**SECURITIES
&
EXCHANGE
                COMMISSION****WASHINGTON,
                D.C. 20549****FORM
                10-Q**(Mark
                One)




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





For
      the
      quarterly period ended September 30, 2007




or





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





For
      the
      transition period from ________ to





Commission
      File No. 1-106





**GAMCO
                INVESTORS, INC.**(Exact
                name of Registrant as specified in its
                charter)





New
                York
            
            
            13-4007862(State
                of other jurisdiction of incorporation or organization)
            
            
            (I.R.S.
                Employer Identification No.)One
                Corporate Center, Rye, NY
            
            
            10580-1422(Address
                of principle executive offices)
            
            
            (Zip
                Code)





(914)
                921-5100Registrant’s
                telephone number, including area
                code





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





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





Large
                accelerated filer  ̈
            Accelerated
                filer x
            Non-accelerated
                filer  ̈





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




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


Class
            
            Outstanding
                at October 31, 2007Class
                A Common Stock, .001 par value
            
            7,438,369Class
                B Common Stock, .001 par value
            
            20,645,816








1








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








2





GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME


UNAUDITED


(In
      thousands, except per share data)











**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September
                30,**
            
            
            **September
                30,****2007**
            
            
            **2006
                (a)**
            
            
            **2007**
            
            
            **2006
                (a)****Revenues**Investment
                advisory and incentive fees
            
            $
            58,392
            
            
            $
            49,751
            
            
            $
            172,606
            
            
            $
            153,735Commission
                revenue
            
            
            3,494
            
            
            
            2,799
            
            
            
            11,550
            
            
            
            9,179Distribution
                fees and other income
            
            
            6,583
            
            
            
            5,444
            
            
            
            19,196
            
            
            
            16,023Total
                revenues
            
            
            68,469
            
            
            
            57,994
            
            
            
            203,352
            
            
            
            178,937**Expenses**Compensation
                and related costs
            
            
            29,064
            
            
            
            23,852
            
            
            
            87,343
            
            
            
            74,064Management
                fee
            
            
            3,541
            
            
            
            3,058
            
            
            
            10,391
            
            
            
            8,293Distribution
                costs
            
            
            6,099
            
            
            
            5,023
            
            
            
            22,146
            
            
            
            15,567Other
                operating expenses
            
            
            2,665
            
            
            
            7,564
            
            
            
            18,693
            
            
            
            22,667Reserve
                for settlement
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            11,900Total
                expenses
            
            
            41,369
            
            
            
            39,497
            
            
            
            138,573
            
            
            
            132,491Operating
                income
            
            
            27,100
            
            
            
            18,497
            
            
            
            64,779
            
            
            
            46,446**Other
                income (expense)**Net
                gain from investments
            
            
            514
            
            
            
            4,663
            
            
            
            17,277
            
            
            
            32,031Interest
                and dividend income
            
            
            6,810
            
            
            
            7,665
            
            
            
            20,978
            
            
            
            20,149Interest
                expense
            
            
            (2,828
            )
            
            
            (3,368
            )
            
            
            (9,537
            )
            
            
            (10,637
            )Total
                other income, net
            
            
            4,496
            
            
            
            8,960
            
            
            
            28,718
            
            
            
            41,543Income
                before income taxes and minority interest
            
            
            31,596
            
            
            
            27,457
            
            
            
            93,497
            
            
            
            87,989Income
                tax provision
            
            
            13,340
            
            
            
            10,296
            
            
            
            37,403
            
            
            
            34,197Minority
                interest
            
            
            (81
            )
            
            
            118
            
            
            
            596
            
            
            
            8,845Net
                income
            
            $
            18,337
            
            
            $
            17,043
            
            
            $
            55,498
            
            
            $
            44,947Net
                income per share:Basic
            
            $
            0.65
            
            
            $
            0.60
            
            
            $
            1.97
            
            
            $
            1.57Diluted
            
            $
            0.64
            
            
            $
            0.60
            
            
            $
            1.95
            
            
            $
            1.55Weighted
                average shares outstanding:Basic
            
            
            28,106
            
            
            
            28,254
            
            
            
            28,164
            
            
            
            28,644Diluted
            
            
            29,099
            
            
            
            29,235
            
            
            
            29,148
            
            
            
            29,635Dividends
                declared:
            
            $
            1.03
            
            
            $
            0.03
            
            
            $
            1.09
            
            
            $
            0.09





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





See
      accompanying notes.





3








GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


(In
      thousands, except share data)





**December
                31,**
            
            
            **September
                30,**
            
            
            **September
                30,****2006**
            
            
            **2006
                (a)**
            
            
            **2007****ASSETS**
            
            
            
            
            (Unaudited)
            
            
            (Unaudited)Cash
                and cash equivalents, including restricted cash of $2,079, $2,056
                and
                $447, respectively
            
            $
            138,113
            
            
            $
            112,089
            
            
            $
            195,893Investments
                in securities, including restricted securities of $52,116, $51,461
                and
                $51,637, respectively
            
            
            507,595
            
            
            
            503,801
            
            
            
            386,190Investments
                in partnerships and affiliates
            
            
            81,884
            
            
            
            81,326
            
            
            
            97,988Receivable
                from brokers
            
            
            53,682
            
            
            
            49,149
            
            
            
            36,677Investment
                advisory fees receivable
            
            
            31,094
            
            
            
            16,218
            
            
            
            18,591Other
                assets
            
            
            24,863
            
            
            
            15,452
            
            
            
            17,432Total
                assets
            
            $
            837,231
            
            
            $
            778,035
            
            
            $
            752,771**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Payable
                to brokers
            
            $
            36,345
            
            
            $
            18,599
            
            
            $
            6,844Income
                taxes payable, including deferred taxes of $363, ($287), and $9,758,
                respectively
            
            
            13,922
            
            
            
            6,101
            
            
            
            21,251Compensation
                payable
            
            
            30,174
            
            
            
            38,387
            
            
            
            43,613Capital
                lease obligation
            
            
            2,781
            
            
            
            2,837
            
            
            
            2,593Securities
                sold, not yet purchased
            
            
            8,244
            
            
            
            8,465
            
            
            
            10,914Accrued
                expenses and other liabilities
            
            
            41,053
            
            
            
            31,843
            
            
            
            32,820Total
                operating liabilities
            
            
            132,519
            
            
            
            106,232
            
            
            
            118,0355.5%
                Senior notes (due May 15, 2013)
            
            
            100,000
            
            
            
            100,000
            
            
            
            100,0006%
                Convertible note, $50 million outstanding (due August 14, 2011)
                (b)
            
            
            49,504
            
            
            
            50,000
            
            
            
            49,5845.22%
                Senior notes (due February 17, 2007)
            
            
            82,308
            
            
            
            82,308
            
            
            
            -Total
                liabilities
            
            
            364,331
            
            
            
            338,540
            
            
            
            267,619Minority
                interest
            
            
            21,324
            
            
            
            20,316
            
            
            
            9,497Stockholders’
                equityClass
                A Common Stock, $0.001 par value; 100,000,000 shares authorized;
              12,055,872, 12,022,762 and 12,173,423 issued, respectively;
                7,487,018,
              7,458,608 and 7,438,369 outstanding, respectively
            
            
            12
            
            
            
            12
            
            
            
            12Class
                  B Common Stock, $0.001 par value; 100,000,000 shares
                  authorized;
                24,000,000
                  shares issued, 20,754,217, 20,781,027
                  and 20,645,816
                shares
                  outstanding, respectively
            
            
            21
            
            
            
            21
            
            
            
            21Additional
                paid-in capital
            
            
            229,699
            
            
            
            228,880
            
            
            
            230,068Retained
                earnings
            
            
            397,893
            
            
            
            371,761
            
            
            
            421,800Accumulated
                comprehensive gain
            
            
            10,427
            
            
            
            4,803
            
            
            
            17,799Treasury
                  stock, at cost (4,568,854, 4,564,154 and 4,735,054shares,
                  respectively)
            
            
            (186,476
            )
            
            
            (186,298
            )
            
            
            (194,045
            )Total
                stockholders' equity
            
            
            451,576
            
            
            
            419,179
            
            
            
            475,655Total
                liabilities and stockholders' equity
            
            $
            837,231
            
            
            $
            778,035
            
            
            $
            752,771





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


See
      accompanying notes.








4


GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
      INCOME


UNAUDITED


(In
      thousands)





**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September
                30,**
            
            
            **September
                30,****2007**
            
            
            **2006
                (a)**
            
            
            **2007**
            
            
            **2006
                (a)**Stockholders’
                equity – beginning of period
            
            $
            490,793
            
            
            $
            402,442
            
            
            $
            451,576
            
            
            $
            424,502Cumulative
                effect of applying the provisions of FIN 48
              at
                January 1, 2007
            
            
            -
            
            
            
            -
            
            
            
            (822
            )
            
            
            -Comprehensive
                income:Net
                income
            
            
            18,337
            
            
            
            17,043
            
            
            
            55,498
            
            
            
            44,947Foreign
                currency translation adjustments
            
            
            14
            
            
            
            14
            
            
            
            27
            
            
            
            (40
            )Net
                unrealized (loss) gain on securities available for sale
            
            
            (2,108
            )
            
            
            2,367
            
            
            
            7,244
            
            
            
            4,234Total
                comprehensive income
            
            
            16,243
            
            
            
            19,424
            
            
            
            62,769
            
            
            
            49,141Dividends
                declared
            
            
            (28,977
            )
            
            
            (847
            )
            
            
            (30,668
            )
            
            
            (2,565
            )Excess
                tax benefit for exercised stock options
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,782Stock
                based compensation expense
            
            
            23
            
            
            
            16
            
            
            
            68
            
            
            
            36Exercise
                of stock options including tax benefit
            
            
            35
            
            
            
            290
            
            
            
            301
            
            
            
            708Purchase
                of treasury stock
            
            
            (2,462
            )
            
            
            (2,146
            )
            
            
            (7,569
            )
            
            
            (54,425
            )Stockholders’
                equity – end of period
            
            $
            475,655
            
            
            $
            419,179
            
            
            $
            475,655
            
            
            $
            419,179








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


See
                accompanying notes.








5











GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


UNAUDITED


(In
      thousands)





**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September
                30,**
            
            
            **September
                30,****2007**
            
            
            **2006
                (a)**
            
            
            **2007**
            
            
            **2006
                (a)****Operating
                activities**Net
                income
            
            $
            18,337
            
            
            $
            17,043
            
            
            $
            55,498
            
            
            $
            44,947Adjustments
                to reconcile net income to net cash
              provided
                by (used in) operating
                activities:Cumulative
                effect of applying the provisions of FIN 48
            
            
            -
            
            
            
            -
            
            
            
            (822
            )
            
            
            -Equity
                in gains from partnerships and affiliates
            
            
            (855
            )
            
            
            (1,090
            )
            
            
            (5,600
            )
            
            
            (4,428
            )Depreciation
                and amortization
            
            
            217
            
            
            
            221
            
            
            
            739
            
            
            
            665Stock
                based compensation expense
            
            
            24
            
            
            
            16
            
            
            
            68
            
            
            
            36Tax
                benefit from exercise of stock options
            
            
            5
            
            
            
            79
            
            
            
            62
            
            
            
            166Foreign
                currency loss
            
            
            14
            
            
            
            14
            
            
            
            27
            
            
            
            44Other-than-temporary
                loss on available for sale securities
            
            
            3
            
            
            
            -
            
            
            
            3
            
            
            
            56Market
                value of donated securities
            
            
            151
            
            
            
            -
            
            
            
            273
            
            
            
            -Impairment
                of goodwill
            
            
            -
            
            
            
            -
            
            
            
            56
            
            
            
            -Amortization
                of debt discount
            
            
            24
            
            
            
            -
            
            
            
            80
            
            
            
            -Minority
                interest in net income of consolidated subsidiaries
            
            
            90
            
            
            
            158
            
            
            
            610
            
            
            
            501Realized
                gains on sales of available for sale securities, net
            
            
            (184
            )
            
            
            -
            
            
            
            (657
            )
            
            
            (442
            )Realized
                gains on sales of trading investments in securities, net
            
            
            (5,742
            )
            
            
            (4,244
            )
            
            
            (16,617
            )
            
            
            (14,218
            )Change
                in unrealized (gains) losses of trading investments in securities,
                net
            
            
            6,951
            
            
            
            (1,923
            )
            
            
            4,453
            
            
            
            (5,259
            )Excess
                tax benefit adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,782Increase
                (decrease) in operating assets:Purchases
                of trading investments in securities
            
            
            (216,219
            )
            
            
            (300,255
            )
            
            
            (1,069,008
            )
            
            
            (837,871
            )Proceeds
                from sales of trading investments in securities
            
            
            336,992
            
            
            
            277,225
            
            
            
            1,212,842
            
            
            
            804,747Investments
                in partnerships and affiliates
            
            
            (13,948
            )
            
            
            (354
            )
            
            
            (17,998
            )
            
            
            (4,402
            )Distributions
                from partnerships and affiliates
            
            
            2,570
            
            
            
            3,925
            
            
            
            15,719
            
            
            
            11,838Investment
                advisory fees receivable
            
            
            (152
            )
            
            
            (363
            )
            
            
            12,529
            
            
            
            5,763Other
                receivables from affiliates
            
            
            87
            
            
            
            325
            
            
            
            5,193
            
            
            
            10,417Receivable
                from brokers
            
            
            10,298
            
            
            
            (9,222
            )
            
            
            20,320
            
            
            
            (36,781
            )Other
                assets
            
            
            1,747
            
            
            
            262
            
            
            
            1,594
            
            
            
            142Increase
                (decrease) in operating liabilities:Payable
                to brokers
            
            
            (24,065
            )
            
            
            9,404
            
            
            
            (28,022
            )
            
            
            12,848Income
                taxes payable
            
            
            7,608
            
            
            
            2,132
            
            
            
            3,773
            
            
            
            (6,877
            )Compensation
                payable
            
            
            (2,097
            )
            
            
            3,600
            
            
            
            12,192
            
            
            
            10,553Accrued
                expenses and other liabilities
            
            
            (2,845
            )
            
            
            2,538
            
            
            
            (7,892
            )
            
            
            13,116Effects
                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
            
            
            (115
            )
            
            
            (235
            )
            
            
            (722
            )
            
            
            (12,315
            )Change
                in unrealized value of investments in securities and securities sold
                short, net
            
            
            462
            
            
            
            (304
            )
            
            
            547
            
            
            
            (4,573
            )Purchases
                of trading investments in securities and securities sold
                short
            
            
            (7,615
            )
            
            
            (10,515
            )
            
            
            (42,051
            )
            
            
            (661,456
            )Proceeds
                from sales of trading investments in securities and securities sold
                short
            
            
            11,921
            
            
            
            9,849
            
            
            
            46,472
            
            
            
            639,070Investments
                in partnerships and affiliates
            
            
            -
            
            
            
            (586
            )
            
            
            (2,000)
            
            
            
            (1,904
            )Distributions
                from partnerships and affiliates
            
            
            4,764
            
            
            
            -
            
            
            
            5,589
            
            
            
            380Equity
                in earnings of partnerships and affiliates
            
            
            (102
            )
            
            
            240
            
            
            
            (835)
            
            
            
            (288
            )Decrease
                (increase) in advisory fees receivable
            
            
            -
            
            
            
            19
            
            
            
            (26
            )
            
            
            117(Increase)
                decrease in receivable from brokers
            
            
            (3,787
            )
            
            
            1,399
            
            
            
            (3,315
            )
            
            
            (10,028
            )Decrease
                (increase) in other assets
            
            
            107
            
            
            
            172
            
            
            
            (138
            )
            
            
            505(Decrease)
                increase in payable to brokers
            
            
            (64
            )
            
            
            (33
            )
            
            
            (1,480
            )
            
            
            7,597(Decrease)
                increase in accrued expenses and other liabilities
            
            
            (80
            )
            
            
            (6
            )
            
            
            237
            
            
            
            (11,684
            )(Loss)
                income related to investment partnerships and offshore funds consolidated
                under FIN 46R and EITF 04-5, net
            
            
            (157
            )
            
            
            84
            
            
            
            839
            
            
            
            14,721Total
                adjustments
            
            
            106,008
            
            
            
            (17,468
            )
            
            
            147,034
            
            
            
            (77,462
            )Net
                cash provided by (used in) operating activities
            
            
            124,345
            
            
            
            (425
            )
            
            
            202,532
            
            
            
            (32,515
            )





6








GAMCO
      INVESTORS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


UNAUDITED


(In
      thousands)





**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September
                30,**
            
            
            **September
                30,****2007**
            
            
            **2006
                (a)**
            
            
            **2007**
            
            
            **2006
                (a)****Investing
                activities**Purchases
                of available for sale securities
            
            
            (688
            )
            
            
            (1,680
            )
            
            
            (25,942
            )
            
            
            (4,933
            )Proceeds
                from sales of available for sale securities
            
            
            350
            
            
            
            -
            
            
            
            2,642
            
            
            
            1,486Net
                cash used in investing activities
            
            
            (338
            )
            
            
            (1,680
            )
            
            
            (23,300
            )
            
            
            (3,447
            )**Financing
                activities**Contributions
                related to investment partnerships and offshore funds
              consolidated
                under FIN 46R and EITF 04-5, net
            
            
            (1,156
            )
            
            
            (89
            )
            
            
            (645
            )
            
            
            29,638Retirement
                of 5.22% senior notes
            
            
            -
            
            
            
            -
            
            
            
            (82,308
            )
            
            
            -Proceeds
                from exercise of stock options
            
            
            29
            
            
            
            210
            
            
            
            238
            
            
            
            542Dividends
                paid
            
            
            (28,978
            )
            
            
            (847
            )
            
            
            (30,668
            )
            
            
            (2,565
            )Subsidiary
                stock repurchased from minority shareholders
            
            
            (290
            )
            
            
            -
            
            
            
            (531
            )
            
            
            -Purchase
                of treasury stock
            
            
            (2,461
            )
            
            
            (2,146
            )
            
            
            (7,569
            )
            
            
            (54,425
            )Net
                cash used in financing activities
            
            
            (32,856
            )
            
            
            (2,872
            )
            
            
            (121,483
            )
            
            
            (26,810
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            91,151
            
            
            
            (4,977
            )
            
            
            57,749
            
            
            
            (62,772
            )Effect
                of exchange rates on cash and cash equivalents
            
            
            16
            
            
            
            10
            
            
            
            31
            
            
            
            (54
            )Net
                increase in cash from partnerships and offshore funds consolidated
                under
                FIN 46R and EITF 04-5
            
            
            -
            
            
            
            204
            
            
            
            -
            
            
            
            1,754Cash
                and cash equivalents at beginning of period
            
            
            104,726
            
            
            
            116,852
            
            
            
            138,113
            
            
            
            173,161Cash
                and cash equivalents at end of period
            
            $
            195,893
            
            
            $
            112,089
            
            
            $
            195,893
            
            
            $
            112,089




SUPPLEMENTAL
        DISCLOSURES OF NONCASH OPERATING ACTIVITIES:
 Noncash
          operating activities that were previously classified under investment in
          trading
          securities are now classified as investments in partnerships and
          affiliates.  The amount reclassified is $24,054,974 for the three and
          nine months ended September 30, 2007.


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








See
      accompanying notes.








7








**GAMCO
      INVESTORS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**September
      30, 2007**


**(Unaudited)**





**A.  Basis
      of Presentation**





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





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





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





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





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





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





*Changes
      in Accounting Policy*




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





*Restatement*




On
      August
      9, 2007, GAMCO filed a Form 10-K/A restating 2006 results to reflect the
      reversal of certain previously accrued expenses for investment partnership
      compensation.




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




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




**As
                restated**
              
              **2006
                  Quarter**(in
                  thousands, except per share data)
              
              **1st**
              
              
              **2nd**
              
              
              **3rd**
              
              
              **4th**
              
              
              **Full
                  Year**Revenues
              
              $
              59,284
              
              
              $
              61,659
              
              
              $
              57,994
              
              
              $
              82,526
              
              
              $
              261,463Operating
                  income
              
              
              18,486
              
              
              
              9,463
              
              
              
              18,497
              
              
              
              29,901
              
              
              
              76,347Net
                  income
              
              
              18,959
              
              
              
              8,945
              
              
              
              17,043
              
              
              
              26,980
              
              
              
              71,927Net
                  income per share:Basic
              
              
              0.65
              
              
              
              0.31
              
              
              
              0.60
              
              
              
              0.96
              
              
              
              2.52Diluted
              
              
              0.64
              
              
              
              0.31
              
              
              
              0.60
              
              
              
              0.94
              
              
              
              2.49
  Quarterly
        financial information for the year ended December 31, 2006, as originally
        reported, is presented below.
  **As
                  reported**
                
                **2006
                    Quarter**(in
                    thousands, except per share data)
                
                **1st**
                
                
                **2nd**
                
                
                **3rd**
                
                
                **4th**
                
                
                **Full
                    Year**Revenues
                
                $
                59,284
                
                
                $
                61,659
                
                
                $
                57,994
                
                
                $
                82,526
                
                
                $
                261,463Operating
                    income
                
                
                18,034
                
                
                
                8,936
                
                
                
                18,220
                
                
                
                26,971
                
                
                
                72,161Net
                    income
                
                
                18,700
                
                
                
                8,641
                
                
                
                16,884
                
                
                
                25,293
                
                
                
                69,518Net
                    income per share:Basic
                
                
                0.64
                
                
                
                0.30
                
                
                
                0.60
                
                
                
                0.90
                
                
                
                2.44Diluted
                
                
                0.63
                
                
                
                0.30
                
                
                
                0.59
                
                
                
                0.88
                
                
                
                2.40




8


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


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





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




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





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




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


In
      May
      2007, the FASB issued FSP No. FIN 46(R)-7, “Application of FASB Interpretation
      No. 46(R) to Investment Companies”. This FSP amends Interpretation FIN 46(R) to
      provide an exception to the scope of FIN 46(R) for companies within the scope
      of
      the revised Audit and Accounting Guide Investment Companies. The Company plans
      to adopt this FSP upon its adoption of SOP 07-1. The Company is currently
      evaluating the potential impact of adopting FIN 46(R)-7 on its consolidated
      financial statements.




**C.  Investment
      in Securities**





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




GAMCO
      has
      an established accounting policy and methodology to determine
      other-than-temporary impairment.  Under this policy, a holding must
      generally be impaired for nine consecutive months in order to be considered
      other-than-temporarily impaired.  Once the nine month threshold is
      met, the investment is considered other-than-temporarily impaired and the
      appropriate writedown is taken in accordance with SFAS 115.  However,
      the determination of temporary versus other-than-temporary impairment for
      investments where the impairment is less than nine consecutive months are
      subject to further scrutiny.  GAMCO augments the general systematic
“nine month” methodology by identifying both issuer-specific declines and
      market/industry related declines, which might indicate other-than-temporary
      impairment in instances where the nine consecutive month threshold has not
      yet
      been met.For the three and nine months ended September 30, 2007, there
      was an impairment of approximately $3,000 in AFS securities.  For the
      three month period ended September 30, 2006, there was no impairment in AFS
      securities. For the nine month period ended September 30, 2006, there were
      $0.1
      million in losses on AFS securities deemed to be other than temporary which
      were
      recorded in the condensed consolidated statements of income.




Securities
      sold, not yet purchased are financial instruments purchased under agreements
      to
      resell and financial instruments sold under agreements to
      repurchase.  These financial instruments are stated at fair value and
      are subject to market risks resulting from changes in price and volatility.
      At
      September 30, 2007 and 2006, the market value of securities sold, not yet
      purchased was $10.9 million and $8.5 million, respectively.




9


The
      Company accounts for derivative financial instruments in accordance with
      Statement No. 133. 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. There were no swaps and
      treasury futures included in investments in securities in the condensed
      statements of financial condition at September 30, 2007. The fair value of
      swaps
      and treasury futures are included in investments in securities in the condensed
      consolidated statement of financial condition at September 30, 2006, and gains
      and losses from the swaps are included in the condensed consolidated statements
      of income for the three and nine months ended September 30, 2006. The market
      value of derivatives was $17.8 million at September 30, 2006.




At
      September 30, 2007 and 2006, the market value of investments available for
      sale
      was $137.2 million and $92.6 million, respectively.  At September 30,
      2007 and 2006, the total gains for available for sale securities with net gains
      were $34.4 million and $9.6 million, respectively, while total losses for
      securities with net losses were $3.6 million and $0.0 million, respectively.
      Unrealized gains in market value, net of management fee and taxes, of $17.8
      million and $4.8 million have been included in stockholders’ equity as at
      September 30, 2007 and 2006, respectively.








**D.
      Investments in Partnerships and Affiliates**





Beginning
      January 1, 2006, the provisions of FIN 46R and EITF 04-5 required consolidation
      of the majority of our investment partnerships and offshore funds managed by
      our
      subsidiaries into our consolidated financial statements.  However,
      since we amended the agreements of certain investment partnerships and an
      offshore fund on March 31, 2006, FIN 46R and EITF 04-5 only required us to
      consolidate these entities on our condensed consolidated statement of income
      and
      condensed consolidated statement of cash flows for the first quarter 2006.
The
      business purpose of amending the agreements was to avoid having to consolidate
      them.  There was no economic impact of giving up presumptive control
      of these entities.We were not required to consolidate these entities on
      our condensed consolidated statement of financial condition at March 31,
      2006.  In addition, these partnerships and offshore funds, for which
      the agreements were amended, were not required to be consolidated within our
      condensed consolidated statement of income and condensed consolidated statement
      of cash flows or on our condensed consolidated statement of financial condition
      for any period subsequent to the first quarter 2006 and will continue to not
      be
      required as long as GAMCO does not maintain direct or indirect control over
      the
      investment partnerships and offshore funds, which remains the case at and for
      the three and nine months ended September 30, 2007.  For the nine
      months ended September 30, 2006, the consolidation of these entities had no
      effect on net income but did affect the classification of income between
      operating and other income.




The
        consolidation of the entities whose agreements were amended to add the
        substantive kickout rights and were not consolidated at and after March 31,
        2006
        but whose results of operations were consolidated for the three months ended
        March 31, 2006 had the following impact on our Condensed Consolidated Statement
        of Income for the three months ended March 31, 2006: decrease to distribution
        fees and other income revenues of $0.9 million, increase to other operating
        expenses of $0.2 million, decrease in operating income of $1.0 million, increase
        to net gain from investments of $13.6 million, increase to interest and dividend
        income of $1.3 million, increase to interest expense of $0.6 million, increase
        to income taxes of $4.9 million and an increase to minority interest of $8.2
        million.  There was no impact on net income for the three months ended
        March 31, 2006.  The impact on the cash flows for the three month
        ended March 31, 2006 was as follows:  $627.9 million in purchase of
        trading investments in securities and securities sold short, $609.4 million
        in
        proceeds from sales of trading investments in securities and securities sold
        short, $28.2 million in contributions related to investment partnerships
        and
        offshore funds consolidated under FIN 46R and EITF 04-5, net, $13.8 million
        of
        income related to investment partnerships and offshore funds consolidated
        under
        FIN 46R and EITF 04-5, net, $11.5 million increase in receivable from brokers,
        $11.7 million of realized gains on sales of investments in securities and
        securities sold short, net, $11.4 million decrease in accrued expenses and
        other
        liabilities, $6.3 million increase in payable to brokers, $4.7million increase
        in unrealized value of investments in securities and securities sold short,
        net,
        $0.3 million of investments in partnerships and affiliates, $0.4 million
        of
        equity in net gains from partnerships and affiliates, less than $0.1 million
        in
        distributions from partnerships and affiliates, $0.3 million decrease in
        other
        assets.


For
        the
        three and nine months ended September 2006, we have also consolidated five
        other
        investment partnerships and two offshore funds in which we have a direct
        or
        indirect controlling financial interest, and we will continue to consolidate
        these in future periods as long as we continue to maintain a direct or indirect
        controlling financial interest. From January 1, 2007 to September 30, 2007,
        we
        consolidated these same five investment partnerships and one of these offshore
        funds in which we continue to have a direct or indirect controlling financial
        interest.
  Our
        balance
        sheet caption “investments in partnerships and affiliates” does include those
        investments which we account for under the equity method of
        accounting.  We reflect the equity in earnings of these equity method
        investees under the caption net gain from investments on the condensed
        consolidated statements of income. For the three months ended September 30,
        2007
        and 2006, profits from these investments were $0.9 million and $1.1 million,
        respectively. For the nine months ended September 30, 2007 and 2006, profits
        from these investments were $5.6 million and $4.4 million,
        respectively.




For
      the
      three and nine months ended September 30, 2007 and 2006, the consolidation
      of
      investment partnerships and offshore funds in which we have a direct or indirect
      controlling financial interest had no impact on net income but did result in
      (a)
      the elimination of revenues and expenses which are now intercompany
      transactions; (b) the recording of all the partnerships’ operating expenses of
      these entities including those pertaining to third-party interests; (c) the
      recording of all other income of these entities including those pertaining
      to
      third-party interests; (d) recording of income tax expense of these entities
      including those pertaining to third party interests; and (e) the recording
      of
      minority interest which offsets the net amount of any of the partnerships’
revenues, operating expenses, other income and income taxes recorded in these
      respective line items which pertain to third-party interest in these
      entities.  While this had no impact on net income, the consolidation
      of these entities did affect the classification of income between operating
      and
      other income.  Cash and cash equivalents, investments in securities
      receivable/payable to brokers and securities sold, not yet repurchased held
      by
      investment partnerships and offshore funds, which at September 30, 2007,
      September 30, 2006 and December 31, 2006 were $2.6 million, $14.7 million and
      $15.6 million, respectively, consolidated under FIN 46R and EITF 04-5 are
      also restricted from use for general operating purposes.





**E.
      Debt**





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





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


10


F. Income Taxes and Adoption of FIN 48




The
      Internal Revenue Service (“IRS”) concluded its audit of the 2003 and 2004
      federal income tax returns during the third quarter 2007. Total adjustments
      of $1.4 million were recognized during the three months ended September 30,
      2007. The Company’s FIN 48 liability decreased by approximately $0.3 million as
      a result of the conclusion of these audits.  The 2005 and 2006 federal
      income tax returns remain subject to potential future audit by the
      IRS.









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




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





As
      of
      January 1, 2007, the Company had a gross unrecognized tax benefit of
      approximately $2.6 million, of which recognition of $2.5 million would impact
      the Company’s effective tax rate.  As of September 30, 2007, the total
      amount of gross unrecognized tax benefits was approximately $3.9 million, of
      which recognition of $2.6 million would impact the Company’s effective tax rate.
      As of January 1, 2007, the Company had a cumulative effect of adopting FIN
      48 of
      $0.8 million, and an adjustment was recorded to retained earnings upon such
      adoption.





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




The
      Company is currently being
      audited in one state jurisdiction for its income tax returns filed between
      1999
      and 2003.  It is reasonably possible that the Company will conclude the
      audits of 1999 and 2000 within the next 12-month period, and it is estimated
      that the Company’s FIN 48 liability could decrease by approximately $0.8 million
      upon the conclusion of these audits.  The state income tax returns for all
      years after 2002 are subject to potential future audit by tax authorities in
      the
      Company’s major state tax jurisdictions.


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


**G.
      Earnings Per Share**





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


(in
                  thousands, except per share amounts)
              
              Three
                  Months Ended
                September
                  30, 2007
              
              
              Three
                  Months Ended
                September
                  30, 2006 (a)
              
              
              Nine
                  Months Ended
                September
                  30, 2007
              
              
              Nine
                  Months Ended
                September
                  30, 2006 (a)Basic:Net
                  income
              
              $
              18,337
              
              
              $
              17,043
              
              
              $
              55,498
              
              
              $
              44,947Average
                  shares outstanding
              
              
              28,106
              
              
              
              28,254
              
              
              
              28,164
              
              
              
              28,644Basic
                  net income per share
              
              $
              0.65
              
              
              $
              0.60
              
              
              $
              1.97
              
              
              $
              1.57Diluted:Net
                  income
              
              $
              18,337
              
              
              $
              17,043
              
              
              $
              55,498
              
              
              $
              44,947Add
                  interest expense on convertible note, net of management fee
                  and taxes
              
              
              429
              
              
              
              364
              
              
              
              1,286
              
              
              
              1,067Total
              
              $
              18,766
              
              
              $
              17,407
              
              
              $
              56,784
              
              
              $
              46,014Average
                  shares outstanding
              
              
              28,106
              
              
              
              28,254
              
              
              
              28,164
              
              
              
              28,644Dilutive
                  stock options
              
              
              50
              
              
              
              22
              
              
              
              41
              
              
              
              30Assumed
                  conversion of convertible note
              
              
              943
              
              
              
              959
              
              
              
              943
              
              
              
              961Total
              
              
              29,099
              
              
              
              29,235
              
              
              
              29,148
              
              
              
              29,635Diluted
                  net income per share
              
              $
              0.64
              
              
              $
              0.60
              
              
              $
              1.95
              
              
              $
              1.55
   (a)
              As
                  restated to reflect the reversal of certain
                  previously-accrued expenses for investment partnership compensation
                  as
                  described in Note A of this report on Form
                  10-Q.




11


**H.
      Stockholders’ Equity**




Shares
        outstanding on September 30, 2007 were 28.1 million, level
        with June 30, 2007 shares and approximately 0.6% lower than 28.2
        million shares outstanding on September 30, 2006.  Fully diluted
        shares outstanding for the third quarter of 2007 were 29.1 million, level
        with second quarter 2007 fully diluted shares outstanding and 0.5% below
        our
        fully diluted shares of 29.2 million for the third quarter
        2006.
  On
        July
        10, 2007, we declared a special dividend of $1.00 per share that was paid
        on
        July 30, 2007 to shareholders of record on July 23, 2007. Our regular dividend
        of $0.03 per share was declared on August 7, 2007 and paid on September 28,
        2007
        to holders of record on September 14, 2007.
 
 *Stock
        Award and Incentive Plan*
 
 Effective
        January 1, 2003, we adopted the fair value recognition provisions of FAS
        No. 123
        in accordance with the transition and disclosure provisions under the recently
        issued FAS No. 148, “Accounting for Stock Based Compensation – Transition and
        Disclosure.”
 
 We
        adopted FAS 123 (R) on January 1, 2005.  In light of our modified
        prospective adoption of the fair value recognition provisions of FAS 123
        (R) for
        all grants of employee stock options, the adoption of FAS 123 (R) did not
        have a
        material impact on our condensed consolidated financial
        statements.  For the three months ended September 30, 2007 and
        2006, we recognized stock-based compensation expense of $24,000 and $16,000,
        respectively.  For the nine months ended September 30, 2007 and 2006,
        we recognized stock-based compensation expense of $68,000 and $36,000,
        respectively.   The total compensation costs related to
        non-vested awards not yet recognized are approximately
        $170,000.  These will be recognized as expense in the following
        periods:
  Remainder
                  of
                2007
              
              
              2008
              
              
              2009
              
              
              2010$
              24,000
              
              
              $
              89,000
              
              
              $
              47,000
              
              
              $
              10,000
  Proceeds
        from the exercise of 1,000 and 11,900 stock options were $29,000 and $210,000
        for the three months ended September 30, 2007 and 2006, respectively. The
        exercise of the options resulted in a tax benefit to GAMCO of $5,000 and
        $79,000 for the three months ended September 30, 2007 and 2006, respectively.
        Proceeds from the exercise of 9,150 and 26,950 stock options were $238,000
        and $542,000 for the nine months ended September 30, 2007 and 2006,
        respectively, resulting in a tax benefit to GAMCO of $62,000 and $166,000
        for
        the nine months ended September 30, 2007 and 2006,
        respectively.




*Stock
      Repurchase Program*




********In
      the
      third quarter of 2007, we repurchased 52,000 shares at an average investment
      of
      $47.31 per share. Through September 30, 2007, we repurchased 4,835,858
      class A common shares at an average investment of $39.66 per share since our
      buyback program was initiated in March 1999. The total amount of shares
      currently available for repurchase under the current authorization is
      approximately 882,000 shares at September 30, 2007.




I.
      Goodwill





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





**J.  Other
      Matters**





Since
      September 2003, GAMCO and certain of its subsidiaries have cooperated with
      inquiries from the N.Y. Attorney General's office and the SEC by providing
      documents and testimony regarding certain mutual fund share trading
      practices.  As a result of discussions with the SEC for a potential
      resolution of their inquiry, GAMCO recorded a reserve against earnings of
      approximately $15 million in 2006, which is included within the condensed
      consolidated statements of financial condition.  In February 2007, one
      of our advisory subsidiaries made an offer of settlement to the SEC staff for
      communication to the Commission for its consideration to resolve this matter.
      This offer of settlement is subject to final agreement regarding the specific
      language of the SEC’s administrative order and other settlement documents. Since
      these discussions are ongoing, we cannot determine at this time whether they
      will ultimately result in a settlement of this matter and whether our
      reserves will be sufficient to cover any payments by GAMCO related to such
      a
      settlement. In the third quarter 2007, GAMCO received reimbursement for a
      portion of its insurance claim for legal fees and expenses related to this
      matter. The insurance carrier paid $3.8 million of legal fees and expenses
      submitted for reimbursement in prior quarters which have reduced other
      operating expenses for the three and nine month periods ended September 30,
      2007
      in the condensed consolidated statements of income.




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




12




**K.
      Subsequent Events**




On
      November 5, 2007, the Company
      filed a preliminary proxy statement with the Securities and Exchange
      Commission announcing that a special shareholder meeting will be
      held. The meeting is scheduled to occur during the fourth quarter
      2007. At this meeting, shareholders will be asked to (a) approve, subject to
      final action by the Company's Board of Directors, the distribution to our
      shareholders of the shares of common stock of Gabelli Advisers, Inc. that the
      Company owns, (b) whether to recommend that the Company's Board of
      Directors consider the conversion and reclassifcation of the Company's shares
      of
      Class B Common Stock into Class A Common Stock at a ratio of 1.15 shares of
      Class A Common Stock for each share of Class B Common Stock, and (c) to approve
      the amended and restated Employment Agreement with the Company's Chairman and
      CEO.


On
        November 6, 2007, our Board of
        Directors declared a quarterly dividend of $0.03 per share to be paid on
        December 28, 2007 to shareholders of record on December 14, 2007.
  On
        November 6, 2007, our Board of
        Directors and Compensation Committee discussed the granting of approximately
        500,000 restricted stock awards to the Company's employees during the fourth
        quarter 2007.


13





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





*Overview*





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





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





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




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




Assets
      Under Management (AUM) were a record $31.6 billion as of September 30, 2007,
      3.3% higher than June 30, 2007 AUM of $30.6 billion and 18.9% higher than
      September 30, 2006 AUM of $26.6 billion.  Equity assets under
      management were a record $30.6 billion on September 30, 2007, 2.1% more than
      June 30, 2007 equity assets of $29.9 billion and 18.2% above the $25.9 billion
      on September 30, 2006. Our
      closed-end equity funds at September 30, 2007 were level with June 30, 2007
      AUM of $6.4 billion and were 20.9% higher than the $5.3 billion on
      September 30, 2006. Our
      open-end equity fund AUM were a record $9.9 billion on September 30, 2007,
      a
      3.5% gain from $9.5 billion on June 30, 2007 and 25.6% higher than the $7.9
      billion at September 30, 2006.Our
      institutional and high net worth business had $13.8 billion in separately
      managed accounts on September 30, 2007, an increase of 2.0% over June 30, 2007
      AUM of $13.5 billion and 12.6% over September 30, 2006 AUM of $12.2 billion.Our
      investment partnerships AUM were $491 million on September 30, 2007 versus
      $486
      million on June 30, 2007 and $488 million on September 30, 2006.We
      receive incentive and fulcrum fees for our investment partnership assets,
      certain institutional client assets, preferred issues of our closed-end funds
      and our new closed-end fund launched in January 2007, the Gabelli Global Deal
      Fund.  As of September 30, 2007, assets generating performance-based
      fees were $3.7 billion, an increase of 1.6% versus the $3.6 billion on June
      30,
      2007 and a 24.3% increase over the $3.0 billion on September 30, 2006.Fixed
      income AUM, primarily money market mutual funds, totaled $1.1 billion on
      September 30, 2007 compared to AUM of $705 million on June 30, 2007 and AUM
      of
      $737 million on September 30, 2006.


14


The
        company reported Assets Under Management as follows:
 **Table
                    I:**
                  
                  **Assets
                      Under Management
                      (millions)******Mutual
                      Funds:
                  
                  September
                      30, 2006
                  
                  
                  September
                      30, 2007
                  
                  
                  %
                      Inc. (Dec.)Open-end
                  
                  $
                  7,854
                  
                  
                  $
                  9,866
                  
                  
                  
                  25.6
                  %Closed-end
                  
                  
                  5,327
                  
                  
                  
                  6,443
                  
                  
                  
                  20.9Fixed
                      Income
                  
                  
                  683
                  
                  
                  
                  1,048
                  
                  
                  
                  53.4Total
                      Mutual Funds
                  
                  
                  13,864
                  
                  
                  
                  17,357
                  
                  
                  
                  25.2Institutional
&
Separate
                      Accounts:Equities:
                      direct
                  
                  
                  9,470
                  
                  
                  
                  11,266
                  
                  
                  
                  19.0“        sub-advisory
                  
                  
                  2,725
                  
                  
                  
                  2,494
                  
                  
                  
                  (8.5
                  )Fixed
                      Income
                  
                  
                  54
                  
                  
                  
                  27
                  
                  
                  
                  (50.0
                  )Total
                      Institutional & Separate Accounts
                  
                  
                  12,249
                  
                  
                  
                  13,787
                  
                  
                  
                  12.6Investment
                      Partnerships
                  
                  
                  488
                  
                  
                  
                  491
                  
                  
                  
                  0.6Total
                      Assets Under Management
                  
                  $
                  26,601
                  
                  
                  $
                  31,635
                  
                  
                  
                  18.9Equities
                  
                  $
                  25,864
                  
                  
                  $
                  30,560
                  
                  
                  
                  18.2Fixed
                      Income
                  
                  
                  737
                  
                  
                  
                  1,075
                  
                  
                  
                  45.9Total
                      Assets Under Management
                  
                  $
                  26,601
                  
                  
                  $
                  31,635
                  
                  
                  
                  18.9
 **Table
                      II:**
                    
                    **Assets
                        Under Management (millions)**%
                        Increase/(decrease)Mutual
                        Funds
                    
                    
                    9/06
                    
                    
                    
                    12/06
                    
                    
                    
                    3/07
                    
                    
                    
                    6/07
                    
                    
                    
                    9/07
                    
                    
                    
                    6/07
                    
                    
                    
                    9/06Open-end
                    
                    $
                    7,854
                    
                    
                    $
                    8,389
                    
                    
                    $
                    8,858
                    
                    
                    $
                    9,529
                    
                    
                    $
                    9,866
                    
                    
                    
                    3.5
                    %
                    
                    
                    25.6
                    %Closed-end
                    
                    
                    5,327
                    
                    
                    
                    5,806
                    
                    
                    
                    6,188
                    
                    
                    
                    6,412
                    
                    
                    
                    6,443
                    
                    
                    
                    0.5
                    
                    
                    
                    20.9Fixed
                        income
                    
                    
                    683
                    
                    
                    
                    744
                    
                    
                    
                    591
                    
                    
                    
                    684
                    
                    
                    
                    1,048
                    
                    
                    
                    53.2
                    
                    
                    
                    53.4Total
                        Mutual Funds
                    
                    
                    13,864
                    
                    
                    
                    14,939
                    
                    
                    
                    15,637
                    
                    
                    
                    16,625
                    
                    
                    
                    17,357
                    
                    
                    
                    4.4
                    
                    
                    
                    25.2Institutional
                        & Separate Accounts:Equities:
                        direct
                    
                    
                    9,470
                    
                    
                    
                    10,282
                    
                    
                    
                    10,587
                    
                    
                    
                    11,116
                    
                    
                    
                    11,266
                    
                    
                    
                    1.3
                    
                    
                    
                    19.0“        sub-advisory
                    
                    
                    2,725
                    
                    
                    
                    2,340
                    
                    
                    
                    2,608
                    
                    
                    
                    2,383
                    
                    
                    
                    2,494
                    
                    
                    
                    4.7
                    
                    
                    
                    (8.5
                    )Fixed
                        Income
                    
                    
                    54
                    
                    
                    
                    50
                    
                    
                    
                    49
                    
                    
                    
                    21
                    
                    
                    
                    27
                    
                    
                    
                    28.6
                    
                    
                    
                    (50.0
                    )Total
                        Institutional & Separate Accounts
                    
                    
                    12,249
                    
                    
                    
                    12,672
                    
                    
                    
                    13,244
                    
                    
                    
                    13,520
                    
                    
                    
                    13,787
                    
                    
                    
                    2.0
                    
                    
                    
                    12.6Investment
                        Partnerships
                    
                    
                    488
                    
                    
                    
                    491
                    
                    
                    
                    477
                    
                    
                    
                    486
                    
                    
                    
                    491
                    
                    
                    
                    1.0
                    
                    
                    
                    0.6Total
                        Assets Under Management
                    
                    $
                    26,601
                    
                    
                    $
                    28,102
                    
                    
                    $
                    29,358
                    
                    
                    $
                    30,631
                    
                    
                    $
                    31,635
                    
                    
                    
                    3.3
                    
                    
                    
                    18.9
 **Table
                    III:**
                **Fund
                    Flows – 3rd Quarter 2007 (millions)**June
                    30,
                  2007
                Net
                  Cash
                    Flows
                MarketAppreciation
                    / (Depreciation)
                September
                    30,
                  2007
 
 Mutual
                    Funds:Equities
                
                $
                15,941
                
                
                $
                88
                
                
                $
                280
                
                
                $
                16,309Fixed
                    Income
                
                
                684
                
                
                
                356
                
                
                
                8
                
                
                
                1,048Total
                    Mutual Funds
                
                
                16,625
                
                
                
                444
                
                
                
                288
                
                
                
                17,357Institutional
&
Separate
                    AccountsEquities:
                    direct
                
                
                11,116
                
                
                
                34
                
                
                
                116
                
                
                
                11,266“        sub-advisory
                
                
                2,383
                
                
                
                85
                
                
                
                26
                
                
                
                2,494Fixed
                    Income
                
                
                21
                
                
                
                6
                
                
                
                -
                
                
                
                27Total
                    Institutional & Separate Accounts
                
                
                13,520
                
                
                
                125
                
                
                
                142
                
                
                
                13,787Investment
                    Partnerships
                
                
                486
                
                
                
                2
                
                
                
                3
                
                
                
                491Total
                    Assets Under Management
                
                $
                30,631
                
                
                $
                571
                
                
                $
                433
                
                
                $
                31,635




15


**Regulatory**





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, FINRA, 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 received information
      requests and subpoenas from the SEC and the NYAG in connection with their
      inquiries and have complied with these requests for documents and testimony.
      We
      implemented additional compliance policies and procedures in response to recent
      industry initiatives and an internal review of our mutual fund practices and
      procedures in a variety of areas.  A special committee of all of our
      independent directors was also formed to review various issues involving mutual
      fund share transactions and was assisted by independent counsel.





As
      part
      of our review, hundreds of documents were examined and approximately fifteen
      individuals were interviewed.  We found no evidence that any employee
      participated in or facilitated any “late trading”.  We also found no
      evidence of any improper trading in our mutual funds by our investment
      professionals or senior executives.  As we previously reported, we did
      find that in August of 2002, we banned an account, which had been engaging
      in
      frequent trading in our Global Growth Fund (the prospectus of which did not
      impose limits on frequent trading) and which had made a small investment in
      one
      of our hedge funds, from further transactions with our firm. Certain other
      investors had been banned prior to that.  We also found that certain
      discussions took place in 2002 and 2003 between GAMCO’s staff and personnel of
      an investment advisor regarding possible frequent trading in certain Gabelli
      domestic equity funds.  In June 2006, we began discussions with the
      SEC staff for a potential resolution of their inquiry.  In February
      2007, one of our advisory subsidiaries made an offer of settlement to the SEC
      staff for communication to the Commission for its consideration to resolve
      this
      matter. This offer of settlement is subject to final agreement regarding the
      specific language of the SEC’s administrative order and other settlement
      documents. As a result of these developments, we recorded a reserve of
      approximately $15.0 million in 2006. Since these discussions are ongoing,
      we cannot determine at this time whether they will ultimately result in a
      settlement of this matter and whether our reserves will be sufficient to
      cover any payments by GAMCO related to such a settlement. In the third quarter
      2007, GAMCO received reimbursement for a portion of its insurance claim for
      legal fees and expenses related to this matter. The insurance carrier paid
      $3.8
      million of legal fees and expenses submitted for reimbursement
      in prior quarters.





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





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





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




16


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




**RESULTS
      OF OPERATIONS**




Three
      Months Ended September 30, 2007 Compared To Three Months Ended September 30,
      2006





Condensed
      Consolidated Results – Three Months Ended September 30:


(Unaudited;
      in thousands, except per share data)


**2007**
            
            
            **2006
                (a)****Revenues**Investment
                advisory and incentive fees
            
            $
            58,392
            
            
            $
            49,751Commission
                revenue
            
            
            3,494
            
            
            
            2,799Distribution
                fees and other income
            
            
            6,583
            
            
            
            5,444Total
                revenues
            
            
            68,469
            
            
            
            57,994**Expenses**Compensation
                and related costs
            
            
            29,064
            
            
            
            23,852Management
                fee
            
            
            3,541
            
            
            
            3,058Distribution
                costs
            
            
            6,099
            
            
            
            5,023Other
                operating expenses
            
            
            2,665
            
            
            
            7,564Total
                expenses
            
            
            41,369
            
            
            
            39,497Operating
                income
            
            
            27,100
            
            
            
            18,497**Other
                income (expense)**Net
                gain from investments
            
            
            514
            
            
            
            4,663Interest
                and dividend income
            
            
            6,810
            
            
            
            7,665Interest
                expense
            
            
            (2,828
            )
            
            
            (3,368
            )Total
                other income, net
            
            
            4,496
            
            
            
            8,960Income
                before taxes and minority interest
            
            
            31,596
            
            
            
            27,457Income
                tax provision
            
            
            13,340
            
            
            
            10,296Minority
                interest
            
            
            (81
            )
            
            
            118Net
                income
            
            $
            18,337
            
            
            $
            17,043Net
                income per share:Basic
            
            $
            0.65
            
            
            $
            0.60Diluted
            
            $
            0.64
            
            
            $
            0.60Reconciliation
                of Net income to Adjusted EBITDA:Net
                income
            
            $
            18,337
            
            
            $
            17,043Interest
                Expense
            
            
            2,828
            
            
            
            3,368Income
                tax provision and minority interest
            
            
            13,259
            
            
            
            10,414Depreciation
                and amortization
            
            
            217
            
            
            
            221Adjusted
                EBITDA(b)
            
            $
            34,641
            
            
            $
            31,046




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


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





Total
      revenues were $68.5 million in the third quarter of 2007 up $10.5 million or
      18.1% from total revenues of $58.0 million reported in the third quarter of
      2006.  Operating income was $27.1 million, an increase of $8.6 million
      or 46.5% from the $18.5 million in the third quarter of 2006.  Total
      other income, net of interest expense, decreased to $4.5 million for the third
      quarter 2007, half of the $9.0 million for third quarter 2006.  In the
      short-run, our results remain sensitive to changes in the equity
      market.  Net income for the quarter was $18.3 million or $0.64 per
      fully diluted share versus $17.0 million or $0.60 per fully diluted share in
      the
      prior year’s quarter.




Investment
      advisory and incentive fees increased to $58.4 million, an increase of $8.6
      million or 17.4% compared to the revenues in 2006. Our closed-end funds revenues
      climbed 19.5% to $12.8 million in the third quarter 2007 from $10.7 million
      in
      2006, driven by investment returns and the launch of our new fund, the Gabelli
      Global Deal Fund. Open-end mutual funds revenues grew 23.1% to $24.1 million
      from $19.6 million in the third quarter 2006, primarily due to investment
      performance. Institutional and high net worth separate accounts revenues
      increased 14.7% to $21.0 million from $18.3 million in third quarter 2006,
      as a
      result of greater investment performance. Investment Partnership revenues
      were $0.5 million, down 54.2%, or $0.6 million from the 2006
      quarter.  A decrease in Investment Partnership AUM led to lower
      management fees as well as a decline in incentive fees.




Commission
      revenues from our institutional research business, Gabelli & Company, Inc.,
      continued to climb, up 24.8% from the prior year at $3.5 million.  The
      increase was primarily due to continued recognition of our growing institutional
      research and sales efforts.




Mutual
      fund distribution fees and other income were $6.6 million for the third quarter
      2007, an increase of $1.2 million, or 20.9%, higher than the $5.4 million in
      third quarter 2006.




17


Total
      expenses, excluding management fee, were $37.8 million in the third quarter
      of
      2007, a 3.8% increase from total expenses of $36.4 million in the third quarter
      of 2006.




Compensation
      and related costs, which are largely variable, of $29.1 million were $5.2
      million or 21.9% higher than the $23.9 million recorded in the prior year
      period.  This increase was primarily due to higher variable
      compensation of $4.0 million, directly a result of higher revenues, and
      increased fixed compensation of $1.2 million.








Distribution
      costs were $6.1 million, $1.1 million or 21.4% above the prior year’s
      period.





Other
      operating expenses, including GAMCO's receipt of a portion of
      proceeds from an insurance carrier, decreased to $2.7 million from $7.6
      million in third quarter 2006. The decrease is due to the recovery of these
      insurance claims, without which operating expenses would have been $6.5
      million.




Total
      other income (which represents primarily investment income from our proprietary
      investments), net of interest expense, was $4.5 million for the third quarter
      2007 compared to $9.0 million in 2006.




Interest
      expense decreased approximately $0.5 million from the prior year third
      quarter amount of $3.4 million.




The
      effective tax rate for the three months ended September 30, 2007 was 42.2%
      compared to the prior year quarter’s effective rate of 37.5%.  The
      higher effective tax rate reflects adjustments as we settled tax audit open
      items in tax returns prior to 2004, without which our effective tax rate would
      have been 37.7% for the period.


Minority
          interest decreased by $0.2 million year over year.
  In
          the
          first quarter of 2006, the provisions of FASB Interpretation No. 46R (“FIN 46R”)
          and Emerging Issue Task Force 04-5 (“EITF 04-5”) required the consolidation of
          our investment partnerships and offshore funds managed by our subsidiaries
          into
          our consolidated financial statements. However, since we amended the agreements
          of five investment partnerships and an offshore fund on March 31, 2006
          to add
          substantive kickout rights, FIN 46R and EITF 04-5 only required us to
          consolidate these entities on our consolidated condensed statement of income
          for
          the first quarter 2006.  Accordingly, to provide a better
          understanding of our core results and trends, GAMCO has provided the 2006
          results before adjusting the first quarter 2006 results for FIN 46R and
          EITF 04-5 on these partnerships and this fund.  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 on page
          19.
 18
 **Nine
            Months Ended September 30, 2007 Compared To Nine Months Ended September
            30,
            2006**
  Condensed
          Consolidated Results – Nine Months Ended September 30th:


(Unaudited;
      in thousands, except per share data)


**2006
                (a)**
            
            
            **2006
                (b)**
            
            
            **Adjust-**
              **ments(c)**
            
            
            **2006
                (d)**
            
            
            **2007
                (e)****Revenues**Investment
                advisory and incentive fees
            
            $
            154,698
            
            
            $
            154,622
            
            
            $
            (887
            )
            
            $
            153,735
            
            
            $
            172,606Commission
                revenue
            
            
            8,973
            
            
            
            9,179
            
            
            
            -
            
            
            
            9,179
            
            
            
            11,550Distribution
                fees and other income
            
            
            16,229
            
            
            
            16,023
            
            
            
            -
            
            
            
            16,023
            
            
            
            19,196Total
                revenues
            
            
            179,900
            
            
            
            179,824
            
            
            
            (887
            )
            
            
            178,937
            
            
            
            203,352**Expenses**Compensation
                and related costs
            
            
            75,459
            
            
            
            74,064
            
            
            
            -
            
            
            
            74,064
            
            
            
            87,343Management
                fee
            
            
            8,153
            
            
            
            8,293
            
            
            
            -
            
            
            
            8,293
            
            
            
            10,391Distribution
                costs
            
            
            15,568
            
            
            
            15,567
            
            
            
            -
            
            
            
            15,567
            
            
            
            22,146Other
                operating expenses
            
            
            22,478
            
            
            
            22,505
            
            
            
            162
            
            
            
            22,667
            
            
            
            18,693Reserve
                for settlement
            
            
            11,900
            
            
            
            11,900
            
            
            
            -
            
            
            
            11,900
            
            
            
            -Total
                expenses
            
            
            133,558
            
            
            
            132,329
            
            
            
            162
            
            
            
            132,491
            
            
            
            138,573Operating
                income
            
            
            46,342
            
            
            
            47,495
            
            
            
            (1,049
            )
            
            
            46,446
            
            
            
            64,779**Other
                income (expense)**Net
                gain from investments
            
            
            18,260
            
            
            
            18,522
            
            
            
            13,509
            
            
            
            32,031
            
            
            
            17,277Interest
                and dividend income
            
            
            18,824
            
            
            
            18,899
            
            
            
            1,250
            
            
            
            20,149
            
            
            
            20,978Interest
                expense
            
            
            (10,046
            )
            
            
            (10,057
            )
            
            
            (580
            )
            
            
            (10,637
            )
            
            
            (9,537
            )Total
                other income, net
            
            
            27,038
            
            
            
            27,364
            
            
            
            14,179
            
            
            
            41,543
            
            
            
            28,718Income
                before taxes and minority interest
            
            
            73,380
            
            
            
            74,859
            
            
            
            13,130
            
            
            
            87,989
            
            
            
            93,497Income
                tax provision
            
            
            28,718
            
            
            
            29,273
            
            
            
            4,924
            
            
            
            34,197
            
            
            
            37,403Minority
                interest
            
            
            437
            
            
            
            639
            
            
            
            8,206
            
            
            
            8,845
            
            
            
            596Net
                income
            
            $
            44,225
            
            
            $
            44,947
            
            
            $
            -
            
            
            $
            44,947
            
            
            $
            55,498Net
                income per share:Basic
            
            $
            1.54
            
            
            $
            1.57
            
            
            $
            -
            
            
            $
            1.57
            
            
            $
            1.97Diluted
            
            $
            1.53
            
            
            $
            1.55
            
            
            $
            -
            
            
            $
            1.55
            
            
            $
            1.95Reconciliation
                of Net income to Adjusted EBITDA:Net
                income
            
            $
            44,225
            
            
            $
            44,947
            
            
            $
            -
            
            
            $
            44,947
            
            
            $
            55,498Interest
                Expense
            
            
            10,046
            
            
            
            10,057
            
            
            
            580
            
            
            
            10,637
            
            
            
            9,537Income
                tax provision and minority interest
            
            
            29,155
            
            
            
            29,912
            
            
            
            13,130
            
            
            
            43,042
            
            
            
            37,999Depreciation
                and amortization
            
            
            665
            
            
            
            665
            
            
            
            -
            
            
            
            665
            
            
            
            739Adjusted
                EBITDA (f)
            
            $
            84,091
            
            
            $
            85,581
            
            
            $
            13,710
            
            
            $
            99,291
            
            
            $
            103,773




(a)
            As
                originally reported. Non-GAAP.


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


(c)
            Adjustments
                relating to FIN 46R and EITF 04-5 on five partnerships and one offshore
                fund on which substantive kick-out rights were added on March 31,
                2006.


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


(e)
            GAAP
                basis.


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




Total
      revenues were $203.4 million in the nine months ended September 30, 2007, up
      $24.5 million or 13.6% from total revenues of $178.9 million in the prior year’s
      period.  Operating income was $64.8 million, an increase of $18.4
      million or 39.5% from the $46.4 million in 2006.  Total other income,
      net of interest expense, was $28.7 million compared to $41.5 million in 2006.
      Net income for the period was $55.5 million or $1.95 per fully diluted share
      versus $44.9 million or $1.55 per fully diluted share in the prior year’s
      period.




For
      the
      nine months ended September 30, 2007, investment advisory fees were $172.6
      million, an increase of $18.9 million or 12.3% compared to the year ago period.
      Our closed-end funds revenues were up 18.0% to $37.4 million versus the $31.7
      million in 2006, as a result of investment returns and the addition
      of The Gabelli Global Deal Fund. Open-end mutual funds revenues grew 15.0%
      to $68.8 million from $59.8 million in 2006 based on higher average AUM. Larger
      performance fees contributed to institutional and high net worth separate
      account revenues increasing 7.6% to $62.8 million from $58.4 million reported
      in
      2006. Investment Partnership revenues were down $0.2 million to
      $3.5 million from $3.7 million in the prior period.




Commission
      revenues from our institutional research business, Gabelli & Company, Inc.,
      were $11.5 for the nine months ended September 30, 2007, up 25.8% from the
      prior
      year’s comparable amount of $9.2 million.  The increase was primarily
      due to continued recognition of our growing institutional research and sales
      efforts.




Mutual
      fund distribution fees and other income were $19.2 million for the nine months
      ended September 30, 2007, an increase of $3.2 million, or 19.8%, from the $16.0
      million in the 2006 period.


19
     Distribution
        costs were $22.1 million, an increase of 42.3% from $15.6 million in the
        prior
        year’s period due to the termination of a closed-end fund compensation
        agreement, which increased distribution costs by $4.2 million for the
        period.
  Other
        operating expenses decreased by $4.0 million to $18.7 million in the first nine
        months of 2007 from the prior year
        period of $22.7 million, excluding the previously mentioned
        $12 million reserve in the first nine months of 2006. Included
        within the nine months ended September 30, 2007 are the previously
        disclosed recovery of claims from its insurance carrier of $3.8
        million.




28.7 12.8 41.5 September




The
      actual effective tax rate was 40.0% for the nine months ended September 30,
      2007
      as compared to 38.9% in the prior year’s comparable period. The effective
      rate before tax audit adjustments would be 38.5% for the nine months ended
      September 30, 2007.





Minority
      interest decreased to $0.6 million in 2007 from $8.8 million in 2006 principally
      due to adjustments related to the consolidation of investment partnerships
      and
      offshore fund in accordance with FIN 46R and EITF 04-5 during first quarter
      2006.




**LIQUIDITY
      AND CAPITAL RESOURCES**





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





Summary
      cash flow data is as follows:


Nine
                    Months Ended
                  September
                    30,
                  (in
                    thousands)Cash
                    flows provided by (used in):
                
                2007
                
                
                2006
                    (a)Operating
                    activities
                
                $
                202,532
                
                
                $
                (32,515
                )Investing
                    activities
                
                
                (23,300
                )
                
                
                (3,447
                )Financing
                    activities
                
                
                (121,483
                )
                
                
                (26,810
                )Decrease
                
                
                57,749
                
                
                
                (62,772
                )Effect
                    of exchange rates on cash and cash equivalents
                
                
                31
                
                
                
                (54
                )Net
                    increase in cash from partnerships and offshore funds
                    consolidated under FIN 46R and EITF 04-5
                
                
                -
                
                
                
                1,754Cash
                    and cash equivalents at beginning of period
                
                
                138,113
                
                
                
                173,161Cash
                    and cash equivalents at end of period
                
                $
                195,893
                
                
                $
                112,089


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




Cash
        requirements and liquidity needs have historically been met through cash
        generated by operating activities and through our borrowing
        capacity.  We have received investment grade ratings from both Moody’s
        Investors Services and Standard & Poor’s Rating Services.  These
        investment grade ratings expand our ability to attract both public and private
        capital.   Our shelf registrations provide us opportunistic
        flexibility to sell any combination of senior and subordinate debt securities,
        convertible debt securities, equity securities (including common and preferred
        stock), and other securities up to a total amount of $520 million.
 For
          the
          nine months ended September 30, 2007, cash provided by operating activities
          was
          $202.5 million principally resulting from $55.5 million in net income,
          proceeds
          from sales of investments in securities of $1.2 billion, a $20.3 million
          decrease in receivable from brokers, $15.7 million in distributions from
          partnerships and affiliates, a $12.5 million decrease in investment advisory
          fee
          receivable, and a $3.8 million increase in income taxes payable. This was
          partially offset by $1.1 billion in purchases of investments in securities,
          $18.0 million in purchases of investments in partnerships and affiliates
          and a
          $28.0 million decrease in payable to brokers.
  Cash
          used
          in investing activities, related to purchases and sales of available for
          sale
          securities, was $23.3 million in the first nine months of 2007.
  Cash
          used
          in financing activities in the first nine months of 2007 was $121.5
          million.  The decrease in cash was primarily due to the $82.3 million
          retirement of senior notes and $38.2 million in dividends paid and the
          repurchase of our class A common stock under the Stock Repurchase
          Program.


20


Cash
      used
      in operating activities was $32.5 million in the first nine months of 2006
      principally resulting from $838 million in purchases of investments in
      securities, a $36.8 million increase in receivable from brokers, $4.4 million
      in
      purchases of investments in partnerships and affiliates and $39.9 million from
      the net effects of the FIN 46R and EITF 04-5 consolidation.  This was
      partially offset by $44.9 million in net income, proceeds from sales of
      investments in securities of $804.7 million, $11.8 million in distributions
      from
      investments in partnerships and affiliates and an increase in compensation
      payable of $10.6 million.  Excluding the net effects of the
      consolidation of investment partnerships and offshore funds, our cash provided
      by operating activities was $7.4 million.




















Market
      Risk





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




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




With
      respect to our proprietary investment activities, included in investments in
      securities of $386.2 million at September 30, 2007 were investments in Treasury
      Bills and Notes of $84.3 million, mutual funds, largely invested in equity
      products, of $145.0 million, a selection of common and preferred stocks totaling
      $156.0 million, and other investments of approximately $0.9
      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 $156.0 million
      invested in common and preferred stocks at September 30, 2007, $43.2 million
      was
      related to our investment in Westwood Holdings Group Inc., and $46.0 million
      was
      invested in risk arbitrage opportunities in connection with mergers,
      consolidations, acquisitions, tender offers or other similar transactions.
      Securities sold, not yet purchased are financial instruments purchased under
      agreements to resell and financial instruments sold under agreement to
      repurchase.  These financial instruments are stated at fair value and
      are subject to market risks resulting from changes in price and volatility.
      At
      September 30, 2007 and 2006, the market value of securities sold, not yet
      purchased was $10.9 million and $8.5 million, respectively. Investments in
      partnerships and affiliates totaled $98.0 million at September 30, 2007, the
      majority of which consisted of investment partnerships and offshore funds which
      invest in risk arbitrage opportunities.  These transactions generally
      involve announced deals with agreed-upon terms and conditions, including
      pricing, which typically involve less market risk than common stocks held in
      a
      trading portfolio.  The principal risk associated with risk arbitrage
      transactions is the inability of the companies involved to complete the
      transaction.




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




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





**Critical
      Accounting Policies and Estimates**





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





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





*Accounting
      for Income Taxes*





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




21


**Recent
      Accounting Developments**





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





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





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




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





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





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




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


22


**Item
      4.  Controls and Procedures**




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




As
      disclosed in the Company’s
      Form 10-K/A as at and for the period ended December 31, 2006, the Company
      identified two material weakensses in internal control over financial
      reporting.  These deficiencies were identified during the course of
      the 2006 audit.  Accordingly, because of these material weaknesses,
      management concluded that the Company’s disclosure controls and procedures were
      not effective as of December 31, 2006 and that the Company did not maintain
      effective internal control over financial reporting, as of December 31,
      2006.




However,
      subsequent to December
      31, 2006, we have taken steps to strengthen our disclosure controls, procedures
      and internal controls over financial reporting.  These steps were
      taken to strengthen our processes relating to the material weaknesses discussed
      above.  Specifically, we have implemented the following internal
      control improvements:




With
      regard to the first material
      weakness, we have implemented a new procedure to review the accounting treatment
      for all proprietary investments on a regular basis.  We have also
      worked with the personnel in our operations and accounting areas who are
      responsible for the accounting for these proprietary investments to ensure
      that
      appropriate procedures are in place to more closely monitor proprietary
      investments.




In
      the second material weakness
      relating to the evaluation of and accounting for certain non-routine
      transactions in accordance with U.S. generally accepted accounting principles,
      the Company’s control deficiencies over accrual of compensation expense for
      investment partnerships compensation were contemplated on the determination
      of
      the material weakness evaluation.  As a result of the second material
      weakness, the Company filed a Form 10-K/A for the year ended December 31, 2006
      to restate the financial statements to reflect the reversal of certain
      previously-accrued expenses for investment partnerships
      compensation.




The
      Company’s Chief Executive
      Officer and Co-Chief Financial Officers, after evaluating the effectiveness
      of
      the Company’s disclosure controls and procedures (as defined in the Exchange
      Act) as of the end of the period covered by this quarterly report, have
      concluded that the Company’s disclosure controls and procedures are effective to
      provide reasonable assurance that information required to be disclosed by the
      Company in the reports that it files or submits under the Exchange Act is
      accumulated and communicated to the Company’s management, including its
      principal executive officer and principal financial officers, as appropriate
      to
      allow timely decisions regarding required disclosure and are effective to
      provide reasonable assurance that such information is recorded, processed,
      summarized and reported within the time periods specified in the SEC’s rules and
      forms.




The
      Company’s internal control
      over financial reporting (as defined in Exchange Act Rule 13a-15(f) and
      15d-15(f)) is designed to provide reasonable assurance regarding the reliability
      of financial reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting principles. 
Other than the changes described above related to the on-going remediation
      of
      the Company’s two material weaknesses identified during the course of the 2006
      audit, there were no changes in the Company’s internal control over financial
      reporting that occurred during the Company’s most recent fiscal quarter that
      have materially affected, or are reasonably likely to materially affect, the
      Company’s internal control over financial reporting.






**Forward-Looking
      Information**




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


23


**Part
      II:  Other Information**





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




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





Period
            
            (a)
                Total Number of Shares Repurchased
            
            
            (b)
                Average Price Paid Per Share, net of Commissions
            
            
            (c)
                Total Number of Shares Repurchased as Part of Publicly Announced
                Plans or
                Programs
            
            
            (d)
                Maximum Number of Shares That May Yet Be Purchased Under the Plans
                or
                ProgramsGBL7/01/07
                – 7/31/07
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            
            933,5618/01/07
                – 8/31/07
            
            
            51,000
            
            
            $
            47.24
            
            
            
            51,000
            
            
            
            882,5619/01/07
                – 9/30/07
            
            
            1,000
            
            
            $
            50.97
            
            
            
            1,000
            
            
            
            881,561Totals
            
            
            52,000
            
            
            
            
            
            
            
            52,000







**Item
                6.**
            (a)
                Exhibits


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





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





GAMCO
                INVESTORS, INC.(Registrant)November
                9, 2007
            
            /s/
                Kieran CaterinaDate
            
            Kieran
                CaterinaActing
                Co-Chief Financial
                Officer





November
                9, 2007
            
            /s/
                Diane M. LaPointeDate
            
            Diane
                M. LaPointeActing
                Co-Chief Financial Officer








24