $8.2
          million.  There was no impact on net income for the three months ended
          March 31, 2006.  The impact on the cash flows for the three month
          ended March 31, 2006 was as follows:  $627.9 million in purchase of
          trading investments in securities and securities sold short, $609.4 million
          in
          proceeds from sales of trading investments in securities and securities
          sold
          short, $28.2 million in contributions related to investment partnerships
          and
          offshore funds consolidated under FIN 46R and EITF 04-5, net, $13.8 million
          of
          income related to investment partnerships and offshore funds consolidated
          under
          FIN 46R and EITF 04-5, net, $11.5 million increase in receivable from brokers,
          $11.7 million of realized gains on sales of investments in securities and
          securities sold short, net, $11.4 million decrease in accrued expenses
          and other
          liabilities, $6.3 million increase in payable to brokers, $4.7 million
          increase
          in unrealized value of investments in securities and securities sold short,
          net,
          $0.3 million of investments in partnerships and affiliates, $0.4 million
          of
          equity in net gains from partnerships and affiliates, less than $0.1 million
          in
          distributions from partnerships and affiliates, $0.3 million decrease in
          other
          assets.


10


For
          the
          three and six months ended June 2006, we have also consolidated five other
          investment partnerships and two offshore funds in which we have a direct
          or
          indirect controlling financial interest, and we will continue to consolidate
          these in future periods as long as we continue to maintain a direct or
          indirect
          controlling financial interest. From January 1, 2007 to June 30, 2007,
          we
          consolidated these same five investment partnerships and one of these offshore
          funds in which we continue to have a direct or indirect controlling financial
          interest.
  Our
        balance sheet caption “investments in partnerships and affiliates” does include
        those investments which we account for under the equity method of
        accounting.The Company reflects the equity in earnings of
        these equity method investees as Net gain from investments on the
        condensed consolidated statements of income. For the three months ended
        June 30, 2007 and 2006, profits from these investments were $2.4 million
        and
        $0.9 million, respectively. For the six months ended June 30, 2007 and
        2006, profits from these investments were $4.4 million and $3.9 million,
        respectively.
  For
        the
        three and six months ended June 30, 2007 and 2006, the consolidation of these
        entities had no impact on net income but did result in (a) the elimination
        of
        revenues and expenses which are now intercompany transactions; (b) the recording
        of all the partnerships’ operating expenses of these entities including those
        pertaining to third-party interests; (c) the recording of all other income
        of
        these entities including those pertaining to third-party interests; (d)
        recording of income tax expense of these entities including those pertaining
        to
        third party interests; and (e) the recording of minority interest which offsets
        the net amount of any of the partnerships’ revenues, operating expenses, other
        income and income taxes recorded in these respective line items which pertain
        to
        third-party interest in these entities.  While this had no impact on
        net income, the consolidation of these entities did affect the classification
        of
        income between operating and other income.  Cash and cash equivalents
        and investments in securities held by investment partnerships and offshore
        funds, which at June 30, 2007, June 30, 2006 and December 31, 2006 were $6.1
        million, $11.9 million and $15.7 million, respectively, consolidated under
        FIN 46R and EITF 04-5 are also restricted from use for general operating
        purposes.




**E.
      Debt**




In
      February 2007, the Company retired the $82.3 million in 5.22% Senior Notes
      due
      February 17, 2007 plus accrued interest from its cash and cash equivalents
      and
      investments. This debt was originally issued in connection with GBL's sale
      of
      mandatory convertible securities in February 2002 and was remarketed in November
      2004.




On
      April
      18, 2007, the Company and Cascade Investment L.L.C. (“Cascade”) amended the
      terms of the $50 million convertible note maturing in August 2011, to extend
      the
      exercise date for Cascade’s put option from May 15, 2007 to December 17, 2007
      and to extend the expiration date of the related letter of credit to December
      24, 2007.




**F.
      Income Taxes and Adoption of FIN 48**




The
      effective tax rate for the three months ended June 30, 2007 was 41.2% as
      compared to the prior year quarter’s effective rate of 44.8%.  For the
      six months ended June 30, 2007, the effective tax rate was 38.9% as compared
      to
      39.5% in the prior year’s comparable period.




In
      June
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes” (“FIN 48”), which is an interpretation of FAS 109. This
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. The Company adopted this
      interpretation on January 1, 2007.




In
      May
      2007, the FASB issued FSP FIN 48-1, “Definition of Settlement in FASB
      Interpretation No. 48”, amending FSP FIN 48 to clarify that a tax position could
      be effectively settled upon examination by a taxing authority. For the second
      quarter 2007, we have updated our schedule of uncertain tax positions and the
      impact of taxes, interest, and penalties has been reflected within our income
      tax provision and disclosed within our footnotes to the financial
      statements.




As
      of
      January 1, 2007, the Company had a gross unrecognized tax benefit of
      approximately $2.6 million, of which recognition of $2.5 million would impact
      the Company’s effective tax rate.  As of June 30, 2007, the total amount of
      gross unrecognized tax benefits was approximately $3.7 million, of which
      recognition of $2.5 million would impact the Company’s effective tax rate. As of
      January 1, 2007, the Company had a cumulative effect of adopting FIN 48 of
      $0.8
      million, and an adjustment was recorded to retained earnings upon such
      adoption.




The
      Company’s historical accounting policy with respect to penalties and interest
      related to tax uncertainties has been to classify these amounts as income taxes,
      and the Company continued this classification upon the adoption of FIN 48. 
As of January 1, 2007, the total amount of accrued penalties and interest
      related to uncertain tax positions recognized in the condensed consolidated
      statement of financial condition was approximately $1.4
      million.




The
      Internal Revenue Service (“IRS”) is currently auditing the 2003 and 2004 federal
      income tax returns. It is reasonably possible that the Company will conclude
      the
      audits within the next 12-month period. It is estimated that the Company’s
      FIN 48 liability could decrease by approximately $0.9 million upon the
      conclusion of these audits.  The 2005 and 2006 federal income tax returns
      remain subject to potential future audit by the IRS.




The
      Company is currently being audited in one state jurisdiction for its income
      tax
      returns filed between 1999 and 2003.  It is reasonably possible that the
      Company will conclude the audits of 1999 and 2000 within the next 12-month
      period, and it is estimated that the Company’s FIN 48 liability could decrease
      by approximately $0.7 million upon the conclusion of these audits.  The
      state income tax returns for all years after 2002 are subject to potential
      future audit by tax authorities in the Company’s major state tax
      jurisdictions.




Income
      tax expense is based on pre-tax financial accounting income, including
      adjustments made for the recognition or derecognition related to uncertain
      tax
      positions.  The recognition or derecognition of income tax expense related
      to uncertain tax positions is determined under the guidance as prescribed by
      FIN 48.  Deferred tax assets and liabilities are recognized for the
      future tax attributable to differences between the financial statement carrying
      amounts of existing assets and liabilities and their respective tax bases. 
Deferred tax assets and liabilities are measured using enacted tax rates
      expected to be recovered or concluded.  The effect on deferred tax assets
      and liabilities of a change in tax rates is recognized in earnings in the period
      that includes the enactment date.




11




**G.
      Earnings Per Share**




The
      computations of basic and diluted net income per share are as
      follows:




(in
                thousands, except per share amounts)
            
            **Three
                Months Ended**
              **June
                30, 2007**
            
            
            **Three
                Months Ended**
              **June
                30, 2006 (a)**
            
            
            **Six
                Months Ended**
              **June
                30, 2007**
            
            
            **Six
                Months Ended**
              **June
                30, 2006 (a)**Basic:Net
                income
            
            $
            17,997
            
            
            $
            8,945
            
            
            $
            37,161
            
            
            $
            27,904Average
                shares outstanding
            
            
            28,160
            
            
            
            28,507
            
            
            
            28,194
            
            
            
            28,842Basic
                net income per share
            
            $
            0.64
            
            
            $
            0.31
            
            
            $
            1.32
            
            
            $
            0.97Diluted:Net
                income
            
            $
            17,997
            
            
            $
            8,945
            
            
            $
            37,161
            
            
            $
            27,904Add
                interest expense on convertible note, net of management fee and
                taxes
            
            
            429
            
            
            
            351
            
            
            
            857
            
            
            
            703Total
            
            $
            18,426
            
            
            $
            9,296
            
            
            $
            38,018
            
            
            $
            28,607Average
                shares outstanding
            
            
            28,160
            
            
            
            28,507
            
            
            
            28,194
            
            
            
            28,842Dilutive
                stock options
            
            
            44
            
            
            
            27
            
            
            
            35
            
            
            
            34Assumed
                conversion of convertible note
            
            
            943
            
            
            
            962
            
            
            
            943
            
            
            
            962Total
            
            
            29,147
            
            
            
            29,496
            
            
            
            29,172
            
            
            
            29,838Diluted
                net income per share
            
            $
            0.63
            
            
            $
            0.31
            (b)
            
            $
            1.30
            
            
            $
            0.96




(a)
            As
                restated to reflect the reversal of certain previously-accrued expenses
                for investment partnership compensation as described in Note A of
                this
                report on Form 10-Q.


(b)
            Diluted
                net income per share is anti-dilutive and has therefore been reported
                at
                basic net income per share.




**H.
      Stockholders’ Equity**




Shares
      outstanding on June 30, 2007 were 28.1 million, slightly below March 31, 2007
      shares of 28.2 million and approximately 0.5% lower than 28.3 million shares
      outstanding on June 30, 2006.  Fully diluted shares outstanding for
      the second quarter of 2007 were 29.1 million, 0.1 million below the first
      quarter 2007 fully diluted shares outstanding and 1.2% below our fully diluted
      shares of 29.5 million for the second quarter 2006.




In
      addition to
      the regular dividend of $0.03 per share which was declared on May 9, 2007 and
      paid on June 28, 2007, and subsequent to the end of our quarter, the Board
      of
      Directors declared a special cash dividend of $1.00 per share payable on July
      30, 2007 to holders of record on July 23, 2007.





*Stock
      Award and Incentive Plan*





Effective
      January 1, 2003, we adopted the fair value recognition provisions of FAS No.
      123
      in accordance with the transition and disclosure provisions under the recently
      issued FAS No. 148, “Accounting for Stock Based Compensation – Transition and
      Disclosure.”





We
      adopted FAS 123 (R) on January 1, 2005.  In light of our modified
      prospective adoption of the fair value recognition provisions of FAS 123 (R)
      for
      all grants of employee stock options, the adoption of FAS 123 (R) did not have
      a
      material impact on our consolidated financial statements.  For the
      three months ended June 30, 2007 and 2006, we recognized stock-based
      compensation expense of $24,000 and $14,000, respectively.  For the
      six months ended June 30, 2007 and 2006, we recognized stock-based compensation
      expense of $45,000 and $20,000, respectively.   The total
      compensation costs related to non-vested awards not yet recognized are
      approximately $193,000.  These will be recognized as expense in the
      following periods:




**Remainder
                of**
              **2007**
            
            
            **2008**
            
            
            **2009**
            
            
            **2010**$
            47,000
            
            
            $
            89,000
            
            
            $
            47,000
            
            
            $
            10,000




Proceeds
      from the exercise of
      5,400 and 5,000 stock options were $162,000 and $133,000 for the three months
      ended June 30, 2007 and 2006, respectively. The excersize of the
      options resulted in a tax benefit to GAMCO of $32,000 and $21,000 for the
      three months ended June 30, 2007 and 2006, respectively. Proceeds from the
      exercise of 8,150 and 15,000 stock options were $209,000 and $348,000 for the
      six months ended June 30, 2007 and 2006, respectively, resulting in a tax
      benefit to GAMCO of $57,000 and $87,000 for the six months ended June 30, 2007
      and 2006, respectively.





*Stock
      Repurchase Program*




In
      March 1999,
      the Board of Directors established the Stock Repurchase Program to grant us
      authority to repurchase shares of our Class A common stock.  For the
      three months ended June 30, 2007 and 2006, we repurchased 55,600 shares at
      an
      average investment of $49.35.  Since the inception of the program we
      have repurchased 4,783,858 class A common shares at an average investment of
      $39.58 per share.  The total amount of shares currently available for
      repurchase under the current authorization is approximately 934,000 shares
      at
      June 30, 2007.




**I.
      Goodwill**




In
      accordance with FAS 142
“Accounting for Goodwill and Other Intangible Assets,” we assess the
      recoverability of goodwill and other intangible assets at least annually, or
      more often should events warrant, using a present value cash flow
      method.  There was no impairment charge recorded for the three months
      ended June 30, 2007 and 2006, respectively.  For the six months ended
      June 30, 2007, there was an impairment charge of $56,000 recorded as a result
      of
      the voluntary deregistration of an inactive broker dealer subsidiary. There
      was
      no impairment charge recorded for the six months ended June 30, 2006. At June
      30, 2007 and 2006, there remains $3.5 million of goodwill related to our
      92%-owned subsidiary, Gabelli Securities, Inc.




12




**J.  Other
      Matters**




Since
      September 2003, GAMCO and certain of its subsidiaries have been cooperating
      with
      inquiries from the N.Y. Attorney General's office and the SEC by providing
      documents and testimony regarding certain mutual fund share trading
      practices.  As a result of discussions with the SEC for a potential
      resolution of their inquiry, GAMCO recorded a reserve against earnings of
      approximately $15 million in 2006.  Since these discussions are
      ongoing, we cannot determine at this time whether they will ultimately result
      in
      a settlement of this matter, whether our reserves will be sufficient to cover
      any payments by GAMCO related to such a settlement, or whether and to what
      extent insurance may cover such payments.




We
      indemnify
      our clearing brokers for losses they may sustain from the customer accounts
      introduced by our broker-dealer subsidiaries.  In accordance with NYSE
      rules, customer balances are typically collateralized by customer securities
      or
      supported by other recourse provisions.  In addition, we further limit
      margin balances to a maximum of 25% versus 50% permitted under Regulation T
      of
      the Federal Reserve Board and exchange regulations.  At June 30, 2007
      and 2006, the total amount of customer balances subject to indemnification
      (i.e.
      margin debits) was immaterial.  The Company also has entered into
      arrangements with various other third parties which provide for indemnification
      of the third parties or the Company against losses, costs, claims and
      liabilities arising from the performance of obligations under the agreements,
      except for generally gross negligence or bad faith.  The Company has
      had no claims or payments pursuant to these or prior agreements, and we believe
      the likelihood of a claim being made is remote.  Utilizing the
      methodology in the FASB issued Interpretation No. 45, “Guarantor’s Accounting
      and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
      Indebtedness of Others”, our estimate of the value of such agreements is de
      minimis, and therefore an accrual has not been made in the financial
      statements.





**K.
      Subsequent Events**




On
      July
      10, 2007, our Board of Directors declared a special cash dividend of $1.00
      per
      share payable on July 30, 2007 to holders of record on July 23,
      2007.




On
      July
      10, 2007, the Company appointed Kieran Caterina and Diane M. LaPointe Acting
      Co-Chief Financial Officers.




On
      August 7, 2007, our Board of Directors declared a quarterly dividend of $0.03
      per share to be paid on September 14, 2007 to shareholders of record on
      September 28, 2007.




From
      July 1 through August 9, 2007, we repurchased 27,600 shares of our class A
      common stock, under the Stock Repurchase Program, at an average investment
      of
      $49.09 per share.




13








**ITEM
                2:**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                (INCLUDING QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK)**





*Overview*





GAMCO
      Investors, Inc. (NYSE: GBL), well known for its Private Market Value (PMV)
      with
      a CatalystTM
      investment approach,is a
      widely-recognized provider of investment advisory services to mutual funds,
      institutional and high net worth investors, and investment partnerships,
      principally in the United States.  Through Gabelli & Company,
      Inc., we provide institutional research services to institutional clients and
      investment partnerships.  We generally manage assets on a
      discretionary basis and invest in a variety of U.S. and international securities
      through various investment styles.  Our revenues are based primarily
      on the firm’s levels of assets under management and fees associated with our
      various investment products.





Since
      1977, we have been identified with and have enhanced the “value” style approach
      to investing. Our investment objective is to earn a superior risk-adjusted
      return for our clients over the long-term through our proprietary fundamental
      research.  In addition to our value portfolios, we offer our clients a
      broad array of investment strategies that includes global, growth, international
      and convertible products.  We also offer a series of investment
      partnership (performance fee-based) vehicles that provide a series of long-short
      investment opportunities in market and sector specific opportunities, including
      offerings of non-market correlated investments in merger arbitrage, as well
      as
      fixed income strategies.





Our
      revenues are highly correlated to the level of assets under management and
      fees
      associated with our various investment products, rather than our own corporate
      assets.  Assets under management, which are directly influenced by the
      level and changes of the overall equity markets, can also fluctuate through
      acquisitions, the creation of new products, the addition of new accounts or
      the
      loss of existing accounts.  Since various equity products have
      different fees, changes in our business mix may also affect
      revenues.  At times, the performance of our equity products may differ
      markedly from popular market indices, and this can also impact our
      revenues.  It is our belief that general stock market trends will have
      the greatest impact on our level of assets under management and hence,
      revenues.  This becomes increasingly likely as the base of assets
      grows.




We
      conduct our investment advisory business principally through: GAMCO Asset
      Management Inc. (Separate Accounts), Gabelli Funds, LLC (Mutual Funds) and
      Gabelli Securities, Inc. (Investment Partnerships).  We also act as an
      underwriter, are a distributor of our open-end mutual funds and provide
      institutional research through Gabelli & Company, Inc., our broker-dealer
      subsidiary.




Assets
      Under Management (AUM) were a record $30.6 billion as of June 30, 2007, 4.3%
      higher than March 31, 2007 AUM of $29.4 billion and 14.4% greater than June
      30,
      2006 AUM of $26.8 billion.  Equity assets under management were a
      record $29.9 billion on June 30, 2007, 4.2% more than March 31, 2007 equity
      assets of $28.7 billion and 15.7% above the $25.9 billion on June 30, 2006.
      Our
      closed-end equity funds reached a record AUM of $6.4 billion on June 30, 2007,
      up 3.6% from $6.2 billion on March 31, 2007 and 21.9% higher than the $5.3
      billion on June 30, 2006. Our open-end equity fund AUM were $9.5 billion on
      June
      30, 2007, a 7.6% gain from $8.9 billion on March 31, 2007 and 22.2% from $7.8
      billion at June 30, 2006. Our institutional and high net worth business had
      $13.5 billion in separately managed accounts on June 30, 2007.  While
      up only a nominal 2.1% from $13.2 billion on March 31st, we do
      note that –
as previously disclosed – on June 22nd we were
      displaced
      as a sub-advisor to a mutual fund entity that was sold.  We managed
      $551 million as of March 31, 2007 for this account. Our Investment Partnerships
      AUM were $486 million on June 30, 2007 versus $477 million on March 31, 2007
      and
      $536 million on June 30, 2006. We receive incentive and fulcrum fees for our
      investment partnership assets, certain institutional client assets, preferred
      issues of our closed-end funds and our new closed-end fund launched in January
      2007, the Gabelli Global Deal Fund.  As of June 30, 2007, assets
      generating performance-based fees were $3.6 billion, an increase of 3.8% versus
      the $3.5 billion on March 31, 2007 and 19.5% increase over the $3.0 billion
      on
      June 30, 2006. Fixed income AUM, primarily money market mutual funds, totaled
      $705 million on June 30, 2007 compared to AUM of $640 million on March 31,
      2007
      and AUM of $918 million on June 30, 2006.





14





The
      company reported Assets Under Management as follows:




Assets
      Under Management (millions)




**Table
      I:**


Mutual
                Funds:
            
            **June
                30, 2006**
            
            
            **June
                30, 2007**
            
            
            **%
                Inc. (Dec.)**Open-end
            
            $
            7,796
            
            
            $
            9,529
            
            
            
            22.2
            %Closed-end
            
            
            5,258
            
            
            
            6,412
            
            
            
            21.9Fixed
                Income
            
            
            863
            
            
            
            684
            
            
            
            (20.7
            )Total
                Mutual Funds
            
            
            13,917
            
            
            
            16,625
            
            
            
            19.5Institutional
                & Separate Accounts:Equities:
                direct
            
            
            9,520
            
            
            
            11,116
            
            
            
            16.8“        sub-advisory
            
            
            2,750
            
            
            
            2,383
            
            
            
            (13.3
            )Fixed
                Income
            
            
            55
            
            
            
            21
            
            
            
            (61.8
            )Total
                Institutional & Separate Accounts
            
            
            12,325
            
            
            
            13,520
            
            
            
            9.7Investment
                Partnerships
            
            
            536
            
            
            
            486
            
            
            
            (9.3
            )Total
                Assets Under Management
            
            $
            26,778
            
            
            $
            30,631
            
            
            
            14.4Equities
            
            $
            25,860
            
            
            $
            29,926
            
            
            
            15.7Fixed
                Income
            
            
            918
            
            
            
            705
            
            
            
            (23.2
            )Total
                Assets Under Management
            
            $
            26,778
            
            
            $
            30,631
            
            
            
            14.4





**Table
      II:**


**Assets
                Under Management (millions)****%
                Increase/(decrease)**Mutual
                Funds
            
            
            **6/06**
            
            
            
            **9/06**
            
            
            
            **12/06**
            
            
            
            **3/07**
            
            
            
            **6/07**
            
            
            
            **3/07**
            
            
            
            **6/06**Open-end
            
            $
            7,796
            
            
            $
            7,854
            
            
            $
            8,389
            
            
            $
            8,858
            
            
            $
            9,529
            
            
            
            7.6
            %
            
            
            22.2
            %Closed-end
            
            
            5,258
            
            
            
            5,327
            
            
            
            5,806
            
            
            
            6,188
            
            
            
            6,412
            
            
            
            3.6
            
            
            
            21.9Fixed
                income
            
            
            863
            
            
            
            683
            
            
            
            744
            
            
            
            591
            
            
            
            684
            
            
            
            15.7
            
            
            
            (20.7
            )Total
                Mutual Funds
            
            
            13,917
            
            
            
            13,864
            
            
            
            14,939
            
            
            
            15,637
            
            
            
            16,625
            
            
            
            6.3
            
            
            
            19.5Institutional
                & Separate Accounts:Equities:
                direct
            
            
            9,520
            
            
            
            9,470
            
            
            
            10,282
            
            
            
            10,587
            
            
            
            11,116
            
            
            
            5.0
            
            
            
            16.8“       sub-advisory
            
            
            2,750
            
            
            
            2,725
            
            
            
            2,340
            
            
            
            2,608
            
            
            
            2,383
            
            
            
            (8.6
            )
            
            
            (13.3
            )Fixed
                Income
            
            
            55
            
            
            
            54
            
            
            
            50
            
            
            
            49
            
            
            
            21
            
            
            
            (57.1
            )
            
            
            (61.8
            )Total
                Institutional & Separate Accounts
            
            
            12,325
            
            
            
            12,249
            
            
            
            12,672
            
            
            
            13,244
            
            
            
            13,520
            
            
            
            2.1
            
            
            
            9.7Investment
                Partnerships
            
            
            536
            
            
            
            488
            
            
            
            491
            
            
            
            477
            
            
            
            486
            
            
            
            1.9
            
            
            
            (9.3
            )Total
                Assets Under Management
            
            $
            26,778
            
            
            $
            26,601
            
            
            $
            28,102
            
            
            $
            29,358
            
            
            $
            30,631
            
            
            
            4.3
            
            
            
            14.4





**Table
                III:**
            **Fund
                Flows – 2nd
                Quarter 2007
                (millions)****March
                31,**
              **2007**
            **Net**
              **Cash
                Flows**
            **Market**
              **Appreciation
                / (Depreciation)**
            **June
                30,**
              **2007**


Mutual
                  Funds:Equities
              
              $
              15,046
              
              
              $
              149
              
              
              $
              746
              
              
              $
              15,941Fixed
                  Income
              
              
              591
              
              
              
              80
              
              
              
              13
              
              
              
              684Total
                  Mutual Funds
              
              
              15,637
              
              
              
              229
              
              
              
              759
              
              
              
              16,625Institutional
                  & Separate AccountsEquities:
                  direct
              
              
              10,587
              
              
              
              (161
              )
              
              
              690
              
              
              
              11,116“        sub-advisory
              
              
              2,608
              
              
              
              (415
              )
              
              
              190
              
              
              
              2,383Fixed
                  Income
              
              
              49
              
              
              
              (29
              )
              
              
              1
              
              
              
              21Total
                  Institutional & Separate Accounts
              
              
              13,244
              
              
              
              (605
              )
              
              
              881
              
              
              
              13,520Investment
                  Partnerships
              
              
              477
              
              
              
              (3
              )
              
              
              12
              
              
              
              486Total
                  Assets Under Management
              
              $
              29,358
              
              
              $
              (379
              )
              
              $
              1,652
              
              
              $
              30,631


15


**Recent
      regulatory developments**





On
      September 3, 2003, the New York Attorney General’s office (“NYAG”) announced
      that it had found evidence of widespread improper trading involving mutual
      fund
      shares.  These transactions included the “late trading” of mutual fund
      shares after the 4:00 p.m. pricing cutoff and “time zone arbitrage” of mutual
      fund shares designed to exploit pricing inefficiencies.  Since the
      NYAG’s announcement, the NASD, the SEC, the NYAG and officials of other states
      have been conducting inquiries into and bringing enforcement actions related
      to
      trading abuses in mutual fund shares.  We have received information
      requests and subpoenas from the SEC and the NYAG in connection with their
      inquiries and have been complying with these requests for documents and
      testimony. We implemented additional compliance policies and procedures in
      response to recent industry initiatives and an internal review of our mutual
      fund practices and procedures in a variety of areas.  A special
      committee of all of our independent directors was also formed to review various
      issues involving mutual fund share transactions and was assisted by independent
      counsel.





As
      part
      of our review, hundreds of documents were examined and approximately fifteen
      individuals were interviewed.  We have found no evidence that any
      employee participated in or facilitated any “late trading”.  We also
      have found no evidence of any improper trading in our mutual funds by our
      investment professionals or senior executives.  As we previously
      reported, we did find that in August of 2002, we banned an account, which had
      been engaging in frequent trading in our Global Growth Fund (the prospectus
      of
      which did not impose limits on frequent trading) and which had made a small
      investment in one of our hedge funds, from further transactions with our firm.
      Certain other investors had been banned prior to that.  We also found
      that certain discussions took place in 2002 and 2003 between GAMCO’s staff and
      personnel of an investment advisor regarding possible frequent trading in
      certain Gabelli domestic equity funds.  In June 2006, we began
      discussions with the SEC staff for a potential resolution of their
      inquiry.  In February 2007, one of our advisory subsidiaries made an
      offer of settlement to the SEC staff for communication to the Commission for
      its
      consideration to resolve this matter. This offer of settlement is subject to
      final agreement regarding the specific language of the SEC’s administrative
      order and other settlement documents. As a result of these developments, we
      recorded a reserve of approximately $15.0 million in 2006. Since these
      discussions are ongoing, we cannot determine at this time whether they will
      ultimately result in a settlement of this matter, whether our reserves will
      be
      sufficient to cover any payments by GAMCO related to such a settlement, or
      whether and to what extent insurance may cover such payments.





In
      September 2005, we were informed by the staff of the SEC that they may recommend
      to the Commission that one of our advisory subsidiaries be held accountable
      for
      the actions of two of the eight closed-end funds managed by the subsidiary
      relating to Section 19(a) and Rule 19a-1 of the Investment Company Act of
      1940.  These provisions require registered investment companies to
      provide written statements to shareholders when a dividend is made from a source
      other than net investment income.  While the funds sent annual
      statements containing the required information and Form 1099-Div statements
      as
      required by the IRS, the funds did not send written statements to shareholders
      with each distribution in 2002 and 2003.  The staff indicated that
      they may recommend to the Commission that administrative remedies be sought,
      including a monetary penalty. The closed-end funds changed their notification
      procedures, and we believe that all of the funds are now in
      compliance.





In
      response to industry-wide inquiries and enforcement actions, a number of
      regulatory and legislative initiatives were introduced.  The SEC has
      proposed and adopted a number of rules under the Investment Company Act and
      the
      Investment Advisers Act and is currently studying potential major revisions
      of
      other rules.  The SEC adopted rules requiring written compliance
      programs for registered investment advisers and registered investment companies
      and additional disclosures regarding portfolio management and advisory contract
      renewals.  In addition, several bills were introduced in a prior
      Congress that, if adopted, would have amended the Investment Company
      Act.  These proposals, if reintroduced and enacted, or if adopted by
      the SEC, could have a substantial impact on the regulation and operation of
      our
      registered and unregistered funds.  For example, certain of these
      proposals would, among other things, limit or eliminate Rule 12b-1 distribution
      fees, limit or prohibit third party soft dollar arrangements and restrict the
      management of hedge funds and mutual funds by the same portfolio
      manager.




The
      investment management industry is likely to continue facing a high level of
      regulatory scrutiny and become subject to additional rules designed to increase
      disclosure, tighten controls and reduce potential conflicts of
      interest.  In addition, the SEC has substantially increased its use of
      focused inquiries in which it requests information from a number of fund
      complexes regarding particular practices or provisions of the securities
      laws.  We participate in some of these inquiries in the normal course
      of our business.  Changes in laws, regulations and administrative
      practices by regulatory authorities, and the associated compliance costs, have
      increased our cost structure and could in the future have a material
      impact.





The
      following discussion should be read in conjunction with the Condensed
      Consolidated Financial Statements and the notes thereto included in Item 1
      to
      this report.





16








**RESULTS
      OF OPERATIONS**




**Three
      Months Ended June 30, 2007 Compared To Three Months Ended June 30,
      2006**





Condensed
      Consolidated Results – Three Months Ended June 30:


(Unaudited;
      in thousands, except per share data)


**2007**
            
            
            **2006
                (a)****Revenues**Investment
                advisory and incentive fees
            
            $
            57,654
            
            
            $
            53,586Commission
                revenue
            
            
            4,036
            
            
            
            2,829Distribution
                fees and other income
            
            
            6,587
            
            
            
            5,244Total
                revenues
            
            
            68,277
            
            
            
            61,659**Expenses**Compensation
                and related costs
            
            
            29,905
            
            
            
            25,436Management
                fee
            
            
            3,449
            
            
            
            1,818Distribution
                costs
            
            
            10,161
            
            
            
            5,329Other
                operating expenses
            
            
            7,594
            
            
            
            7,713Reserve
                for settlement
            
            
            -
            
            
            
            11,900Total
                expenses
            
            
            51,109
            
            
            
            52,196Operating
                income
            
            
            17,168
            
            
            
            9,463**Other
                income (expense)**Net
                gain from investments
            
            
            11,193
            
            
            
            4,244Interest
                and dividend income
            
            
            6,166
            
            
            
            6,111Interest
                expense
            
            
            (3,329
            )
            
            
            (3,394
            )Total
                other income (expense), net
            
            
            14,030
            
            
            
            6,961Income
                before taxes and minority interest
            
            
            31,198
            
            
            
            16,424Income
                tax provision
            
            
            12,856
            
            
            
            7,360Minority
                interest
            
            
            345
            
            
            
            119Net
                income
            
            $
            17,997
            
            
            $
            8,945Net
                income per share:Basic
            
            $
            0.64
            
            
            $
            0.31Diluted
            
            $
            0.63
            
            
            $
            0.31Reconciliation
                of Net income to Adjusted EBITDA:Net
                income
            
            $
            17,997
            
            
            $
            8,945Interest
                Expense
            
            
            3,329
            
            
            
            3,394Income
                tax provision and minority interest
            
            
            13,201
            
            
            
            7,479Depreciation
                and amortization
            
            
            216
            
            
            
            220Adjusted
                EBITDA(b)
            
            $
            34,743
            
            
            $
            20,038




(a)
                As restated to reflect the reversal of certain previously-accrued
                expenses
                for investment partnership compensation as described in note A in
                item 1
                of this report on Form 10-Q.





(b)
                Adjusted EBITDA is defined as earnings before interest, taxes,
                depreciation and amortization, and minority interest.  Adjusted
                EBITDA is a non-GAAP measure and should not be considered as an
                alternative to any measure of performance as promulgated under accounting
                principles generally accepted in the United States nor should it
                be
                considered as an indicator of our overall financial
                performance.  We use Adjusted EBITDA as a supplemental measure
                of performance as we believe it gives investors a more complete
                understanding of our operating results before the impact of investing
                and
                financing activities as a tool for determining the private market
                value of
                an enterprise.





Total
      revenues were $68.3 million in the second quarter of 2007 up $6.6 million or
      10.7% from total revenues of $61.7 million reported in the second quarter of
      2006.  Operating income was $17.2 million, an increase of $7.7 million
      or 81.4% from the $9.5 million in the second quarter of 2006.  Total
      other income, net of interest expense, increased to $14.0 million for the second
      quarter 2007, doubling from the $7.0 million for second quarter
      2006.  In the short-run, our results remain sensitive to changes in
      the equity market.  Net income for the quarter was $18.0 million or
      $0.63 per fully diluted share versus $8.9 million or $0.31 per fully diluted
      share in the prior year’s quarter.




Investment
      advisory and incentive fees increased to $57.7 million, an increase of $4.1
      million or 7.6% compared to the revenues in 2006. Our closed-end funds revenues
      surged 19.2% to $12.8 million in the second quarter 2007 from $10.8 million
      in
      2006 primarily due to higher performance and the launch of a new fund. Open-end
      mutual funds revenues grew 15.7% to $23.3 million from $20.1 million in second
      quarter 2006 primarily due to higher performance. Institutional and high net
      worth separate accounts revenues decreased 2.4% to $20.3 million from $20.7
      million in second quarter 2006 primarily due to lower performance related fees.
      Investment Partnership revenues were $1.2 million, $0.7 million or 35.0% below
      revenues in 2006.  The decline was primarily due to lower management
      fees resulting from a decrease in AUM.





Commission
      revenues from our institutional research affiliate, Gabelli & Company, Inc.,
      were $4.0 million in the second quarter 2007, up 42.7% from the prior
      year.  The increase was traced to an increase in overall trading
      volume and to a change in the mix of business transacted.





Revenues
      from the distribution of mutual funds and other income were $6.6 million for
      the
      second quarter 2007, an increase of $1.4 million, or 25.6%, from $5.2 million in
      second quarter 2006.





Total
      expenses, excluding management fee, were $47.7 million in the second quarter
      of
      2007, a 5.4% decrease from total expenses of $50.4 million in the second quarter
      of 2006.  Included within second quarter 2007 total expenses are
      approximately $4.2 million in distribution costs associated with the termination
      of a closed-end fund compensation agreement. Second quarter 2006 total expenses
      include a previously-reported special charge of approximately $12
      million.





Compensation
      and related costs, which are largely variable, of $29.9 million were $4.5
      million or 17.6% higher than the $25.4 million recorded in the prior year
      period.  This increase was primarily due to higher variable
      compensation of $2.9 million and increased salaries of $1.4
      million.




Management
      fee expense, which is totally variable and based on pretax income, was $3.4
      million versus $1.8 million in 2006.


17


Distribution
      costs were $10.2 million, near double the $5.3 million in the prior year’s
      period. The termination of a closed-end fund compensation agreement increased
      the current quarter’s costs by $4.2 million.




Other
      operating expenses, excluding the previously mentioned special charge in the
      second quarter of 2006  reserve of approximately $12 million, remained
      relatively flat, at $7.6 million.





Total
      other income (which represents primarily investment income in our proprietary
      investments), net of interest expense, was $14.0 million for the second quarter
      2007 compared to $7.0 million in 2006.





Interest
      expense remained relatively flat, decreasing approximately $0.1 million from
      the
      prior year second quarter amount of $3.4 million.




The
      effective tax rate for the three months ended June 30, 2007 was 41.2% as
      compared to the prior year quarter’s effective rate of
      44.8%.




Minority
      interest increased to $0.3 million in 2007 from $0.1 million in
      2006.




In
      the
      first quarter of 2006, the provisions of FASB Interpretation No. 46R (“FIN 46R”)
      and Emerging Issue Task Force 04-5 (“EITF 04-5”) required the consolidation of
      our investment partnerships and offshore funds managed by our subsidiaries
      into
      our consolidated financial statements. However, since we amended the agreements
      of certain investment partnerships and an offshore fund on March 31, 2006,
      FIN
      46R and EITF 04-5 only required us to consolidate these entities on our
      consolidated condensed statement of income for the first quarter
      2006.  Accordingly, to provide a better understanding of our core
      results and trends, GAMCO has provided the 2006 results throughout the following
      analysis before adjusting for FIN 46R and EITF 04-5.  These results
      are not presented in accordance with generally accepted accounting principles
      (“GAAP”) in the United States.  A reconciliation of these non-GAAP
      financial measures to results presented in accordance with GAAP is presented
      below.





**Six
      Months Ended June 30, 2007 Compared To Six Months Ended June 30,
      2006**


Condensed
      Consolidated Results – Six Months Ended June 30th:


(Unaudited;
      in thousands, except per share data)


**2006
                (a)**
            
            
            **2006
                (b)**
            
            
            **Adjust-**
              **ments(c)**
            
            
            **2006
                (d)**
            
            
            **2007
                (e)****Revenues**Investment
                advisory and incentive fees
            
            $
            106,413
            
            
            $
            104,947
            
            
            $
            (963
            )
            
            $
            103,984
            
            
            $
            114,214Commission
                revenue
            
            
            6,380
            
            
            
            6,380
            
            
            
            -
            
            
            
            6,380
            
            
            
            8,056Distribution
                fees and other income
            
            
            10,579
            
            
            
            10,579
            
            
            
            -
            
            
            
            10,579
            
            
            
            12,613Total
                revenues
            
            
            123,372
            
            
            
            121,906
            
            
            
            (963
            )
            
            
            120,943
            
            
            
            134,883**Expenses**Compensation
                and related costs
            
            
            54,233
            
            
            
            50,212
            
            
            
            -
            
            
            
            50,212
            
            
            
            58,279Management
                fee
            
            
            5,282
            
            
            
            5,235
            
            
            
            -
            
            
            
            5,235
            
            
            
            6,850Distribution
                costs
            
            
            10,544
            
            
            
            10,544
            
            
            
            -
            
            
            
            10,544
            
            
            
            16,047Other
                operating expenses
            
            
            15,104
            
            
            
            14,915
            
            
            
            189
            
            
            
            15,104
            
            
            
            16,028Reserve
                for settlement
            
            
            11,900
            
            
            
            11,900
            
            
            
            -
            
            
            
            11,900
            
            
            
            -Total
                expenses
            
            
            97,063
            
            
            
            92,806
            
            
            
            189
            
            
            
            92,995
            
            
            
            97,204Operating
                income
            
            
            26,309
            
            
            
            29,100
            
            
            
            (1,152
            )
            
            
            27,948
            
            
            
            37,679**Other
                income (expense)**Net
                gain from investments
            
            
            27,369
            
            
            
            13,597
            
            
            
            13,772
            
            
            
            27,369
            
            
            
            16,763Interest
                and dividend income
            
            
            12,484
            
            
            
            11,159
            
            
            
            1,325
            
            
            
            12,484
            
            
            
            14,168Interest
                expense
            
            
            (7,269
            )
            
            
            (6,678
            )
            
            
            (591
            )
            
            
            (7,269
            )
            
            
            (6,709
            )Total
                other income (expense), net
            
            
            32,584
            
            
            
            18,078
            
            
            
            14,506
            
            
            
            32,584
            
            
            
            24,222Income
                before taxes and minority interest
            
            
            58,893
            
            
            
            47,178
            
            
            
            13,354
            
            
            
            60,532
            
            
            
            61,901Income
                tax provision
            
            
            23,285
            
            
            
            18,893
            
            
            
            5,008
            
            
            
            23,901
            
            
            
            24,063Minority
                interest
            
            
            7,458
            
            
            
            381
            
            
            
            8,346
            
            
            
            8,727
            
            
            
            677Net
                income
            
            $
            28,150
            
            
            $
            27,904
            
            
            $
            -
            
            
            $
            27,904
            
            
            $
            37,161Net
                income per share:Basic
            
            $
            0.98
            
            
            $
            0.97
            
            
            $
            -
            
            
            $
            0.97
            
            
            $
            1.32Diluted
            
            $
            0.97
            
            
            $
            0.96
            
            
            $
            -
            
            
            $
            0.96
            
            
            $
            1.30Reconciliation
                of Net income to Adjusted EBITDA:Net
                income
            
            $
            28,150
            
            
            $
            27,904
            
            
            $
            -
            
            
            $
            27,904
            
            
            $
            37,161Interest
                Expense
            
            
            7,269
            
            
            
            6,678
            
            
            
            591
            
            
            
            7,269
            
            
            
            6,709Income
                tax provision and minority interest
            
            
            30,743
            
            
            
            19,274
            
            
            
            13,354
            
            
            
            32,628
            
            
            
            24,740Depreciation
                and amortization
            
            
            444
            
            
            
            444
            
            
            
            -
            
            
            
            444
            
            
            
            522Adjusted
                EBITDA (f)
            
            $
            66,606
            
            
            $
            54,300
            
            
            $
            13,945
            
            
            $
            68,245
            
            
            $
            69,132




(a)
            As
                originally reported. Non-GAAP.





(b)
            Financial
                results before adjustments relating to FIN 46R and EITF 04-5 as described
                above and in Note D to the condensed consolidated financial statements
                in
                this report on Form 10-Q (not GAAP), and as restated to reflect the
                reversal of certain previously-accrued expenses for investment partnership
                compensation.





(c)
            Adjustments
                relating to FIN 46R and EITF 04-5.





(d)
            GAAP
                basis as restated to reflect the reversal of certain previously-accrued
                expenses for investment partnership compensation as described in
                note A in
                item 1 of this report on Form 10-Q.





(e)
            GAAP
                basis.





(f)
            Adjusted
                EBITDA is defined as earnings before interest, taxes, depreciation
                and
                amortization, and minority interest.  Adjusted EBITDA is a
                Non-GAAP measure and should not be considered as an alternative to
                any
                measure of performance as promulgated under accounting principles
                generally accepted in the United States nor should it be considered
                as an
                indicator of our overall financial performance.  We use Adjusted
                EBITDA as a supplemental measure of performance as we believe it
                gives
                investors a more complete understanding of our operating results
                before
                the impact of investing and financing activities as a tool for determining
                the private market value of an
                enterprise.


18


Total
      revenues were $134.9 million in the six months ended June 30, 2007, up $13.0
      million or 10.7% from total revenues of $121.9 million in the prior year’s
      period excluding the adjustments relating to FIN 46R and EITF 04-5 as described
      above.  Operating income was $37.7 million, an increase of $8.6
      million or 29.6% from the $29.1 million in 2006 on a comparable reporting
      basis.  Total other income, net of interest expense, was $24.2 million
      compared to $18.1 million in 2006 on a comparable reporting basis. Net income
      for the period was $37.2 million or $1.30 per fully diluted share versus $27.9
      million or $0.96 per fully diluted share in the prior year’s
      period.




Investment
      advisory and incentive fees increased $10.2 million or 9.8% to $114.2 million
      from $104.0 million in 2006.  Investment advisory and incentive fees
      increased $9.3 million or 8.9% to $114.2 million from $104.9 million in 2006
      excluding the adjustments relating to FIN 46R and EITF 04-5. Our closed-end
      funds revenues surged 17.3% to $24.6 million for the six months ended June
      30,
      2007 from $21.0 million in 2006 primarily due to increased average AUM. Open-end
      mutual funds revenues grew 11.0% to $44.7 million from $40.2 million in 2006
      primarily due to higher average AUM. Institutional and high net worth separate
      accounts revenues increased 4.3% to $41.9 million from $40.1 million reported
      in
      2006 primarily due to higher performance fees. Investment Partnership revenues
      were $3.0 million versus $3.6 million in 2006 before adjusting for FIN 46R
      and
      EITF 04-5.





Commission
      revenues from our institutional research affiliate, Gabelli & Company, Inc.,
      were $8.1 for the six months ended June 30, 2007, up 30.5% from the prior year’s
      comparable amount of $6.2 million.  The increase was due to overall
      trading volume as well as to an increase in higher average per share revenue
      due
      to changes in trade mix.




Revenues
      from the distribution of mutual funds and other income were $12.6 million for
      the six months ended June 30, 2007, an increase of $2.0 million, or 18.9%,
      from
      $10.6 million from the 2006 period.




Total
      expenses, excluding management fee, were $90.4 million in the six months ended
      June 30, 2007, a 3.0% decrease from total expenses of $87.8 million in the
      2006
      period. Included within the six months ended June 30, 2007 are approximately
      $4.2 million in distribution costs associated with the termination of a
      closed-end fund compensation agreement. In addition, for the six months ended
      June 30, 2006 total expenses include the previously reported special charge
      of
      approximately $12 million.





Compensation
      and related costs, which are largely variable, were $58.3 million or 16.1%
      higher than the $50.2 million recorded in the prior year period.  This
      increase was primarily due to higher variable compensation of $4.9 million
      and
      increased salaries of $2.4 million.




Management
      fee expense, which is totally variable and based on pretax income, was $6.9
      million versus $5.2 million in 2006.




Distribution
      costs were $16.0 million, an increase of 52.2% from $10.5 million in the prior
      year’s period due to the termination of a closed-end fund compensation
      agreement, which increased the distribution costs for the first half of 2007
      by
      $4.2 million.





Other
      operating expenses increased by $0.9 million to $16.0 million in the first
      half
      of 2007 from the prior year period of $15.1 million, excluding the previously
      mentioned $12 million reserve in the first half of 2006.





Other
      income, net of interest expense, was $24.2 million in the first half of 2007,
      a
      decline of $8.4 million from $32.6 million in the first half of
      2006.  The 2006 results include $14.5 million relating to adjustments
      for FIN 46R and EITF 04-5. Excluding the adjustments relating to FIN 46R and
      EITF 04-5, other income, net of interest expense, was $18.1 million for the
      six
      months ended June 30, 2006.Interest expense fell to $6.7 million for the six
      months ended June 30, 2007 from $7.3 million for the prior year period. The
      decrease was primarily due to lower debt outstanding as a result of the
      retirement of the 5.22% senior notes in February 2007.




For
      the
      six months ended June 30, 2007, the effective tax rate was 38.9% as compared
      to
      39.5% in the prior year’s comparable period.




Minority
      interest decreased to $0.7 million in 2007 from $8.7 million in 2006 principally
      due to adjustments related to the consolidation of investment partnerships
      and
      offshore fund in accordance with FIN 46R and EITF 04-5 during first quarter
      2006. Excluding the adjustments relating to FIN 46R and EITF 04-5, minority
      interest was $0.4 million for the six months ended June 30, 2006.





19





**LIQUIDITY
      AND CAPITAL RESOURCES**





Our
      assets are primarily liquid, consisting mainly of cash, short term investments,
      securities held for investment purposes and investments in partnerships and
      affiliates in which we are a general partner, limited partner or investment
      manager. Investments in partnerships and affiliates are generally illiquid;
      however the underlying investments in such entities are generally liquid and
      the
      valuations of the investment partnerships and affiliates reflect this underlying
      liquidity.





Summary
      cash flow data is as follows:





**Six
                Months Ended**
              **June
                30,**
              **(in
                thousands)**Cash
                flows provided by (used in):
            
            **2007**
            
            
            **2006
                (a)**Operating
                activities
            
            $
            78,186
            
            
            $
            (32,090
            )Investing
                activities
            
            
            (22,962
            )
            
            
            (1,767
            )Financing
                activities
            
            
            (88,627
            )
            
            
            (23,938
            )Decrease
            
            
            (33,403
            )
            
            
            (57,795
            )Effect
                of exchange rates on cash and cash equivalents
            
            
            16
            
            
            
            (64
            )Net
                increase in cash from partnerships and offshore funds consolidated
                under
                FIN 46R and EITF 04-5
            
            
            -
            
            
            
            1,550Cash
                and cash equivalents at beginning of period
            
            
            138,113
            
            
            
            173,161Cash
                and cash equivalents at end of period
            
            $
            104,726
            
            
            $
            116,852





(a)
                As restated to reflect the reversal of certain previously-accrued
                expenses
                for investment partnership compensation as described in Note A of
                this
                report on Form 10-Q.




Cash
      requirements and liquidity needs have historically been met through cash
      generated by operating activities and through our borrowing
      capacity.  We have received investment grade ratings from both Moody’s
      Investors Services and Standard & Poor’s Rating Services.  These
      investment grade ratings expand our ability to attract both public and private
      capital.   Our shelf registrations provide us opportunistic
      flexibility to sell any combination of senior and subordinate debt securities,
      convertible debt securities, equity securities (including common and preferred
      stock), and other securities up to a total amount of $520 million.




At
      June
      30, 2007, we had total cash and cash equivalents of $104.7 million, a decrease
      of $33.4 million from December 31, 2006.  Gabelli has established a
      collateral account, consisting of cash and cash equivalents and investments
      in
      securities totaling $52.6 million, to secure a letter of credit issued in favor
      of the holder of the $50 million 6% convertible note.  On April 18,
      2007, a put option the note holder may exercise was extended from May 15, 2007
      to December 17, 2007 and the letter of credit was extended from May 15, 2007
      to
      December 24, 2007.  Cash and cash equivalents and investments in
      securities held in the collateral account are restricted from other uses until
      the date of expiration. Cash and cash equivalents and investments in securities
      held by investment partnerships and offshore funds consolidated under FIN 46R
      and EITF 04-5 are also restricted from use for general operating purposes.
      Total
      debt outstanding at June 30, 2007 was $150.0 million, consisting of the $50
      million 6% convertible note and $100 million of 5.5% non-callable senior notes
      due May 15, 2013.  In February 2007, the Company retired the $82.3
      million in 5.22% Senior Notes due February 17, 2007.





For
      the
      six months ended June 30, 2007, cash provided by operating activities was $78.2
      million principally resulting from $37.2 million in net income, proceeds from
      sales of investments in securities of $875.9 million, a $10.0 million decrease
      in receivable from brokers, $13.2 million in distributions from partnerships
      and
      affiliates, and a $12.7 million decrease in investment advisory fee receivable.
      This was partially offset by $852.8 million in purchases of investments in
      securities, $4.1 million in purchases of investments in partnerships and
      affiliates and a $3.8 million decrease in income taxes payable.




Cash
      used
      in investing activities, related to purchases and sales of available for sale
      securities, was $23.0 million in the first six months of 2007.




Cash
      used
      in financing activities in the first six months of 2007 was $88.6
      million.  The decrease in cash was primarily due to the $82.3 million
      retirement of senior notes and $6.8 million in dividends paid and the repurchase
      of our class A common stock under the Stock Repurchase Program.




Cash
      used
      in operating activities was $32.1 million in the first six months of 2006
      principally resulting from $537.6 million in purchases of investments in
      securities, a $27.6 million increase in receivable from brokers, $4.0 million
      in
      purchases of investments in partnerships and affiliates and $39.9 million from
      the net effects of the FIN 46R and EITF 04-5 consolidation.  This was
      partially offset by $27.9 million in net income, proceeds from sales of
      investments in securities of $527.5 million, $7.9 million in distributions
      from
      investments in partnerships and affiliates and an increase in compensation
      payable of $7.0 million.  Excluding the net effects of the
      consolidation of investment partnerships and offshore funds, our cash provided
      by operating activities was $7.8 million.




Cash
      used
      in investing activities, related to purchases and sales of available for sale
      securities, was $1.8 million in the first six months of 2006.




Cash
      used
      in financing activities in the first six months of 2006 was $23.9
      million.  The decrease in cash principally resulted from the
      repurchase of our class A common stock under the Stock Repurchase Program of
      $52.3 million partially offset by a $29.7 million in contributions by partners
      into our investment partnerships. Excluding the net effects of the consolidation
      of investment partnerships and offshore funds, our net cash used in financing
      activities was $53.7 million.




Based
      upon our current level of operations and anticipated growth, we expect that
      our
      current cash balances plus cash flows from operating activities and our
      borrowing capacity will be sufficient to finance our working capital needs
      for
      the foreseeable future.  We have no material commitments for capital
      expenditures.




Gabelli
      & Company, Inc., a subsidiary of GAMCO, is registered with the Securities
      and Exchange Commission as a broker-dealer and is a member of the National
      Association of Securities Dealers. As such, it is subject to the minimum net
      capital requirements promulgated by the Commission. Gabelli & Company's net
      capital has historically exceeded these minimum requirements. Gabelli &
Company computes its net capital under the alternative method permitted by
      the
      Commission, which requires minimum net capital of the greater of $250,000 or
      2%
      of the aggregate debt items in the reserve formula for those broker-dealers
      subject to Rule 15c3-3.  The requirement was $250,000 at June 30,
      2007.  At June 30, 2007, Gabelli & Company had net capital, as
      defined, of approximately $16.8 million, exceeding the regulatory requirement
      by
      approximately $16.6 million.  Gabelli & Company’s net capital, as
      defined, may be reduced when Gabelli & Company is involved in firm
      commitment underwriting activities.  This did not occur as of or for
      the six months ended June 30, 2007.





20


**Market
      Risk**





Our
      primary market risk exposure is to changes in equity prices and interest
      rates.  Since over 95% of our AUM are equities, our financial results
      are subject to equity-market risk as revenues from our money management services
      are sensitive to stock market dynamics.  In addition, returns from our
      proprietary investment portfolio are exposed to interest rate and equity market
      risk.




We
      are
      subject to potential losses from certain market risks as a result of absolute
      and relative price movements in financial instruments due to changes in interest
      rates, equity prices and other factors.  Our exposure to market risk
      is directly related to our role as financial intermediary, adviser and general
      partner for assets under management in our mutual funds, institutional and
      separate accounts business, investment partnerships and our proprietary
      investment activities.




With
      respect to our proprietary investment activities, included in investments in
      securities of $550.3 million at June 30, 2007 were investments in Treasury
      Bills
      and Notes of $116.5 million, mutual funds, largely invested in equity products,
      of $172.6 million, a selection of common and preferred stocks totaling $192.4
      million, investments in corporate bonds of $67.6 million, and other investments
      of approximately $1.2 million.  Investments in mutual funds generally
      lower market risk through the diversification of financial instruments within
      their portfolio.  In addition, we may alter our investment holdings
      from time to time in response to changes in market risks and other factors
      considered appropriate by management.  Of the approximately $192.4
      million invested in common and preferred stocks at June 30, 2007, $43.1 million
      was related to our investment in Westwood Holdings Group Inc., and $40.9 million
      was invested in risk arbitrage opportunities in connection with mergers,
      consolidations, acquisitions, tender offers or other similar transactions.
      Securities sold, not yet purchased are financial instruments purchased under
      agreements to resell and financial instruments sold under agreement to
      repurchase.  These financial instruments are stated at fair value and
      are subject to market risks resulting from changes in price and volatility.
      At
      June 30, 2007 and 2006, the market value of securities sold, not yet purchased
      was $21.0 million and $7.6 million, respectively. Investments in partnerships
      and affiliates totaled $69.9 million at June 30, 2007, the majority of which
      consisted of investment partnerships and offshore funds which invest in risk
      arbitrage opportunities.  These transactions generally involve
      announced deals with agreed-upon terms and conditions, including pricing, which
      typically involve less market risk than common stocks held in a trading
      portfolio.  The principal risk associated with risk arbitrage
      transactions is the inability of the companies involved to complete the
      transaction.




GAMCO’s
      exposure to interest rate risk results, principally, are from the impact of
      changes in interest rates in the global market and its investment of excess
      cash
      in U.S. Government obligations.  These investments are primarily short
      term in nature, and the carrying value of these investments generally
      approximates market value.




Our
      revenues are largely driven by the market value of our assets under management
      and are therefore exposed to fluctuations in market
      prices.  Investment advisory fees for mutual funds are based on
      average daily asset values.  Management fees earned on institutional
      and high net worth separate accounts, for any given quarter, are generally
      determined based on asset values on the last day of the preceding
      quarter.  Any significant increases or decreases in market value of
      institutional and high net worth separate accounts assets managed which occur
      on
      the last day of the quarter will generally result in a relative increase or
      decrease in revenues for the following quarter.





**Critical
      Accounting Policies and Estimates**





Management
      believes certain critical accounting policies affect its more significant
      judgments and estimates used in the preparation of its consolidated financial
      statements.  Due to the implementation of
      Interpretation  No. 48 “Accounting for Uncertainty in Income Taxes –
an interpretation of FASB Statement No. 109” (“FIN 48”), we modified our
      critical accounting policy related to accounting for income taxes, which is
      listed below.  The Company’s other critical accounting policies and
      estimates are disclosed in the “Significant Accounting Policies” section of our
      2006 Form 10-K/A.





In
      June
      2006, the Financial Accounting Standards Board issued FIN 48, to clarify certain
      aspects of accounting for uncertain tax positions.  FIN 48 clarifies
      the accounting for income taxes by prescribing a minimum recognition threshold
      that a tax provision is required to meet before being recognized in the
      financial statements.  FIN 48 also provides guidance on derecognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition.  The Company adopted FIN 48 on
      January 1, 2007.





*Accounting
      for Income Taxes*





Income
      tax expense is based on pre-tax financial accounting income, including
      adjustments made for the recognition or derecognition related to uncertain
      tax
      positions.  The recognition or derecognition of income tax expense
      related to uncertain tax positions is determined under the guidance as
      prescribed by FIN 48.





**Recent
      Accounting Developments**





In
      February 2006, the FASB issued FASB Statement No. 155, “Accounting for Certain
      Hybrid Financial Instruments – an amendment of FASB Statement No. 133 and 140,”
(“Statement 155”) that amends FASB Statements No. 133 “Accounting for Derivative
      Instruments and Hedging Activities,” (“Statement 133”) and No. 140 “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities a replacement of FASB Statement 125” (“Statement
      140”).  The statement permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation; clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of Statement 133; establishes a
      requirement to evaluate interests in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation; clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives; amends Statement 140 to eliminate the prohibition on a qualifying
      special-purpose entity from holding a derivative financial instrument that
      pertains to a beneficial interest other than another derivative financial
      instrument.  Statement 155 does not permit prior period
      restatement.  The statement is effective for all financial instruments
      acquired or issued after the beginning of an entity’s first fiscal year that
      begins after September 15, 2006.  The Company adopted this statement
      on January 1, 2007.  The impact of adopting this statement has been
      immaterial to the Company’s consolidated financial statements.





In
      April
      2006, the FASB issued FSP FIN 46R-6 “Determining the Variability to be
      Considered in Applying FASB Interpretation No. 46(R)” (“FSP”).  The
      FSP addresses certain major implementation issues related to FIN 46R,
      specifically how a reporting enterprise should determine the variability to
      be
      considered in applying FIN 46R. The FSP is effective as of the beginning of
      the
      first day of the first reporting period beginning after September 15, 2006.
      The
      Company adopted this Statement on January 1, 2007.  The impact of
      adopting this statement has been immaterial to the Company’s consolidated
      financial statements.





In
      June
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes” (“FIN 48”), which is an interpretation of FAS 109. This
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. This interpretation is effective for
      fiscal years beginning after December 15, 2006. The Company adopted this
      interpretation on January 1, 2007.   See Note F to the condensed
      consolidated financial statements of this report on Form 10-Q for
      discussion.





In
      September 2006, the FASB issued FASB Statement No. 157, “Fair Value
      Measurements” (“Statement 157”). The statement provides guidance for using fair
      value to measure assets and liabilities. The statement provides guidance to
      companies about the extent of which to measure assets and liabilities at fair
      value, the information used to measure fair value, and the effect of fair value
      measurements on earnings. The statement applies whenever other standards require
      (or permit) assets or liabilities to be measured at fair value. The statement
      does not expand the use of fair value in any new circumstances. The statement
      is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007 and for interim periods within those fiscal years. The Company
      plans to adopt this statement on January 1, 2008. The impact of adopting
      Statement 157 is expected to be immaterial to the Company’s consolidated
      financial statements.





In
      September 2006, the SEC released Staff Accounting Bulletin No. 108, "Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements" (the “SAB”). The SAB addresses diversity in
      how companies consider and resolve the quantitative effect of financial
      statement misstatements. The SAB is effective as of the beginning
      of  the first day of the first reporting period beginning after
      November 15, 2006.  The Company adopted this SAB on January 1,
      2007.  The impact of adopting this SAB has been immaterial to the
      Company’s consolidated financial statements.





In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
      115,” (“Statement 159”), which provides companies with an option to report
      selected financial assets and liabilities at fair value. The standard’s
      objective is to reduce both the complexity in accounting for financial
      instruments and the volatility in earnings caused by measuring related assets
      and liabilities differently. Statement 159 also establishes presentation and
      disclosure requirements designed to facilitate comparisons between companies
      that choose different measurement attributes for similar types of assets and
      liabilities.  This statement is effective as of the beginning of an
      entity’s first fiscal year beginning after November 15, 2007. Early adoption is
      permitted as of the beginning of the previous fiscal year provided that the
      entity makes that choice in the first 120 days of that fiscal year and also
      elects to apply the provisions of Statement 157.  The Company plans to
      adopt this statement on January 1, 2008.  The impact of adopting
      Statement 159 is expected to be immaterial to the Company’s consolidated
      financial statements.




21


The
        American Institute of Certified Public Accountants has finalized Statement
        of
        Position (“SOP”) 07-01, Clarification of the Scope of the Audit and Accounting
        Guide Investment Companies and Accounting by Parent Companies and Equity
        Method
        Investors for Investments in Investment Companies. SOP 07-01 provides criteria
        for determining whether an entity is within the scope of the Guide. The
        statement is effective for financial statements issued for fiscal years
        beginning after December 15, 2007. The Company plans to adopt this statement
        on
        January 1, 2008. The Company is currently evaluating the potential impact
        of
        adopting SOP 07-01 on its consolidated financial statements.
  In
        May
        2007, the FASB issued FSP No. FIN 46(R)-7, “Application of FASB Interpretation
        No. 46(R) to Investment Companies”. This FSP amends Interpretation FIN 46(R) to
        provide an exception to the scope of FIN 46(R) for companies within the scope
        of
        the revised Audit and Accounting Guide Investment Companies. The Company
        is
        currently evaluating the potential impact of adopting FIN 46(r)-7 on its
        consolidated financial statements.




**Item
      4.  Controls and Procedures**




The
      Company maintains a system of
      disclosure controls and procedures that is designed to provide reasonable
      assurance that information, which is required to be timely disclosed, is
      recorded, processed, summarized, and reported to management within the time
      periods specified in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange
      Act of 1934, as amended (the “Exchange Act”). As a result of the first
      material weakness, the Company restated its December 31, 2005 consolidated
      financial statements, included in Item 8 of the Company’s Form 10-K/A, to
      properly reflect these proprietary investments.  This first material
      weakness also resulted in errors in the Company’s interim consolidated financial
      statements for the periods ended March 31, 2006, June 30, 2006, and September
      30, 2006. In April 2007, the Company restated its consolidated financial
      statements for each of the above interim periods.


As
        disclosed in the Company’s
        Form 10-K/A as at and for the period ended December 31, 2006, the Company
        identified two material weaknesses in internal control over financial
        reporting.  These deficiencies were identified during the course of
        the 2006 audit.  Accordingly, because of these material weaknesses,
        management concluded that the Company’s disclosure controls and procedures were
        not effective as of December 31, 2006 and that the Company did not maintain
        effective internal control over financial reporting, as of December 31,
        2006.
  However,
        subsequent to December
        31, 2006, we have taken steps to strengthen our disclosure controls, procedures
        and internal controls over financial reporting.  These steps were
        taken to strengthen our processes relating to the material weaknesses discussed
        above.  Specifically, we have implemented the following internal
        control improvements:
  –
                With
                  regard to the first material weakness, we have implemented a new
                  procedure
                  to review the accounting treatment for all proprietary investments
                  on a
                  regular basis.  We have also worked with the personnel in our
                  operations and accounting areas who are responsible for the accounting
                  for
                  these proprietary investments to ensure that appropriate procedures
                  are in
                  place to more closely monitor proprietary investments.
 –
                In
                    the second material weakness relating to the evaluation of and
                    accounting
                    for certain non-routine transactions in accordance with U.S.
                    generally
                    accepted accounting principles, the Company’s control deficiencies over
                    accrual of compensation expense for investment partnerships compensation
                    were contemplated on the determination of the material weakness
                    evaluation.  As a result of the second material weakness, the
                    Company filed a Form 10-K/A of GAMCO Investors, Inc. on August
                    9, 2007,
                    which constituted amendment number 1 to the Company's annual
                    report on
                    Form 10-K for the year ended December 31, 2006 to restate the
                    financial
                    statements and amend management's discussion and analysis of
                    financial
                    condition and results of operations (including quantitative and
                    qualitative disclosure about market risk) in part 1, items 1
                    and 2,
                    respectively, to reflect the reversal of certain previously-accrued
                    expenses for investment partnerships
                    compensation.
  The
        Company’s Chief Executive
        Officer and Co-Chief Financial Officers, after evaluating the effectiveness
        of
        the Company’s disclosure controls and procedures (as defined in the Exchange
        Act) as of the end of the period covered by this quarterly report, have
        concluded that the Company’s disclosure controls and procedures are effective to
        provide reasonable assurance that information required to be disclosed by
        the
        Company in the reports that it files or submits under the Exchange Act is
        accumulated and communicated to the Company’s management, including its
        principal executive officer and principal financial officers, as appropriate
        to
        allow timely decisions regarding required disclosure and are effective to
        provide reasonable assurance that such information is recorded, processed,
        summarized and reported within the time periods specified in the SEC’s rules and
        forms.
  The
        Company’s internal control
        over financial reporting (as defined in Exchange Act Rule 13a-15(f) and
        15d-15(f)) is designed to provide reasonable assurance regarding the reliability
        of financial reporting and the preparation of financial statements for external
        purposes in accordance with generally accepted accounting principles. 
Other than the changes described above related to the on-going remediation
        of
        the Company’s two material weaknesses identified during the course of the 2006
        audit, there were no changes in the Company’s internal control over financial
        reporting that occurred during the Company’s most recent fiscal quarter that
        have materially affected, or are reasonably likely to materially affect,
        the
        Company’s internal control over financial reporting.
  22


**Forward-Looking
      Information**





Our
      disclosure and analysis in this report contain some forward-looking
      statements.  Forward-looking statements give our current expectations
      or forecasts of future events. You can identify these statements because they
      do
      not relate strictly to historical or current facts. They use words such as
      “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and
      other words and terms of similar meaning. They also appear in any discussion
      of
      future operating or financial performance. In particular, these include
      statements relating to future actions, future performance of our products,
      expenses, the outcome of any legal proceedings, and financial
      results.  Although we believe that we are basing our expectations and
      beliefs on reasonable assumptions within the bounds of what we currently know
      about our business and operations, there can be no assurance that our actual
      results will not differ materially from what we expect or believe. Some of
      the
      factors that could cause our actual results to differ from our expectations
      or
      beliefs include, without limitation: the adverse effect from a decline in the
      securities markets; a decline in the performance of our products; a general
      downturn in the economy; changes in government policy or regulation; changes
      in
      our ability to attract or retain key employees; and unforeseen costs and other
      effects related to legal proceedings or investigations of governmental and
      self-regulatory organizations. We also direct your attention to any more
      specific discussions of risk contained in our Form 10-K/A and other public
      filings.  We are providing these statements as permitted by the
      Private Litigation Reform Act of 1995. We do not undertake to update publicly
      any forward-looking statements if we subsequently learn that we are unlikely
      to
      achieve our expectations or if we receive any additional information relating
      to
      the subject matters of our forward-looking statements.





23





**Part
      II:  Other Information**





**Item
                2.**
            Changes
                in Securities, Use of Proceeds and Issuer Purchases of Equity
                Securities





The
      following table provides information with respect to the shares of common stock
      we repurchased during the three months ended June 30, 2007:





**Period**
            
            **(a)
                Total Number of Shares Repurchased**
            
            
            **(b)
                Average Price Paid Per Share, net of Commissions**
            
            
            **(c)
                Total Number of Shares Repurchased as Part of Publicly Announced
                Plans or
                Programs**
            
            
            **(d)
                Maximum Number of Shares That May Yet Be Purchased Under the Plans
                or
                Programs**GBL4/01/07
                – 4/30/07
            
            
            12,300
            
            
            $
            43.85
            
            
            
            12,300
            
            
            
            976,8615/01/07
                – 5/31/07
            
            
            17,200
            
            
            $
            49.64
            
            
            
            17,200
            
            
            
            959,6616/01/07
                – 6/30/07
            
            
            26,100
            
            
            $
            51.74
            
            
            
            26,100
            
            
            
            933,561Totals
            
            
            55,600
            
            
            
            
            
            
            
            55,600








**Item
      4.**                      Submission
      of Matters to a Vote of Security Holders





The
      Annual Meeting of Stockholders of GAMCO Investors, Inc. was held in Greenwich,
      Connecticut on May 8, 2007.  At that meeting, the stockholders
      considered and acted upon the following matter:





THE
      ELECTION OF DIRECTORS.  The stockholders elected the following
      individuals to serve as directors until the 2008 annual meeting of stockholders
      and until their respective successors are duly elected and
      qualified.  All of the nominees were elected with the following votes
      cast:





**Nominees**
            
            **For**
            
            
            **Withheld**Edwin
                L. Artzt
            
            
            207,730,091
            
            
            
            2,142,457Richard
                L. Bready
            
            
            209,658,647
            
            
            
            213,901John
                C. Ferrara
            
            
            208,718,253
            
            
            
            1,154,295John
                D. Gabelli
            
            
            208,410,093
            
            
            
            1,462,455Mario
                J. Gabelli
            
            
            208,479,067
            
            
            
            1,393,481Eugene
                R. McGrath
            
            
            209,776,509
            
            
            
            96,039Karl
                Otto Pöhl
            
            
            208,525,040
            
            
            
            1,347,508Robert
                S. Prather, Jr.
            
            
            209,657,728
            
            
            
            214,820Vincent
                S. Tese
            
            
            209,652,973
            
            
            
            219,575





**Item
                6.**
            (a)
                Exhibits





31.1
            Certification
                by the Chief Executive Officer Pursuant to Rule 13a-14 (a) and 15d-14
                (a)
                as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
                200231.2
            Certification
                by the Acting Co-Chief Financial Officer Pursuant to Rule 13a-14
                (a) and
                15d-14 (a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                Act of
                200231.3
            Certification
                by the Acting Co-Chief Financial Officer Pursuant to Rule 13a-14
                (a) and
                15d-14 (a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                Act of
                200232.1
            Certification
                by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                200232.2
            Certifications
                by the Acting Co-Chief Financial Officers pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002








**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.





GAMCO
                INVESTORS, INC.(Registrant)**November
                xx, 2007**
            
            /s/
                Kieran CaterinaDate
            
            Kieran
                CaterinaActing
                Co-Chief Financial Officer





**November
                xx, 2007**
            
            /s/
                Diane M. LaPointeDate
            
            Diane
                M. LaPointeActing
                Co-Chief Financial Officer

















24