SECURITIES & EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-Q/A
                                   -----------
                                (Amendment No. 2)

(Mark One)

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

For the quarterly period ended June 30, 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 July 31, 2006
                   -----                            ----------------------------
Class A Common Stock, .001 par value                                7,473,758
Class B Common Stock, .001 par value                               20,781,027

<PAGE>

                                Explanatory Note

This Form 10-Q/A of GAMCO Investors, Inc. (the "Company") constitutes Amendment
No. 2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 2006, which was initially filed with the Securities and Exchange Commission
on August 8, 2006 and amended on November 9, 2006, to restate the Financial
Statements and amend Management's Discussion and Analysis of Financial Condition
and Results of Operations (Including Quantitative and Qualitative Disclosure
about Market Risk) in Part I, Items 1 and 2, respectively, as a result of the
Company changing its accounting method for recognizing incentive fee revenues on
Investment Partnerships effective January 1, 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 June 30, 2006 and 2005
                 -    Six months ended June 30, 2006 and 2005

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

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


                 Condensed Consolidated Statements of Cash Flows:
                 -    Three months ended June 30, 2006 and 2005
                 -    Six months ended June 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 4.          Submission of Matters to a Vote of Security Holders

Item 6.          Exhibits


SIGNATURES

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                <C>          <C>          <C>          <C>
                                                     Three Months Ended         Six Months Ended
                                                          June 30,                  June 30,
                                                   ------------------------------------------------
                                                    2006 (a)     2005 (a)     2006 (a)     2005 (a)
                                                   ---------    ---------    ---------    ---------
Revenues
  Investment advisory and incentive fees           $  53,586    $  52,336    $ 103,984    $ 105,049
  Commission revenue                                   2,722        2,574        6,173        5,039
  Distribution fees and other income                   5,351        4,908       10,786       10,043
                                                   ---------    ---------    ---------    ---------
     Total revenues                                   61,659       59,818      120,943      120,131
Expenses
  Compensation and related costs                      26,021       26,919       51,298       52,541
  Management fee                                       1,760        2,313        5,127        4,519
  Distribution costs                                   5,329        4,535       10,544       10,748
  Other operating expenses                             7,713        6,502       15,104       13,058
  Reserve for settlement                              11,900           --       11,900           --
                                                   ---------    ---------    ---------    ---------
     Total expenses                                   52,723       40,269       93,973       80,866

Operating income                                       8,936       19,549       26,970       39,265
Other income (expense)
  Net gain from investments                            4,244          387       27,369          982
  Interest and dividend income                         6,111        4,157       12,484        7,629
  Interest expense                                    (3,394)      (3,275)      (7,269)      (7,204)
                                                   ---------    ---------    ---------    ---------
     Total other income, net                           6,961        1,269       32,584        1,407
                                                   ---------    ---------    ---------    ---------
Income before income taxes and minority interest      15,897       20,818       59,554       40,672
  Income tax provision                                 7,163        7,808       23,534       15,253
  Minority interest                                       93          110        8,679           90
                                                   ---------    ---------    ---------    ---------
    Net income                                     $   8,641    $  12,900    $  27,341    $  25,329
                                                   =========    =========    =========    =========

Net income per share:
  Basic                                            $    0.30    $    0.43    $    0.95    $    0.85
                                                   =========    =========    =========    =========

  Diluted                                          $    0.30    $    0.42    $    0.94    $    0.84
                                                   =========    =========    =========    =========

Weighted average shares outstanding:
  Basic                                               28,507       30,079       28,842       29,821
                                                   =========    =========    =========    =========

  Diluted                                             29,496       31,211       29,838       31,447
                                                   =========    =========    =========    =========


Dividends declared:                                $    0.03    $    0.02    $    0.06    $    0.04
                                                   =========    =========    =========    =========
</TABLE>

(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/A (Amendment No. 1) filed with the Securities and Exchange Commission on
November 9, 2006.

See accompanying notes.

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                                        <C>             <C>             <C>
                                                                           December 31,       June 30,       June 30,
                                                                             2005 (a)         2006 (a)       2005 (a)
                                                                           ------------    ------------    ------------
ASSETS                                                                                              (Unaudited)

Cash and cash equivalents, including restricted cash of
     $2,503, $730 and $1,508                                               $    173,161    $    116,852    $    194,048
Investments in securities, including restricted securities of
     $52,219, $52,141 and $52,270                                               421,404         466,056         379,998
Investments in partnerships and affiliates                                       74,827          83,752          68,858
Receivable from brokers                                                           9,827          41,326          27,205
Investment advisory fees receivable                                              22,098          15,874          16,311
Other assets                                                                     26,821          16,426          25,591
                                                                           ------------    ------------    ------------

     Total assets                                                          $    728,138    $    740,286    $    712,011
                                                                           ============    ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Payable to brokers                                                         $      3,937    $      9,228    $          1
Income taxes payable, including deferred taxes of $1,699, $4,323,
     and $296                                                                    10,097           1,913           2,740
Compensation payable                                                             27,820          36,082          30,371
Capital lease obligation                                                          2,992           2,891           3,084
Securities sold, not yet purchased                                                3,183           7,621           5,466
Accrued expenses and other liabilities                                           17,579          29,150          15,506
                                                                           ------------    ------------    ------------

     Total operating liabilities                                                 65,608          86,885          57,168
                                                                           ------------    ------------    ------------

5.5% Senior notes (due May 15, 2013)                                            100,000         100,000         100,000
5% Convertible note (conversion price, $52.00 per share;
   note due August 14, 2011)                                                     50,000          50,000          50,000
5.22% Senior notes (due February 17, 2007)                                       82,308          82,308          82,308
                                                                           ------------    ------------    ------------

     Total liabilities                                                          297,916         319,193         289,476

Minority interest                                                                 6,147          19,640           5,703

Stockholders' equity
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized;
    9,648,339, 12,010,812 and 9,621,064 issued, respectively; 6,414,517,
    7,509,058 and 6,820,642
    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
    outstanding, respectively                                                        23              23              23
Additional paid-in capital                                                      226,353         228,573         235,104
Retained earnings                                                               329,036         354,576         292,335
Accumulated comprehensive gain                                                      526           2,423           1,864
Treasury stock, at cost (3,233,822, 4,501,754 and 2,800,422
    shares, respectively)                                                      (131,873)       (184,152)       (112,504)
                                                                           ------------    ------------    ------------
     Total stockholders' equity                                                 424,075         401,453         416,832
                                                                           ------------    ------------    ------------

Total liabilities and stockholders' equity                                 $    728,138    $    740,286    $    712,011
                                                                           ============    ============    ============
</TABLE>

(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.
See accompanying notes.

                                       5
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                             <C>          <C>          <C>          <C>
                                                                  Three Months Ended         Six Months Ended
                                                                       June 30,                  June 30,
                                                                ------------------------------------------------
                                                                 2006 (a)     2005 (a)     2006 (a)     2005 (a)
                                                                ---------    ---------    ---------    ---------

Stockholders' equity - beginning of period                      $ 410,359    $ 417,014    $ 424,075    $ 334,878
Cumulative effect of change in accounting principle                    --           --           --         (178)
                                                                ---------    ---------    ---------    ---------
Beginning balance, as restated                                    410,359      417,014      424,075      334,700

Comprehensive income:
  Net income                                                        8,641       12,900       27,341       25,329
  Foreign currency translation adjustments                           (128)         (16)         (53)          34
  Net unrealized (loss) gain on securities available for sale        (588)         741        1,867        1,883
                                                                ---------    ---------    ---------    ---------
Comprehensive income                                                7,925       13,625       29,155       27,246

Dividends declared                                                   (851)        (599)      (1,718)      (1,334)
Stock option expense                                                   14        2,275           20        2,760
Proceeds from settlement of purchase contracts                         --           --           --       70,567
Excess tax benefit for exercised stock options                      1,782           --        1,782           --
Exercise of stock options including tax benefit                       137          304          418          740
Capitalized costs                                                      --          (15)          --          (15)
Purchase of treasury stock                                        (17,913)     (15,772)     (52,279)     (17,832)
                                                                ---------    ---------    ---------    ---------
Stockholders' equity - end of period                            $ 401,453    $ 416,832    $ 401,453    $ 416,832
                                                                =========    =========    =========    =========
</TABLE>

(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/A (Amendment No. 1) filed with the Securities and Exchange Commission on
November 9, 2006.

See accompanying notes.

                                       6
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                                         <C>          <C>          <C>          <C>
                                                                              Three Months Ended         Six Months Ended
                                                                                   June 30,                   June 30,
                                                                            ------------------------------------------------
                                                                             2006 (a)     2005 (a)     2006 (a)     2005 (a)
                                                                            ---------    ---------    ---------    ---------
Operating activities
Net income                                                                  $   8,641    $  12,900    $  27,341    $  25,329
Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
Equity in gains from partnerships and affiliates                                 (474)        (593)      (3,338)      (2,703)
Depreciation and amortization                                                     220          237          444          471
Stock-based compensation expense                                                   14        2,275           20        2,760
Tax benefit from exercise of stock options                                         21           52           87          154
Foreign currency loss                                                              30           (9)          30          202
Other-than-temporary loss on available for sale securities                         56          122           56        3,301
Impairment of goodwill                                                             --           --           --        1,127
Minority interest in net income of consolidated subsidiaries                       55          110          295           90
Realized gains on sales of available for sale securities, net                      --           --         (442)          --
Realized gains on sales of investments in securities, net                      (3,389)        (381)      (9,974)      (1,620)
Change in unrealized value of investments in securities, net                   (2,318)      (1,175)      (3,336)      (3,630)
Excess tax benefit adjustment                                                   1,782           --        1,782           --
(Increase) decrease in operating assets:
   Purchases of investments in securities                                    (250,014)    (154,673)    (537,616)    (555,073)
   Proceeds from sales of investments in securities                           205,993       74,441      527,522      482,056
   Receivables from affiliates                                                  3,423         (744)      10,092        2,681
   Investments in partnerships and affiliates                                  (2,823)      (4,126)      (4,048)     (10,683)
   Distributions from partnerships and affiliates                               7,065        4,248        7,913       33,867
   Investment advisory fees receivable                                            696        6,188        6,126        9,126
   Receivable from brokers                                                     35,314          433      (27,559)     (21,667)
   Other assets                                                                   764          490         (120)      (1,800)
Increase (decrease) in operating liabilities:
   Payable to brokers                                                           3,975           --        3,444         (301)
   Income taxes payable                                                       (12,260)      (5,485)      (9,376)      (6,795)
   Compensation payable                                                         1,891       (1,975)       7,931        3,210
   Accrued expenses and other liabilities                                      10,363       (3,493)      10,578       (2,272)
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                                                           (163)          --      (12,080)          --
   Change in unrealized value of investments in securities and securities
       sold short, net                                                         (2,839)          --       (4,269)          --
   Purchases of investments in securities and securities sold short            (8,882)          --     (650,941)          --
   Proceeds from sales of investments in securities and securities
       sold short                                                               9,517           --      629,221           --
   Investments in partnerships and affiliates                                    (336)          --       (1,318)          --
   Equity in earnings of partnerships and affiliates                             (103)          --         (528)          --
   Distributions from partnerships and affiliates                                  --           --          380           --
   Investment advisory fees receivable                                             98           --           98           --
   Increase in receivable from brokers                                          1,042           --      (11,427)          --
   Decrease in other assets                                                       (21)          --          333           --
   Increase in payable to brokers                                               1,847           --        7,630           --
   Decrease in accrued expenses and other liabilities                          (1,892)          --      (11,678)          --
   Income related to investment partnerships and offshore funds
       consolidated under FIN 46R and EITF 04-5, net                              207           --       14,637           --
                                                                            ---------    ---------    ---------    ---------
Total adjustments                                                              (1,141)     (84,058)     (59,431)     (67,499)
                                                                            ---------    ---------    ---------    ---------
Net cash provided by (used in) operating activities                             7,500      (71,158)     (32,090)     (42,170)
                                                                            ---------    ---------    ---------    ---------
</TABLE>

                                       7
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                                      <C>          <C>          <C>          <C>
                                                                           Three Months Ended         Six Months Ended
                                                                                June 30,                  June 30,
                                                                         ------------------------------------------------
                                                                          2006 (a)     2005 (a)     2006 (a)     2005 (a)
                                                                         ---------    ---------    ---------    ---------
Investing activities
Purchases of available for sale securities                                    (247)      (1,016)      (3,253)      (4,960)
Proceeds from sales of available for sale securities                            --           --        1,486           --
                                                                         ---------    ---------    ---------    ---------
Net cash used in investing activities                                         (247)      (1,016)      (1,767)      (4,960)
                                                                         ---------    ---------    ---------    ---------

Financing activities
Dividend paid to minority stockholders of subsidiary                            --         (544)          --         (544)
Contributions related to investment partnerships and offshore funds
    consolidated under FIN 46R and EITF 04-5, net                            1,537           --       29,727           --
Proceeds from exercise of stock options                                        116          253          332          586
Repurchase of 5% convertible note                                               --      (50,000)          --      (50,000)
Dividends paid                                                                (851)        (599)      (1,718)     (18,636)
Proceeds from settlement of purchase contracts                                  --           (1)          --       70,567
Capitalized costs                                                               --          (15)          --          (15)
Purchase of treasury stock                                                 (17,913)     (15,772)     (52,279)     (17,832)
                                                                         ---------    ---------    ---------    ---------
Net cash used in financing activities                                      (17,111)     (66,678)     (23,938)     (15,874)
                                                                         ---------    ---------    ---------    ---------
Net decrease in cash and cash equivalents                                   (9,858)    (138,852)     (57,795)     (63,004)
Net increase in cash from partnerships and offshore funds consolidated
    under FIN 46R and EITF 04-5                                                 --           --        1,550           --
Effect of exchange rates on cash and cash equivalents                         (132)         (27)         (64)         (44)
                                                                         ---------    ---------    ---------    ---------
Cash and cash equivalents at beginning of period                           126,842      332,927      173,161      257,096
                                                                         ---------    ---------    ---------    ---------
Cash and cash equivalents at end of period                               $ 116,852    $ 194,048    $ 116,852    $ 194,048
                                                                         =========    =========    =========    =========
</TABLE>

(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.

See accompanying notes.

                                       8
<PAGE>

                     GAMCO INVESTORS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 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 June
30, 2006.

         GAMCO inadvertently incorrectly applied the voluntary accounting change
discussed in the preceding paragraph because it did not include changing the
method of accounting for the investment partnerships. Therefore, 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.
The restatement effects of this correction of the application of this accounting
change were previously reported in Form 10-Q/A (Amendment No. 1) filed with the
Securities and Exchange Commission on November 9, 2006. Prior to that correction
of the application of the voluntary accounting change, 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 $1.1
million in incentive fee revenues on investment partnerships for the three month
period ended June 30, 2006. The result of the restatement includes a reduction
in net income of $0.2 million and $0.8 million and a reduction in fully diluted
EPS of $0.01 per share and $0.03 per share for the three month period ended June
30, 2006 and the six month period ended June 30, 2006, respectively.


                                       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>
<S>                             <C>               <C>              <C>                   <C>
                                                                   Quarter Ended (a)
($ millions)                    March 31, 2005    June 30, 2005    September 30, 2005    December 31, 2005
                                ----------------  ---------------  --------------------  -------------------
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
</TABLE>

        (a) Differences due to rounding.

         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>
<S>                                     <C>         <C>         <C>         <C>
       ($ millions)                     3/31/2005   6/30/2005   9/30/2005   12/31/2005
                                        ----------  ----------  ----------  ----------
       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 June 30, 2006 is as follows:

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

         Reported      $     725.2   $      71.8   $     304.1   $     401.5
         Restated            740.3          86.9         319.2         401.5
                       -----------   -----------   -----------   -----------
         Change        $      15.1   $      15.1   $      15.1   $        --

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 second 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 second 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.

                                       11
<PAGE>

         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 second day of
the second reporting period beginning after June 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 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.

         For the three and six month periods ended June 30, 2006, there were
$0.1 million in losses on AFS securities deemed to be other than temporary which
were recorded in the statement of income. For the three and six month periods
ended June 30, 2005, there were $0.1 million in losses and $3.3 million in
losses, respectively, 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 six month period ended June
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
$2.1 million on OXPS for the first six months of 2005. For the six month period
ended June 30, 2006, we recorded a gain of $0.5 million on OXPS.

        At June 30, 2006 and June 30, 2005, the market value of investments
available for sale was $86.7 million and $80.9 million, respectively. An
unrealized gain in market value, net of management fee and taxes, of $2.4
million and $1.9 million has been included in stockholders' equity for June 30,
2006 and June 30, 2005, respectively. The unrealized gain in the six month
period ended June 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 six months ended June 30,
2005.

                                       12
<PAGE>

         There were no sales of investments available for sale for the three
month period ended June 30, 2006 or for the three and six month periods ended
March 31, 2005 and June 30, 2005. Proceeds from sales of investments available
for sale were approximately $1.5 million for the six month period ended June 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 six
months ended June 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 six month period
through June 30, 2006 before adjusting for FIN46R and EITF 04-5 as we believe
this basis is comparable to our reported results for the six months ended June
30, 2005.

         We consolidated four 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 six months ended June 30, 2006. These entities have been
consolidated within our financial statements for the three and six month periods
ended June 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 six month
periods ended June 30, 2006 related to these entities, the consolidation of
these entities also resulted in minor adjustments to our statement of financial
condition at June 30, 2006. The consolidation of these entities on the statement
of financial condition has increased assets by $16.0 million, liabilities by
$2.8 million and minority interest by $13.2 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 six months ended June 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 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.

                                       13
<PAGE>

D.  Earnings Per Share

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

<TABLE>
<CAPTION>
<S>                                            <C>        <C>        <C>        <C>
                                               Three Months Ended     Six Months Ended
                                                     June 30,              June 30,
                                               -----------------------------------------
(in thousands, except per share amounts)       2006 (a)   2005 (a)   2006 (a)   2005 (a)
                                               --------   --------   --------   --------
Basic:
Net income                                     $  8,641   $ 12,900   $ 27,341   $ 25,329
                                               ========   ========   ========   ========
Average shares outstanding                       28,507     30,079     28,842     29,821
                                               ========   ========   ========   ========
Basic net income per share                     $   0.30   $   0.43   $   0.95   $   0.85
                                               ========   ========   ========   ========


Diluted:
Net income                                     $  8,641   $ 12,900   $ 27,341   $ 25,329
Add interest expense on 5% convertible note,
    net of management fee and taxes                 351        352        703      1,055
                                               --------   --------   --------   --------
Total                                          $  8,992   $ 13,252   $ 28,044   $ 26,384
                                               ========   ========   ========   ========

Average shares outstanding                       28,507     30,079     28,842     29,821
Dilutive stock options                               27        171         34        186
Assumed conversion of 5% convertible note           962        961        962      1,440
                                               --------   --------   --------   --------
Total                                            29,496     31,211     29,838     31,447
                                               ========   ========   ========   ========
Diluted net income per share                   $   0.30   $   0.42   $   0.94   $   0.84
                                               ========   ========   ========   ========
</TABLE>

(a) As restated for the change in accounting method as described in Note A in
item 1 of this report.

E.  Stockholders' Equity

         Shares outstanding on June 30, 2006 were 28,290,085, approximately
1.7% lower than the March 31, 2006 outstanding shares of 28,774,485, and
approximately 5.5% below the 29,949,142 shares outstanding on June 30, 2005.
Fully diluted shares outstanding for the second quarter of 2006 were 29,495,759
approximately 2.3% lower than first quarter 2006 fully diluted shares of
30,185,312 and approximately 5.5% lower than our fully diluted shares of
31,211,347 for the second 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. The 2,347,473 Class A
shares are currently unregistered with Securities and Exchange Commission
("SEC") and GAMCO intends to file a registration statement for the Class A
shares with the SEC in the near future. 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 June 30, 2006, there were 7,509,058 of Class A
shares outstanding compared to 5,645,985 shares outstanding at March 31, 2006.

         On May 8, 2006, the Board of Directors declared a quarterly dividend
of $0.03 per share that was paid on June 28, 2006 to shareholders of record on
June 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. For the three months ended June 30,
2006, we recognized a tax benefit from previously exercised stock options of
$1.8 million. For the three months ended June 30, 2006 and 2005, we recognized
stock-based compensation expense of approximately $14,000 and $2.3 million,
respectively. For the six months ended June 30, 2006 and 2005, we recognized
stock-based compensation expense of approximately $20,000 and $2.3 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
     -------            ----            ----            ----           ----
     $33,000            $67,000         $62,000         $20,000        $2,000

         Proceeds from the exercise of 5,000 and 8,750 stock options were
approximately $133,000 and $253,000 for the three months ended June 30, 2006 and
2005, respectively, resulting in a tax benefit to GAMCO of $21,000 and $52,000
for the three months ended June 30, 2006 and 2005, respectively. Proceeds from
the exercise of 15,000 and 22,225 stock options were approximately $348,000 and
$586,000 for the six months ended June 30, 2006 and 2005, respectively,
resulting in a tax benefit to GAMCO of $87,000 and $154,000 for the three months
ended June 30, 2006 and 2005, respectively.

 Stock Repurchase Program

         Our stock buyback program was initiated in March 1999. In the second
quarter of 2006, we repurchased 489,400 shares at an average investment of
$36.58. In May 2006, our Board of Directors authorized an additional 400,000
shares to be repurchased bringing the total amount of shares currently available
to be repurchased under the program to approximately 714,000 shares at June 30,
2006. In the period since our buyback program was initiated, 4,602,558 class A
common shares have been repurchased through June 30, 2006 at an average
investment of $39.52 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.
The rate on the note will increase from 5% to 6% while the conversion price will
be raised to $53 per share from $52 per share, in each case effective September
15, 2006. 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.

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 six month periods ended
June 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 June
30, 2006, there remains $3.5 million, included in other assets, of goodwill
related to our 92% owned subsidiary, Gabelli Securities, Inc.

                                       15
<PAGE>

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 June 30,
2006 and June 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

         From July 1 through July 31, 2006, we repurchased 45,800 shares of our
class A common stock, under the Stock Repurchase Program, at an average
investment of $34.31 per share.

                                       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.
Through Gabelli & Company, Inc., we provide institutional research services to
institutional clients and investment partnerships. We generally manage assets on
a discretionary basis and invest in a variety of U.S. and international
securities through various investment styles. Our revenues are based primarily
on the firm's levels of assets under management and fees associated with our
various investment products, rather than our own corporate assets.

         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 research. In addition to our value products, we offer our clients a
broad array of investment strategies that include growth, international and
convertible products. We also offer non-market correlated, and fixed income
strategies. By earning returns for our clients, we will be earning returns for
all our constituents.

         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. The Gabelli brand will continue to represent our absolute return,
research driven Value style that focuses on our unique Private Market Value with
a Catalyst (TM) investment approach. Our class A common stock will continue to
trade on the New York Stock Exchange under the ticker symbol "GBL". As part of
this initiative, the directors of our mutual funds approved in November 2005 the
name change of the Growth, the Global Series, the Mathers and the International
Growth funds (among others) to GAMCO from Gabelli, which became effective in
December 2005. The funds that reflect the Private Market Value with a Catalyst
approach will continue under the Gabelli brand.

         Our revenues are highly correlated to the level of assets under
management, which are directly influenced by the level and changes of the
overall equity markets. Assets under management 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 $26.8 billion as of June 30, 2006,
3.1% lower than March 31, 2006 and June 30, 2005 AUM of $27.6 billion. Equity
assets under management were $25.9 billion on June 30, 2006, down 3.4% from
March 31, 2006 equity assets of $26.8 billion, and down 2.4% from $26.5 billion
on June 30, 2005. Our equity open-end funds and closed-end funds stood at $13.1
billion in AUM on June 30, 2006, 4.6% higher than the $12.5 billion on June 30,
2005, but 3.0% below the $13.5 billion level on March 31, 2006. Our
institutional and high net worth business had AUM of $12.3 billion in separately
managed equity accounts on June 30, 2006, 2.9% lower than the $12.6 billion on
March 31, 2006, and 7.0% under the $13.2 billion on June 30, 2005. AUM in our
investment partnerships were $536 million versus $681 million on March 31, 2006
and $831 million on June 30, 2005. Fixed income AUM, primarily money market
mutual funds, totaled $918 million on June 30, 2006, up 6% from the March 31,
2006 assets of $866 million, and 18% lower than fixed income AUM of $1.1 billion
on June 30, 2005, principally due to the closing of the Treasurer's Fund in the
fourth quarter of 2005.

                                       18
<PAGE>
Assets Under Management

         The company reported assets under management as follows:

<TABLE>
<CAPTION>
<S>                                                      <C>           <C>           <C>
Table I:
                                                          Assets Under Management (in millions)
                                                          -------------------------------------
                                                                  June 30
                                                                  -------                %
                                                            2005           2006      Inc. (Dec.)
                                                         -----------   -----------   -----------
Mutual Funds:
   Equities
      Open end                                           $     7,798   $     7,796          (0.0)%
      Closed-end                                               4,684         5,258          12.3
   Fixed Income                                                  852           863           1.3
                                                         -----------   -----------
Total Mutual Funds                                            13,334        13,917           4.4
                                                         -----------   -----------
Institutional & High Net Worth Separate Accounts:
   Equities                                                   13,189        12,270          (7.0)
   Fixed Income                                                  269            55         (79.6)
                                                         -----------   -----------
Total Institutional & High Net Worth Separate Accounts        13,458        12,325          (8.4)
                                                         -----------   -----------
Investment Partnerships                                          831           536         (35.5)
                                                         -----------   -----------
Total Assets Under Management                            $    27,623   $    26,778          (3.1)
                                                         ===========   ===========

   Equities                                              $    26,502   $    25,860          (2.4)
   Fixed Income                                                1,121           918         (18.1)
                                                         -----------   -----------
Total Assets Under Management                            $    27,623   $    26,778          (3.1)
                                                         ===========   ===========


Table II:                                                 Fund Flows - 2nd Quarter 2006 (in millions)
                                                          -------------------------------------------
                                                                                      Market
                                                 March 31,            Net          Appreciation /       June 30,
                                                   2006            Cash Flows      (Depreciation)         2006
                                              ---------------   ---------------    ---------------   ---------------
Mutual Funds:
    Equities                                  $        13,460   ($          411)   $             5   $        13,054
    Fixed Income                                          807                43                 13               863
                                              ---------------   ---------------    ---------------   ---------------
Total Mutual Funds                                     14,267              (368)                18            13,917
                                              ---------------   ---------------    ---------------   ---------------
Institutional & HNW Separate Accounts
    Equities                                           12,639              (376)                 7            12,270
    Fixed Income                                           59                (5)                 1                55
                                              ---------------   ---------------    ---------------   ---------------
Total Institutional & HNW Separate Accounts            12,698              (381)                 8            12,325
                                              ---------------   ---------------    ---------------   ---------------

Investment Partnerships                                   681              (155)                10               536
                                              ---------------   ---------------    ---------------   ---------------
Total Assets Under Management                 $        27,646   ($          904)   $            36   $        26,778
                                              ===============   ===============    ===============   ===============


                                      Assets Under Management (in millions)
                                      -------------------------------------------------------------------
Table III:                                                                                 % Increase/
                                                                                           (decrease)
                                       6/05      9/05      12/05     3/06      6/06      3/06      6/05
                                      -------   -------   -------   -------   -------   -------   -------
Mutual Funds
   Open end                           $ 7,798   $ 7,959   $ 7,888   $ 8,176   $ 7,796     (4.6)%   (0.0)%
   Closed-end                           4,684     4,851     5,075     5,284     5,258     (0.5)    12.3
   Fixed income                           852       796       735       807       863      6.9      1.3
                                      -------   -------   -------   -------   -------
Total Mutual Funds                     13,334    13,606    13,698    14,267    13,917     (2.5)     4.4
                                      -------   -------   -------   -------   -------
Institutional & HNW Separate
Accounts:
   Equities                            13,189    13,129    12,382    12,639    12,270     (2.9)    (7.0)
   Fixed Income                           269       158        84        59        55     (6.8)   (79.6)
                                      -------   -------   -------   -------   -------
Total  Institutional & HNW Separate    13,458    13,287    12,466    12,698    12,325     (2.9)    (8.4)
Accounts                              -------   -------   -------   -------   -------

Investment Partnerships                   831       745       634       681       536    (21.3)   (35.5)
                                      -------   -------   -------   -------   -------
Total Assets Under Management         $27,623   $27,638   $26,798   $27,646   $26,778     (3.1)    (3.1)
                                      =======   =======   =======   =======  ========
</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. We are
complying with these requests for documents and testimony and have been
conducting an internal review of our mutual fund practices and procedures in a
variety of areas with the guidance of outside counsel. 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
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.

                                       20
<PAGE>

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

Consolidated Results - Three Months Ended June 30:

                (Unaudited; in thousands, except per share data)
                ------------------------------------------------

                                                          2006 (a)     2005 (a)
                                                          --------     --------
Revenues
  Investment advisory and incentive fees                  $ 53,586     $ 52,336
  Commission revenue                                         2,722        2,574
  Distribution fees and other income                         5,351        4,908
                                                          --------     --------
     Total revenues                                         61,659       59,818
Expenses
  Compensation and related costs                            26,021       26,919
  Management fee                                             1,760        2,313
  Distribution costs                                         5,329        4,535
  Reserve for settlement                                    11,900           --
  Other operating expenses                                   7,713        6,502
                                                          --------     --------
     Total expenses                                         52,723       40,269
                                                          --------     --------
Operating income                                             8,936       19,549
Other income (expense)
Net gain from investments                                    4,244          387
Interest and dividend income                                 6,111        4,157
Interest expense                                            (3,394)      (3,275)
                                                          --------     --------
Total other income (expense), net                            6,961        1,269
                                                          --------     --------
Income before taxes and minority interest                   15,897       20,818
Income tax provision                                         7,163        7,808
Minority interest                                               93          110
                                                          --------     --------
Net income                                                $  8,641     $ 12,900
                                                          ========     ========

Net income per share:
   Basic                                                  $   0.30     $   0.43
                                                          ========     ========
   Diluted                                                $   0.30     $   0.42
                                                          ========     ========

Reconciliation of Net income to Adjusted EBITDA:

Net income                                                $  8,641     $ 12,900
Interest Expense                                             3,394        3,275
Income tax provision and minority interest                   7,256        7,918
Depreciation and amortization                                  220          237
                                                          --------     --------
Adjusted EBITDA(b)                                        $ 19,511     $ 24,330
                                                          --------     --------

(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>

         Total revenues were $61.7 million in the second quarter of 2006 up $1.8
million or 3.1% from total revenues of $59.8 million reported in the second
quarter of 2005

         For the second quarter of 2006, investment advisory fees were $53.6
million, an increase of 2.4% from the $52.3 million generated in the second
quarter of 2005. Our closed-end funds revenues increased 17.0% to $10.8 million
for the second quarter 2006, up from $9.2 million in the prior year's period.
The increase was due to increased AUM within our closed-end funds from $4.7
billion as of second quarter 2005 to $5.3 billion as of second quarter 2006.
Open-end mutual funds revenues rose 3.4% to $20.2 million from $19.5 million in
the 2005 period. Institutional and high net worth separate accounts revenues
increased 2.2% to $20.7 million, up from the $20.3 million reported in 2005. The
2006 period includes the recognition of $2.4 million in performance based
fulcrum fees not in the year ago quarter. Investment Partnership revenues were
$1.9 million, a decrease of 42.6% from the $3.3 million in the year ago quarter.

         Commission revenues from our institutional research affiliate, Gabelli
& Company, Inc., were $2.7 million in the second quarter 2006, up 5.7% from the
prior year's comparable period, attributable to increased trading volume offset
by lower commissions per trade.

         Mutual fund distribution fees and other income were $5.4 million for
the second quarter 2006, 9.0% higher than the $4.9 million reported in the 2005
period. The increase is due to higher distribution fees of $5.1 million for
second quarter 2006 versus $4.7 million for second quarter 2005, principally as
a result of higher average assets under management.

         Operating margin, before management fee, decreased to 17.3% for the
second quarter 2006 from 36.5% in the prior year's quarter primarily due to a
reserve against earnings taken in the second quarter 2006 as further described
below. Excluding the reserve, the operating margin for the second quarter 2006
was 36.6%.

         Expenses not directly tied to revenues were $25.2 million, an increase
from the $12.9 million recorded in the second quarter of 2005. The increase was
primarily due to a reserve against earnings of approximately $12 million in the
second quarter 2006 relating to the potential resolution of a regulatory
inquiry. Excluding the reserve, expenses not directly tied to revenues were
approximately $13 million. 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 the reserve. 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.

         Total other income, net of interest expense, rose to $7.0 million for
the second quarter 2006 from $1.3 million in the 2005 period. The majority of
this increase was attributable to higher net gains from investments as well as
higher interest income due to higher interest rates as compared to the prior
year period. In 2005, we recorded gains from our investment in optionsXpress
(Nasdaq: OXPS) of: $0.03 per fully diluted share in the first quarter, $0.00 per
fully diluted share in the second quarter, $0.05 per fully diluted share in the
third quarter, and $0.01 per fully diluted share in the fourth quarter. For
2006, we recorded $0.01 per fully diluted share in the first quarter and six
months ended June 30, 2006.

         For the second quarter 2006, interest expense was $3.4 million versus
$3.3 million in the prior year's period.

         Management fee was $1.8 million for the three months ended June 30,
2006, versus $2.3 million for the comparable 2005 period. The decrease is due to
lower operating income before management fee, income taxes, and minority
interest of $17.7 million for second quarter 2006 as compared to $23.1 million
for second quarter 2005.

         The effective tax rate for the quarter ended June 30, 2006, excluding
the reserve, remained at 37.5%, the same as the prior year period.

                                       22
<PAGE>
Six Months Ended June 30, 2006 Compared To Six Months Ended June 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 A in item 1C,
"Investments in Partnerships and Affiliates", of this report on Form 10-Q for a
discussion of FIN 46 and EITF 04-5.

Consolidated Results - Six Months Ended June 30:

                (Unaudited; in thousands, except per share data)
                ------------------------------------------------
<TABLE>
<CAPTION>
<S>                                          <C>         <C>                     <C>     <C>
                                               2005 (a)   2006 (a)(b)  Adjustments (c)     2006 (a) (d)
                                             ----------  ------------  ----------------  ----------------
Revenues
  Investment advisory and incentive fees     $  105,049  $    104,947            ($ 963) $       103,984
  Commission revenue                              5,039         6,173                 -            6,173
  Distribution fees and other income             10,043        10,786                 -           10,786
                                             ----------  ------------  ----------------  ----------------
     Total revenues                             120,131       121,906              (963)         120,943
Expenses
  Compensation and related costs                 52,541        51,298                 -           51,298
  Management fee                                  4,519         5,127                 -            5,127
  Distribution costs                             10,748        10,544                 -           10,544
  Reserve for settlement                              -        11,900                 -           11,900
  Other operating expenses                       13,058        14,915               189           15,104
                                             ----------  ------------  ----------------  ----------------
     Total expenses                              80,866        93,784               189           93,973
                                             ----------  ------------  ----------------  ----------------
Operating income                                 39,265        28,122            (1,152)          26,970
Other income (expense)
Net gain from investments                           982        13,597            13,772           27,369
Interest and dividend income                      7,629        11,159             1,325           12,484
Interest expense                                 (7,204)       (6,678)             (591)          (7,269)
                                             ----------  ------------  ----------------  ----------------
Total other income (expense), net                 1,407        18,078            14,506           32,584
                                             ----------  ------------  ----------------  ----------------
Income before taxes and minority interest        40,672        46,200            13,354           59,554
Income tax provision                             15,253        18,526             5,008           23,534
Minority interest                                    90           333             8,346            8,679
                                             ----------  ------------  ----------------  ----------------
Net income                                   $   25,329  $     27,341  $              -  $        27,341
                                             ==========  ============  ================  ================

Net income per share:
   Basic                                     $     0.85  $       0.95  $              -  $          0.95
                                             ==========  ============  ================  ================
   Diluted                                   $     0.84  $       0.94  $              -  $          0.94
                                             ==========  ============  ================  ================
Reconciliation of Net income to Adjusted
 EBITDA:

Net income                                   $   25,329  $     27,341  $              -  $        27,341
Interest Expense                                  7,204         6,678               591            7,269
Income tax provision and minority interest       15,343        18,859            13,354           32,213
Depreciation and amortization                       471           444                 -              444
                                             ----------  ------------  ----------------  ----------------
Adjusted EBITDA(e)                           $   48,347  $     53,322  $         13,945  $        67,267
                                             ----------  ------------  ----------------  ----------------
</TABLE>

(a)  As restated for the change in accounting method as described in note A in
     item 1 of this report.
(b)  Under a comparable reporting methodology as in 2005 - Non-GAAP in 2006.
(c)  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.

                                       23
<PAGE>

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

         Total revenues were $120.9 million for the six months ended June 30,
2006 up $0.8 million or 0.7% from total revenues of $120.1 million reported in
the prior year's period

         For the six months ended June 30, 2006, investment advisory fees were
$104.0 million, a decrease of $1.1 million from the $105.0 million generated for
the six months ended June 30, 2005. Further details on our six month ended June
30, 2006 investment advisory revenues included the following:

         Revenues from our closed-end fund increased 19.2% to $21.0 million for
the six months ended June 30, 2006, up from $17.6 million in the prior year's
period. The increase was due to increased average AUM within our closed-end
funds from $4.5 billion for the first six months of 2005 to $5.3 billion for the
first half of 2006, largely due to the launch of Gabelli Global Gold, Natural
Resources & Income Trust (GGN) as of March 29, 2005. Open-end mutual funds
revenues were $40.3 million, up 1.7% from the $39.6 million in the 2005 period.
Institutional and high net worth separate accounts revenues decreased 5.4% to
$40.1 million from the $42.4 million reported in 2005. Investment Partnership
revenues were $2.5 million, a decrease of 52.8%, as both management fees and
incentive fee revenues were lower.

         Commission revenues from our institutional research affiliate, Gabelli
& Company, Inc., were $6.2 million for the six months ended June 30, 2006, up
22.5% from the prior year's comparable period amount of $5.0 million.

         Mutual fund distribution fees and other income were $10.8 million for
the six months ended June 30, 2006, 7.4% higher than the $10.0 million reported
in the 2005 period. The increase is due to higher distribution fees of $10.2
million for six months ended June 30, 2006 versus $9.4 million for prior year
period, principally as a result of higher average assets under management.

         Operating margin, before management fee, decreased to 26.5% for the six
months ended June 30, 2006 from 36.4% in the prior year's period primarily due
to a reserve against earnings taken in the second quarter 2006 as previously
described. Excluding the reserve, the operating margin for the six month period
ended June 30, 2006 was 36.4%.

         Expenses not directly tied to revenues were $37.4 million, an increase
of 42.6% from the $26.3 million recorded in the period ended June 30, 2005. The
increase was primarily due to a reserve against earnings of approximately $12
million in the second quarter 2006 relating to the potential resolution of a
regulatory inquiry. Excluding the reserve, expenses not directly tied to
revenues were $26 million.

         Total other income, net of interest expense, rose to $32.6 million for
the six months ended June 30, 2006 from $1.4 million in the 2005 period.
Approximately $14.5 million of the increase represents the effects of
consolidation of entities in which GAMCO holds a direct or indirect controlling
interest under FIN46R and EITF 04-5 during 2006 for the first quarter of 2006.
In addition, there were higher net gains of $13.6 million from investments as
well as higher interest income of $4.9 million due to higher interest rates, as
compared to the prior year period. In 2005, we recorded gains from our
investment in optionsXpress (Nasdaq: OXPS) of: $0.03 per fully diluted share in
the first quarter, $0.00 per fully diluted share in the second quarter, $0.05
per fully diluted share in the third quarter, and $0.01 per fully diluted share
in the fourth quarter. For 2006, we recorded $0.01 per fully diluted share in
the first quarter and six months ended June 30, 2006.

         Minority interest had an increase of $8.6 million as a result of the
consolidation of entities in which GAMCO holds a direct or indirect controlling
interest under FIN46R and EITF 04-5 during 2006.

         For the six months ended June 30, 2006, interest expense increased $0.1
million to $7.3 million.

         Management fee was $5.1 million for the six months ended June 30, 2006,
versus $4.5 million for the comparable 2005 period. The increase is due to
higher operating income before management fee, income taxes, and minority
interest of $64.7 million for the six months ended June 30, 2006, as compared to
$45.2 million for the comparable 2005 period.

         The effective tax rate for the six months ended June 30, 2006,
excluding the reserve, remained at 37.5%, the same as the prior year period.

                                       24
<PAGE>

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.

                                                    Six Months Ended June 30,
                                                  ------------------------------
                                                      2005 (a)       2006 (a)
                                                  --------------  --------------
Cash flows used in:                                       (in thousands)
   Operating activities                            $     (42,170) $     (32,090)
   Investing activities                                   (4,960)        (1,767)
   Financing activities                                  (15,874)       (23,938)
                                                  --------------  --------------
   Decrease                                              (63,004)       (57,795)
   Net increase in cash from investment
    partnerships and offshore funds consolidated
    under FIN 46R and EITF 04-5                                -          1,550
   Effect of exchange rates on cash and cash
    equivalents                                              (44)           (64)
   Cash and cash equivalents at beginning of
    period                                               257,096        173,161
                                                  --------------  --------------
   Cash and cash equivalents at end of period      $     194,048  $     116,852
                                                  ==============  ==============

(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, which was filed on June 13, 2005. Our 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 June 30, 2006, we had total cash and cash equivalents of $116.9
million, a decrease of $56.3 million from December 31, 2005. This decrease is
primarily due to an increase in the purchase of securities during the six month
period ended June 30, 2006. Gabelli has established a collateral account,
consisting of cash and cash equivalents and investments in securities totaling
$52.8 million, to secure a letter of credit issued in favor of the holder of the
$50 million 5% 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 and 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 June 30, 2006 was $232.3 million,
consisting of the $50 million 5% 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.

                                       25
<PAGE>

         Cash used in operating activities was $32.1 million in the first six
months of 2006 principally resulting from $537.6 million in purchases of
investments in securities, a $27.6 million increase in receivable from brokers,
$4.0 million in purchases of investments in partnerships and affiliates and
$39.9 million from the net effects of the FIN 46R and EITF 04-5 consolidation.
This was partially offset by $27.3 million in net income, proceeds from sales of
investments in securities of $527.5 million, $7.9 million in distributions from
investments in partnerships and affiliates and an increase in compensation
payable of $7.9 million. Excluding the net effects of the consolidation of
investment partnerships and offshore funds, our cash provided by operating
activities was $7.8 million.

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

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

         Cash used in operating activities was $42.2 million in the first six
months of 2005 principally resulting from $555.1 million in purchases of
investments in securities, a $21.7 million increase in receivable from brokers
and a $6.8 million decrease in income taxes payable partially offset by $482.1
million in proceeds from sales of investments in securities, $25.3 million in
net income, a $9.1 million decrease in investment advisory fees receivable and a
$3.2 million increase in compensation payable.

         Cash used in investing activities, related to investments in and
purchases and sales of available for sale securities, was $5.0 million in the
first six months of 2005.

         Cash used in financing activities in the first six months of 2005 was
$15.9 million. The decrease in cash principally resulted from the repurchase of
$50 million of our $100 million 5% convertible note on April 1, 2005, $18.6
million in dividends paid and $17.8 million from the repurchase of our class A
common stock under the Stock Repurchase Program. This was 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 $0.6 million received from the exercise of
non-qualified stock options that further generated cash tax savings of $0.2
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 June 30,
2006. At June 30, 2006, Gabelli & Company had net capital, as defined, of
approximately $15.7 million, exceeding the regulatory requirement by
approximately $15.5 million. Regulatory net capital requirements increase when
Gabelli & Company is involved in underwriting activities.

Market Risk

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

                                       26
<PAGE>

         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.

         With respect to our proprietary investment activities, included in
investments in securities of $466.1 million at June 30, 2006 were investments in
Treasury Bills and Notes of $241.4 million, in mutual funds, largely invested in
equity products, of $109.1 million, a selection of common and preferred stocks
totaling $81.7 million and other investments of approximately $33.9 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 $81.7 million invested in common and preferred stocks at June 30,
2006, $22.1 million is related to our investment in Westwood Holdings Group Inc.
and $1.2 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 $83.8 million
at June 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.

         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 second half of
2006 than would otherwise be the case. We also note that second half 2006
earnings will be measured against the backdrop of strong financial results in
the second half of 2005.

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 second 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 second 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.

                                       27
<PAGE>

         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 second day of
the second reporting period beginning after June 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 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 June 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 June 30, 2006:
<TABLE>
<CAPTION>
<S> <C>     <C>  <C>       <C>      <C>                       <C>                 <C>
                                                  (c) Total Number of (d) Maximum Number
                    (a) Total      (b) Average     Shares Repurchased  of Shares That May
                     Number of      Price Paid Per as Part of Publicly Yet Be Purchased
                     Shares         Share, net of  Announced Plans or  Under the Plans or
Period               Repurchased    Commissions    Programs            Programs
------------------------------------------------------------------------------------------
  4/01/06 - 4/30/06              -              -                   -             804,261
  5/01/06 - 5/31/06        413,400  $       37.04             413,400             790,861
  6/01/06 - 6/30/06         76,000  $       34.11              76,000             714,861
                    ---------------               --------------------
Totals                     489,400                            489,400
                    ===============               ====================
</TABLE>

         In May 2006, the board of directors approved an increase of 400,000
shares of GBL available to be repurchased under our stock repurchase program.
Our stock repurchase programs are not subject to expiration dates.

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

         The Annual Meeting of Stockholders of GAMCO Investors, Inc. was held in
Greenwich, Connecticut on May 8, 2006. At that meeting, the stockholders
considered and acted upon the following matter:

     THE ELECTION OF DIRECTORS. The stockholders elected the following
     individuals to serve as directors until the 2007 annual meeting of
     stockholders and until their respective successors are duly elected and
     qualified. All of the nominees were elected with the following votes cast:

        Nominees                For             Withheld
        --------                ---             --------
        Edwin L. Artzt          232,832,610     1,385,513
        Richard L. Bready       234,149,101     69,022
        John C. Ferrara         234,142,210     75,913
        John D. Gabelli         232,536,392     1,681,731
        Mario J. Gabelli        232,552,342     1,665,781
        Karl Otto Pohl          232,599,849     1,618,274
        Robert S. Prather, Jr.  234,047,756     170,367
        Vincent S. Tese         234,046,830     171,293


                                       30
<PAGE>

Item 6. (a) Exhibits

     4.1  Fourth Amendment to the Note Purchase Agreement dated as of June 30,
          2006. (Incorporated by reference to Exhibit 99.1 of the Company's
          Report on Form 8-K dated June 30, 2006.)

     4.2  $50 Million Convertible Promissory Note. (Incorporated by reference to
          Exhibit 99.2 of the Company's Report on Form 8-K dated June 30, 2006.)

     10.1 Exchange and Standstill Agreement dated May 31, 2006 (Incorporated by
          reference to Exhibit 10.1 of the Company's report on Form 10-Q dated
          August 8, 2006.)

     10.2 Registration Rights Agreement dated May 31, 2006 (Incorporated by
          reference to Exhibit 10.2 of the Company's report on Form 10-Q dated
          August 8, 2006.)

     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


                                       31