SECURITIES & EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-Q/A
                                   -----------
                                (Amendment No. 1)

(Mark One)

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

For the quarterly period ended September 30, 2006
                               ------------------
                                                         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                       (I.R.S. Employer
incorporation or organization)                        Identification No.)

One Corporate Center, Rye, NY                         10580-1422
--------------------------------------------------------------------------------
(Address of principle executive offices)              (Zip Code)

                                 (914) 921-3700
--------------------------------------------------------------------------------
               Registrant's telephone number, including area code

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

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

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

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

           Class                                Outstanding at October 31, 2006
           -----                                -------------------------------
Class A Common Stock, .001 par value                       7,470,398
Class B Common Stock, .001 par value                      20,769,237



                                       1
<PAGE>

                                Explanatory Note

This Form 10-Q/A of GAMCO Investors, Inc. (the "Company") constitutes Amendment
No. 1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2006, which was initially filed with the Securities and Exchange
Commission on November 9, 2006. As further described in Note A to the Condensed
Consolidated Financial Statements, the purpose of this filing is to restate the
Financial Statements and amend Management's Discussion and Analysis of Financial
Condition and Results of Operations (Including Quantitative and Qualitative
Disclosure about Market Risk) in Part I, Items 1 and 2, respectively, relating
to the reporting of individual assets and liabilities of certain proprietary
investment accounts. In addition, certain reclassifications on the Condensed
Consolidated Statements of Financial Condition and on the Condensed Consolidated
Statements of Cash Flows have been made relating to the consolidation of certain
investment partnerships and offshore funds in accordance with the provisions of
FASB Interpretation No. 46R ("FIN 46R") and Emerging Issue Task Force 04-5
("EITF 04-5") and relating to the voluntary change in accounting principle.




                                       2
<PAGE>


                                      INDEX
                                      -----

                     GAMCO INVESTORS, INC. AND SUBSIDIARIES


PART I.       FINANCIAL INFORMATION
-------       ---------------------

Item 1.       Financial Statements (Unaudited)

              Condensed Consolidated Statements of Income:
              -    Three months ended September 30, 2006 and 2005
              -    Nine months ended September 30, 2006 and 2005

              Condensed Consolidated Statements of Financial Condition:
              -    December 31, 2005 (Audited)
              -    September 30, 2006
              -    September 30, 2005

              Condensed Consolidated Statements of Stockholders' Equity and
                 Comprehensive Income:
              -    Three months ended September 30, 2006 and 2005
              -    Nine months ended September 30, 2006 and 2005

              Condensed Consolidated Statements of Cash Flows:
              -    Three months ended September 30, 2006 and 2005
              -    Nine months ended September 30, 2006 and 2005

              Notes to Condensed Consolidated Financial Statements

Item 2.       Management's Discussion and Analysis of Financial Condition and
              Results of Operations (Including Quantitative and Qualitative
              Disclosure about Market Risk)

Item 4.       Controls and Procedures

PART II.      OTHER INFORMATION
--------      -----------------

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

Item 6.       Exhibits


SIGNATURES




                                       3
<PAGE>

<TABLE>
<CAPTION>

                     GAMCO INVESTORS, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                    UNAUDITED
                      (In thousands, except per share data)




                                                                Three Months Ended                  Nine Months Ended
                                                                  September 30,                       September 30,
                                                         ----------------------------------------------------------------------
                                                              2006           2005 (a)               2006           2005 (a)
                                                              ----           --------               ----           --------
  <S>                                                          <C>               <C>                <C>              <C>
Revenues
  Investment advisory and incentive fees                     $ 49,751          $ 52,019            $ 153,735       $ 157,068
  Commission revenue                                            2,800             3,259                8,973           8,298
  Distribution fees and other income                            5,443             5,428               16,229          15,471
                                                         ------------      ------------         ------------    ------------
     Total revenues                                            57,994            60,706              178,937         180,837
Expenses
  Compensation and related costs                               24,161            24,972               75,459          77,513
  Management fee                                                3,026             3,240                8,153           7,759
  Distribution costs                                            5,024             5,175               15,568          15,923
  Other operating expenses                                      7,563             7,019               22,667          20,077
  Reserve for settlement                                            -                 -               11,900               -
                                                         ------------      ------------         ------------    ------------
     Total expenses                                            39,774            40,406              133,747         121,272

Operating income                                               18,220            20,300               45,190          59,565
Other income (expense)
  Net gain from investments                                     4,663             6,937               32,032           7,919
  Interest and dividend income                                  7,665             5,216               20,149          12,845
  Interest expense                                             (3,368)           (3,298)             (10,637)        (10,502)
                                                         ------------      ------------         ------------    ------------
     Total other income, net                                    8,960             8,855               41,544          10,262
                                                         ------------      ------------         ------------    ------------

Income before income taxes and minority interest               27,180            29,155               86,734          69,827
  Income tax provision                                         10,192            10,933               33,726          26,186
  Minority interest                                               104               176                8,783             266
                                                         ------------      ------------         ------------    ------------

    Net income                                               $ 16,884          $ 18,046             $ 44,225        $ 43,375
                                                         ============      ============         ============    ============

Net income per share:
  Basic                                                        $ 0.60            $ 0.60               $ 1.54          $ 1.45
                                                         ============      ============         ============    ============

  Diluted                                                      $ 0.59            $ 0.59               $ 1.53          $ 1.43
                                                         ============      ============         ============    ============

Weighted average shares outstanding:
  Basic                                                        28,254            29,935               28,647          29,859
                                                         ============      ============         ============    ============

  Diluted                                                      29,235            31,079               29,644          31,323
                                                         ============      ============         ============    ============


Dividends declared:                                            $ 0.03            $ 0.02               $ 0.09          $ 0.06
                                                         ============      ============         ============    ============


(a) As restated for the change in accounting method as described in note A in
item 1 of this report on Form 10-Q/A which was previously reported on Form 10-Q
filed with the Securities and Exchange Commission on November 9, 2006.

See accompanying notes.
</TABLE>


                                       4
<PAGE>

<TABLE>
<CAPTION>

                     GAMCO INVESTORS, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                      (In thousands, except per share data)

                                                                            December 31,       September 30,     September 30,
                                                                              2005 (a)           2006 (a)          2005 (a)
                                                                         -----------------------------------------------------
ASSETS                                                                                                    (Unaudited)
     <S>                                                                         <C>                 <C>                <C>
Cash and cash equivalents, including restricted cash of
     $2,503, $2,056 and $2,483.                                                $ 173,161         $ 112,089            $205,050
Investments in securities, including restricted securities of
     $52,219, $51,461 and $51,731.                                               421,414           503,801             413,018
Investments in partnerships and affiliates                                        74,827            81,326              72,889
Receivable from brokers                                                            9,827            49,149               9,138
Investment advisory fees receivable                                               22,098            16,219              15,792
Other assets                                                                      26,821            15,452              22,345
                                                                             -----------       -----------         -----------

     Total assets                                                              $ 728,138         $ 778,036            $738,232
                                                                             ===========        ===========        ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Payable to brokers                                                              $  3,937         $  18,599            $  1,773
Income taxes payable, including deferred taxes of $1,699, ($287),
     and $1,713.                                                                  10,097             5,353               5,408
Compensation payable                                                              27,820            40,381              36,614
Capital lease obligation                                                           2,992             2,837               3,039
Securities sold, not yet purchased                                                 3,183             8,465               3,379
Accrued expenses and other liabilities                                            17,579            31,844              19,327
                                                                             -----------       -----------         -----------

     Total operating liabilities                                                  65,608           107,479              69,540
                                                                             -----------       -----------         -----------

5.5% Senior notes (due May 15, 2013)                                             100,000           100,000             100,000
6% Convertible note (conversion price, $53.00 per share;
   note due August 14, 2011)(b)                                                   50,000            50,000              50,000
5.22% Senior notes (due February 17, 2007)                                        82,308            82,308              82,308
                                                                             -----------       -----------         -----------

     Total liabilities                                                           297,916           339,787             301,848

Minority interest                                                                  6,147            20,218               5,915

Stockholders' equity
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized;
    9,648,339, 12,022,762 and 9,640,339 issued, respectively; 6,414,517,
    7,458,608 and 6,733,317
    outstanding, respectively                                                         10                10                  10
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;
    23,128,500, 23,128,500 and 23,128,500
    issued, respectively; 23,128,500, 20,781,027 and 23,128,500                       23                23                  23
    outstanding, respectively
Additional paid-in capital                                                       226,353           228,880             235,735
Retained earnings                                                                329,036           370,613             309,782
Accumulated comprehensive gain                                                       526             4,803               2,171
Treasury stock, at cost (3,233,822, 4,564,154 and 2,907,022
    shares, respectively)                                                       (131,873)         (186,298)           (117,252)
                                                                             -----------       -----------         -----------
     Total stockholders' equity                                                  424,075           418,031             430,469
                                                                             -----------       -----------         -----------

Total liabilities and stockholders' equity                                     $ 728,138         $ 778,036            $738,232
                                                                             ===========       ===========         ===========

(a) As restated for (1) the change in accounting method which was previously
reported on Form 10-Q filed with the Securities and Exchange Commission on
November 9, 2006 as described in Note A in item 1 of this report on Form 10-Q/A,
and (2) the reporting of individual assets and liabilities of certain
proprietary investment accounts as described in Note A in item 1 of this report
on Form 10-Q/A.
(b) Convertible note was 5% with a conversion price of $52 per share for
December 31, 2005 and September 30, 2005.

See accompanying notes.
</TABLE>


                                       5
<PAGE>

<TABLE>
<CAPTION>

                     GAMCO INVESTORS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                                    UNAUDITED
                                 (In thousands)


                                                                      Three Months Ended              Nine Months Ended
                                                                          September 30,                 September 30,
                                                                 -------------------------------------------------------------
                                                                     2006          2005 (a)          2006         2005 (a)
                                                                     ----          --------          ----         --------

   <S>                                                                 <C>             <C>             <C>          <C>
Stockholders' equity - beginning of period                          $ 401,453      $ 416,832        $ 424,075      $ 334,878
Cumulative effect of change in accounting principle                         -              -                -          (178)
                                                                 ------------   ------------    -------------   ------------
Beginning balance, as restated                                        401,453        416,832          424,075        334,700

Comprehensive income:
  Net income                                                           16,884         18,046           44,225         43,375
  Foreign currency translation adjustments                                 13            (9)             (40)             25
  Net unrealized (loss) gain on securities available for sale           2,367            316            4,234          2,199
                                                                 ------------   ------------    -------------   ------------
Comprehensive income                                                   19,264         18,353           48,419         45,599
                                                                                           -

Dividends declared                                                       (847)          (599)          (2,565)        (1,933)
Stock option expense                                                       17              -               37          2,760
Proceeds from settlement of purchase contracts                              -              -                -         70,567
Excess tax benefit for exercised stock options                              -              -            1,782              -
Exercise of stock options including tax benefit                           290            648              708          1,388
Capitalized costs                                                           -            (16)               -            (31)
Purchase of treasury stock                                             (2,146)        (4,749)         (54,425)       (22,581)
                                                                 ------------   ------------    -------------   ------------
Stockholders' equity - end of period                                $ 418,031      $ 430,469        $ 418,031      $ 430,469
                                                                 ============   ============    =============   ============


(a) As restated for the change in accounting method as described in note A in
item 1 of this report on Form 10-Q/A which was previously reported on Form 10-Q
filed with the Securities and Exchange Commission on November 9, 2006.

See accompanying notes.
</TABLE>


                                       6
<PAGE>

<TABLE>
<CAPTION>

                     GAMCO INVESTORS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    UNAUDITED
                                 (In thousands)

                                                                              Three Months Ended           Nine Months Ended
                                                                                  September 30,              September 30,
                                                                         ------------------------------------------------------
                                                                           2006 (a)        2005 (a)     2006 (a)      2005 (a)
                                                                           --------        --------     --------      --------
<S>                                                                          <C>              <C>          <C>          <C>
Operating activities
Net income                                                                   $16,884        $ 18,046      $44,225      $ 43,375
Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
Equity in gains from partnerships and affiliates                              (1,090)         (2,046)      (4,428)       (4,749)
Depreciation and amortization                                                    221             298          665           769
Stock-based compensation expense                                                  16               -           36         2,760
Tax benefit from exercise of stock options                                        79             133          166           287
Foreign currency loss                                                             14             (6)           44           196
Other-than-temporary loss on available for sale securities                         -               -           56         3,301
Impairment of goodwill                                                             -               -            -         1,127
Minority interest in net income of consolidated subsidiaries                     143             176          438           266
Realized gains on sales of available for sale securities, net                      -               -         (442)            -
Realized gains on sales of investments in securities, net                     (4,244)         (5,125)     (14,218)       (6,745)
Change in unrealized value of investments in securities, net                  (1,923)         (1,652)      (5,259)       (5,282)
Excess tax benefit adjustment                                                      -               -        1,782             -
(Increase) decrease in operating assets:
   Purchases of investments in securities                                   (300,255)       (228,893)    (837,871)     (783,966)
   Proceeds from sales of investments in securities                          277,225         201,201      804,747       683,257
   Receivables from affiliates                                                   325           2,370       10,417         5,051
   Investments in partnerships and affiliates                                   (354)         (3,058)      (4,402)      (13,741)
   Distributions from partnerships and affiliates                              3,925           1,561       11,838        35,428
   Investment advisory fees receivable                                         (363)             519        5,763         9,645
   Receivable from brokers                                                    (9,222)          18,067     (36,781)       (3,600)
   Other assets                                                                  262             575          142        (1,225)
Increase (decrease) in operating liabilities:
   Payable to brokers                                                          9,404           1,772       12,848         1,471
   Income taxes payable                                                        2,028           2,479       (7,348)       (4,316)
   Compensation payable                                                        3,878           6,189       11,809         9,399
   Accrued expenses and other liabilities                                      2,538           3,784       13,116         1,512
Effects of consolidation of investment partnerships and offshore funds
   consolidated under FIN 46R and EITF 04-5:
   Realized gains on sales of investments in securities and securities
      sold short, net                                                           (235)              -      (12,315)            -
   Change in unrealized value of investments in securities and securities
      sold short, net                                                           (304)              -       (4,573)            -
   Equity in gains from partnerships and affiliates                              240               -         (288)            -
   Purchases of investments in securities and securities sold short          (10,515)              -     (661,456)            -
   Proceeds from sales of investments in securities and securities sold
      short                                                                    9,849               -      639,070             -
   Investments in partnerships and affiliates                                   (586)              -       (1,904)            -
   Distributions from partnerships and affiliates                                  -               -          380             -
   Investment advisory fees receivable                                            19               -          117             -
   Increase in receivable from brokers                                         1,399               -      (10,028)            -
   Decrease in other assets                                                      172               -          505             -
   Increase in payable to brokers                                                (33)              -        7,597             -
   Decrease in accrued expenses and other liabilities                             (6)              -      (11,684)            -
   Income related to investment partnerships and offshore funds
      consolidated under FIN 46R and EITF 04-5, net                               84               -       14,721             -
                                                                          ----------      ----------   ----------    ----------

Total adjustments                                                            (17,309)        (1,656)      (76,740)      (69,155)
                                                                          ----------      ----------   ----------    ----------
Net cash provided by (used in) operating activities                             (425)         16,390      (32,515)      (25,780)
                                                                          ----------      ----------   ----------    ----------
</TABLE>



                                       7
<PAGE>


<TABLE>
<CAPTION>


                     GAMCO INVESTORS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    UNAUDITED
                                 (In thousands)

                                                                      Three Months Ended              Nine Months Ended
                                                                          September 30,                 September 30,
                                                                 ----------------------------------------------------------
                                                                   2006 (a)        2005 (a)       2006 (a)        2005 (a)
                                                                   --------        --------       --------        --------
<S>                                                                   <C>             <C>            <C>             <C>
Investing activities
Purchases of available for sale securities                             (1,680)          (560)         (4,933)        (5,520)
Proceeds from sales of available for sale securities                        -              -           1,486              -
                                                                 ------------   ------------    ------------   ------------
Net cash used in investing activities                                  (1,680)          (560)         (3,447)        (5,520)
                                                                 ------------   ------------    ------------   ------------

Financing activities
Dividend paid to minority stockholders of subsidiary                        -              -               -           (544)
Contributions related to investment partnerships and offshore
    funds consolidated under FIN 46R and EITF 04-5, net                   (89)             -          29,638              -
Accrual for settlement of minority interest                                 -             36               -             36
Proceeds from exercise of stock options                                   210            515             542          1,100
Repurchase of 5% convertible note                                           -              -               -        (50,000)
Dividends paid                                                           (847)          (599)         (2,565)       (19,235)
Proceeds from settlement of purchase contracts                              -              -               -         70,568
Capitalized costs                                                           -            (16)              -            (31)
Purchase of treasury stock                                             (2,146)        (4,748)        (54,425)       (22,580)
                                                                 ------------   ------------    ------------   ------------
Net cash used in financing activities                                  (2,872)        (4,812)        (26,810)       (20,686)
                                                                 ------------   ------------    ------------   ------------
Net increase in (decrease in) cash and cash equivalents                (4,977)        11,018         (62,772)       (51,986)
Net increase in cash from partnerships and offshore funds
    consolidated under FIN 46R and EITF 04-5                              204              -           1,754              -
Effect of exchange rates on cash and cash equivalents                      10            (16)            (54)           (60)
                                                                 ------------   ------------    ------------   ------------
Cash and cash equivalents at beginning of period                      116,852        194,048         173,161        257,096
                                                                 ------------   ------------    ------------   ------------
Cash and cash equivalents at end of period                           $112,089       $205,050        $112,089       $205,050
                                                                 ============   ============    ============   ============


(a) As restated for (1) the change in accounting method which was previously
reported on Form 10-Q filed with the Securities and Exchange Commission on
November 9, 2006 as described in Note A in item 1 of this report on Form 10-Q/A,
and (2) the reporting of individual assets and liabilities of certain
proprietary investment accounts as described in Note A in item 1 of this report
on Form 10-Q/A.

See accompanying notes.
</TABLE>


                                       8
<PAGE>


                     GAMCO INVESTORS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2006
                                   (Unaudited)

A.  Basis of Presentation

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

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

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

         These 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, 2005, from which the accompanying Condensed
Consolidated Statement of Financial Condition was derived.

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

Changes in Accounting Policy

         GAMCO has voluntarily changed its accounting method to recognize
management fee revenues on closed-end preferred shares at the end of the
measurement period, effective January 1, 2006. Unlike most money management
firms, GAMCO does not charge fees on leverage in its closed-end funds unless the
total return to the common shareholders (of the closed-end fund at year-end)
exceeds the dividend rate of the preferred shares. In 2005, GAMCO recognized
these revenues during each interim reporting period if and when the total return
to common shareholders of the closed-end fund exceeded the dividend rate of the
preferred shares. Under this method, management fee revenues recognized in prior
interim periods during the measurement period were subject to possible reversal
in subsequent periods during that measurement period. Had this method not
changed, we would have recorded approximately $3.1 million in management fee
revenues on closed-end preferred shares for the three month period ended
September 30, 2006.

         In addition, GAMCO has changed its accounting method to recognize
incentive fee revenues on investment partnerships at the end of the measurement
period, effective January 1, 2006. Previously, GAMCO recognized these revenues
during each interim reporting period. Under this method, incentive fee revenues
recognized in prior interim periods during the measurement period were subject
to possible reversal in subsequent periods during the measurement period. Had
this method not changed, we would have recorded approximately $0.9 million in
incentive fee revenues on investment partnerships for the three month period
ended September 30, 2006


                                       9
<PAGE>


         After considering the guidance provided in EITF D-96, "Accounting for
Management Fees Based on Formula", GAMCO believes that the preferable method of
accounting is to recognize management fee revenues on closed-end preferred
shares and incentive fees on investment partnerships at the end of the
measurement period. This method results in revenue recognition only when the
measurement period has been completed and when the management fees and incentive
fees have been earned. This eliminates the possibility of revenues that have
been recognized in interim measurement periods subsequently being reversed in
later periods during a fiscal year.

         Under SFAS No. 154 "Accounting Changes and Error Corrections," which
GAMCO adopted on January 1, 2006, a voluntary change in accounting principle
requires retrospective application to each period presented as if the different
accounting principle had always been used and requires an adjustment at the
beginning of the first period presented for the cumulative effect of the change
to the new accounting principle. Whereas some investment partnerships have a
fiscal year-end differing from GAMCO's fiscal year-end, there is an adjustment
for the cumulative effect of a change to the accounting principle at January 1,
2005 and a change in full year 2005 revenues and net income from what was
previously reported. Therefore, this change in accounting principle will result
in a reduction of revenues of approximately $1.2 million in the first quarter of
2005, approximately $23,000 in the second quarter of 2005, $5.5 million in the
third quarter of 2005 and an increase in revenues of $7.7 million in the fourth
quarter of 2005.
<TABLE>
<CAPTION>

                                                                       Quarter Ended (a)
($ millions)                    March 31, 2005       June 30, 2005       September 30, 2005       December 31, 2005
                                ---------------------------------------------------------------------------------------
  <S>                            <C>                  <C>                  <C>                     <C>
Revenue Reported                $61.5                $59.8               $66.2                    $64.8
        Restated                $60.3                $59.8               $60.7                    $72.5
                                -----                -----               -----                    -----
        Change                  ($1.2)               -                   ($5.5)                   $7.7

EPS     Reported                $0.42                $0.43               $0.64                    $0.61
        Restated                $0.41                $0.42               $0.59                    $0.67
                                -----                -----               -----                    -----
        Change                 ($0.01)              ($0.01)             ($0.05)                   $0.06

        (a) Differences due to rounding.

</TABLE>

         As disclosed in our Annual Report on Form 10-K for the year ended
December 31, 2006 (filed with the Securities and Exchange Commission on March
19, 2007), GAMCO is restating its financial statements included herein to
properly report individual assets and liabilities relating to certain of GAMCO's
proprietary investments. The assets and liabilities (primarily short positions
and margin) associated with these investment accounts were previously reported
on a net asset basis but should have been reported on a gross asset and
liability basis. This change had no effect on net income or stockholders'
equity. See Item 7 and Note A contained in Item 8 of our Annual Report on Form
10-K for the year ended December 31, 2006 for further details. The impact of the
change on our Condensed Consolidated Statements of Financial Condition for March
31, 2005, June 30, 2005, September 30, 2005 and December 31, 2005, respectively,
is as follows:



                                       10
<PAGE>

<TABLE>
<CAPTION>

       ($ millions)                   3/31/2005         6/30/2005        9/30/2005         12/31/2005
                                      ---------         ---------        ---------         ----------
          <S>                             <C>               <C>              <C>               <C>
       Assets:
         Reported                   $     768.7        $  709.9         $  733.4         $     720.9
         Restated                         770.5           712.0            738.2               728.1
                                   -----------------  ---------------  --------------   -----------------
         Change                             1.8             2.1              4.8                 7.2

       Operating Liabilities:

         Reported                          63.2            55.1             64.7                58.4
         Restated                          65.0            57.2             69.5                65.6
                                   -----------------  ---------------  --------------   -----------------
         Change                             1.8             2.1              4.8                 7.2


       Total Liabilities:
         Reported                          345.5           287.4            297.0               290.7
         Restated                          347.3           289.5            301.8               297.9
                                   -----------------  ---------------  --------------   -----------------
         Change                              1.8             2.1              4.8                 7.2

       Equity:
         Reported                          417.0           416.8            430.5               424.1
         Restated                          417.0           416.8            430.5               424.1
                                   -----------------  ---------------  --------------   -----------------
         Change                     $          -        $      -        $       -        $          -

</TABLE>

       The impact of the change on our Condensed Consolidated Statement of
Financial Condition at September 30, 2006 is as follows:

                                      Operating          Total
  ($ millions)        Assets         Liabilities      Liabilities       Equity
                      ------         -----------      -----------       ------

    Reported       $      754.4      $    83.9        $   316.2        $   418.0
    Restated              778.0          107.5            339.8            418.0
                  ----------------  ---------------  ---------------  ----------
    Change         $       23.6      $    23.6        $    23.6        $       -

Recent Accounting Developments

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

         In March 2006, the FASB issued FASB Statement No. 156, "Accounting for
Servicing of Financial Assets," which amends FASB Statements No. 140 "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." The Statement permits an entity to choose either the amortization

                                       11
<PAGE>


method or fair value measurement method for each class of separately recognized
servicing assets and servicing liabilities. The Statement is effective as of the
beginning of an entity's first fiscal year that begins after September 15, 2006.
The Company plans to adopt this Statement on January 1, 2007. The adoption is
not expected to have a material impact on the Company's future consolidated
financial statements.

         In April 2006, the FASB issued FSP FIN 46R-6 "Determining the
Variability to be Considered in Applying FASB Interpretation No. 46(R)." The FSP
addresses certain major implementation issues related to FIN 46R, specifically
how a reporting enterprise should determine the variability to be considered in
applying FIN 46R. The FSP is effective as of the beginning of the first day of
the first reporting period beginning after September 15, 2006. The Company plans
to adopt this Statement on January 1, 2007. The adoption is not expected to have
a material impact on the Company's future consolidated financial statements.

          In June 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" which is an interpretation of FASB Statement No.
109, "Accounting for Income Taxes." This Interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expect to be taken in a tax return. This
Interpretation is effective for fiscal years beginning after December 15, 2006.
The Company plans to adopt this Statement on January 1, 2007. The materiality of
the adoption on the Company's future consolidated financial statements is not
known at this time.

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

B.  Investment in Securities

         Management determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. Investments in Treasury Bills and Notes with maturities of
greater than three months at the time of purchase are classified as investments
in securities and with maturities of three months or less at time of purchase
are classified as cash and cash equivalents. 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, net of
deferred taxes, reported in current period earnings. Available for sale ("AFS")
investments are stated at fair value, with any unrealized gains or losses, net
of deferred 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 statement of income.

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

         There were no losses in the three month period ended September 30, 2006
and $0.1 million in losses for the nine month period ended September 30, 2006 on
AFS securities deemed to be other than temporary which were recorded in the
statement of income. There were no losses in the three month period ended

                                       12
<PAGE>


September 30, 2005 and $3.3 million in losses for the nine month period ended
September 30, 2005 on AFS securities deemed to be other than temporary which
were recorded in the statement of income.

         The losses related to AFS securities in the nine month period ended
September 30, 2005 were partially offset by gains related to our $100,000
venture capital investment in optionsXpress Holdings, Inc. (Nasdaq: OXPS) made
in 2001 through our 92% owned subsidiary, Gabelli Securities, Inc. OXPS
completed its initial public offering during the first quarter of 2005. We
recorded a total gain of $4.9 million on OXPS for the first nine months of 2005,
of which $2.7 million was recognized during the third quarter of 2005. For the
nine month period ended September 30, 2006, we recorded a gain of $0.5 million
on OXPS, none of which was recorded in the third quarter of 2006.

        At September 30, 2006 and September 30, 2005, the market value of
investments available for sale was $92.6 million and $82.0 million,
respectively. An unrealized gain in market value, net of management fee and
taxes, of $4.7 million and $2.1 million has been included in stockholders'
equity for September 30, 2006 and September 30, 2005, respectively. The
unrealized gain in the nine month period ended September 30, 2005 included an
increase of $1.9 million, net of management fee and taxes, from the write down
of available for sale securities when these losses were reclassified from
comprehensive loss within stockholders' equity to current period statement of
income for the nine months ended September 30, 2005.

        There were no sales of investments available for sale for the three
month period ended September 30, 2006 or for the three and nine month periods
ended September 30, 2005. Proceeds from sales of investments available for sale
were approximately $1.5 million for the nine month period ended September 30,
2006.

C. Investments in Partnerships and Affiliates

         Beginning January 1, 2006, the provisions of FASB Interpretation No.
46R ("FIN 46R") and Emerging Issue Task Force 04-5 ("EITF 04-5") require
consolidation of the majority of our investment partnerships and offshore funds
managed by our subsidiaries into our consolidated financial statements. However,
since we amended the agreements of certain investment partnerships and an
offshore fund on March 31, 2006, FIN46R and EITF 04-5 only required us to
consolidate these entities on our income statement and statement of cash flows
for the first quarter 2006. We were not required to consolidate these entities
on our balance sheet at March 31, 2006. In addition, these partnerships and
offshore funds, for which the agreements were amended, are not required to be
consolidated within our statement of income and statement of cash flows or on
our balance sheet in the second quarter or future periods. However, for the nine
months ended September 30, 2006, the consolidation of these entities for the
first quarter 2006 does affect the classification of income between operating
and other income. As a result, we have provided our results for the nine month
period through September 30, 2006 before adjusting for FIN46R and EITF 04-5, in
management's discussion and analysis, as we believe this basis is comparable to
our reported results for the nine months ended September 30, 2005.

         We consolidated five other investment partnerships and two offshore
funds in which we have a direct or indirect controlling financial interest as of
and for the three and nine months ended September 30, 2006. These entities have
been consolidated within our financial statements for the three and nine month
periods ended September 30, 2006 and will continue to be consolidated in future
periods as long as we continue to maintain a direct or indirect controlling
financial interest. In addition to minor FIN 46R and EITF 04-5 adjustments to
the statement of income and statement of cash flows for the three and nine month
periods ended September 30, 2006 related to these entities, the consolidation of
these entities also resulted in minor adjustments to our statement of financial
condition at September 30, 2006. The consolidation of these entities on the
statement of financial condition has increased assets by $16.5 million,
liabilities by $2.9 million and minority interest by $13.6 million. Prior to
consolidation of these entities, our investments in these entities were
reflected within investments in partnerships and affiliates on the statement of
financial condition and accounted for under the equity method.

         For the three and nine months ended September 30, 2006, the
consolidation of these entities had no impact on net income but did result in
(a) the elimination of revenues and expenses which are now intercompany
transactions; (b) the recording of all the partnerships' operating expenses of
these entities including those pertaining to third-party interests; (c) the
recording of all other income of these entities including those pertaining to
third-party interests; (d) recording of income tax expense of these entities

                                       13
<PAGE>


including those pertaining to third party interests and (e) the recording of
minority interest which offsets the net amount of any of the partnerships'
revenues, operating expenses, other income and income taxes recorded in these
respective line items which pertain to third-party interest in these entities.
While this had no impact on net income, the consolidation of these entities does
affect the classification of income between operating and other income.

D. Earnings Per Share

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

<TABLE>
<CAPTION>


                                                       Three Months Ended                   Nine Months Ended
                                                         September 30,                        September 30,
(in thousands, except per share amounts)            2006             2005 (a)             2006           2005 (a)
                                                    ----             --------             ----           --------
<S>                                                  <C>                <C>                <C>              <C>
Basic:
Net income                                       $  16,884          $  18,046          $  44,225         $  43,375
                                                    ======             ======             ======            ======
Average shares outstanding                          28,254             29,935             28,644            29,859
                                                    ======             ======             ======            ======
Basic net income per share                       $    0.60          $    0.60         $     1.54         $    1.45
                                                    ======             ======             ======            ======


Diluted:
Net income                                       $  16,884          $  18,046          $  44,225         $  43,375
Add interest expense on 5% convertible note,
   net of management fee and taxes                     289                352              1,067             1,406
                                                    ------             ------             ------            ------
Total                                            $  17,173          $  18,398          $  45,292         $  44,781
                                                    ======             ======             ======            ======

Average shares outstanding                          28,254             29,935             28,644            29,859
Dilutive stock options                                  22                182                 30               185
Assumed conversion of 5% convertible note              959                962                961             1,279
                                                    ------             ------             ------            ------
Total                                               29,235             31,079             29,635            31,323
                                                    ======             ======             ======            ======
Diluted net income per share                     $    0.59          $    0.59          $    1.53         $    1.43
                                                    ======             ======             ======            ======

(a) As restated for the change in accounting method in Note A in item 1 of this
report.
</TABLE>


E. Stockholders' Equity

          Shares outstanding on September 30, 2006 were 28,239,635,
approximately 0.2% lower than the June 30, 2006 outstanding shares of
28,290,085, and approximately 5.4% lower than the 29,861,817 shares outstanding
on September 30, 2005. Fully diluted shares outstanding for the third quarter of
2006 were 29,235,083 approximately 0.9% lower than second quarter 2006 fully
diluted shares of 29,495,759 and approximately 5.9% lower than our fully diluted
shares of 31,079,413 for the third quarter 2005.

          In June 2006, the holders of 2,347,473 Class B shares exchanged their
Class B shares for an equal number of Class A shares. 2,071,635 of these Class A
shares are subject to a lockup period of two years, beginning on the date of
registration of the shares with the SEC. On the first day of every month during
the lockup period, one-twenty fourth (1/24th) of these 2,071,635 Class A shares
are freed from the lockup restrictions and thereafter may be sold in the public
markets or otherwise disposed of. As of September 30, 2006, there were 7,458,608
of Class A shares outstanding compared to 7,509,085 shares outstanding at June
30, 2006.

          On August 10, 2006, the Board of Directors declared a quarterly
dividend of $0.03 per share that was paid on September 28, 2006 to shareholders
of record on September 15, 2006.

Stock Award and Incentive Plan

         Effective January 1, 2003, we adopted the fair value recognition
provisions  of SFAS No. 123 in accordance  with the  transition  and  disclosure
provisions  under SFAS No.  148,  "Accounting  for Stock  Based  Compensation  -
Transition and Disclosure."

                                       14
<PAGE>


         We adopted SFAS 123 (R) on January 1, 2005. In light of our modified
prospective adoption of the fair value recognition provisions of SFAS 123 (R)
for all grants of employee stock options, the adoption of SFAS 123 (R) did not
have a material impact on our consolidated financial statements. During June
2005, we announced that our Board of Directors approved the accelerated vesting
of all unvested stock options. In accordance with Statement of Financial
Accounting Standards ("SFAS") 123(R), the acceleration of vesting resulted in
the recognition of approximately $1.8 million of incremental compensation
expense during the second quarter 2005. In the second quarter of 2006, we
recognized a tax benefit from previously exercised stock options of $1.8
million. For the three months ended September 30, 2006, we recognized
stock-based compensation expense of approximately $16,000 and for the three
months ended September 30, 2005, we did not recognize any stock-based
compensation expense. For the nine months ended September 30, 2006 and 2005, we
recognized stock-based compensation expense of approximately $36,000 and $2.8
million, respectively. The total compensation costs related to non-vested awards
not yet recognized is approximately $0.2 million. This will be recognized as
expense in the following periods:

      Remainder
       of 2006     2007       2008        2009        2010
       -------     ----       ----        ----        ----
      $17,000     $67,000   $62,000     $20,000      $2,000

          Proceeds from the exercise of 11,950 and 19,275 stock options were
approximately $210,000 and $515,000 for the three months ended September 30,
2006 and 2005, respectively, resulting in a tax benefit to GAMCO of $79,000 and
$133,000 for the respective periods. Proceeds from the exercise of 26,950 and
41,500 stock options were approximately $542,000 and $1,100,000 for the nine
months ended September 30, 2006 and 2005, respectively, resulting in a tax
benefit to GAMCO of $166,000 and $287,000 for the respective periods.

 Stock Repurchase Program

         In the third quarter of 2006, we repurchased 62,400 shares at an
average investment of $34.38. The total amount of shares currently available to
be repurchased under the program is approximately 653,000 shares at September
30, 2006. Since our buyback program was initiated in March 1999, 4,664,958 class
A common shares have been repurchased through September 30, 2006 at an average
investment of $39.45 per share.

F. Debt

         In May 2006, the SEC declared effective the Company's $400 million
"shelf" registration statement on Form S-3. This provides us flexibility to sell
any combination of senior and subordinate debt securities, convertible debt
securities and equity securities (including common and preferred securities) up
to a total amount of $520 million, which includes the remaining $120 million
available under our shelf registration filed in 2001.

         In June 2006, GAMCO and Cascade Investments L.L.C. ("Cascade") agreed
to amend the terms of the $50 million convertible note maturing in August 2011.
Effective September 15, 2006, the rate on the note increased from 5% to 6% while
the conversion price was raised to $53 per share from $52 per share. In
addition, the exercise date of Cascade's put option was extended to May 15,
2007, the expiration date of the related letter of credit was extended to May
22, 2007 and a call option was included giving GAMCO the right to redeem the
note at 101% of its principle amount together with all accrued but unpaid
interest thereon upon at least 30 days prior written notice, subject to certain
provisions.


                                       15
<PAGE>


G. Goodwill

          In accordance with SFAS 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 month or nine month periods
ended September 30, 2006. During the first quarter of 2005, assets under
management for our fixed income business decreased approximately 42% from the
beginning of the year, triggering under our accounting policies the need to
reassess goodwill for this 80% owned subsidiary. Using a present value cash flow
method, we reassessed the recoverability of goodwill for this entity and
determined that the value of the entity no longer justified the amount of
goodwill. Accordingly, we recorded a charge of $1.1 million during the first
quarter of 2005 for the impairment of goodwill that represented the entire
amount of goodwill for this entity. At September 30, 2006, there remains $3.5
million, included in other assets, of goodwill related to our 92% owned
subsidiary, Gabelli Securities, Inc.

H.  Other Matters

          Since September 2003, GAMCO and certain of its subsidiaries have been
cooperating with inquiries from the N.Y. Attorney General's office and the SEC
by providing documents and testimony regarding certain mutual fund share trading
practices. In June 2006, we began discussions with the SEC for a potential
resolution of their inquiry. As a result of these discussions, GAMCO recorded a
reserve against earnings of approximately $12 million. Since these discussions
are ongoing, we cannot determine at this time whether they will ultimately
result in a settlement of this matter, whether our reserves will be sufficient
to cover any payments by GAMCO related to such a settlement, or whether and to
what extent insurance may cover such payments.

          In November 2002, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to
Others" ("FIN 45"), which provides accounting and disclosure requirements for
certain guarantees. The disclosure requirements are effective for financial
statements of interim or annual periods ending after December 15, 2002. The
Interpretation's initial recognition and initial measurement provisions are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. We indemnify our clearing brokers for losses they may sustain
from the customer accounts introduced by our broker-dealer subsidiaries. In
accordance with NYSE rules, customer balances are typically collateralized by
customer securities or supported by other recourse provisions. In addition, we
further limit margin balances to a maximum of 25% versus 50% permitted under
Regulation T of the Federal Reserve Board and exchange regulations. At September
30, 2006 and September 30, 2005, the total amount of customer balances subject
to indemnification (i.e. margin debits) was immaterial. The Company also has
entered into arrangements with various other third parties which provide for
indemnification against losses, costs, claims and liabilities arising from the
performance of their obligations under our agreement, except for gross
negligence or bad faith. The Company has had no claims or payments pursuant to
these or prior agreements, and we believe the likelihood of a claim being made
is remote. Utilizing the methodology in FIN 45, our estimate of the value of
such agreements is de minimis, and therefore an accrual has not been made in the
financial statements.

I. Subsequent Events

          On November 7, 2006, our Board of Directors authorized the repurchase
of an additional 400,000 shares of our Class A common stock, bringing the total
available authorization to approximately 1,052,000 shares.


                                       16
<PAGE>


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

Overview

         GAMCO Investors, Inc. (formerly Gabelli Asset Management Inc.) (NYSE:
GBL) is a widely recognized provider of investment advisory services to mutual
funds, institutional and high net worth investors, and investment partnerships.
The Gabelli brand represents our absolute return, research driven Value style
that focuses on our unique Private Market Value with a Catalyst (TM) investment
approach. In addition to our Value products, we offer our clients a broad array
of investment strategies under the GAMCO brand that include growth,
international, convertible, non-market correlated, and fixed income products.
Through Gabelli & Company, Inc., we provide our institutional equity research
reports and services to institutional clients and investment partnerships.

         Since 1977, we have been identified with and 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 equity research. By earning returns for our clients, we will be
earning returns for all our constituents. We generally manage assets on a
discretionary basis and invest in a variety of U.S. and international
securities.

         As part of our re-branding initiative to accelerate growth, our
corporate name change to GAMCO Investors, Inc. became effective August 29, 2005.
Since the firm was founded in 1977, GAMCO has been the name of our asset
management business, representing our institutional and high net worth effort.
We believe changing our corporate name to GAMCO helps us achieve our vision for
assets entrusted to us, that is, to earn a superior return for our clients by
providing various value-added (alpha) products. GAMCO is a more inclusive parent
company name, and more appropriately represents the various investment
strategies and asset management brands contributing to the continued growth of
our company. As part of this initiative, the directors of our mutual funds
approved (November 2005) the name change of the Growth, the Global Series, Gold,
International Growth, and Mathers to GAMCO from Gabelli, which became effective
in December 2005. The funds that reflect the Private Market Value with a
Catalyst(TM) approach will continue under the Gabelli brand.

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

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



                                       17
<PAGE>


         Assets Under Management (AUM) were $26.6 billion as of September 30,
2006, nominally lower than June 30, 2006 AUM of $26.8 billion and 3.8% lower
than September 30, 2005 AUM of $27.6 billion. Equity assets under management
were $25.9 billion on September 30, 2006, remaining level with June 30, 2006
equity assets of $25.9 billion, but 3.1% lower than the $26.7 billion on
September 30, 2005. Our equity closed-end funds reached record AUM of $5.3
billion on September 30, 2006, slightly above AUM at June 30, 2006 and 9.8%
higher than the $4.9 billion on September 30, 2005. Our equity open-end funds
were $7.9 billion in AUM on September 30, 2006, 0.7% above the $7.8 billion
level on June 30, 2006 and 1.3% lower than the $8.0 billion on September 30,
2005. Our institutional and high net worth business had AUM of $12.2 billion in
separately managed equity accounts on September 30, 2006, 0.6% lower than the
$12.3 billion on June 30, 2006, and 7.1% lower than the $13.1 billion on
September 30, 2005. AUM in our investment partnerships were $488 million versus
$536 million on June 30, 2006 and $745 million on September 30, 2005. Fixed
income AUM, primarily money market mutual funds, totaled $737 million on
September 30, 2006, down 19.7% from the June 30, 2006 AUM of $918 million, and
22.7% lower than fixed income AUM of $954 million on September 30, 2005.



                                       18
<PAGE>


The company reported Assets Under Management as follows:

<TABLE>
<CAPTION>

Table I:                                                              Assets Under Management (millions)
                                                                      ----------------------------------

                                                                          September 30              %
                                                                          ------------
                                                                      2005           2006     Inc. (Dec.)
                                                                     ------        --------   -----------
<S>                                                                   <C>             <C>            <C>
Mutual Funds:
   Equities
      Open end                                                      $ 7,959         $ 7,854         (1.3)%
      Closed-end                                                      4,851           5,327          9.8
   Fixed Income                                                         796             683        (14.2)
                                                                     ------          ------
Total Mutual Funds                                                   13,606          13,864          1.9
                                                                     ------          ------
Institutional & High Net Worth Separate Accounts:
   Equities                                                          13,129          12,195         (7.1)
   Fixed Income                                                         158              54        (65.8)
                                                                     ------          ------
Total Institutional & High Net Worth Separate Accounts               13,287          12,249         (7.8)
                                                                     ------          ------
Investment Partnerships                                                 745             488        (34.5)
                                                                     ------          ------
Total Assets Under Management                                      $ 27,638        $ 26,601         (3.8)
                                                                   ========        ========

   Equities                                                          26,684          25,864         (3.1)
   Fixed Income                                                         954             737        (22.7)
                                                                     ------          ------
Total Assets Under Management                                      $ 27,638        $ 26,601         (3.8)
                                                                   ========        ========

</TABLE>

<TABLE>
<CAPTION>

Table II:                                                         Assets Under Management (millions)
                                          -----------------------------------------------------------------------------------

                                                                                                       % Increase/(decrease)
                                              9/05        12/05        3/06        6/06        9/06       6/06          9/05
                                              ----        -----        ----        ----        ----       ----          ----
   <S>                                         <C>         <C>          <C>         <C>         <C>        <C>           <C>
Mutual Funds
   Open end                                 $7,959       $7,888      $8,176      $7,796      $7,854       0.7%         (1.3)%
   Closed-end                                4,851        5,075       5,284       5,258       5,327       1.3           9.8
   Fixed income                                796          735         807         863         683     (20.9)        (14.2)
                                               ---          ---         ---         ---         ---
Total Mutual Funds                          13,606       13,698      14,267      13,917      13,864      (0.4)          1.9
                                            ------       ------      ------      ------      ------
Institutional & HNW Separate
Accounts:
   Equities                                 13,129       12,382      12,639      12,270      12,195      (0.6)         (7.1)
   Fixed Income                                158           84          59          55          54      (1.8)        (65.8)
                                               ---           --          --          --          --
Total Institutional & HNW Separate          13,287       12,466      12,698      12,325      12,249      (0.6)         (7.8)
                                            ------       ------      ------      ------      ------
Accounts

Investment Partnerships                        745          634         681         536         488      (9.0)        (34.5)
                                               ---          ---         ---         ---         ---
Total Assets Under Management             $ 27,638     $ 26,798    $ 27,646    $ 26,778    $ 26,601      (0.7)         (3.8)
                                          ========     ========    ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>

Table III:                                                        Fund Flows - 3rd Quarter 2006 (millions)
                                                 ----------------------------------------------------------------------------

                                                                                             Market
                                                      June 30,              Net           Appreciation /        September 30,
                                                        2006            Cash Flows        (Depreciation)            2006
                                                   ----------------     -------------    -----------------    -----------------
    <S>                                                 <C>                   <C>                  <C>              <C>
Mutual Funds:
    Equities                                         $ 13,054                  ($94)                $ 221        $ 13,181
    Fixed Income                                          863                  (188)                    8             683
                                                          ---                  -----                    -             ---
Total Mutual Funds                                     13,917                  (282)                  229          13,864
                                                       ------                  -----                  ---          ------
Institutional & HNW Separate Accounts
    Equities                                           12,270                  (182)                  107          12,195
    Fixed Income                                           55                    (2)                    1              54
                                                           --                    ---                  ---              --
Total Institutional & HNW Separate Accounts            12,325                  (184)                  108          12,249
                                                       ------                  -----                  ---          ------

Investment Partnerships                                   536                   (51)                    3             488
                                                          ---                   ----                    -             ---
Total Assets Under Management                        $ 26,778                 ($517)                 $340        $ 26,601
                                                     ========                 ======                 ====        ========
</TABLE>


                                       19
<PAGE>


Recent regulatory developments

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

          As part of our review, hundreds of documents were examined and
approximately fifteen individuals were interviewed. We have found no evidence
that any employee participated in or facilitated any "late trading". We also
have found no evidence of any improper trading in our mutual funds by our
investment professionals or senior executives. As we previously reported, we did
find that in August of 2002, we banned an account, which had been engaging in
frequent trading in our Global Growth Fund (the prospectus of which did not
impose limits on frequent trading) and which had made a small investment in one
of our hedge funds, from further transactions with our firm. Certain other
investors had been banned prior to that. We also found that certain discussions
took place in 2002 and 2003 between GAMCO's staff and personnel of an investment
advisor regarding possible frequent trading in certain Gabelli domestic equity
funds. In June 2006, we began discussions with the SEC for a potential
resolution of their inquiry. As a result of these discussions, GAMCO recorded a
reserve against earnings of approximately $12 million. Since these discussions
are ongoing, we cannot determine at this time whether they will ultimately
result in a settlement of this matter, whether our reserves will be sufficient
to cover any payments by GAMCO related to such a settlement, or whether and to
what extent insurance may cover such payments.

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

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

          In the coming months, the investment management industry is likely to
continue facing a high level of regulatory scrutiny and become subject to
additional rules designed to increase disclosure, tighten controls and reduce
potential conflicts of interest. In addition, the SEC has substantially
increased its use of focused inquiries in which it requests information from a
number of fund complexes regarding particular practices or provisions of the
securities laws. We participate in some of these inquiries in the normal course

                                       20
<PAGE>


of our business. Changes in laws, regulations and administrative practices by
regulatory authorities, and the associated compliance costs, have increased our
cost structure and could in the future have a material impact.

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

RESULTS OF OPERATIONS

Three Months Ended September 30, 2006 Compared To
Three Months Ended September 30, 2005

Consolidated Results - Three Months Ended September 30:

                (Unaudited; in thousands, except per share data)

                                                       2006          2005 (a)
                                                       ----          --------

Revenues
  Investment advisory and incentive fees                $49,751       $ 52,019
  Commission revenue                                      2,800          3,259
  Distribution fees and other income                      5,443          5,428
                                                    -----------    -----------
     Total revenues                                      57,994         60,706
Expenses
  Compensation and related costs                         24,161         24,972
  Management fee                                          3,026          3,240
  Distribution costs                                      5,024          5,175
  Other operating expenses                                7,563          7,019
                                                    -----------    -----------
     Total expenses                                      39,774         40,406
                                                    -----------    -----------
Operating income                                         18,220         20,300
Other income (expense)
Net gain from investments                                 4,663          6,937
Interest and dividend income                              7,665          5,216
Interest expense                                         (3,368)        (3,298)
                                                    -----------    -----------
Total other income (expense), net                         8,960          8,855
                                                    -----------    -----------
Income before taxes and minority interest                27,180         29,155
Income tax provision                                     10,192         10,933
Minority interest                                           104            176
                                                    -----------    -----------
Net income                                              $16,884        $18,046
                                                    ===========    ===========

Net income per share:
   Basic                                                $  0.60        $  0.60
                                                    ===========    ===========
   Diluted                                              $  0.59        $  0.59
                                                    ===========    ===========

Reconciliation of Net income to Adjusted EBITDA:

Net income                                              $16,884        $18,046
Interest Expense                                          3,368          3,298
Income tax provision and minority interest               10,296         11,109
Depreciation and amortization                               221            298
                                                    -----------    -----------
Adjusted EBITDA (b)                                    $ 30,769       $ 32,751
                                                    -----------    -----------



(a) As restated for the change in accounting method as described in Note A in
   item 1 of this report.
(b) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation
   and amortization, and minority interest. Adjusted EBITDA is a Non-GAAP
   measure and should not be considered as an alternative to any measure of
   performance as promulgated under accounting principles generally accepted in
   the United States nor should it be considered as an indicator of our overall
   financial performance. We use Adjusted EBITDA as a supplemental measure of
   performance as we believe it gives investors a more complete understanding of
   our operating results before the impact of investing and financing activities
   as a tool for determining the private market value of an enterprise.


                                       21
<PAGE>


         Revenues were $58.0 million for the third quarter versus $60.7 million
in the comparable 2005 period.

         Investment advisory fees for the third quarter of 2006 were $49.8
million, a decrease of 4.4% from the $52.0 million generated in the third
quarter of 2005. Our closed-end funds revenues increased 8.6% to $10.7 million
for the third quarter 2006, up from $9.8 million in the prior year's period
primarily due to increased average AUM. Open-end mutual funds revenues decreased
3.8% to $19.6 million from $20.4 million in the 2005 period primarily due to
lower average AUM. Institutional and high net worth separate accounts revenues
decreased 8.2% to $18.3 million, down from the $19.9 million reported in 2005
primarily due to a decrease in AUM. Investment Partnership revenues decreased
37.5% to $1.2 million from $1.9 million in the prior year's period primarily due
to a decrease in AUM.

          Commission revenues from our institutional research affiliate, Gabelli
& Company, Inc., were $2.8 million in the third quarter 2006, down 14.1% from
the prior year's comparable period. The decrease was primarily due to a decline
in trading volume and average revenue earned per share traded.

         Mutual fund distribution fees and other income were $5.4 million for
the third quarter 2006, level with the prior year's period.

         Expenses not directly tied to revenues were $13.0 million, an increase
from the $12.2 million recorded in the third quarter of 2005. The increase was
primarily due to a $0.4 million increase in compensation costs and a net $0.4
increase in operating expenses, primarily legal and accounting fees resulting in
operating margin, before management fee, decreasing to 36.6% for the third
quarter 2006 from 38.8% in the prior year's quarter,

         Total other income, net of interest expense was $9.0 million for the
third quarter 2006, marginally higher than the $8.9 million in the comparable
2005 period. A $2.4 million increase in interest and dividend income from the
prior quarter was partially offset by a $2.3 million decease in net gain from
investments. For the quarter ended September 30, 2006, we recorded no earnings
from our investment in optionXpress (Nasdaq: OXPS) as compared to $0.05 per
fully diluted share for the quarter ended September 30, 2005.

         For the third quarter 2006, interest expense was $3.4 million, $0.1
million greater than the prior year's period.

          Management fee dropped to $3.0 million for the three months ended
September 30, 2006, versus $3.2 million for the comparable 2005 period.

          The effective tax rate for the quarter ended September 30, 2006 was
37.5%, the same as the prior year period.




                                       22
<PAGE>


Nine Months Ended September 30, 2006 Compared To Nine Months Ended
September 30, 2005

To provide a better understanding of core results and trends, GAMCO has provided
our results before adjusting for FASB Interpretation No. 46R ("FIN 46R") and
Emerging Issue Task Force 04-5 ("EITF 04-5"). These results are not presented in
accordance with generally accepted accounting principles ("GAAP") in the United
States. A reconciliation of these non-GAAP financial measures to results
presented in accordance with GAAP is presented herein. See Note C, "Investments
in Partnerships and Affiliates", of this report on Form 10-Q for a discussion of
FIN 46 and EITF 04-5.

<TABLE>
<CAPTION>

Consolidated Results - Nine Months Ended September 30:

                (Unaudited; in thousands, except per share data)
                ------------------------------------------------
                                                                                           Adjust-
                                                              2005 (e)     2006 (a)(e)     ments(b)     2006 (c)(e)
                                                             ----------    ----------     ----------    ----------
<S>                                                              <C>          <C>            <C>           <C>
Revenues
  Investment advisory and incentive fees                      $ 157,068      $154,698         ($ 963)     $153,735
  Commission revenue                                              8,298         8,973              -         8,973
  Distribution fees and other income                             15,471        16,229                       16,229
                                                             ----------    ----------     ----------    ----------
                                                                                                   -
     Total revenues                                             180,837       179,900           (963)      178,937
Expenses
  Compensation and related costs                                 77,513        75,459              -        75,459
  Management fee                                                  7,759         8,153              -         8,153
  Distribution costs                                             15,923        15,568              -        15,568
  Reserve for settlement                                              -        11,900              -        11,900
  Other operating expenses                                       20,077        22,478            189        22,667
                                                             ----------    ----------     ----------    ----------
     Total expenses                                             121,272       133,558            189       133,747
                                                             ----------    ----------     ----------    ----------
Operating income                                                 59,565        46,342         (1,152)       45,190
Other income (expense)
Net gain from investments                                         7,919        18,260         13,772        32,032
Interest and dividend income                                     12,845        18,824          1,325        20,149
Interest expense                                                (10,502)      (10,046)          (591)     (10,637)
                                                             ----------    ----------     ----------    ----------
Total other income (expense), net                                10,262        27,038         14,506        41,544
                                                             ----------    ----------     ----------    ----------
Income before taxes and minority interest                        69,827        73,380         13,354        86,734
Income tax provision                                             26,186        28,718          5,008        33,726
Minority interest                                                   266           437          8,346         8,783
                                                             ----------    ----------     ----------    ----------
Net income                                                      $43,375       $44,225     $        -       $44,225
                                                             ==========    ==========     ==========    ==========

Net income per share:
   Basic                                                        $  1.45       $  1.54     $        -       $  1.54
                                                             ==========    ==========     ==========    ==========
   Diluted                                                      $  1.43       $  1.53     $        -       $  1.53
                                                             ==========    ==========     ==========    ==========

Reconciliation of Net income to Adjusted EBITDA:

Net income                                                      $43,375       $44,225      $       -       $44,225
Interest Expense                                                 10,502        10,046            591        10,637
Income tax provision and minority interest                       26,452        29,155         13,354        42,509
Depreciation and amortization                                       769           665              -           665
                                                             ----------    ----------     ----------    ----------
Adjusted EBITDA(d)                                             $ 81,098       $84,091      $  13,945       $98,036
                                                             ----------    ----------     ----------    ----------
(a) Under a comparable reporting methodology as in 2005 - Non-GAAP in 2006.
(b) Represents the effects of consolidation of those entities in which GBL
    holds a direct or indirect  controlling  interest and the  consolidation of
    entities under FIN 46R and EITF 04-5 for the first quarter of 2006.
(c) GAAP basis.
(d) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation
    and amortization, and minority interest. Adjusted EBITDA is a Non-GAAP
    measure and should not be considered as an alternative to any measure of
    performance as promulgated under accounting principles generally accepted in
    the United States nor should it be considered as an indicator of our overall
    financial performance. We use Adjusted EBITDA as a supplemental measure of
    performance as we believe it gives investors a more complete understanding
    of our operating results before the impact of investing and financing
    activities as a tool for determining the private market value of an
    enterprise.
(e) As restated for the change in accounting method as described in Note A in
    item 1 of this report.
</TABLE>


                                       23
<PAGE>


         Revenues were $178.9 million for the nine months ended September 30,
2006 versus $180.8 million for the comparable 2005 period.

         Investment advisory fees for the nine months ended September 30, 2006
were $153.7 million, a decrease of $3.3 million, or 2.1%, from the $157.1
million generated for the nine months ended September 30, 2005. Revenues from
our closed-end fund increased 15.4% to a record $31.7 million for the nine
months ended September 30, 2006, up from $27.5 million in the prior year's
period primarily due to increased average AUM within our closed-end funds from
$4.6 billion for the first nine months of 2005 to $5.3 billion for the first
nine months of 2006. Open-end mutual funds revenues were $59.9 million, down
0.2% from the $60.0 million in the 2005 period. Institutional and high net worth
separate accounts revenues decreased 6.3% to $58.4 million from the $62.3
million reported in 2005 primarily due to a decrease in AUM. Investment
Partnership revenues were $3.7 million, a decrease of 48.8% from the $7.3
million in the 2005 period primarily due to a decrease in AUM and lower
performance fees.

          Commission revenues from our institutional research affiliate, Gabelli
& Company, Inc., were $9.0 million for the nine months ended September 30, 2006,
up 8.1% from the prior year's comparable period amount of $8.3 million primarily
due to increased trading volume which was partially offset by a decline in the
average revenue earned per share traded.

          Mutual fund distribution fees and other income were $16.2 million for
the nine months ended September 30, 2006, 4.9% higher than the $15.5 million
reported in the 2005 period. The increase was primarily due to higher
distribution fees of $15.2 million for nine months ended September 30, 2006
versus $14.4 million for prior year period, principally as a result of an
increase in average assets under management from our increased wholesaling of
funds sold through unaffiliated broker dealers.

         For the nine months ended September 30, 2006, operating margin, before
management fee, decreased to 29.8% from 37.2% in the prior year's period
primarily due to an $11.9 million litigation reserve recorded during the second
quarter of 2006. Without the reserve, operating margin would have been 36.5% for
2006.

         Expenses not directly tied to revenues were $50.7 million, an increase
of 31.9% from the $38.5 million recorded in the period ended September 30, 2005.
The increase was primarily the result of the litigation reserve taken during
second quarter 2006.

         Total other income, net of interest expense, rose to $41.5 million for
the nine months ended September 30, 2006 from $10.3 million in the 2005 period.

         For the nine months ended September 30, 2006, interest expense
increased $0.1 million from the prior year's comparable period to $10.6 million.

          Management fee was $8.2 million for the nine months ended September
30, 2006, versus $7.8 million for the comparable 2005 period. The increase was
due to higher operating income before management fee, income taxes, and minority
interest of $94.9 million for the nine months ended September 30, 2006, as
compared to $77.6 million for the comparable 2005 period.

          The effective tax rate for the nine months ended September 30, 2006,
excluding the reserve taken during the second quarter of 2006, remained at
37.5%, the same as the prior year period.

LIQUIDITY AND CAPITAL RESOURCES

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



                                       24
<PAGE>


Summary cash flow data is as follows:
                                                 Nine Months Ended September 30,
                                                 -------------------------------
                                                     2006 (a)        2005 (a)
                                                   -----------      -----------
Cash flows used in:                                        (in thousands)
   Operating activities                          $   (32,515)     $   (25,780)
   Investing activities                               (3,447)          (5,520)
   Financing activities                              (26,810)         (20,686)
                                                   -----------      -----------
   Decrease                                          (62,772)         (51,986)
   Net increase in cash from investment
        partnerships and offshore funds
        consolidated under FIN 46R and EITF 04-5       1,754                -
   Effect of exchange rates on cash and cash
        equivalents                                      (54)             (60)
                                                   -----------      -----------
   Cash and cash equivalents at beginning
        of period                                    173,161          257,096
                                                   -----------      -----------
   Cash and cash equivalents at end of period     $  112,089       $  205,050
                                                   ===========      ===========

       (a) As restated for (1) the change in accounting method which was
       previously reported on Form 10-Q/A (Amendment No. 1) filed with
       the Securities and Exchange Commission on November 9, 2006 as
       described in Note A in item 1 of this report on Form 10-Q/A, and
       (2) the reporting of individual assets and liabilities of certain
       proprietary investment accounts as described in Note A in item 1
       of this report on Form 10-Q/A.

         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. In February 2005,
our Board of Directors authorized a plan to file a "shelf" registration
statement on Form S-3. The shelf registration, which was declared effective on
May 8, 2006, provides 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 $400 million. This authorization is in addition to the remaining
$120 million available under our "shelf" registration filed in 2001.

         At September 30, 2006, we had total cash and cash equivalents of $112.1
million, a decrease of $61.1 million from December 31, 2005. This decrease was
primarily due to an increase in the purchase of securities during the nine month
period ended September 30, 2006. Gabelli has established a collateral account,
consisting of cash and cash equivalents and investments in securities totaling
$53.5 million, to secure a letter of credit issued in favor of the holder of the
$50 million 6% convertible note. On April 1, 2005, the letter of credit was
reduced to $51.3 million and extended to September 22, 2006. Additionally, the
principal of the convertible note was reduced to $50 million and limitations on
the issuance of additional debt were removed. The expiration date of the related
letter of credit was extended to May 22, 2007. Cash and cash equivalents and
investments in securities held in the collateral account are restricted from
other uses until the date of expiration. In addition, cash and cash equivalents
and investments in securities held by investment partnerships and offshore funds
consolidated under FIN 46R and EITF 04-5 are also restricted from use for
general operating purposes. Total debt at September 30, 2006 was $232.3 million,
consisting of the $50 million 6% convertible note, $100 million of 5.5%
non-callable senior notes due May 15, 2013 and $82.3 million in 5.22% senior
notes due February 17, 2007, issued pursuant to our mandatory convertible
securities.

         Cash used in operating activities was $32.5 million in the first nine
months of 2006 principally resulting from $837.9 million in purchases of
investments in securities, a $36.8 million increase in receivable from brokers,
$4.4 million in purchases of investments in partnerships and affiliates and
$39.9 million from the net effects of the FIN 46R and EITF 04-5 consolidation.
The uses were partially offset by $44.2 million in net income, proceeds from
sales of investments in securities of $804.7 million, $11.8 million in
distributions from investments in partnerships and affiliates and an increase in
compensation payable of $11.8 million. Excluding the net effects of the
consolidation of investment partnerships and offshore funds, our cash provided
by operating activities was $7.4 million.

                                       25
<PAGE>


         Cash used in investing activities, related to purchases and sales of
available for sale securities, was $3.4 million in the first nine months of
2006.

         Cash used in financing activities in the first nine months of 2006 was
$26.8 million. The decrease in cash principally resulted from the repurchase of
our class A common stock under the Stock Repurchase Program of $54.4 million
partially offset by $29.6 million in contributions by partners into our
investment partnerships. Excluding the net effects of the consolidation of
investment partnerships and offshore funds, our net cash used in financing
activities was $56.4 million.

         Cash used in operating activities was $25.8 million in the first nine
months of 2005 principally resulting from purchases of $784.0 million of
investments in securities, proceeds from sales of investments in securities of
$683.3 million and a $4.3 million decrease in income taxes payable, partially
offset by $43.4 million in net income, a $9.6 million decrease in investment
advisory fees receivable and a $9.4 million increase in compensation payable.

         Cash used in investing activities, related to purchases and sales of
available for sale securities, was $5.5 million in the first nine months of
2005.

          Cash used in financing activities in the first nine months of 2005 was
$20.7 million. The decrease in cash principally resulted from the repurchase of
$50 million of our $100 million 6% convertible note, $19.2 million in dividends
paid and the repurchase of $22.6 million of our class A common stock under the
Stock Repurchase Program. These uses were partially offset by $70.6 million in
proceeds from the issuance of 1.5 million shares of class A common stock in
settlement of the purchase contracts issued pursuant to our mandatory
convertible securities and $1.1 million received from the exercise of
non-qualified stock options that further generated cash tax savings of $0.3
million.

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

         Gabelli & Company, Inc., a subsidiary of Gabelli, is registered with
the Securities and Exchange Commission as a broker-dealer and is a member of the
National Association of Securities Dealers. As such, it is subject to the
minimum net capital requirements promulgated by the Commission. Gabelli &
Company's net capital has historically exceeded these minimum requirements.
Gabelli & Company computes its net capital under the alternative method
permitted by the Commission, which requires minimum net capital of the greater
of $250,000 or 2% of the aggregate debt items in the reserve formula for those
broker-dealers subject to Rule 15c3-3. The requirement was $250,000 at September
30, 2006. At September 30, 2006, Gabelli & Company had net capital, as defined,
of approximately $16.5 million, exceeding the regulatory requirement by
approximately $16.3 million. Regulatory net capital requirements increase when
Gabelli & Company is involved in underwriting activities.

Market Risk

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

       Since over 95% of our AUM are invested in equities, the primary risk
factor affecting our revenues and financial results is the general market level
of stock prices and interest rates. Our financial results are also subject to
the gain or loss of clients. In addition, returns from our proprietary
investment portfolio are also exposed to interest rate and equity market risk.
Should negative market conditions that impact our AUM or proprietary investment
portfolio occur, we could report lower operating results in the fourth quarter
of 2006 than expected under current market conditions.



                                       26
<PAGE>


         With respect to our proprietary investment activities, included in
investments in securities of $503.8 million at September 30, 2006 were
investments in Treasury Bills and Notes of $231.7 million, in mutual funds,
largely invested in equity products, of $113.5 million, a selection of common
and preferred stocks totaling $104.6 million and other investments of
approximately $54.0 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 $104.6 million invested in common and
preferred stocks at September 30, 2006, $25.3 million is related to our
investment in Westwood Holdings Group Inc. and $12.4 million is invested in risk
arbitrage opportunities in connection with mergers, consolidations,
acquisitions, tender offers or other similar transactions. Investments in
partnerships and affiliates totaled $81.3 million at September 30, 2006, 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 obligations. These investments are
primarily short term in nature and the carrying value of these investments
generally approximates market value.

Recent Accounting Developments

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

         In March 2006, the FASB issued FASB Statement No. 156, "Accounting for
Servicing of Financial Assets," which amends FASB Statements No. 140 "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." The Statement permits an entity to choose either the amortization
method or fair value measurement method for each class of separately recognized
servicing assets and servicing liabilities. The Statement is effective as of the
beginning of an entity's first fiscal year that begins after September 15, 2006.
The Company plans to adopt this Statement on January 1, 2007. The adoption is
not expected to have a material impact on the Company's future consolidated
financial statements.

         In April 2006, the FASB issued FSP FIN 46R-6 "Determining the
Variability to be Considered in Applying FASB Interpretation No. 46(R)." The FSP
addresses certain major implementation issues related to FIN 46R, specifically
how a reporting enterprise should determine the variability to be considered in
applying FIN 46R. The FSP is effective as of the beginning of the first day of
the first reporting period beginning after September 15, 2006. The Company plans
to adopt this Statement on January 1, 2007. The adoption is not expected to have
a material impact on the Company's future consolidated financial statements.

                                       27
<PAGE>


         In June 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" which is an interpretation of FASB Statement No.
109, "Accounting for Income Taxes". This Interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expect to be taken in a tax return. This
Interpretation is effective for fiscal years beginning after December 15, 2006.
The Company plans to adopt this Statement on January 1, 2007. The materiality of
the adoption on the Company's future consolidated financial statements is not
known at this time.

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

Item 4.  Controls and Procedures

         Management, with the participation of the Chief Executive Officer and
under the supervision of the Chief Financial Officer, has evaluated the
effectiveness of the Company's disclosure controls and procedures, as such term
is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as of December 31, 2006. In conducting
the aforementioned evaluation and assessment, management identified two material
weaknesses in internal control over financial reporting relating to (i) the
reporting of individual assets and liabilities of certain proprietary investment
accounts in accordance with U.S. generally accepted accounting principles and
(ii) the evaluation of and accounting for certain non-routine transactions in
accordance with U.S. generally accepted accounting principles, as further
described Item 9A (b) of the Company's Form 10-K. These deficiencies were
identified during the course of the 2006 audit. Accordingly, because of these
material weaknesses, management concluded that the Company's disclosure controls
and procedures were not effective, with respect to these items, as of December
31, 2006.
         As a result of the first material weakness, the Company restated its
December 31, 2005 consolidated financial statements, included in Item 8 of the
Company's Form 10-K, to properly reflect these proprietary investments. This
first material weakness also resulted in errors in the Company's interim
consolidated financial statements for the periods ended March 31, 2006, June 30,
2006, and September 30, 2006.
         Based upon the evaluation described above, management concluded that,
as of September 30, 2006, the Company did not maintain effective internal
control over financial reporting because of the effect of the material
weaknesses described above.
          However, subsequent to December 31, 2006, we have taken steps to
strengthen our disclosure controls, procedures and internal controls over
financial reporting. These steps were taken to strengthen our processes relating
to the material weaknesses discussed above. Specifically, we have implemented or
are in the process of implementing the following internal control improvements:
o    With regard to the first material weakness, we have implemented a new
     procedure to review the accounting treatment for all proprietary
     investments on a regular basis. We have also worked with the personnel in
     our operations and accounting areas who are responsible for the accounting
     for these proprietary investments to ensure that appropriate procedures are
     in place to more closely monitor proprietary investments. Although these
     design changes have been implemented, management has not had the
     opportunity to evaluate the operating effectiveness of these revised
     controls.
o    With regard to the second material weakness, we are formalizing the process
     for identifying and evaluating non-routine and/or non-recurring
     transactions to ensure that the revised procedures will detect such
     transactions on a timely basis and ensure adequate evaluation for
     conformity with U.S. generally accepted accounting principles. This process
     is expected to be fully implemented in the first half of 2007.



                                       28
<PAGE>


Forward-Looking Information

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



                                       29
<PAGE>


Part II:  Other Information

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

               The following table provides information with respect to the
               shares of common stock we repurchased during the three months
               ended September 30, 2006:
<TABLE>
<CAPTION>

                                               (c) Total Number of     (d) Maximum Number of
                  (a) Total    (b) Average      Shares Repurchased as   Shares That May Yet
                   Number of    Price Paid Per  Part of Publicly        Be Purchased Under
                   Shares       Share, net of   Announced Plans or      the Plans or
Period             Repurchased  Commissions     Programs                Programs
--------------------------------------------------------------------------------------------
  <S>                   <C>         <C>               <C>                      <C>
7/01/06 - 7/30/06       45,800     $34.31              45,800              669,061
8/01/06 - 8/31/06       16,600     $34.56              16,600              652,461
9/01/06 - 9/30/06            -          -                   -              652,461
                  -------------                     ----------
Totals                  62,400                         62,400
                  =============                     ==========
</TABLE>

Item 6       (a)    Exhibits

                    31.1 Certification by Chief Executive Officer Pursuant to
                         Rule 13a-14 (a) and 15d-14 (a) as Adopted Pursuant to
                         Section 302 of the Sarbanes-Oxley Act of 2002

                    31.2 Certification by Interim Chief Financial Officer
                         Pursuant to Rule 13a-14 (a) and 15d-14 (a) as Adopted
                         Pursuant to Section 302 of the Sarbanes-Oxley Act of
                         2002

                    32.1 Certification of Chief Executive Officer 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 Interim Chief Financial Officer
                         pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                         to Section 906 of the Sarbanes-Oxley Act of 2002


SIGNATURES

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


                                                   GAMCO INVESTORS, INC.
                                              ----------------------------------
                                                       (Registrant)


         April 13, 2007                       /s/ John C. Ferrara
         ------------------------             ----------------------------------
         Date                                 John C. Ferrara
                                              Interim Chief Financial Officer



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