SECURITIES
& EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549
 FORM
10-Q
 
 (Mark
One)
 
 [X]
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
quarterly period ended March 31,
2009
 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
              o
  Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company.  See the definitions of “large accelerated filer",
      "accelerated filer", and "smaller reporting company” in Rule 12b-2 of the
      Exchange Act. (Check one):Large
      accelerated filer  ̈
              
              Accelerated
      filer xNon-accelerated
      filer  ̈
              
              Smaller
      reporting company  ̈
  Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2).
 Yes
              o
              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 April 30,
    2009Class
      A Common Stock, .001 par value
              
              7,399,483Class
      B Common Stock, .001 par value
              
              20,350,931
  
  INDEXGAMCO
      INVESTORS, INC. AND SUBSIDIARIESPART
      I.
                FINANCIAL
      INFORMATIONItem
      1.
                Unaudited
      Condensed Consolidated Financial StatementsCondensed
      Consolidated Statements of Income:-    Three months
      ended March 31, 2009 and 2008Condensed
      Consolidated Statements of Financial Condition:-    March 31,
      2009-    December 31,
      2008-    March 31,
      2008Condensed
      Consolidated Statements of Stockholders’ Equity and Comprehensive
      Income:-    Three months ended March
      31, 2009 and 2008Condensed
      Consolidated Statements of Cash Flows:-    Three months ended March 31,
      2009 and 2008Notes to Unaudited 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
      3.
                Quantitative and Qualitative Disclosures About Market
      RiskItem
      4.
                Controls and ProceduresPART
      II.
                OTHER INFORMATIONItem
      1.
                Legal ProceedingsItem
      2.
                Unregistered Sales of Equity Securities and Use of
      ProceedsItem
      6.
                ExhibitsSIGNATURES
 
 2
  
 GAMCO
      INVESTORS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF INCOMEUNAUDITED(In
      thousands, except per share data)
 
 Three
      Months EndedMarch
      31,2009
                                        
                                        
                                        2008RevenuesInvestment
      advisory and incentive fees
                                        
                                        $
                                        35,199
                                        
                                        
                                        $
                                        56,841Commission
      revenue
                                        
                                        
                                        3,650
                                        
                                        
                                        
                                        3,256Distribution
      fees and other income
                                        
                                        
                                        4,510
                                        
                                        
                                        
                                        6,451Total
      revenues
                                        
                                        
                                        43,359
                                        
                                        
                                        
                                        66,548ExpensesCompensation
                                        
                                        
                                        20,785
                                        
                                        
                                        
                                        28,922Management
      fee
                                        
                                        
                                        1,349
                                        
                                        
                                        
                                        1,981Distribution
      costs
                                        
                                        
                                        5,422
                                        
                                        
                                        
                                        6,334Other
      operating expenses
                                        
                                        
                                        4,301
                                        
                                        
                                        
                                        6,054Total
      expenses
                                        
                                        
                                        31,857
                                        
                                        
                                        
                                        43,291Operating
      income
                                        
                                        
                                        11,502
                                        
                                        
                                        
                                        23,257Other
      (expense) incomeNet
      gain (loss) from investments
                                        
                                        
                                        2,592
                                        
                                        
                                        
                                        (8,389
                                        )Interest
      and dividend income
                                        
                                        
                                        1,278
                                        
                                        
                                        
                                        4,774Interest
      expense
                                        
                                        
                                        (3,168
                                        )
                                        
                                        
                                        (2,007
                                        )Total
      other income (expense), net
                                        
                                        
                                        702
                                        
                                        
                                        
                                        (5,622
                                        )Income
      before income taxes
                                        
                                        
                                        12,204
                                        
                                        
                                        
                                        17,635Income
      tax provision
                                        
                                        
                                        3,988
                                        
                                        
                                        
                                        7,326Net
      income
                                        
                                        
                                        8,216
                                        
                                        
                                        
                                        10,309Net
      income (loss) attributable to noncontrolling interests
                                        
                                        
                                        4
                                        
                                        
                                        
                                        (177
                                        )Net
      income attributable to GAMCO Investors, Inc.’s
shareholders
                                        
                                        $
                                        8,212
                                        
                                        
                                        $
                                        10,486Net
      income attributable to GAMCO Investors, Inc.’s
shareholdersper
      share:Basic
                                        
                                        $
                                        0.30
                                        
                                        
                                        $
                                        0.37Diluted
                                        
                                        $
                                        0.30
                                        
                                        
                                        $
                                        0.37Weighted
      average shares outstanding:Basic
                                        
                                        
                                        27,379
                                        
                                        
                                        
                                        28,175Diluted
                                        
                                        
                                        27,386
                                        
                                        
                                        
                                        28,227Dividends
      declared:
                                        
                                        $
                                        0.03
                                        
                                        
                                        $
                                        0.03See
      accompanying notes.
  3
 
 GAMCO
      INVESTORS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITIONUNAUDITED(In
      thousands, except share data)March
      31,
                            
                            
                            December
      31,
                            
                            March
      31,2009
                            
                            
                            2008
                            
                            2008ASSETSCash
      and cash equivalents, including restricted cash of $204, $2,158, and
      $0
                            
                            $
                            393,859
                            
                            
                            $
                            333,332
                            
                            $
                            280,796Investments
      in securities, including restricted securities of $61,963, $59,892, and
      $0
                            
                            
                            187,609
                            
                            
                            
                            231,492
                            
                            
                            325,407Investments
      in partnerships and affiliates
                            
                            
                            56,244
                            
                            
                            
                            60,707
                            
                            
                            85,572Receivable
      from brokers
                            
                            
                            12,911
                            
                            
                            
                            16,460
                            
                            
                            15,186Investment
      advisory fees receivable
                            
                            
                            11,522
                            
                            
                            
                            11,261
                            
                            
                            18,862Income
      tax receivable and deferred tax assets
                            
                            
                            23,913
                            
                            
                            
                            23,952
                            
                            
                            6,753Other
      assets
                            
                            19,217
                            
                            
                            20,430
                            
                            23,202Total
      assets
                            
                            $                    
          705,275
                            
                            
                            $                 
         697,634
                            
                            $                  
          755,778LIABILITIES
      AND STOCKHOLDERS' EQUITYPayable
      to brokers
                            
                            $
                            2,149
                            
                            
                            $
                            1,857
                            
                            $
                            5,421Income
      taxes payable
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            10,799Compensation
      payable
                            
                            
                            15,129
                            
                            
                            
                            15,862
                            
                            
                            30,278Capital
      lease obligation
                            
                            
                            5,313
                            
                            
                            
                            5,329
                            
                            
                            2,453Securities
      sold, not yet purchased
                            
                            
                            3,570
                            
                            
                            
                            1,677
                            
                            
                            3,110Mandatorily
      redeemable noncontrolling interests
                            
                            
                            2,229
                            
                            
                            
                            2,303
                            
                            
                            2,581Accrued
      expenses and other liabilities
                            
                            21,034
                            
                            
                            23,605
                            
                            43,655Sub-total
                            
                            49,424
                            
                            
                            50,633
                            
                            98,2975.5%
      Senior notes (due May 15, 2013)
                            
                            
                            99,000
                            
                            
                            
                            99,000
                            
                            
                            100,0006%
      Convertible note (due August 14, 2011)
                            
                            
                            39,787
                            
                            
                            
                            39,766
                            
                            
                            39,7066.5%
      Convertible note (due October 2, 2018)
                            
                            60,000
                            
                            
                            60,000
                            
                            -Total liabilities
                            
                            
                            248,211
                            
                            
                            
                            249,399
                            
                            
                            238,003Redeemable
      noncontrolling interests
                            
                            
                            2,327
                            
                            
                            
                            3,294
                            
                            
                            4,146Commitments
      and contingencies (Note J)Stockholders’
      equityGAMCO
      Investors, Inc. stockholders’ equityClass
      A Common Stock, $0.001 par value; 100,000,000shares
      authorized; 13,033,062, 13,018,869, 12,765,674issued,
      respectively; 7,381,283, 7,367,090, and 7,801,831
                            
                            
                            13
                            
                            
                            
                            13
                            
                            
                            12outstanding, respectivelyClass
      B Common Stock, $0.001 par value; 100,000,000shares
      authorized; 24,000,000 shares issued,
                            
                            
                            20
                            
                            
                            
                            20
                            
                            
                            2120,370,931,
      20,378,699, 20,626,644 shares outstanding,
      respectivelyAdditional
      paid-in capital
                            
                            
                            247,128
                            
                            
                            
                            245,973
                            
                            
                            242,293Retained
      earnings
                            
                            
                            420,841
                            
                            
                            
                            413,761
                            
                            
                            454,749Accumulated
      other comprehensive income
                            
                            
                            17,121
                            
                            
                            
                            14,923
                            
                            
                            16,737Treasury
      stock, at cost (5,651,779, 5,651,779, and 4,963,843 shares,
      respectively)
                            
                            (234,537
                            )
                            
                            (234,537
                            )
                            (205,950
                            )Total
      GAMCO Investors, Inc. stockholders’ equity
                            
                            450,586
                            
                            
                            440,153
                            
                            507,862Noncontrolling
      interests
                            
                            4,151
                            
                            
                            4,788
                            
                            5,767Total
      stockholders’ equity
                            
                            454,737
                            
                            
                            444,941
                            
                            513,629Total
      liabilities and stockholders' equity
                            
                            $                   
          705,275
                            
                            
                            $               
          697,634
                            
                            $                   
         755,778See
      accompanying
notes.
  4
  GAMCO
      INVESTORS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
      INCOMEUNAUDITED(In
      thousands)
  For the three months ended March 31,
      2009GAMCO
      Investors, Inc. shareholdersAccumulatedAdditional
                    
                    
                    
                    
                    
                    OtherNoncontrolling
                    
                    
                    Common
                    
                    
                    Paid-in
                    
                    
                    Retained
                    
                    
                    Comprehensive
                    
                    
                    TreasuryInterests
                    
                    
                    Stock
                    
                    
                    Capital
                    
                    
                    Earnings
                    
                    
                    Income
                    
                    
                    Stock
                    
                    
                    TotalBalance
      at December 31, 2008
                    
                    $
                    4,788
                    
                    $
                    33
                    
                    $
                    245,973
                    
                    $
                    413,761
                    
                    $
                    14,923
                    
                    $
                    (234,537
                    )
                    $
                    444,941Purchase
      of subsidiary sharesfrom
      noncontrolling interest
                    
                    
                    (172
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (172
                    )Spin-off
      of subsidiary sharesto
      noncontrolling interests
                    
                    
                    (412
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (412
                    )Comprehensive
      income:Net
      (loss) income
                    
                    
                    (53
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    8,212
                    
                    
                    -
                    
                    
                    -
                    
                    
                    8,159Net
      unrealized gains onsecurities
      available for sale, netof
      income tax
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    2,205
                    
                    
                    -
                    
                    
                    2,205Foreign
      currency translation
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (7
                    )
                    
                    -
                    
                    
                    (7
                    )Total
      comprehensive income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    10,357Dividends
      declared
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (1,132
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    (1,132
                    )Income
      tax effect of transactionwith
      shareholders
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (243
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (243
                    )Stock
      based compensationexpense
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,271
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,271Exercise
      of stock optionsincluding
      tax benefit
                    
                    
                    -
                    
                    
                    -
                    
                    
                    127
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    127Balance
      at March 31, 2009
                    
                    $
                    4,151
                    
                    $
                    33
                    
                    $
                    247,128
                    
                    $
                    420,841
                    
                    $
                    17,121
                    
                    $
                    (234,537
                    )
                    $
                    454,737
 
 5
  GAMCO
      INVESTORS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
      INCOMEUNAUDITED
      (Continued)(In
      thousands)For
      the three months ended March 31, 2008GAMCO
      Investors, Inc. shareholdersAccumulatedAdditional
                      
                      
                      
                      
                      
                      OtherNoncontrolling
                      
                      
                      Common
                      
                      
                      Paid-in
                      
                      
                      Retained
                      
                      
                      Comprehensive
                      
                      
                      TreasuryInterests
                      
                      
                      Stock
                      
                      
                      Capital
                      
                      
                      Earnings
                      
                      
                      Income
                      
                      
                      Stock
                      
                      
                      TotalBalance
      at December 31, 2007
                      
                      $
                      5,791
                      
                      $
                      33
                      
                      $
                      230,483
                      
                      $
                      445,121
                      
                      $
                      20,815
                      
                      $
                      (195,137
                      )
                      $
                      507,106Comprehensive
      income:Net
      (loss) income
                      
                      
                      (24
                      )
                      
                      -
                      
                      
                      -
                      
                      
                      10,486
                      
                      
                      -
                      
                      
                      -
                      
                      
                      10,462Net
      unrealized gains onsecurities
      available for sale, netof
      income tax
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      (4,100
                      )
                      
                      -
                      
                      
                      (4,100
                      )Foreign
      currency translation
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      22
                      
                      
                      -
                      
                      
                      22Total
      comprehensive income
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      6,384Dividends
      declared
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      (858
                      )
                      
                      -
                      
                      
                      -
                      
                      
                      (858
                      )Stock
      based compensationexpense
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,198
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,198Conversion
      of 6% convertiblenote
                      
                      
                      -
                      
                      
                      -
                      
                      
                      10,000
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      10,000Exercise
      of stock optionsincluding
      tax benefit
                      
                      
                      -
                      
                      
                      -
                      
                      
                      612
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      612Purchase
      of treasury stock
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      (10,813
                      )
                      
                      (10,813
                      )Balance
      at March 31, 2008
                      
                      $
                      5,767
                      
                      $
                      33
                      
                      $
                      242,293
                      
                      $
                      454,749
                      
                      $
                      16,737
                      
                      $
                      (205,950
                      )
                      $
                      513,629
 See
accompanying notes.
  6
  GAMCO
      INVESTORS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWSUNAUDITED(In
      thousands)
 
 Three
      Months EndedMarch
      31,2009
                
                
                2008Operating
      activitiesNet
      income
                
                $
                8,216
                
                
                $
                10,309Adjustments
      to reconcile net incometo
      net cash provided by operating activities:Equity
      in net (gains) losses from partnerships and affiliates
                
                
                (1,032
                )
                
                
                2,375Depreciation
      and amortization
                
                
                165
                
                
                
                229Stock
      based compensation expense
                
                
                1,271
                
                
                
                1,198Deferred
      income taxes
                
                
                (947
                )
                
                
                (2,815
                )Tax benefit
      from exercise of stock options
                
                
                34
                
                
                
                43Foreign
      currency (gain) loss
                
                
                (7
                )
                
                
                22Other-than-temporary
      loss on available for sale securities
                
                
                -
                
                
                
                249Acquisition of intangible asset
                
                
                -
                
                
                
                (4,043
                )Fair
      value of donated securities
                
                
                121
                
                
                
                -Realized
      gains on sales of available for sale securities
                
                
                (794
                )
                
                
                (253
                )Realized
      gains on sales of trading investments in securities, net
                
                
                (3,080
                )
                
                
                (3,121
                )Change
      in unrealized value of trading investments in securities and securities
      sold, not yet purchased, net
                
                
                1,767
                
                
                
                7,012Realized gains on covers of securities sold, not yet purchased,
      net
                
                
                (483
                )
                
                
                (318
                )Amortization
      on discount on debt
                
                
                21
                
                
                
                98(Increase)
      decrease in operating assets:Purchases
      of trading investments in securities
                
                
                (105,391
                )
                
                
                (109,155
                )Proceeds
      from sales of trading investments in securities
                
                
                158,822
                
                
                
                164,837Cost of covers on securities sold, not yet purchased
                
                
                (6,895
                )
                
                
                (10,173
                )Proceeds from sales of securities sold, not yet purchased
                
                
                8,301
                
                
                
                11,495Investments
      in partnerships and affiliates
                
                
                (807
                )
                
                
                (182
                )Distributions
      from partnerships and affiliates
                
                
                2,182
                
                
                
                12,728Receivable
      from brokers
                
                
                3,598
                
                
                
                22,609Investment
      advisory fees receivable
                
                
                (203
                )
                
                
                14,994Other
      receivables from affiliates
                
                
                338
                
                
                
                2,512Income
      tax receivable and deferred tax assets
                
                
                774
                
                
                
                -Other
      assets
                
                
                117
                
                
                
                (1,440
                )Increase
      (decrease) in operating liabilities:Payable
      to brokers
                
                
                292
                
                
                
                (2,149
                )Income
      taxes payable
                
                
                (1,255
                )
                
                
                1,662Compensation
      payable
                
                
                (1,109
                )
                
                
                5,791Mandatorily redeemable noncontrolling interests
                
                
                (74
                )
                
                
                (60
                )Accrued
      expenses and other liabilities
                
                
                (2,228
                )
                
                
                (4,038
                )Effects
      of consolidation of investment partnerships and offshore funds
      consolidated under EITF 04-5:Realized (losses) gains on sales of investments in securities
      and securities sold, not yet purchased, net
                
                
                (33
                )
                
                
                67Change in unrealized value of investments in securities and
      securities sold, not yet purchased, net
                
                
                226
                
                
                
                350Equity in net losses (gains) from partnerships and
    affiliates
                
                
                388
                
                
                
                (28
                )Purchases of trading investments in securities
                
                
                (3,998
                )
                
                
                (3,218
                )Proceeds from sales of trading investments in securities and securities
      sold, not yet purchased, net
                
                
                4,493
                
                
                
                4,322Distributions from partnerships and affiliates
                
                
                3,397
                
                
                
                -Decrease (increase) in investment advisory fees receivable
                
                
                (58
                )
                
                
                (155
                )Decrease (increase) in receivable from brokers
                
                
                (49
                )
                
                
                2,350Increase in other assets
                
                
                591
                
                
                
                (52
                )Decrease in payable to brokers
                
                
                -
                
                
                
                8(Decrease) increase in accrued expenses and other
    liabilities
                
                
                (584
                )
                
                
                107Loss related to investment partnerships and offshore
      funds consolidated under EITF 04-5, net
                
                
                (306
                )
                
                
                (601
                )Total
      adjustments
                
                
                57,565
                
                
                
                113,257Net
      cash provided by operating activities
                
                
                65,781
                
                
                
                123,566
  7
  GAMCO
      INVESTORS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWSUNAUDITED
      (continued)(In
      thousands)
 
 Three
      Months EndedMarch
      31,2009
                        
                        
                        2008Investing
      activitiesPurchases
      of available for sale securities
                        
                        $
                        (5,419
                        )
                        $
                        (774
                        )Proceeds
      from sales of available for sale securities
                        
                        
                        2,175
                        
                        
                        383Net
      cash used in investing activities
                        
                        
                        (3,244
                        )
                        
                        (391
                        )Financing
      activities(Contributions)
      distributions related to investment partnerships and offshore funds
      consolidated
                        
                        
                        (371
                        )
                        
                        404under
      EITF 04-5, netProceeds
      from exercise of stock options
                        
                        
                        93
                        
                        
                        569Dividends
      paid
                        
                        
                        (1,132
                        )
                        
                        (857
                        )Subsidiary
      dividends to noncontrolling interests
                        
                        
                        (585
                        )
                        
                        -Purchase
      of treasury stock
                        
                        
                        -
                        
                        
                        (10,813
                        )Net
      cash used in financing activities
                        
                        
                        (1,995
                        )
                        
                        (10,697
                        )Net
      increase in cash and cash equivalents
                        
                        
                        60,542
                        
                        
                        112,478Effect
      of exchange rates on cash and cash equivalents
                        
                        
                        (15
                        )
                        
                        (1
                        )Cash
      and cash equivalents at beginning of period
                        
                        
                        333,332
                        
                        
                        168,319Cash
      and cash equivalents at end of period
                        
                        $
                        393,859
                        
                        $
                        280,796Supplemental
      disclosures of cash flow information:Cash
      paid for interest
                        
                        $
                        3,413
                        
                        $
                        1,400Cash
      paid for taxes
                        
                        $
                        5,743
                        
                        $
                        8,609Non-cash
      activity:-
      On January 22, 2008, Cascade Investment, L.L.C. elected to convert $10
      million of its $50 million convertible note paying interest of
      6% into 188,679 GAMCO Investors, Inc. class A common
    shares.
 See
accompanying notes.
 
 8
  GAMCO
INVESTORS, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March
31, 2009
 (Unaudited)
 A.  Significant
Accounting Policies
 
 Basis
of Presentation
  Unless we
have indicated otherwise, or the context otherwise requires, references in this
report to “GAMCO Investors, Inc.,” “GAMCO,” “the Company,” “GBL,” “we,” “us” and
“our” or similar terms are to GAMCO Investors, Inc., its predecessors and its
subsidiaries.
  The
unaudited interim condensed consolidated financial statements of
GAMCO 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 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.
  The
condensed consolidated financial statements include the accounts of GAMCO and
its subsidiaries.  Intercompany accounts and transactions are
eliminated.
  These
condensed consolidated financial statements should be read in conjunction with
our audited consolidated financial statements included in our Annual Report on
Form 10-K for the year ended December 31, 2008 from which the accompanying
condensed consolidated financial statements were derived.
 
 On March
20, 2009, the Company completed its spin-off of its ownership of Teton Advisors,
Inc. (“Teton”) to its shareholders.  The condensed consolidated
financial statements for the first quarter of 2009 include the results of Teton
up to March 20, 2009.  Prior periods have not been
restated.
  Certain
items previously reported have been reclassified to conform to the current
period’s condensed consolidated financial statement presentation.
  Use
of Estimates
  The
preparation of the condensed consolidated financial statements in conformity
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the condensed
consolidated financial statements and accompanying notes.  Actual
results could differ from those estimates.
  9
 
 Recent
Accounting Developments
  In
December 2007 the Financial Accounting Standards Board ("FASB") issued
FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial
Statements” (“Statement 160”).  The statement’s objective is to
improve the relevance, comparability, and transparency of the financial
information that a reporting entity with minority interests provides in its
consolidated financial statements.  Statement 160 does not change the
provisions of Accounting Research Bulletin No. 51, “Consolidated Financial
Statements” ("ARB 51") related to consolidation purpose or consolidation
policy or the requirement that a parent consolidate all entities in which it has
a controlling financial interest.  Statement 160 does, however, amend
certain of ARB 51’s consolidation procedures to make them consistent with the
requirements of FASB Statement No. 141(R) "Business Combinations".  It
also amends ARB 51 to provide definitions for certain terms and to clarify some
terminology. Statement 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15,
2008.  The Company adopted this statement on January 1,
2009.  The impact of adopting Statement 160 to the Company’s condensed
consolidated financial statements required a change in presentation on the
condensed consolidated financial statements that clearly identify and
distinguish between the interests of the parent’s owners and the interests of
the noncontrolling owners of a subsidiary.  In accordance with this
pronouncement as well as with FASB Statement No. 150, “Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity”, and
SEC Topic No. D-98, “Classification and Measurement of Redeemable Securities,”
GAMCO now discloses noncontrolling interests, formerly referred to as minority
interest, in three different line items in the condensed consolidated statements
of financial condition, depending on their
characteristics.  Noncontrolling interests that are mandatorily
redeemable upon a certain date or event occurring are classified as
liabilities.  Noncontrolling interests that are redeemable at the
option of the holder are classified as redeemable noncontrolling interests in
the mezzanine section between liabilities and stockholders’
equity.  All other noncontrolling interests are classified as equity
and are presented within the stockholders’ equity section, separately from GAMCO
Investors, Inc.’s portion of equity.  Statement 160 also requires
prior periods to be recast in the same manner.
 
 In March
2008, the FASB issued FASB Statement No. 161, "Disclosures about
Derivative Instruments and Hedging Activities" ("Statement 161") to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. Statement 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early
application encouraged.  The Company adopted Statement 161 on January 1,
2009.  Statement 161 will impact only the Company's disclosure
of derivative instruments.  Refer also to Note B.
 
 In April
2008, the FASB issued FASB Staff Position (“FSP”) 142-3, "Determination of the
Useful Life of Intangible Assets" ("FSP 142-3") which amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, "Goodwill and Other Intangible Assets".  FSP 142-3 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008 and interim periods within those fiscal years. Early adoption
is prohibited. The Company adopted FSP 142-3 on January 1, 2009 without a
material impact to the condensed consolidated financial statements.
 In
February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement
No. 157” (“FSP FAS 157-2”).  FSP FAS 157-2 delays the effective date of the
application of FASB Statement No. 157, “Fair Value Measurements” (“Statement
157”) to fiscal years beginning after November 15, 2008 for all non-financial
assets and liabilities recognized or disclosed at fair value in the financial
statements on a non-recurring basis.  Such non-financial assets and
liabilities include goodwill, intangible assets, and long-lived assets, each
measured at fair value for purposes of impairment testing, and non-financial
assets and liabilities initially measured at fair value in a business
combination.  On January 1, 2009, the Company adopted the Statement 157
provisions pertaining to non-financial assets and liabilities without a material
impact to the condensed consolidated financial statements.
  In April
2009, the FASB issued three FSPs intended to provide additional application
guidance and enhance disclosures regarding fair value measurements and
impairments of securities. FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly” ("FSP FAS 157-4"),
provides guidelines for making fair value measurements more consistent with the
principles presented in Statement 157. FSP FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments ("FSP FAS 107-1 and APB
28-1"), enhances consistency in financial reporting by increasing the frequency
of fair value disclosures. FSP FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments ("FSP FAS 115-2 and FAS
124-2"), provides additional guidance designed to create greater clarity and
consistency in accounting for and presenting impairment losses on
securities.  The application of these FSPs is not material to the
condensed consolidated financial statements.
 10
  B.  Investment
in Securities
 
 Investments
in securities at March 31, 2009 and 2008 consisted of the
following:
 
 2009
                  
                  
                  2008Cost
                  
                  
                  Fair
      Value
                  
                  
                  Cost
                  
                  
                  Fair
      Value(In
      thousands)Trading
      securities:U.S.
      Government obligations
                  
                  $
                  65,703
                  
                  
                  $
                  65,815
                  
                  
                  $
                  79,626
                  
                  
                  $
                  80,618Common
      stocks
                  
                  
                  40,782
                  
                  
                  
                  35,250
                  
                  
                  
                  67,934
                  
                  
                  
                  64,474Mutual
      funds
                  
                  
                  3,132
                  
                  
                  
                  2,328
                  
                  
                  
                  56,617
                  
                  
                  
                  53,363Preferred
      stocks
                  
                  
                  -
                  
                  
                  
                  14
                  
                  
                  
                  -
                  
                  
                  
                  -Other investments
                  
                  
                  321
                  
                  
                  
                  323
                  
                  
                  
                  663
                  
                  
                  
                  774Total
      trading securities
                  
                  
                  109,938
                  
                  
                  
                  103,730
                  
                  
                  
                  204,840
                  
                  
                  
                  199,229Available
      for sale securities:Common
      stocks
                  
                  
                  18,234
                  
                  
                  
                  39,285
                  
                  
                  
                  20,931
                  
                  
                  
                  44,595Mutual
      funds
                  
                  
                  50,167
                  
                  
                  
                  44,594
                  
                  
                  
                  80,213
                  
                  
                  
                  81,583Total
      available for sale securities
                  
                  
                  68,401
                  
                  
                  
                  83,879
                  
                  
                  
                  101,144
                  
                  
                  
                  126,178Total
      investments in securities
                  
                  $
                  178,339
                  
                  
                  $
                  187,609
                  
                  
                  $
                  305,984
                  
                  
                  $
                  325,407
 
 Securities
sold, not yet purchased at March 31, 2009 and 2008 consisted of the
following:
 
 2009
                  
                  
                  2008Cost
                  
                  
                  Fair
      Value
                  
                  
                  Cost
                  
                  
                  Fair
      Value(In
      thousands)Common
      stocks
                  
                  $
                  3,443
                  
                  
                  $
                  3,570
                  
                  
                  $
                  2,963
                  
                  
                  $
                  2,784Mutual
      funds
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  434
                  
                  
                  
                  326Total
      securities sold, not yet purchased
                  
                  $
                  3,443
                  
                  
                  $
                  3,570
                  
                  
                  $
                  3,397
                  
                  
                  $
                  3,110
 
 Management
determines the appropriate classification of debt and equity securities at the
time of purchase and reevaluates such designation as of each balance sheet
date.  Investments in United States Treasury Bills and Notes with
maturities of greater than three months at the time of purchase are classified
as investments in securities and those with maturities of three months or less
at time of purchase are classified as cash and cash equivalents.  A
substantial portion of investments in securities are held for resale in
anticipation of short-term market movements and therefore are classified as
trading securities.  Trading securities are stated at fair value, with
any unrealized gains or losses, reported in current period
earnings.  Available for sale (“AFS”) investments are stated at fair
value, with any unrealized gains or losses, net of management fee and taxes,
reported as a 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.  For the three months ended March
31, 2009, there was no impairment of AFS securities.  For the three
months ended March 31, 2008, there was an impairment of $0.2 million of AFS
securities.
  The
Company accounts for derivative financial instruments in accordance with FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities, as amended" (“Statement 133”).  Statement 133 requires
that an entity recognize all derivatives, as defined, as either assets or
liabilities measured at fair value.  From time to time, the Company
will enter into hedging transactions to manage its exposure to foreign
currencies related to its proprietary investments.  These transactions
are not designated as hedges, and changes in fair values of these derivatives
are included in net gain (loss) from investments in the condensed consolidated
statements of income.  During the three months ended March 31, 2009, the
Company closed out of its only two foreign currency forwards which resulted in a
net loss of $27,000.  As of March 31, 2009, the Company does not hold
any derivative contracts.
 11
 
 At March
31, 2009, December 31, 2008 and March 31, 2008, the fair value of investments
available for sale was $83.9 million, $76.1 million and $126.2 million,
respectively.  Increases in unrealized gains to fair value, net of
management fee and taxes, for the three months ended March 31, 2009 of $2.2
million have been included in stockholders’ equity at March 31, 2009 while
decreases in unrealized losses to fair value, net of management fee and taxes,
for the three months ended March 31, 2008 of $4.1 million have been included in
stockholders’ equity at March 31, 2008.  Proceeds from sales of
investments available for sale were approximately $2.2 million and $0.4 million
for the three-month periods ended March 31, 2009 and 2008,
respectively.  For the three months ended March 31, 2009, gross gains
on the sale of investments available for sale amounted to $0.8 million; there
were no gross losses on the sale of investments available for
sale.  For the three months ended March 31, 2008, gross gains on the
sale of investments available for sale amounted to $0.3 million; there were no
gross losses on the sale of investments available for sale.
 
 C.
Investments in Partnerships and Affiliates
  The
provisions of FIN 46(R) and Emerging Issues Task Force Issue No. 04-5,
“Investor’s Accounting for an Investment in a Limited Partnership When the
Investor is the Sole General Partner and the Limited Partners Have Certain
Rights” (“EITF 04-5”), require consolidation of several of our investment
partnerships and offshore funds managed by our subsidiaries into our condensed
consolidated financial statements.
  Cash and
cash equivalents, investments in securities, investments in partnerships and
affiliates, receivable from brokers, securities sold, not yet purchased and
payable to brokers held by investment partnerships and offshore funds
consolidated under EITF 04-5 which resulted in a net increase to the condensed
consolidated statements of financial condition of $3.2 million, $4.1 million and
$5.2 million as of March 31, 2009, December 31, 2008 and March 31, 2008,
respectively, are also restricted from use for general operating
purposes.
 
 In the
normal course of business, the Company is the manager of several sponsored
investment partnerships.  We evaluate each partnership for the
appropriate accounting treatment and disclosure.  Certain of the
partnerships are consolidated, generally because a majority of the equity is
owned by the Company.  Other investment partnerships for which we
serve as the general partner but have only a minority ownership interest are not
consolidated because the limited partners have substantive rights to replace the
Company as general partner.  We also have sponsored a number of
investment vehicles where we are the investment manager in which we do not have
an equity investment.  These vehicles are considered variable interest
entities under FASB Interpretation No. 46 (revised), Variable Interest Entities,
and we are not the primary beneficiary because we do not absorb a majority of
the entities’ expected losses or expected returns.  For these
entities, the Company has no amount recorded on the balance sheet, has zero
maximum exposure to loss, and has not provided any financial or other support to
the entity.  The total assets of these entities at both March 31, 2009
and December 31, 2008 were $9.1 million.
 
 D.
Fair Value
 
 In
September 2006, the FASB issued Statement 157, which defines fair
value, establishes a framework for measuring fair value and expands disclosures
about fair value measurements. All of the instruments within cash and cash
equivalents, investments in securities and securities sold, not yet purchased
are measured at fair value.
 
 The
Company’s assets and liabilities recorded at fair value have been categorized
based upon a fair value hierarchy in accordance with Statement 157. The
levels of the fair value hierarchy and their applicability to the Company are
described below:
 
 -
              Level
      1 inputs utilize quoted prices (unadjusted) in active markets for
      identical assets or liabilities.-
              Level
      2 inputs utilize inputs other than quoted prices included in Level 1 that
      are observable for the asset or liability, either directly or indirectly.
      Level 2 inputs include quoted prices for similar assets and liabilities in
      active markets and inputs other than quoted prices that are observable for
      the asset or liability, such as interest rates and yield curves that are
      observable at commonly-quoted intervals.-
              Level
      3 inputs are unobservable inputs for the asset or liability, and include
      situations where there is little, if any, market activity for the asset or
      liability.
  In
certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, per
Statement 157, the level in the fair value hierarchy within which the fair value
measurement in its entirety falls has been determined based on the lowest level
input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment and
considers factors specific to the asset or liability.
  12
  The
availability of observable inputs can vary from product to product and is
affected by a wide variety of factors, including, for example, the type of
product, whether the product is new and not yet established in the marketplace,
and other characteristics particular to the transaction. To the extent that
valuation is based on models or inputs that are less observable or unobservable
in the market, the determination of fair value requires more judgment.
Accordingly, the degree of judgment exercised by the Company in determining fair
value is greatest for instruments categorized as Level 3.
  Many of
our securities have bid and ask prices that can be observed in the marketplace.
Bid prices reflect the highest price that the Company and others are willing to
pay for an asset. Ask prices represent the lowest price that the Company and
others are willing to accept for an asset.
 
 Cash and cash
equivalents – Cash and cash equivalents are valued using quoted market
prices. Valuation adjustments are not applied. Accordingly, cash and cash
equivalents are categorized in Level 1 of the fair value hierarchy.
 
 Investments in securities
and securities sold, not yet purchased – Investments in securities and
securities sold, not yet purchased are generally valued based on quoted prices
from an exchange.  To the extent these securities are actively traded,
valuation adjustments are not applied, and they are categorized in Level 1 of
the fair value hierarchy.  Listed derivatives that are actively traded
and are valued based on quoted prices from an exchange are also categorized in
Level 1 of the fair value hierarchy.  Listed derivatives that are not
actively traded are valued using the same approaches as those applied
to over the counter derivatives, and they are generally
categorized in Level 2 of the fair value hierarchy.  Nonpublic and
infrequently traded investments are included in Level 3 of the fair value
hierarchy because significant inputs to measure fair value are
unobservable.  Investments
are transferred into or out of Level 3 at their beginning period
values.
  The
following table presents information about the Company’s assets and
liabilities by major categories measured at fair value on a recurring basis as
of March 31, 2009 and 2008 and indicates the fair value hierarchy of the
valuation techniques utilized by the Company to determine such fair
value:
 
 Assets
and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2009
(in thousands)
  Quoted
      Prices in Active Markets
                                            
                                            
                                            Significant
      Other
                                            
                                            
                                            Significant
      Unobservable
                                            
                                            
                                            Balance
      as ofAssets
                                            
                                            for
      Identical Assets (Level 1)
                                            
                                            
                                            Observable
      Inputs (Level 2)
                                            
                                            
                                            Inputs
      (Level 3)
                                            
                                            
                                            March
      31, 2009Cash
      and cash equivalents
                                            
                                            $
                                            393,859
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            393,859Investments
      in securities:Available for sale
                                            
                                            
                                            83,880
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            83,880Trading
                                            
                                            
                                            101,176
                                            
                                            
                                            
                                            2,086
                                            
                                            
                                            
                                            467
                                            
                                            
                                            
                                            103,729Total
      investments in securities
                                            
                                            
                                            185,056
                                            
                                            
                                            
                                            2,086
                                            
                                            
                                            
                                            467
                                            
                                            
                                            
                                            187,609Total
      financial instruments owned
                                            
                                            $
                                            578,915
                                            
                                            
                                            $
                                            2,086
                                            
                                            
                                            $
                                            467
                                            
                                            
                                            $
                                            581,468LiabilitiesSecurities
      sold, not yet purchased
                                            
                                            $
                                            3,570
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            3,570
 
 13
 
 Assets
and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2008
(in thousands)
 
 Quoted
      Prices in Active Markets
                            
                            
                            Significant
      Other
                            
                            
                            Significant
      Unobservable
                            
                            
                            Balance
      as ofAssets
                            
                            for
      Identical Assets (Level 1)
                            
                            
                            Observable
      Inputs (Level 2)
                            
                            
                            Inputs
      (Level 3)
                            
                            
                            March
      31, 2008Cash
      and cash equivalents
                            
                            $
                            280,796
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            280,796Investments
      in securities:Available-for-sale
                            
                            
                            126,178
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            126,178Trading
                            
                            
                            197,634
                            
                            
                            
                            407
                            
                            
                            
                            1,188
                            
                            
                            
                            199,229Total
      investments in securities
                            
                            
                            323,812
                            
                            
                            
                            407
                            
                            
                            
                            1,188
                            
                            
                            
                            325,407Total
      financial instruments owned
                            
                            $
                            604,608
                            
                            
                            $
                            407
                            
                            
                            $
                            1,188
                            
                            
                            $
                            606,203LiabilitiesSecurities
      sold, not yet purchased
                            
                            $
                            3,110
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            3,110
 
 The
following tables present additional information about assets and liabilities by
major categories measured at fair value on a recurring basis and for which the
Company has utilized Level 3 inputs to determine fair value.
  Changes
in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
for the Three Months Ended March 31, 2009 (in thousands)
  TotalUnrealizedGains
      or
                                                                                                          
                                                                                                          Total(Losses)
                                                                                                          
                                                                                                          Realized
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          NetDecember
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          Included
      in
                                                                                                          
                                                                                                          and
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          Transfers31,
      2008
                                                                                                          
                                                                                                          Total
      Realized and Unrealized
                                                                                                          
                                                                                                          Other
                                                                                                          
                                                                                                          Unrealized
                                                                                                          
                                                                                                          Purchases
                                                                                                          
                                                                                                          
                                                                                                          In
      and/orBeginning
                                                                                                          
                                                                                                          Gains
      or (Losses) in Income
                                                                                                          
                                                                                                          Comprehensive
                                                                                                          
                                                                                                          Gains
      or
                                                                                                          
                                                                                                          and
      Sales,
                                                                                                          
                                                                                                          
                                                                                                          (Out)
      of
                                                                                                          
                                                                                                          
                                                                                                          EndingAsset
                                                                                                          
                                                                                                          Balance
                                                                                                          
                                                                                                          Trading
                                                                                                          
                                                                                                          
                                                                                                          Investments
                                                                                                          
                                                                                                          Income
                                                                                                          
                                                                                                          (Losses)
                                                                                                          
                                                                                                          net
                                                                                                          
                                                                                                          
                                                                                                          Level
      3
                                                                                                          
                                                                                                          
                                                                                                          BalanceFinancial
      instruments owned:Investments
      in securities - trading
                                                                                                          
                                                                                                          $
                                                                                                          1,541
                                                                                                          
                                                                                                          $
                                                                                                          (82
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          $
                                                                                                          (82
                                                                                                          )
                                                                                                          $
                                                                                                          (29
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          (963
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          467Total
                                                                                                          
                                                                                                          $
                                                                                                          1,541
                                                                                                          
                                                                                                          $
                                                                                                          (82
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          $
                                                                                                          (82
                                                                                                          )
                                                                                                          $
                                                                                                          (29
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          (963
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          467
 
 14
 
 Changes
in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
for the Three Months Ended March 31, 2008 (in thousands)
  TotalUnrealizedGains
      or
              
              Total(Losses)
              
              Realized
              
              
              
              
              NetDecember
              
              
              
              Included
      in
              
              and
              
              
              
              
              Transfers31,
      2007
              
              Total
      Realized and Unrealized
              
              Other
              
              Unrealized
              
              Purchases
              
              
              In
      and/orBeginning
              
              Gains
      or (Losses) in Income
              
              Comprehensive
              
              Gains
      or
              
              and
      Sales,
              
              
              (Out)
      of
              
              
              EndingAsset
              
              Balance
              
              Trading
              
              
              Investments
              
              Income
              
              (Losses)
              
              net
              
              
              Level
      3
              
              
              BalanceFinancial
      instruments owned:Investments
      in securities - trading
              
              $
              1,423
              
              $
              (235
              )
              
              $
              -
              
              $
              -
              
              $
              (235
              )
              $
              -
              
              
              $
              -
              
              
              $
              1,188Total
              
              $
              1,423
              
              $
              (235
              )
              
              $
              -
              
              $
              -
              
              $
              (235
              )
              $
              -
              
              
              $
              -
              
              
              $
              1,188
  Unrealized
Level 3 losses included in the condensed consolidated statement of income for
the three months ended March 31, 2009 and 2008 were approximately $0.1 million
and $0.2 million, respectively, for those Level 3 securities held at March 31,
2009 and 2008, respectively.
  E.
Debt
  On
January 18, 2008, the Securities and Exchange Commission ("Commission") declared
effective a registration statement on Form S-3 for the registration
for resale by Cascade Investment, L.L.C. ("Cascade") of an aggregate of
943,396 shares of GAMCO's Class A Common Stock issuable upon conversion of the
6% convertible note due August 14, 2011 (“2011 Note”) of the Company issued to
Cascade on August 14, 2001.  On January 22, 2008, Cascade elected to
convert $10 million of the 2011 Note into 188,679 GAMCO
shares.  Cascade requested that the remaining $40 million face value
of the 2011 Note be segregated into eight notes each with a face value of $5
million each.
  F.
Income Taxes
  The
effective tax rate for the three months ended March 31, 2009 was
32.7% as compared to the prior year quarter’s effective rate of 41.6%. The
current period decreases are due to $0.5 million relating to a
reduction to prior period income tax reserves.  For the prior year’s
quarter, the increase in the effective income tax rate related to increased
state and local income taxes and the tax impact of a change in the deductibility
of a portion of a legal settlement.
 15
  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
                              
                              
                              Three
      Months EndedMarch
      31, 2009
                              
                              
                              March
      31, 2008Basic:Net
      income attributable to GAMCO Investors, Inc.
                              
                              $
                              8,212
                              
                              
                              $
                              10,486Weighted
      average shares outstanding
                              
                              
                              27,379
                              
                              
                              
                              28,175Basic
      net income attributable to GAMCO Investors, Inc. per share
                              
                              $
                              0.30
                              
                              
                              $
                              0.37Diluted:Net
      income attributable to GAMCO Investors, Inc.
                              
                              $
                              8,212
                              
                              
                              $
                              10,486Weighted
      average shares outstanding
                              
                              
                              27,379
                              
                              
                              
                              28,175Dilutive
      stock options
                              
                              
                              7
                              
                              
                              
                              52Total
                              
                              
                              27,386
                              
                              
                              
                              28,227Diluted
      net income attributable to GAMCO Investors, Inc. per share
                              
                              $
                              0.30
                              
                              
                              $
                              0.37
  H.
Stockholders’ Equity
  Shares
outstanding were 27.8 million on March 31, 2009, 27.7 million on December 31,
2008, and 28.4 million shares on March 31, 2008.
  On
February 3, 2009, our Board of Directors declared a quarterly dividend of
$0.03 per share to all of its Class A and Class B shareholders, payable on March
31, 2009 to shareholders of record on March 17, 2009.
 
 On
February 25, 2009, our Board of Directors declared a distribution to all of its
Class A and Class B shareholders in the form of shares of Class B common stock
of Teton owned by the Company.  The distribution was paid on March 20,
2009 to shareholders of record on March 10, 2009 at a ratio of 14.930 shares of
Teton for each 1,000 shares of GBL owned on the record date.  The
spin-off was accounted for as a nonreciprocal transfer to shareholders and was
recorded at book value.
 Voting
Rights
 
 The
holders of Class A Common Stock and Class B Common Stock have identical rights
except that (i) holders of Class A Common Stock are entitled to one vote per
share, while holders of Class B Common Stock are entitled to ten votes per share
on all matters to be voted on by shareholders in general, and (ii) holders of
Class A Common Stock are not eligible to vote on matters relating
exclusively to Class B Common Stock and vice versa.
  16
  Stock
Award and Incentive Plan
  The
Company maintains two Plans approved by the shareholders, which are designed to
provide incentives which will attract and retain individuals key to the success
of GAMCO through direct or indirect ownership of our common stock. Benefits
under the Plans may be granted in any one or a combination of stock options,
stock appreciation rights, restricted stock, restricted stock units, stock
awards, dividend equivalents and other stock or cash based awards. A maximum of
1,500,000 shares of class A common stock have been reserved for issuance under
each of the Plans by the compensation committee of the Board of Directors
responsible for administering the Plans. Under the Plans, the committee may
grant either incentive or nonqualified stock options with a term not to exceed
ten years from the grant date and at an exercise price that the committee may
determine. Options granted under the Plans vest 75% after three years and 100%
after four years from the date of grant and expire after ten years.
  On
January 2, 2009, the Company issued 15,000 restricted stock award (“RSA”) shares
at a grant day fair value of $29.06 per share.  As of March 31, 2009,
there are 371,000 RSA shares outstanding that were issued at an average
grant price of $60.87.  All grants of the RSAs were recommended by the
Company's Chairman, who did not receive an RSA award, and approved by the
Compensation Committee of the Company's Board of Directors.  This
expense will be recognized over the vesting period for these awards which is 30%
over three years from the date of grant and 70% over five years from the
date of grant.  During the vesting period, dividends to RSA holders
are held for them until the RSA vesting dates and are forfeited if the grantee
is no longer employed by the Company on the vesting dates.  Dividends
declared on these RSAs are charged to retained earnings on the declaration
date.
  For the
three months ended March 31, 2009 and 2008, we recognized stock-based
compensation expense of $1.3 million and $1.2 million,
respectively.  Stock-based compensation expense for RSAs and
options for the years ended December 31, 2008 through December 31, 2013 is
as follows ($ in thousands):
  2008
                                          
                                          
                                          2009
                                          
                                          
                                          2010
                                          
                                          
                                          2011
                                          
                                          
                                          2012
                                          
                                          
                                          2013Q1
                                          
                                          $
                                          1,198
                                          
                                          
                                          $
                                          1,271
                                          
                                          
                                          $
                                          1,260
                                          
                                          
                                          $
                                          766
                                          
                                          
                                          $
                                          730
                                          
                                          
                                          $
                                          44Q2
                                          
                                          
                                          1,204
                                          
                                          
                                          
                                          1,267
                                          
                                          
                                          
                                          1,257
                                          
                                          
                                          
                                          763
                                          
                                          
                                          
                                          729
                                          
                                          
                                          
                                          44Q3
                                          
                                          
                                          1,237
                                          
                                          
                                          
                                          1,265
                                          
                                          
                                          
                                          1,256
                                          
                                          
                                          
                                          746
                                          
                                          
                                          
                                          729
                                          
                                          
                                          
                                          23Q4
                                          
                                          
                                          1,252
                                          
                                          
                                          
                                          1,264
                                          
                                          
                                          
                                          1,093
                                          
                                          
                                          
                                          739
                                          
                                          
                                          
                                          501
                                          
                                          
                                          
                                          12Full
      Year
                                          
                                          $
                                          4,891
                                          
                                          
                                          $
                                          5,067
                                          
                                          
                                          $
                                          4,866
                                          
                                          
                                          $
                                          3,014
                                          
                                          
                                          $
                                          2,689
                                          
                                          
                                          $
                                          123
 
 The total
compensation costs related to non-vested restricted stock awards and options not
yet recognized is approximately $14.5 million.  Proceeds from the exercise
of 5,325 and 15,500 stock options were $0.09 million and $0.6 million for
the three months ended March 31, 2009 and 2008, respectively, resulting in a tax
benefit to GAMCO of $0.03 million and $0.04 million for the three months ended
March 31, 2009 and 2008, respectively.
  Stock
Repurchase Program
  In March
1999, GAMCO's Board of Directors established the Stock Repurchase Program to
grant the authority to repurchase shares of our Class A Common
Stock.  The Company did not repurchase any shares during the three
months ended March 31, 2009.  For the three months ended March 31,
2008, the Company repurchased approximately 209,000 shares at an average
price per share of $51.83.   From the inception of the program through
March 31, 2009, 6,052,583 shares have been repurchased at an average price of
$39.77 per share.  At March 31, 2009, the total shares available under
the program to be repurchased were approximately 865,000.
  17
  I.
Goodwill and Identifiable Intangible Assets
  In
accordance with FASB Statement No. 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.  There was no impairment charge recorded for the three months
ended March 31, 2009.  At March 31, 2009, $3.5 million of goodwill is
reflected within other assets on our condensed consolidated statements of
financial condition related to our 92%-owned subsidiary, Gabelli Securities,
Inc.
  On March
10, 2008, the Enterprise Mergers and Acquisitions Fund's (the "Fund") Board of
Directors, subsequent to obtaining shareholder approval, approved the assignment
of the advisory contract to Gabelli Funds, LLC (the "Adviser") as the investment
adviser to the Fund.  GAMCO Asset Management, Inc. had been the
sub-adviser to the Fund.  On July 8, 2008, the Fund was renamed the
Gabelli Enterprise Merger and Acquisitions Fund.  As a result of
becoming the adviser to the rebranded Gabelli Enterprise Mergers and
Acquisitions Fund, at March 31, 2009, the Company maintains an
indefinite-lived identifiable intangible asset within other assets on the
condensed consolidated statements of financial condition of approximately $1.9
million, after the write down of $1.5 million in the fourth quarter of
2008.  The investment advisory agreement is subject to annual renewal
by the Fund's Board of Directors, which the Company expects will be renewed, and
the Company does not expect to incur additional expense as a
result, which is consistent with other investment advisory agreements
entered into by GAMCO.  The advisory contract is up for renewal in
February 2010.
 J.  Commitments
and Contingencies
  From time
to time, the Company has been, and may continue to be, named in legal actions,
including filed FINRA arbitration claims.  These claims may seek
substantial compensatory as well as punitive damages.  At this stage
the Company cannot predict the ultimate outcome of these claims.  The
condensed consolidated financial statements include the necessary provision for
losses that are deemed to be probable and estimable.  In the opinion
of management, the resolution of such claims will not be material to the
financial condition of the Company.
 
 We
indemnify the clearing brokers for our affiliated broker-dealer for losses they
may sustain from the customer accounts that trade on margin introduced by our
broker-dealer subsidiary. At March 31, 2009, the total amount of customer
balances subject to indemnification (i.e. unsecured margin debits) was
immaterial.  The Company also has entered into arrangements with
various other third parties many of which provide for indemnification of the
third parties against losses, costs, claims and liabilities arising from the
performance of our obligations under the agreements. 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.  Management cannot
estimate any potential maximum exposure due both to the remoteness of any
potential claims and the fact that items that would be included within any such
calculated claim would be beyond the control of
management.  Consequently, no accrual has been made in the condensed
consolidated financial statements.
  K.
Subsequent Events
  On May 5,
2009, our Board of Directors declared a quarterly dividend of $0.03 per
share to all of its Class A and Class B shareholders, payable on June 30, 2009
to shareholders of record on June 16, 2009.
  18
  ITEM 2:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (INCLUDING QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK)
 
 Overview
  GAMCO
through the Gabelli brand, 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 and brokerage services to institutional
clients and investment partnerships and mutual fund distribution.  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 include 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.  General stock market trends will have the greatest impact
on our level of assets under management and hence, revenues.
 
 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.
  On March
20, 2009, GAMCO distributed its shares of Teton Advisors, Inc. (“Teton”) to
shareholders.  At the time of the spin-off Teton had $374 million in
Assets Under Management (“AUM”).  AUM comparisons that follow for
GAMCO are presented excluding Teton’s AUM for the periods
presented.  AUM were $18.5 billion as of March 31, 2009, 8.4% lower
than December 31, 2008 AUM of $20.2 billion and 34.6% below March 31, 2008 AUM
of $28.3 billion.  Equity AUM were $16.7 billion on March 31, 2009,
10.7% less than December 31, 2008 equity AUM of $18.7 billion and 37.7% below
the $26.8 billion on March 31, 2008.  Significant highlights are as
follows:
  -
              Our
      open-end equity fund AUM were $5.6 billion on March 31, 2009, 8.2% less
      than $6.1 billion on December 31, 2008 and 37.8% below $9.0 billion on
      March 31, 2008.
 
 -
              Our
      closed-end equity funds had AUM of $3.4 billion on March 31, 2009, down
      10.5% from $3.8 billion on December 31, 2008 and 41.4% below the $5.8
      billion on March 31, 2008.
 
 -
              Our
      institutional and private wealth management business ended the quarter
      with $7.5 billion in separately managed accounts, down 11.8% from December
      31, 2008 level of $8.5 billion and 35.3% lower than the $11.6 billion on
      March 31, 2008.
 
 -
              Our
      Investment Partnerships AUM were $265 million on March 31, 2009 versus
      $295 million on December 31, 2008 and $396 million on March 31,
      2008.
 
 -
              AUM
      in The Gabelli U.S. Treasury Fund, our 100% U.S. Treasury money market
      fund, increased 20.0% to $1.8 billion on March 31, 2009, versus the $1.5
      billion on December 31, 2008 and 28.6% from the March 31, 2008 AUM of $1.4
      billion.
 
 -
              We
      have the opportunity to earn incentive fees for certain institutional
      client assets, assets attributable to preferred issues for our closed-end
      funds, assets of the Gabelli Global Deal Fund (NYSE: GDL) and investment
      partnership assets.  As of March 31, 2009, assets with incentive
      based fees were $2.5 billion, down 3.8% from the $2.6 billion on December
      31, 2008 and 24.2% below the $3.3 billion on March 31,
    2008.
  19
  The
Company reported Assets Under Management as follows:
  Table I:Mutual
      Funds:
                  
                  March
      31, 2009
                  
                  
                  March
      31, 2008
                  
                  %
      Inc.(Dec.)Open-end
                  $
                  5,627
                  
                  $
                  9,042
                  
                  (37.8
                  )Closed-end
                  
                  3,359
                  
                  
                  5,762
                  
                  (41.7
                  )Fixed
      Income
                  
                  1,794
                  
                  
                  1,431
                  
                  25.4Total
      Mutual Funds
                  
                  10,780
                  
                  
                  16,235
                  
                  (33.6
                  )Institutional
      & PWM:Equities:
      direct
                  
                  6,227
                  
                  
                  9,746
                  
                  (36.1
                  )Equities:
      sub-advisory
                  
                  1,202
                  
                  
                  1,887
                  
                  (36.3
                  )Fixed
      Income
                  
                  21
                  
                  
                  2
                  
                  n/mTotal
      Institutional & PWM
                  
                  7,450
                  
                  
                  11,635
                  
                  (36.0
                  )Investment
      Partnerships
                  
                  265
                  
                  
                  396
                  
                  (33.1
                  )Total
      Assets Under Management
                  $
                  18,495
                  
                  $
                  28,266
                  
                  (34.6
                  )Equities
                  $
                  16,680
                  
                  $
                  26,833
                  
                  (37.8
                  )Fixed
      Income
                  
                  1,815
                  
                  
                  1,433
                  
                  26.7Total
      Assets Under Management
                  $
                  18,495
                  
                  $
                  28,266
                  
                  (34.6
                  )
 Note:
Teton’s AUM at March 31, 2008 were $431 million and have been excluded from
Table I.
 
 Table
II:
                                
                                Assets
      Under Management By Quarter (millions)%
      Increase/(decrease)Mutual
      Funds:
                                
                                
                                3/09
                                
                                
                                
                                12/08
                                
                                
                                
                                9/08
                                
                                
                                
                                6/08
                                
                                
                                
                                3/08
                                
                                
                                
                                3/08
                                
                                
                                12/08Open-end
                                
                                $
                                5,627
                                
                                
                                $
                                6,139
                                
                                
                                $
                                8,015
                                
                                
                                $
                                9,063
                                
                                
                                $
                                9,042
                                
                                
                                
                                (37.8
                                )
                                
                                (8.3
                                )Closed-end
                                
                                
                                3,359
                                
                                
                                
                                3,792
                                
                                
                                
                                4,869
                                
                                
                                
                                5,704
                                
                                
                                
                                5,762
                                
                                
                                
                                (41.7
                                )
                                
                                (11.4
                                )Fixed
      income
                                
                                
                                1,794
                                
                                
                                
                                1,507
                                
                                
                                
                                1,003
                                
                                
                                
                                1,153
                                
                                
                                
                                1,431
                                
                                
                                
                                25.4
                                
                                
                                19.0Total
      Mutual Funds
                                
                                
                                10,780
                                
                                
                                
                                11,438
                                
                                
                                
                                13,887
                                
                                
                                
                                15,920
                                
                                
                                
                                16,235
                                
                                
                                
                                (33.6
                                )
                                
                                (5.8
                                )Institutional
      & PWM:Equities:
      direct
                                
                                
                                6,227
                                
                                
                                
                                6,861
                                
                                
                                
                                8,964
                                
                                
                                
                                9,564
                                
                                
                                
                                9,746
                                
                                
                                
                                (36.1
                                )
                                
                                (9.2
                                )Equities:
      sub-advisory
                                
                                
                                1,202
                                
                                
                                
                                1,585
                                
                                
                                
                                1,964
                                
                                
                                
                                2,043
                                
                                
                                
                                1,887
                                
                                
                                
                                (36.3
                                )
                                
                                (24.2
                                )Fixed
      Income
                                
                                
                                21
                                
                                
                                
                                22
                                
                                
                                
                                19
                                
                                
                                
                                17
                                
                                
                                
                                2
                                
                                
                                
                                n/m
                                
                                
                                (4.5
                                )Total
      Institutional & PWM
                                
                                
                                7,450
                                
                                
                                
                                8,468
                                
                                
                                
                                10,947
                                
                                
                                
                                11,624
                                
                                
                                
                                11,635
                                
                                
                                
                                (36.0
                                )
                                
                                (12.0
                                )Investment
      Partnerships
                                
                                
                                265
                                
                                
                                
                                295
                                
                                
                                
                                340
                                
                                
                                
                                354
                                
                                
                                
                                396
                                
                                
                                
                                (33.1
                                )
                                
                                (10.2
                                )Total
      Assets Under Management
                                
                                $
                                18,495
                                
                                
                                $
                                20,201
                                
                                
                                $
                                25,174
                                
                                
                                $
                                27,898
                                
                                
                                $
                                28,266
                                
                                
                                
                                (34.6
                                )
                                
                                (8.4
                                )
 Note:
Teton’s AUM at December 31, 2008, September 30, 2008, June 30, 2008 and March
31, 2008 were $450 million, $418 million, $434 million and $431 million,
respectively, and have been excluded from Table II.
 
 Table
      III:MarketAppreciation
      /Mutual
      Funds:
                                                                          
                                                                          December
      31, 2008
                                                                          
                                                                          Net
      Cash Flows
                                                                          
                                                                          (Depreciation)
                                                                          
                                                                          March 31,
      2009Equities
                                                                          
                                                                          $
                                                                          9,931
                                                                          
                                                                          $
                                                                          (57
                                                                          )
                                                                          $
                                                                          (888
                                                                          )
                                                                          $
                                                                          8,986Fixed
      Income
                                                                          
                                                                          
                                                                          1,507
                                                                          
                                                                          
                                                                          285
                                                                          
                                                                          
                                                                          2
                                                                          
                                                                          
                                                                          1,794Total
      Mutual Funds
                                                                          
                                                                          
                                                                          11,438
                                                                          
                                                                          
                                                                          228
                                                                          
                                                                          
                                                                          (886
                                                                          )
                                                                          
                                                                          10,780Institutional
      & PWM:Equities:
      direct
                                                                          
                                                                          
                                                                          6,861
                                                                          
                                                                          
                                                                          61
                                                                          
                                                                          
                                                                          (695
                                                                          )
                                                                          
                                                                          6,227Equities: sub-advisory
                                                                          
                                                                          
                                                                          1,585
                                                                          
                                                                          
                                                                          (217
                                                                          )
                                                                          
                                                                          (166
                                                                          )
                                                                          
                                                                          1,202Fixed
      Income
                                                                          
                                                                          
                                                                          22
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          (1
                                                                          )
                                                                          
                                                                          21Total
      Institutional & PWM
                                                                          
                                                                          
                                                                          8,468
                                                                          
                                                                          
                                                                          (156
                                                                          )
                                                                          
                                                                          (862
                                                                          )
                                                                          
                                                                          7,450Investment
      Partnerships
                                                                          
                                                                          
                                                                          295
                                                                          
                                                                          
                                                                          (34
                                                                          )
                                                                          
                                                                          4
                                                                          
                                                                          
                                                                          265Total
      Assets Under Management
                                                                          
                                                                          $
                                                                          20,201
                                                                          
                                                                          $
                                                                          38
                                                                          
                                                                          $
                                                                          (1,744
                                                                          )
                                                                          $
                                                                          18,495
 Note:
Teton’s AUM at December 31, 2008 were $450 million and have been excluded from
Table III.
  20
  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.
 
 RESULTS
OF OPERATIONS
  Three
Months Ended March 31, 2009 Compared To Three Months Ended March 31,
2008
  (Unaudited; in thousands,
except per share data)
 2009
                                
                                
                                2008RevenuesInvestment
      advisory and incentive fees
                                
                                $
                                35,199
                                
                                
                                $
                                56,841Commission
      revenue
                                
                                
                                3,650
                                
                                
                                
                                3,256Distribution
      fees and other income
                                
                                
                                4,510
                                
                                
                                
                                6,451Total
      revenues
                                
                                
                                43,359
                                
                                
                                
                                66,548ExpensesCompensation
      and related costs
                                
                                
                                20,785
                                
                                
                                
                                28,922Management
      fee
                                
                                
                                1,349
                                
                                
                                
                                1,981Distribution
      costs
                                
                                
                                5,422
                                
                                
                                
                                6,334Other
      operating expenses
                                
                                
                                4,301
                                
                                
                                
                                6,054Total
      expenses
                                
                                
                                31,857
                                
                                
                                
                                43,291Operating
      income
                                
                                
                                11,502
                                
                                
                                
                                23,257Other
      income (expense)Net
      gain (loss) from investments
                                
                                
                                2,592
                                
                                
                                
                                (8,389
                                )Interest
      and dividend income
                                
                                
                                1,278
                                
                                
                                
                                4,774Interest
      expense
                                
                                
                                (3,168
                                )
                                
                                
                                (2,007
                                )Total
      other income (expense), net
                                
                                
                                702
                                
                                
                                
                                (5,622
                                )Income
      before taxes
                                
                                
                                12,204
                                
                                
                                
                                17,635Income
      tax provision
                                
                                
                                3,988
                                
                                
                                
                                7,326Net
      income
                                
                                
                                8,216
                                
                                
                                
                                10,309Net
      income (loss) attributable to noncontrolling interests
                                
                                
                                4
                                
                                
                                
                                (177
                                )Net
      income attributable to GAMCO Investors, Inc.’s
shareholders
                                
                                $
                                8,212
                                
                                
                                $
                                10,486Net
      income attributable to GAMCO Investors, Inc.’s shareholders per
      share:Basic
                                
                                $
                                0.30
                                
                                
                                $
                                0.37Diluted
                                
                                $
                                0.30
                                
                                
                                $
                                0.37Reconciliation
      of net income attributable to GAMCO Investors, Inc.’s shareholderstoAdjusted
      EBITDA:Net
      income attributable to GAMCO Investors, Inc.’s
shareholders
                                
                                $
                                8,212
                                
                                
                                $
                                10,486Interest
      expense
                                
                                
                                3,168
                                
                                
                                
                                2,007Income
      tax provision and net income attributable to noncontrolling
      interests
                                
                                
                                3,992
                                
                                
                                
                                7,149Depreciation
      and amortization
                                
                                
                                165
                                
                                
                                
                                229Adjusted
      EBITDA (a)
                                
                                $
                                15,537
                                
                                
                                $
                                19,871(a)
      Adjusted EBITDA is defined as earnings before interest, taxes,
      depreciation and amortization, and noncontrolling
      interests.  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 financing
      activities as a tool for determining the private market value of an
      enterprise.
  21
  Total
revenues were $43.4 million in the first quarter of 2009, 34.7% below the $66.5
million reported in the first quarter of 2008.  Operating income was
$11.5 million, a decrease of $11.8 million or 50.6% from the $23.3 million in
the first quarter of 2008.  Total other income/expense, net of
interest expense, was income of $0.7 million for the first quarter 2009 versus
an expense of $5.6 million in the prior year’s quarter.  In the
short-run, our results remain sensitive to changes in the equity
market.  Net income attributable to GAMCO Investors, Inc.’s
shareholders for the quarter was $8.2 million or $0.30 per fully diluted share
versus $10.5 million or $0.37 per fully diluted share in the prior year’s
quarter.
  Investment
advisory fees for the first quarter 2009 were $35.2 million, 38.0% below the
2008 comparative figure of $56.8 million. Open-end mutual fund revenues declined
by 33.5% to $15.7 million from $23.6 million in first quarter 2008 primarily due
to lower average AUM.  Our closed-end fund revenues fell 49.6% to $5.8
million in the first quarter 2009 from $11.5 million in 2008 primarily due to
decreased average AUM.  Institutional and high net worth separate
accounts revenues, whose revenues are based upon prior quarter-end AUM,
decreased 36.8% to $13.2 million from $20.9 million in first quarter 2008,
primarily due to lower AUM. Investment partnership revenues were $0.5 million, a
decrease of $0.3 million or 37.5% from $0.8 million in 2008.  This
decrease was primarily due to lower AUM in the current quarter as compared to
the prior year's quarter.
  Commission
revenues from our institutional research affiliate, Gabelli & Company, Inc.,
were $3.7 million in the first quarter 2009, up 12.1% from the prior
year.
  Mutual
fund distribution fees and other income were $4.5 million for the first quarter
2009, a decline of 30.8% or $2.0 million from the prior period’s $6.5 million,
primarily due to the decline in open-end equity mutual fund AUM.
  Compensation
costs, which are largely variable, were $20.8 million or 28.0% lower than
the $28.9 million recorded in the prior year period.  This decrease
was driven by lower revenues across most business lines as AUM declined quarter
over quarter.
  Management
fee expense, which is completely variable and based on pretax income, declined
to $1.3 million in the first quarter of 2009 from $2.0 million in the 2008
period.
  Distribution
costs were $5.4 million, a decrease of 14.3% from $6.3 million in the prior
year’s period.
  Other
operating expenses decreased by $1.8 million to $4.3 million in the first
quarter of 2009 from the prior year first quarter of $6.1
million.  Quarter over quarter, the receipt of insurance claims for
legal fees and expenses submitted in prior quarters led to a decline of $0.7
million in other operating expenses.  Clearing charges declined 29.4%
or $0.3 million even as commission revenue increased 12.1% as we benefited from
our cost reduction efforts.
  Total
expenses, excluding the management fee, were $30.5 million in the first quarter
of 2009, a 26.2% decrease from total expenses of $41.3 million in the first
quarter of 2008.
  Operating
income for the first quarter of 2009 was $11.5 million, lower by $11.8 million
than the first quarter 2008’s $23.3 million.  This decline was largely
due to the decline in revenues and impacted negatively by a decline in operating
expenses that was less than the revenue decline.
  Total
other income/expense (net of interest expense) was $0.7 million of income for
the first quarter 2009 versus other expense (net of interest expense) of $5.6
million in the prior year’s quarter.  $11.0 million of this increase
is from the effect of mark to market increases in equity instruments. 
Interest income was lower by $2.4 million and dividend income was lower
by $1.1 million.  Interest expense increased to $3.2 million for
first quarter 2009 from $2.0 million for the prior year quarter primarily the
result of the issuance in October 2008 of the $60 million 6.5% convertible
note.
  The
effective tax rate for the three months ended March 31, 2009 was
32.7% as compared to the prior year period’s effective rate of 41.6%. 
The current year’s rate includes a reduction to prior period income tax reserves
while the prior year’s effective rate included an adjustment relating to the
deductibility of a legal settlement.
  22
  LIQUIDITY
AND CAPITAL RESOURCES
 Our
principal assets consist of cash and cash equivalents, short-term investments,
securities held for investment purposes and investments in mutual funds, and
investment partnerships and offshore funds, both proprietary and
external.  Cash and cash equivalents are comprised primarily of United
States treasury securities with maturities of less than three months and money
market funds managed by GAMCO.  Short-term investments are comprised
primarily of United States treasury securities with maturities between three
months and one year.  Although the investment partnerships and
offshore funds are for the most part illiquid, the underlying investments of
such partnerships or funds are for the most part liquid, and the valuations of
these products reflect that underlying liquidity.
  Summary
cash flow data is as follows:
 Three
      Months Ended March 31,2009
                      
                      
                      2008Cash
      flows (used in) provided by:
                      
                      (in
      thousands)Operating
      activities
                      
                      $
                      65,781
                      
                      
                      $
                      123,566Investing
      activities
                      
                      
                      (3,244
                      )
                      
                      
                      (391
                      )Financing
      activities
                      
                      
                      (1,995
                      )
                      
                      
                      (10,697
                      )Increase
                      
                      
                      60,542
                      
                      
                      
                      112,478Effect
      of exchange rates on cash and cash equivalents
                      
                      
                      (15
                      )
                      
                      
                      (1
                      )Cash
      and cash equivalents at beginning of period
                      
                      
                      333,332
                      
                      
                      
                      168,319Cash
      and cash equivalents at end of period
                      
                      $
                      393,859
                      
                      
                      $
                      280,796
  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 March
31, 2009, we had total cash and cash equivalents of $393.9 million, an
increase of $60.6 million from December 31, 2008.  Cash and cash
equivalents and investments in securities held in escrow relating to the $60
million 6.5% convertible note and held by investment partnerships and offshore
funds consolidated under EITF 04-5 are restricted from use for general operating
purposes.  Total debt outstanding at March 31, 2009 was $198.8
million, consisting of the $60 million 6.5% convertible note, the $40 million 6%
convertible note and the $99 million of 5.5% senior notes.  On
January 22, 2008, Cascade Investment, L.L.C. elected to convert $10 million of
the 6% convertible note into 188,679 GAMCO shares.
  For the
three months ended March 31, 2009, cash provided by operating activities was
$65.8 million.  The most significant contributors to the lower cash
provided by operating activities in the first quarter 2009 versus first quarter
2008 were lower incentive fees, reduced distributions from partnerships and
affiliates and timing of settlement of securities transactions.  Cash
used in investing activities, related to purchases and proceeds from sales of
available for sale securities, was $3.2 million in the first three months of
2009.  Cash used in financing activities in the first three months of
2009 was $2.0 million.
  For the
three months ended March 31, 2008, cash provided by operating activities was
$123.6 million.  Cash used in investing activities, related to
purchases and sales of available for sale securities, was $0.4 million in the
first three months of 2008.  Cash used in financing activities in the
first three months of 2008 was $10.7 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.
  23
  As a
registered broker-dealer, Gabelli & Company, Inc. (“Gabelli & Company”)
is subject to certain net capital requirements in accordance with Commission
rules.  Gabelli & Company's net capital has historically exceeded
these minimum net capital 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 promulgated under the Securities Exchange Act of
1934.  The requirement was $250,000 at March 31, 2009.  At
March 31, 2009, Gabelli & Company had net capital, as defined, of
approximately $17.2 million, exceeding the regulatory requirement by
approximately $16.9 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 three months ended March 31, 2009.
 
 Market
Risk
  Our
primary market risk exposure is to changes in equity prices and interest
rates.  Since over 90% 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.
  The
Company earns substantially all of its revenue as advisory fees from our Mutual
Fund, Institutional and Private Wealth Management, and Investment Partnership
assets.  Such fees represent a percentage of AUM and the majority of
these assets are in equity investments.  Accordingly, since revenues
are proportionate to the value of those investments, a substantial increase or
decrease in equity markets overall will have a corresponding effect on the
Company's revenues.
  With
respect to our proprietary investment activities, included in investments in
securities of $187.6 million at March 31, 2009 were investments in United States
Treasury Bills and Notes of $65.8 million, mutual funds, largely invested in
equity products, of $46.8 million, a selection of common and preferred stocks
totaling $74.5 million, and other investments of approximately $0.5
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 $74.5 million
invested in common and preferred stocks at March 31, 2009, $39.3 million
represented our investment in Westwood Holdings Group Inc., and $10.9 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 stated at fair
value and are subject to market risks resulting from changes in price and
volatility.  At March 31, 2009 and 2008, the fair value of securities
sold, not yet purchased was $3.6 million and $3.1 million,
respectively.  Investments in partnerships and affiliates totaled
$56.2 million at March 31, 2009, 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, from its investment of
excess cash in U.S. Government securities.  These investments are
primarily short term in nature, and the carrying value of these investments
generally approximates fair value.
 
 Critical
Accounting Policies and Estimates
  The
preparation of the condensed consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the condensed consolidated financial statements
and the reported amounts of revenues and expenses during the reporting
periods.  Actual results could differ significantly from those
estimates.  See Note A and the Company’s Critical Accounting Policies
in Management’s Discussion and Analysis of Financial Condition and Results of
Operations in GAMCO’s 2008 Annual Report on Form 10-K filed with the SEC on
March 10, 2009 for details on Significant Accounting Policies.
  24
  Item 3.  Quantitative and Qualitative Disclosures About
Market Risk
  In the
normal course of its business, GAMCO is exposed to risk of loss due to
fluctuations in the securities market and general economy. Management is
responsible for identifying, assessing and managing market and other
risks.
  At March
31, 2009, GAMCO was exposed to interest-rate risk as a result of holding
investments in money market funds ($392.3 million) and United Stated Treasury
Bills ($65.8 million).  Management considered a hypothetical 100 basis
point increase in interest rates and determined that the impact of such a
fluctuation on these investments would have a $4.6 million effect on GAMCO’s
condensed consolidated statements of income.
  Our
exposure to pricing risk in equity securities is directly related to our role as
financial intermediary and advisor for AUM in our Mutual Funds, Separate
Accounts, and Investment Partnerships as well as our proprietary investment and
trading activities.  At March 31, 2009, we had equity investments,
including mutual funds largely invested in equity products, of $117.8
million.  Investments in mutual funds, $46.8 million, usually generate
lower market risk through the diversification of financial instruments within
their portfolios.  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.  We also hold investments in
partnerships and affiliates which invest primarily in equity securities and
which are subject to changes in equity prices.  Investments in
partnerships and affiliates totaled $56.2 million, of which $11.1 million were
invested in partnerships and affiliates which invest in event-driven merger
arbitrage strategies.  These strategies are primarily dependent upon
deal closure rather than the overall market environment.  The equity
investment portfolio is at fair value and will move in line with the equity
markets.  The trading portfolio changes will be recorded as net gain
(loss) from investments in the condensed consolidated statements of income while
the available for sale portfolio changes will be recorded in other comprehensive
income in the condensed consolidated statements of financial
condition.
 
 Item 4.  Controls and Procedures
  We
evaluated the effectiveness of our disclosure controls and procedures as of
March 31, 2009.  Disclosure controls and procedures as defined under
the Securities Exchange Act Rule 13a-15(e), are designed to ensure that the
information we are required to disclose in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time period specified in the SEC’s rule and forms.  Disclosure
controls and procedures include, without limitation, controls and procedures
accumulated and communicated to our management, including our Chief Executive
Officer (“CEO”), Chief Financial Officer ("CFO"), and Co-Principal
Accounting Officers (“PAOs”), to allow timely decisions regarding required
disclosure.  Our CEO, CFO, and PAOs participated in this
evaluation and concluded that, as of the date of March 31, 2009, our disclosure
controls and procedures were effective.
  There
have been no changes in our internal control over financial reporting as defined
by Rule 13a-15(f) that occurred during our most recently completed fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
  25
 
 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-Q 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.
  Part II:  Other Information
 
 Item
      1.
              Legal Proceedings
 From time
to time, the Company has been, and may continue to be, named in legal actions,
including filed FINRA arbitration claims.  These claims may seek
substantial compensatory as well as punitive damages.  At this stage
the Company cannot predict the ultimate outcome of these claims.
  Item 2.
              Unregistered Sales of Equity Securities and Use of
      ProceedsNo
      shares were purchased during the first quarter of
  2009.
  Item
      6.
              (a) Exhibits
  31.1
                Certification
      of CEO pursuant to Rule
13a-14(a).
 
 31.2
                Certification
      of CFO pursuant to Rule
13a-14(a).
 
 32.1
                Certification
      of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.
 
 32.2
                Certification
      of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes- Oxley Act of
2002.
  26
 
 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)
  By:/s/ Kieran Caterina
                                        
                                        
                                        By:/s/ Diane M.
    LaPointeName: Kieran
      Caterina
                                        
                                        
                                        Name:  Diane
      M. LaPointeTitle:
      Co-Principal Accounting Officer
                                        
                                        Title:
      Co-Principal Accounting OfficerDate:
      May 8, 2009
                                        
                                        
                                        Date:
      May 8, 2009
  27