GAMCO INVESTORS, INC. ET AL - Quarter Report: 2013 March (Form 10-Q)

form10q033113.htm

SECURITIES & EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2013

[ ]	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. 001-14761

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) 921-3700
Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx Noo Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer", "accelerated filer", and "smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

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

Class		Outstanding at April 30, 2013
Class A Common Stock, .001 par value		6,138,795
Class B Common Stock, .001 par value		19,564,174

INDEX

GAMCO INVESTORS, INC. AND SUBSIDIARIES


PART I.	FINANCIAL INFORMATION


Item 1.	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Statements of Income:
	- Three months ended March 31, 2013 and 2012

	Condensed Consolidated Statements of Comprehensive Income:
	- Three months ended March 31, 2013 and 2012

	Condensed Consolidated Statements of Financial Condition:
	- March 31, 2013
	- December 31, 2012
	- March 31, 2012

	Condensed Consolidated Statements of Equity:

	- Three months ended March 31, 2013 and 2012

	Condensed Consolidated Statements of Cash Flows:
	- Three months ended March 31, 2013 and 2012

	Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk (Included in Item 2)

Item 4.	Controls and Procedures

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.	Exhibits

SIGNATURES

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


	Three Months Ended
	March 31,
	2013			2012
Revenues
Investment advisory and incentive fees	$	72,607		$	67,783
Distribution fees and other income		11,353			11,623
Institutional research services		2,221			2,343
Total revenues		86,181			81,749
Expenses
Compensation		35,652			34,554
Management fee		3,980			4,184
Distribution costs		11,010			10,177
Other operating expenses		4,812			5,822
Total expenses		55,454			54,737

Operating income		30,727			27,012
Other income (expense)
Net gain from investments		12,291			13,878
Interest and dividend income		1,345			1,236
Interest expense		(3,488	)		(4,404	)
Shareholder-designated contribution		(5,000	)		-
Total other income, net		5,148			10,710
Income before income taxes		35,875			37,722
Income tax provision		13,195			13,756
Net income		22,680			23,966
Net income attributable to noncontrolling interests		135			130
Net income attributable to GAMCO Investors, Inc.'s shareholders	$	22,545		$	23,836

Net income attributable to GAMCO Investors, Inc.'s shareholders
per share:
Basic	$	0.88		$	0.90

Diluted	$	0.88		$	0.90

Weighted average shares outstanding:
Basic		25,742			26,415

Diluted		25,758			26,533

Dividends declared:	$	0.05		$	0.04


See accompanying notes.

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


	Three Months Ended
	March 31,
	2013			2012

Net income	$	22,680		$	23,966
Other comprehensive income, net of tax:
Foreign currency translation		(49	)		(17	)
Net unrealized gains on securities available for sale (a)		6,040			3,457
Other comprehensive income		5,991			3,440

Comprehensive income		28,671			27,406
Less: Comprehensive income attributable to noncontrolling interests		(135	)		(130	)

Comprehensive income attributable to GAMCO Investors, Inc.	$	28,536		$	27,276

(a) Net of income tax expense of $3,547 and $2,031 for 2013 and 2012, respectively.

See accompanying notes.

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

	March 31,			December 31,			March 31,
	2013			2012			2012
ASSETS
Cash and cash equivalents	$	273,353		$	190,608		$	324,630
Investments in securities		229,286			218,843			257,607
Investments in sponsored registered investment companies		64,294			61,872			62,305
Investments in partnerships		94,260			97,549			101,685
Receivable from brokers		44,583			50,655			29,298
Investment advisory fees receivable		29,624			42,429			27,193
Income tax receivable		917			1,018			39
Other assets		24,312			27,759			23,668
Total assets	$	760,629		$	690,733		$	826,425

LIABILITIES AND EQUITY
Payable to brokers	$	15,059		$	14,346		$	22,366
Income taxes payable and deferred tax liabilities		34,292			25,398			24,782
Capital lease obligation		4,914			4,949			5,043
Compensation payable		34,676			10,535			28,834
Securities sold, not yet purchased		6,377			3,136			9,657
Mandatorily redeemable noncontrolling interests		1,343			1,342			1,390
Accrued expenses and other liabilities		34,537			26,365			28,692
Sub-total		131,198			86,071			120,764

5.5% Senior notes (due May 15, 2013)		99,000			99,000			99,000
5.875% Senior notes (due June 1, 2021)		100,000			100,000			100,000
Zero coupon subordinated debentures, Face value: $21.7 million at March 31, 2013 and
December 31, 2012 and $86.3 million at March 31, 2012 (due December 31, 2015)		17,688			17,366			65,300
Total liabilities		347,886			302,437			385,064

Redeemable noncontrolling interests		16,414			17,362			16,828
Commitments and contingencies (Note J)
Equity
GAMCO Investors, Inc. stockholders' equity
Preferred stock, $.001 par value; 10,000,000 shares authorized;
none issued and outstanding
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized;
14,265,769, 14,203,146 and 13,760,697 issued, respectively; 6,147,532,
6,121,585 and 6,592,716 outstanding, respectively		13			13			13
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;
24,000,000 shares issued; 19,564,174, 19,624,174 and 20,040,746 shares
outstanding, respectively		20			20			20
Additional paid-in capital		280,196			280,089			265,280
Retained earnings		429,553			408,295			431,963
Accumulated other comprehensive income		32,291			26,300			25,960
Treasury stock, at cost (8,118,237, 8,081,561 and 7,167,981 shares, respectively)		(349,074	)		(347,109	)		(302,152	)
Total GAMCO Investors, Inc. stockholders' equity		392,999			367,608			421,084
Noncontrolling interests		3,330			3,326			3,449
Total equity		396,329			370,934			424,533

Total liabilities and equity	$	760,629		$	690,733		$	826,425

See accompanying notes.

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

For the three months ended March 31, 2013
			GAMCO Investors, Inc. stockholders
										Accumulated
					Additional					Other									Redeemable
	Noncontrolling		Common		Paid-in		Retained			Comprehensive			Treasury						Noncontrolling
	Interests		Stock		Capital		Earnings			Income			Stock			Total			Interests
Balance at December 31, 2012	$	3,326	$	33	$	280,089	$	408,295		$	26,300		$	(347,109	)	$	370,934		$	17,362
Redemptions of redeemable
noncontrolling interests		-		-		-		-			-			-			-			(2,298	)
Contributions from redeemable
noncontrolling interests		-		-		-		-			-			-			-			1,219
Net income (loss)		4		-		-		22,545			-			-			22,549			131
Net unrealized gains on
securities available for sale,
net of income tax ($3,823)		-		-		-		-			6,511			-			6,511			-
Amounts reclassified from
accumulated other
comprehensive income,
net of income tax benefit ($276)		-		-		-		-			(471	)		-			(471	)		-
Foreign currency translation		-		-		-		-			(49	)		-			(49	)		-
Dividends declared ($0.05 per
share)		-		-		-		(1,287	)		-			-			(1,287	)		-
Stock based compensation
expense		-		-		15		-			-			-			15			-
Exercise of stock options
including tax benefit		-		-		92		-			-			-			92			-
Purchase of treasury stock		-		-		-		-			-			(1,965	)		(1,965	)		-
Balance at March 31, 2013	$	3,330	$	33	$	280,196	$	429,553		$	32,291		$	(349,074	)	$	396,329		$	16,414

See accompanying notes.

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

For the three months ended March 31, 2012
			GAMCO Investors, Inc. stockholders
										Accumulated
					Additional					Other									Redeemable
	Noncontrolling		Common		Paid-in		Retained			Comprehensive			Treasury						Noncontrolling
	Interests		Stock		Capital		Earnings			Income			Stock			Total			Interests
Balance at December 31, 2011	$	3,439	$	33	$	264,409	$	409,191		$	22,520		$	(292,181	)	$	407,411		$	6,071
Redemptions of redeemable
noncontrolling interests		-		-		-		-			-			-			-			(3	)
Contributions from redeemable
noncontrolling interests		-		-		-		-			-			-			-			10,640
Net income		10		-		-		23,836			-			-			23,846			120
Net unrealized gains on
securities available for sale,
net of income tax ($2,031)		-		-		-		-			3,457			-			3,457			-
Foreign currency translation		-		-		-		-			(17	)		-			(17	)		-
Dividends declared
($0.04 per share)		-		-		-		(1,064	)		-			-			(1,064	)		-
Stock based compensation
expense		-		-		871		-			-			-			871			-
Purchase of treasury stock		-		-		-		-			-			(9,971	)		(9,971	)		-
Balance at March 31, 2012	$	3,449	$	33	$	265,280	$	431,963		$	25,960		$	(302,152	)	$	424,533		$	16,828

See accompanying notes.

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

	Three Months Ended
	March 31,
	2013			2012
Operating activities
Net income	$	22,680		$	23,966
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in net gains from partnerships		795			(3,351	)
Depreciation and amortization		202			180
Stock based compensation expense		15			871
Deferred income taxes		1,471			1,515
Tax benefit from exercise of stock options		16			-
Foreign currency translation gain/(loss)		(49	)		(17	)
Fair value of donated securities		148			83
Gains on sales of available for sale securities		(597	)		(279	)
Accretion of zero coupon debentures		323			1,180
Loss on extinguishment of debt		-			1
(Increase) decrease in assets:
Investments in trading securities		(5,538	)		(13,604	)
Investments in partnerships:
Contributions to partnerships		(3,492	)		(23,293	)
Distributions from partnerships		5,987			25,852
Receivable from brokers		6,071			(8,385	)
Investment advisory fees receivable		12,804			4,963
Income tax receivable and deferred tax assets		97			-
Other assets		3,227			5,023
Increase (decrease) in liabilities:
Payable to brokers		713			11,596
Income taxes payable and deferred tax liabilities		3,881			5,940
Compensation payable		24,141			11,139
Mandatorily redeemable noncontrolling interests		1			4
Accrued expenses and other liabilities		8,136			4,227
Total adjustments		58,352			23,645
Net cash provided by operating activities	$	81,032		$	47,611

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

	Three Months Ended
	March 31,
	2013			2012
Investing activities
Purchases of available for sale securities	$	(4	)	$	(4	)
Proceeds from sales of available for sale securities		5,343			525
Return of capital on available for sale securities		611			571
Net cash provided by investing activities		5,950			1,092

Financing activities
Contributions from redeemable noncontrolling interests		1,219			10,640
Redemptions of redeemable noncontrolling interests		(2,298	)		(3	)
Proceeds from exercise of stock options		76			-
Dividends paid		(1,287	)		(1,070	)
Purchase of treasury stock		(1,965	)		(9,971	)
Net cash used in financing activities		(4,255	)		(404	)
Effect of exchange rates on cash and cash equivalents		18			(9	)
Net increase in cash and cash equivalents		82,745			48,290
Cash and cash equivalents at beginning of period		190,608			276,340
Cash and cash equivalents at end of period	$	273,353		$	324,630
Supplemental disclosures of cash flow information:
Cash paid for interest	$	285		$	322
Cash paid for taxes	$	7,272		$	6,038

Non-cash activity:
- For the three months ended March 31, 2013 and March 31, 2012, the Company accrued dividends on restricted
stock awards of $0 and $13, respectively.
See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

(Unaudited)

A. Significant Accounting Policies

Basis of Presentation

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

The unaudited interim condensed consolidated financial statements of GAMCO included herein have been prepared in conformity with generally accepted accounting principles (“GAAP”) 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 U.S. GAAP in the United States for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial position, results of operations and cash flows of GAMCO for the interim periods presented and are not necessarily indicative of a full year’s results.

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

These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012 from which the accompanying condensed consolidated financial statements were derived.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported on the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Developments

In December 2011, the Financial Accounting Standards Board (“FASB”) issued guidance which creates new disclosure requirements about the nature of an entity’s right of offset and related arrangements associated with its financial instruments and derivative instruments. In January 2013, the FASB issued guidance which clarifies the scope of the disclosure requirements. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods therein, with retrospective application required. The new disclosures are designed to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under International Financial Reporting Standards. The Company adopted this guidance on January 1, 2013 and now presents the disclosures required by this guidance in Note B.

In July 2012, the FASB issued guidance allowing companies to first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If a company determines, on the basis of qualitative factors, that the fair value of such asset is not more likely than not impaired, it would not need to calculate the fair value of such asset. However, if a company concludes otherwise, it must calculate the fair value of the asset, compare the value with its carrying amount and record an impairment charge, if any. To perform the qualitative assessment, a company must identify and evaluate events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. This guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company adopted this guidance on January 1, 2013 without a material impact to the financial statements.

In February 2013, the FASB issued guidance which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”). The guidance is intended to help entities improve the transparency of changes in other comprehensive income (“OCI”) and items reclassified out of AOCI in their financial statements. It does not amend any existing requirements for reporting net income or OCI in the financial statements. The guidance requires entities to disclose additional information about reclassification adjustments, including changes in AOCI balances by component and significant items reclassified out of AOCI. The guidance requires an entity to present information about significant items reclassified out of AOCI by component either on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statements. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company adopted this guidance on January 1, 2013 and now presents the disclosures required by this guidance in Note B.

B. Investment in Securities

Investments in securities at March 31, 2013, December 31, 2012 and March 31, 2012 consisted of the following:

	March 31, 2013				December 31, 2012				March 31, 2012
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Government obligations	$	49,970	$	49,990	$	42,973	$	42,989	$	48,624	$	48,630
Common stocks		119,918		139,503		125,697		138,478		156,206		170,224
Mutual funds		1,073		1,655		1,072		1,484		1,086		1,495
Other investments		315		1,179		328		630		601		571
Total trading securities		171,276		192,327		170,070		183,581		206,517		220,920

Available for sale securities:
Common stocks		14,312		35,225		14,822		33,560		16,158		34,578
Mutual funds		1,014		1,734		1,105		1,702		1,362		2,109
Total available for sale securities		15,326		36,959		15,927		35,262		17,520		36,687

Total investments in securities	$	186,602	$	229,286	$	185,997	$	218,843	$	224,037	$	257,607

Securities sold, not yet purchased at March 31, 2013, December 31, 2012 and March 31, 2012 consisted of the following:

	March 31, 2013				December 31, 2012				March 31, 2012
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Trading securities:	(In thousands)
Common stocks	$	5,163	$	5,650	$	2,593	$	2,867	$	9,016	$	9,553
Other		86		727		184		269		21		104
Total securities sold, not yet purchased	$	5,249	$	6,377	$	2,777	$	3,136	$	9,037	$	9,657

Investments in sponsored registered investment companies at March 31, 2013, December 31, 2012 and March 31, 2012 consisted of the following:

	March 31, 2013				December 31, 2012				March 31, 2012
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Mutual funds	$	19	$	17	$	19	$	20	$	15	$	17
Total trading securities		19		17		19		20		15		17

Available for sale securities:
Closed-end funds		31,014		60,895		35,868		58,511		36,546		58,721
Mutual funds		2,047		3,382		2,055		3,341		2,204		3,567
Total available for sale securities		33,061		64,277		37,923		61,852		38,750		62,288

Total investments in sponsored
registered investment companies	$	33,080	$	64,294	$	37,942	$	61,872	$	38,765	$	62,305

Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of each balance sheet date. Investments in United States Treasury Bills and Notes with maturities of greater than three months at the time of purchase are classified as investments in securities, and those with maturities of three months or less at the time of purchase are classified as cash equivalents. A substantial portion of investments in securities is held for resale in anticipation of short-term market movements and therefore is classified as trading securities. Trading securities are stated at fair value, with any unrealized gains or losses reported in current period earnings. Available for sale (“AFS”) investments are stated at fair value, with any unrealized gains or losses, net of taxes, reported as a component of equity except for losses deemed to be other than temporary which are recorded as unrealized losses in the condensed consolidated statements of income.

The following table identifies all reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2013 (in thousands):

Amount			Affected Line Item in	Reason for
Reclassified			in the Statements	Reclassification
from AOCI			Of Income	from AOCI

$	597		Net gain from investments	Realized gain / (loss) on sale of securities
	150		Other operating expenses	Donation of securities
$	747		Income before income taxes
	(276	)	Income tax provision
$	471		Net income

The Company recognizes all derivatives as either assets or liabilities measured at fair value and includes them in either investments in securities or securities sold, not yet purchased on the condensed consolidated statements of financial condition. From time to time, the Company and/or the partnerships and offshore funds that the Company consolidates will enter into hedging transactions to manage their exposure to foreign currencies and equity prices related to their proprietary investments. For the three months ended March 31, 2013 and 2012, the Company had transactions in equity derivatives which resulted in net gains of $281,000 and net losses of $29,000, respectively. At March 31, 2013, December 31, 2012 and March 31, 2012, we held derivative contracts on 222,000 equity shares, 1.2 million equity shares and 1.0 million equity shares, respectively, and the fair value was $61,000, $(121,000) and $105,000, respectively; these are included in investments in securities in the condensed consolidated statements of financial condition. These transactions are not designated as hedges for accounting purposes, and therefore changes in fair values of these derivatives are included in net gain/(loss) from investments in the condensed consolidated statements of income.

The Company is a party to enforceable master netting arrangements for swaps entered into as part of the investment strategy of the Company’s proprietary portfolio. They are typically not used as hedging instruments. These swaps, while settled on a net basis with the counterparties, major U.S. financial institutions, are shown gross in assets and liabilities on the consolidated statements of financial position. The swaps have a firm contract end date and are closed out and settled when each contract expires.

							Gross Amounts Not Offset in the
							Statements of Financial Position
	Gross		Gross Amounts		Net Amounts of
	Amounts of		Offset in the		Assets Presented
	Recognized		Statements of		in the Statements		Financial			Cash Collateral
	Assets		Financial Position		of Financial Position		Instruments			Received		Net Amount
Swaps:	(In thousands)
March 31, 2013	$	788	$	-	$	788	$	(703	)	$	-	$	85
December 31, 2012		148		-		148		(132	)		-		16
March 31, 2012	$	-	$	-	$	-	$	-		$	-	$	-

							Gross Amounts Not Offset in the
							Statements of Financial Position
	Gross		Gross Amounts		Net Amounts of
	Amounts of		Offset in the		Liabilities Presented
	Recognized		Statements of		in the Statements		Financial			Cash Collateral
	Liabilities		Financial Position		of Financial Position		Instruments			Received		Net Amount
Swaps:	(In thousands)
March 31, 2013	$	703	$	-	$	703	$	(703	)	$	-	$	-
December 31, 2012		132		-		132		(132	)		-		-
March 31, 2012	$	-	$	-	$	-	$	-		$	-	$	-

The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of available for sale investments as of March 31, 2013, December 31, 2012 and March 31, 2012:

	March 31, 2013
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Common stocks	$	14,312	$	20,913	$	-		$	35,225
Closed-end Funds		31,014		29,884		(3	)		60,895
Mutual funds		3,061		2,055		-			5,116
Total available for sale securities	$	48,387	$	52,852	$	(3	)	$	101,236

	December 31, 2012
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Common stocks	$	14,822	$	18,738	$	-		$	33,560
Closed-end Funds		35,868		22,645		(2	)		58,511
Mutual funds		3,160		1,883		-			5,043
Total available for sale securities	$	53,850	$	43,266	$	(2	)	$	97,114

	March 31, 2012
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Common stocks	$	16,158	$	18,420	$	-		$	34,578
Closed-end Funds		36,546		22,189		(14	)		58,721
Mutual funds		3,566		2,110		-			5,676
Total available for sale securities	$	56,270	$	42,719	$	(14	)	$	98,975

Unrealized changes in fair value, net of taxes, for the three months ended March 31, 2013 and March 31, 2012 of $6.0 million and $3.5 million in gains, respectively, have been included in other comprehensive income, a component of equity, at March 31, 2013 and March 31, 2012. Return of capital on available for sale securities was $0.6 million and $0.6 million for the three months ended March 31, 2013 and March 31, 2012, respectively. Proceeds from sales of investments available for sale were approximately $5.3 million and $0.5 million for the three months ended March 31, 2013 and March 31, 2012, respectively. For the three months ended March 31, 2013 and March 31, 2012, gross gains on the sale of investments available for sale amounted to $0.6 million and $0.3 million, respectively, and were reclassified from other comprehensive income into net gain from investments in the condensed consolidated statements of income. There were no losses on the sale of investments available for sale for the three months ended March 31, 2013 or March 31, 2012. The basis on which the cost of a security sold is determined is specific identification.

Investments classified as available for sale that are in an unrealized loss position for which other-than-temporary impairment has not been recognized consisted of the following:

	March 31, 2013							December 31, 2012							March 31, 2012
			Unrealized							Unrealized							Unrealized
	Cost		Losses			Fair Value		Cost		Losses			Fair Value		Cost		Losses			Fair Value
(in thousands)
Mutual Funds	$	216	$	(3	)	$	213	$	73	$	(2	)	$	71	$	97	$	(14	)	$	83

At December 31, 2012 and March 31, 2012, there was one holding in a loss position which was not deemed to be other-than-temporarily impaired due to the length of time that it had been in a loss position and because it passed scrutiny in our evaluation of issuer-specific and industry-specific considerations. In this specific instance, the investment at December 31, 2012 and March 31, 2012 was a closed-end fund with diversified holdings across multiple companies and across multiple industries. The one holding was impaired for one and ten consecutive months at December 31, 2012 and March 31, 2012, respectively. The value of this holding at both December 31, 2012 and March 31, 2012 was $0.1 million.

At March 31, 2013, there were two holdings in loss positions which were not deemed to be other-than-temporarily impaired due to the length of time that they had been in a loss position and because they passed scrutiny in our evaluation of issuer-specific and industry-specific considerations. In this specific instance, the investments at March 31, 2013 were closed-end funds with diversified holdings across multiple companies and across multiple industries. Both holdings were impaired for two consecutive months at March 31, 2013. The value of these holding at March 31, 2013 was $0.2 million.

For the three months ended March 31, 2013 and 2012, there were no losses on available for sale securities deemed to be other than temporary.

C. Fair Value

The following tables present information about the Company’s assets and liabilities by major categories measured at fair value on a recurring basis as of March 31, 2013, December 31, 2012 and March 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2013 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Balance as of
	Markets for Identical		Observable		Unobservable		March 31,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		2013
Cash equivalents	$	272,653	$	-	$	-	$	272,653
Investments in partnerships		-		23,772		-		23,772
Investments in securities:
AFS - Common stocks		35,225		-		-		35,225
AFS - Mutual funds		1,734		-		-		1,734
Trading - Gov't obligations		49,990		-		-		49,990
Trading - Common stocks		138,829		7		667		139,503
Trading - Mutual funds		1,655		-		-		1,655
Trading - Other		92		788		299		1,179
Total investments in securities		227,525		795		966		229,286
Investments in sponsored registered investment companies:
AFS - Closed-end Funds		60,895		-		-		60,895
AFS - Mutual Funds		3,382		-		-		3,382
Trading - Mutual funds		17		-		-		17
Total investments in sponsored
registered investment companies		64,294		-		-		64,294
Total investments		291,819		24,567		966		317,352
Total assets at fair value	$	564,472	$	24,567	$	966	$	590,005
Liabilities
Trading - Common stocks	$	5,650	$	-	$	-	$	5,650
Trading - Other		-		727		-		727
Securities sold, not yet purchased	$	5,650	$	727	$	-	$	6,377

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2012 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Balance as of
	Markets for Identical		Observable		Unobservable		December 31,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		2012
Cash equivalents	$	190,475	$	-	$	-	$	190,475
Investments in partnerships		-		26,128		-		26,128
Investments in securities:
AFS - Common stocks		33,560		-		-		33,560
AFS - Mutual funds		1,702		-		-		1,702
Trading - Gov't obligations		42,989		-		-		42,989
Trading - Common stocks		137,796		7		675		138,478
Trading - Mutual funds		1,484		-		-		1,484
Trading - Other		120		148		362		630
Total investments in securities		217,651		155		1,037		218,843
Investments in sponsored registered investment companies:
AFS - Closed-end Funds		58,511		-		-		58,511
AFS - Mutual Funds		3,341		-		-		3,341
Trading - Mutual funds		20		-		-		20
Total investments in sponsored
registered investment companies		61,872		-		-		61,872
Total investments		279,523		26,283		1,037		306,843
Total assets at fair value	$	469,998	$	26,283	$	1,037	$	497,318
Liabilities
Trading - Common stocks	$	2,867	$	-	$	-	$	2,867
Trading - Other		-		269		-		269
Securities sold, not yet purchased	$	2,867	$	269	$	-	$	3,136

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2012 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Balance as of
	Markets for Identical		Observable		Unobservable		March 31,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		2012
Cash equivalents	$	324,333	$	-	$	-	$	324,333
Investments in partnerships		-		23,166		-		23,166
Investments in securities:
AFS - Common stocks		34,578		-		-		34,578
AFS - Mutual funds		2,109		-		-		2,109
Trading - Gov't obligations		48,630		-		-		48,630
Trading - Common stocks		169,463		114		647		170,224
Trading - Mutual funds		1,495		-		-		1,495
Trading - Other		293		-		278		571
Total investments in securities		256,568		114		925		257,607
Investments in sponsored registered investment companies:
AFS - Closed-end Funds		58,721		-		-		58,721
AFS - Mutual Funds		3,567		-		-		3,567
Trading - Mutual funds		17		-		-		17
Total investments in sponsored
registered investment companies		62,305		-		-		62,305
Total investments		318,873		23,280		925		343,078
Total assets at fair value	$	643,206	$	23,280	$	925	$	667,411
Liabilities
Trading - Common stocks	$	9,553	$	-	$	-	$	9,553
Trading - Other		-		104		-		104
Securities sold, not yet purchased	$	9,553	$	104	$	-	$	9,657

The following tables present additional information about assets by major categories measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2013 (in thousands)

								Total
								Unrealized
								Gains or		Total
			Total Realized and					(Losses)		Realized
	December		Unrealized Gains or					Included in		and								Transfers
	31, 2012		(Losses) in Income					Other		Unrealized								In and/or
	Beginning					AFS		Comprehensive		Gains or								(Out) of		Ending
Asset	Balance		Trading			Investments		Income		(Losses)			Purchases		Sales			Level 3		Balance
Financial
instruments owned:
Trading - Common
stocks	$	675	$	(8	)	$	-	$	-	$	(8	)	$	-	$	-		$	-	$	667
Trading - Other		362		1			-		-		1			-		(64	)		-		299
Total	$	1,037	$	(7	)	$	-	$	-	$	(7	)	$	-	$	(64	)	$	-	$	966

There were no transfers between any Levels during the three months ended March 31, 2013.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended March 31, 2012 (in thousands)

								Total
								Unrealized
								Gains or		Total
			Total Realized and					(Losses)		Realized
	December		Unrealized Gains or					Included in		and								Transfers
	31, 2011		(Losses) in Income					Other		Unrealized								In and/or
	Beginning					AFS		Comprehensive		Gains or								(Out) of		Ending
Asset	Balance		Trading			Investments		Income		(Losses)			Purchases		Sales			Level 3		Balance
Financial
instruments owned:
Trading - Common
stocks	$	670	$	-		$	-	$	-	$	-		$	57	$	(80	)	$	-	$	647
Trading - Other		284		(2	)		-		-		(2	)		4		(8	)		-		278
Total	$	954	$	(2	)	$	-	$	-	$	(2	)	$	61	$	(88	)	$	-	$	925

There were no transfers between any Levels during the three months ended March 31, 2012.

D. Investments in Partnerships, Offshore Funds and Variable Interest Entities (“VIEs”)

The Company is general partner or co-general partner of various affiliated entities in which the Company has investments totaling $80.8 million, $83.9 million and $86.9 million at March 31, 2013, December 31, 2012 and March 31, 2012, respectively, and whose underlying assets consist primarily of marketable securities (the “affiliated entities”). We also have investments in unaffiliated entities of $13.5 million, $13.6 million and $14.8 million at March 31, 2013, December 31, 2012 and March 31, 2012, respectively (the “unaffiliated entities”). We evaluate each entity for the appropriate accounting treatment and disclosure. Certain of the affiliated entities, and none of the unaffiliated entities, are consolidated.

For those entities where consolidation is not deemed to be appropriate, we report them in our statement of financial condition under the caption “Investments in partnerships”. This caption includes those investments, in both affiliated and unaffiliated entities, which the Company accounts for under the equity method of accounting, as well as certain investments that the feeder funds hold that are carried at fair value, as described in Note C. The Company reflects the equity in earnings of these equity method investees and the change in fair value of the consolidated feeder funds (“CFFs”) under the caption “Net gain from investments” on the condensed consolidated statements of income.

The following table highlights the number of entities, including voting interest entities (“VOEs”), that we consolidate as well as under which accounting guidance they are consolidated, including CFFs, which retain their specialized investment company accounting, partnerships and offshore funds.

Entities consolidated
	CFFs				Partnerships				Offshore Funds				Total
	VIEs		VOEs		VIEs		VOEs		VIEs		VOEs		VIEs		VOEs
Entities consolidated at December 31, 2011		1		2		-		1		-		1		1		4
Additional consolidated entities		-		-		-		-		-		-		-		-
Deconsolidated entities		-		-		-		-		-		-		-		-
Entities consolidated at March 31, 2012		1		2		-		1		-		1		1		4
Additional consolidated entities		-		-		-		-		-		-		-		-
Deconsolidated entities		-		-		-		-		-		-		-		-
Entities consolidated at December 31, 2012		1		2		-		1		-		1		1		4
Additional consolidated entities		-		-		-		-		-		-		-		-
Deconsolidated entities		-		-		-		-		-		-		-		-
Entities consolidated at March 31, 2013		1		2		-		1		-		1		1		4

At and for the three months ended March 31, 2013 and 2012 and at December 31, 2012, the one CFF VIE is consolidated, as the Company has been determined to be the primary beneficiary because it has an equity interest and absorbs the majority of the expected losses and/or expected gains. At and for the three months ended March 31, 2013 and 2012 and at December 31, 2012, the two CFF VOEs, the one Partnership VOE and the one Offshore Fund VOE are consolidated because the unaffiliated partners or shareholders lack substantive rights, and the Company, as either the general partner or investment manager, is deemed to have control.

The following table breaks down the investments in partnerships line by accounting method, either fair value or equity method, and investment type.

	March 31, 2013
	Investment Type
	Affiliated						Unaffiliated
	Consolidated
Accounting method	Feeder Funds		Partnerships		Offshore Funds		Partnerships		Offshore Funds		Total

Fair Value	$	23,772	$	-	$	-	$	-	$	-	$	23,772
Equity Method		-		27,477		29,551		6,427		7,033		70,488

Total	$	23,772	$	27,477	$	29,551	$	6,427	$	7,033	$	94,260

	December 31, 2012
	Investment Type
	Affiliated						Unaffiliated
	Consolidated
Accounting method	Feeder Funds		Partnerships		Offshore Funds		Partnerships		Offshore Funds		Total

Fair Value	$	26,128	$	-	$	-	$	-	$	-	$	26,128
Equity Method		-		28,158		29,679		6,505		7,079		71,421

Total	$	26,128	$	28,158	$	29,679	$	6,505	$	7,079	$	97,549

	March 31, 2012
	Investment Type
	Affiliated						Unaffiliated
	Consolidated
Accounting method	Feeder Funds		Partnerships		Offshore Funds		Partnerships		Offshore Funds		Total

Fair Value	$	23,166	$	-	$	-	$	-	$	-	$	23,166
Equity Method		-		33,374		30,398		7,776		6,971		78,519

Total	$	23,166	$	33,374	$	30,398	$	7,776	$	6,971	$	101,685

The following table includes the net impact by line item on the condensed consolidated statements of financial condition for each category of entity consolidated (in thousands):

	March 31, 2013
	Prior to
	Consolidation			CFFs			Partnerships			Offshore Funds			As Reported
Assets
Cash and cash equivalents	$	272,454		$	534		$	365		$	-		$	273,353
Investments in securities		214,627			-			7,733			6,926			229,286
Investments in sponsored investment companies		64,278			-			16			-			64,294
Investments in partnerships		99,500			3,423			(8,663	)		-			94,260
Receivable from brokers		30,569			-			866			13,148			44,583
Investment advisory fees receivable		29,717			(6	)		(2	)		(85	)		29,624
Other assets		26,136			(1,000	)		-			93			25,229
Total assets	$	737,281		$	2,951		$	315		$	20,082		$	760,629
Liabilities and equity
Securities sold, not yet purchased	$	5,864		$	-		$	-		$	513		$	6,377
Accrued expenses and other liabilities		118,401			614			34			5,772			124,821
Total debt		216,688			-			-			-			216,688
Redeemable noncontrolling interests		(1	)		2,337			281			13,797			16,414
Total equity		396,329			-			-			-			396,329
Total liabilities and equity	$	737,281		$	2,951		$	315		$	20,082		$	760,629

	December 31, 2012
	Prior to
	Consolidation			CFFs			Partnerships			Offshore Funds			As Reported
Assets
Cash and cash equivalents	$	189,743		$	-		$	865		$	-		$	190,608
Investments in securities		213,639			-			6,944			(1,740	)		218,843
Investments in sponsored investment companies		61,852			-			20			-			61,872
Investments in partnerships		100,164			5,388			(8,003	)		-			97,549
Receivable from brokers		25,972			-			1,480			23,203			50,655
Investment advisory fees receivable		42,425			9			(5	)		-			42,429
Other assets		32,673			(2,986	)		(1,000	)		90			28,777
Total assets	$	666,468		$	2,411		$	301		$	21,553		$	690,733
Liabilities and equity
Securities sold, not yet purchased	$	3,033		$	-		$	-		$	103		$	3,136
Accrued expenses and other liabilities		76,135			384			21			6,395			82,935
Total debt		216,366			-			-			-			216,366
Redeemable noncontrolling interests		-			2,027			280			15,055			17,362
Total equity		370,934			-			-			-			370,934
Total liabilities and equity	$	666,468		$	2,411		$	301		$	21,553		$	690,733

	March 31, 2012
	Prior to
	Consolidation			CFFs			Partnerships			Offshore Funds			As Reported
Assets
Cash and cash equivalents	$	322,523		$	-		$	2,107		$	-		$	324,630
Investments in securities		236,387			-			6,503			14,717			257,607
Investments in sponsored investment companies		62,289			-			16			-			62,305
Investments in partnerships		109,136			990			(8,441	)		-			101,685
Receivable from brokers		18,400			-			121			10,777			29,298
Investment advisory fees receivable		27,189			5			(1	)		-			27,193
Other assets		23,691			16			-			-			23,707
Total assets	$	799,615		$	1,011		$	305		$	25,494		$	826,425
Liabilities and equity
Securities sold, not yet purchased	$	9,633		$	-		$	-		$	24		$	9,657
Accrued expenses and other liabilities		101,149			59			38			9,861			111,107
Total debt		264,300			-			-			-			264,300
Redeemable noncontrolling interests		-			952			267			15,609			16,828
Total equity		424,533			-			-			-			424,533
Total liabilities and equity	$	799,615		$	1,011		$	305		$	25,494		$	826,425

The following table includes the net impact by line item on the condensed consolidated statements of income for each category of entity consolidated (in thousands):

	Three Months Ended March 31, 2013
	Prior to
	Consolidation		CFFs			Partnerships			Offshore Funds			As Reported
Total revenues	$	86,456	$	(6	)	$	(1	)	$	(268	)	$	86,181
Total expenses		55,215		53			10			176			55,454
Operating income		31,241		(59	)		(11	)		(444	)		30,727
Total other income, net		4,502		110			15			521			5,148
Income before income taxes		35,743		51			4			77			35,875
Income tax provision		13,195		-			-			-			13,195
Net income		22,548		51			4			77			22,680
Net income attributable to noncontrolling interests		3		51			4			77			135
Net income attributable to GAMCO	$	22,545	$	-		$	-		$	-		$	22,545

	Three Months Ended March 31, 2012
	Prior to
	Consolidation		CFFs			Partnerships			Offshore Funds			As Reported
Total revenues	$	82,579	$	(1	)	$	(1	)	$	(828	)	$	81,749
Total expenses		54,521		23			11			182			54,737
Operating income		28,058		(24	)		(12	)		(1,010	)		27,012
Total other income, net		9,544		85			23			1,058			10,710
Income before income taxes		37,602		61			11			48			37,722
Income tax provision		13,756		-			-			-			13,756
Net income		23,846		61			11			48			23,966
Net income attributable to noncontrolling interests		10		61			11			48			130
Net income attributable to GAMCO	$	23,836	$	-		$	-		$	-		$	23,836

Variable Interest Entities

We sponsor a number of investment vehicles where we are the general partner or investment manager. Certain of these vehicles are VIEs, but we are not the primary beneficiary, in all but one case, because we do not absorb a majority of the entities’ expected losses or expected returns, and they are, therefore, not consolidated. We consolidate the one VIE where we are the primary beneficiary. The Company has not provided any financial or other support to those VIEs where we are not the primary beneficiary. The total net assets of these non-consolidated VIEs at March 31, 2013, December 31, 2012 and March 31, 2012 were $77.8 million, $75.0 million and $74.5 million, respectively. Our maximum exposure to loss as a result of our involvement with the VIEs is limited to the investment in one VIE and the deferred carried interest that we have in another. On March 31, 2013, December 31, 2012 and March 31, 2012, we had an investment in one of the VIE offshore funds of approximately $8.3 million, $7.7 million and $8.2 million, respectively, which was included in investments in partnerships on the condensed consolidated statements of financial condition. On March 31, 2013, December 31, 2012 and March 31, 2012, we had a deferred carried interest in one of the VIE offshore funds of approximately $45,000, $45,000 and $49,000, respectively, which was included in investments in partnerships on the condensed consolidated statements of financial condition. Additionally, as the general partner or investment manager to these VIEs the Company earns fees in relation to these roles, which given a decline in AUMs of the VIEs would result in lower fee revenues earned by the Company which would be reflected on the condensed consolidated statement of income, condensed consolidated statement of financial condition and condensed consolidated statement of cash flows.

The assets of these VIEs may only be used to satisfy obligations of the VIEs. The following table presents the balances related to the VIE that is consolidated and is included on the condensed consolidated statements of financial condition as well as GAMCO’s net interest in this VIE. Only one VIE is consolidated at March 31, 2013, December 31, 2012 and March 31, 2012:

	March 31,			December 31,			March 31,
	2013			2012			2012
(In thousands)
Cash and cash equivalents	$	21		$	-		$	-
Investments in partnerships		15,484			18,507			17,183
Accrued expenses and other liabilities		(1,041	)		(3,010	)		(7	)
Redeemable noncontrolling interests		-			(411	)		(403	)
GAMCO's net interests in consolidated VIE	$	14,464		$	15,086		$	16,773

E. Income Taxes

The effective tax rate for the three months ended March 31, 2013 was 36.8% compared to 36.5% for the prior year three month period.

F. Earnings Per Share

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

	Three Months Ended March 31,
(in thousands, except per share amounts)	2013		2012
Basic:
Net income attributable to GAMCO Investors, Inc.'s shareholders	$	22,545	$	23,836
Weighted average shares outstanding		25,742		26,415
Basic net income attributable to GAMCO Investors, Inc.'s
shareholders per share	$	0.88	$	0.90

Diluted:
Net income attributable to GAMCO Investors, Inc.'s shareholders	$	22,545	$	23,836

Weighted average share outstanding		25,742		26,415
Dilutive stock options and restricted stock awards		16		118
Total		25,758		26,533
Diluted net income attributable to GAMCO Investors, Inc.'s
shareholders per share	$	0.88	$	0.90

G. Debt

Debt consists of the following:

	March 31, 2013				December 31, 2012				March 31, 2012
	Carrying		Fair Value		Carrying		Fair Value		Carrying		Fair Value
	Value		Level 2		Value		Level 2		Value		Level 2
(In thousands)
5.5% Senior notes	$	99,000	$	99,581	$	99,000	$	100,485	$	99,000	$	100,733
5.875% Senior notes		100,000		109,969		100,000		106,250		100,000		104,375
0% Subordinated debentures		17,688		19,635		17,366		19,638		65,300		66,774
Total	$	216,688	$	229,185	$	216,366	$	226,373	$	264,300	$	271,882

5.5% Senior notes

On May 15, 2003, the Company issued 10-year, $100 million senior notes, of which $99 million was outstanding at March 31, 2013, December 31, 2012 and March 31, 2012. The senior notes, due May 15, 2013, pay interest semi-annually at 5.5%.

5.875% Senior notes

On May 31, 2011, the Company issued 10-year, $100 million senior notes. The notes mature on June 1, 2021 and bear interest at 5.875% per annum, payable semi-annually on June 1 and December 1 of each year and commenced on December 1, 2011. Upon the occurrence of a change of control triggering event, as defined in the indenture, the Company would be required to offer to repurchase the notes at 101% of their principal amount.

Zero coupon Subordinated debentures due December 31, 2015

On December 31, 2010, the Company issued $86.4 million in par value of five year zero coupon subordinated debentures due December 31, 2015 (“Debentures”) to its shareholders of record on December 15, 2010 through the declaration of a special dividend of $3.20 per share. The Debentures have a par value of $100 and are callable at the option of the Company, in whole or in part, at any time or from time to time, at a redemption price equal to 100% of the principal amount of the Debentures to be redeemed. During the three month periods ended March 31, 2013 and March 31, 2012, the Company repurchased 32 Debentures and 229 Debentures, respectively, having a face value of $3,200 and $22,900, respectively. The redemptions were accounted for as extinguishments of debt and resulted in a loss of less than $1,000 and a loss of $1,000, respectively, which were included in net gain from investments on the condensed consolidated statements of income. The debt is being accreted to its face value using the effective rate on the date of issuance of 7.45%. At March 31, 2013, December 31, 2012 and March 31, 2012, the debt was recorded at its accreted value of $17.7 million, $17.4 million and $65.3 million, respectively.

The fair value of the Company’s debt, which is a Level 2 valuation, is estimated based on either quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities or using market standard models. Inputs in these standard models include credit rating, maturity and interest rate.

On May 30, 2012, the Securities and Exchange Commission (“SEC”) declared effective the “shelf” registration statement filed by the Company. The “shelf” provides the Company with the flexibility of issuing any combination of senior and subordinated debt securities, convertible securities and common and preferred securities up to a total amount of $500 million and replaced the existing shelf registration which was due to expire in July 2012. As of March 31, 2013, $400 million is available on the shelf.

H. Stockholders’ Equity

Shares outstanding were 25.7 million on March 31, 2013 and December 31, 2012, and 26.6 million on March 31, 2012.

Dividends

	Payment	Record
	Date	Date	Amount

Three months ended March 31, 2013	March 26, 2013	March 12, 2013	$	0.05
Three months ended March 31, 2012	March 27, 2012	March 13, 2012	$	0.04

Voting Rights

The holders of Class A Common stock (“Class A Stock”) and Class B Common stock (“Class B Stock”) have identical rights except that (i) holders of Class A Stock are entitled to one vote per share, while holders of Class B Stock are entitled to ten votes per share on all matters to be voted on by shareholders in general, and (ii) holders of Class A Stock are not eligible to vote on matters relating exclusively to Class B Stock and vice versa.

Stock Award and Incentive Plan

The Company maintains two plans approved by the shareholders, which are designed to provide incentives which will attract and retain individuals key to the success of GAMCO through direct or indirect ownership of our common stock. Benefits under the Plans may be granted in any one or a combination of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents and other stock or cash based awards. A maximum of 1.5 million shares of Class A Stock have been reserved for issuance under each of the Plans by a committee of the Board of Directors responsible for administering the Plans (“Compensation Committee”). Under the Plans, the committee may grant restricted stock awards (“RSA”) and either incentive or nonqualified stock options with a term not to exceed ten years from the grant date and at an exercise price that the committee may determine. Options granted under the plans typically vest 75% after three years and 100% after four years from the date of grant and expire after ten years. RSA shares granted under the Plans typically vest 30% after three years and 100% after five years.

On January 3, 2012, the Company approved the granting of 105,300 RSA shares at a grant date fair value of $43.49 per share. As of March 31, 2012, there were 375,000 RSA shares outstanding that were previously issued at an average weighted grant price of $45.14. All grants of the RSA shares were recommended by the Company's Chairman, who did not receive a RSA, and approved by the Compensation Committee. This expense, net of forfeitures, was recognized over the vesting period for these awards which is 30% over three years from the date of grant and 70% over five years from the date of grant. During the vesting period, dividends to RSA holders were being held for them until the RSA vesting dates and were forfeited if the grantee was no longer employed by the Company on the vesting dates. Dividends declared on these RSAs, less estimated forfeitures, were charged to retained earnings on the declaration date. During November 2012, the Board of Directors accelerated the lapsing of restrictions on all outstanding RSAs resulting in recognition of $10.1 million in stock compensation expense during 2012 that would have been recorded in 2013 through 2016. There were no RSAs outstanding at either March 31, 2013 or December 31, 2012.

For the three months ended March 31, 2013 and March 31, 2012, we recognized stock-based compensation expense of $15,000 and $0.9 million, respectively. Actual and projected stock-based compensation expense for RSA shares and options for the years ended December 31, 2012 through December 31, 2015 (based on awards currently issued or granted) is as follows ($ in thousands):

		2012		2013		2014		2015
	Q1	$	871	$	15	$	7	$	1
	Q2		869		15		3		-
	Q3		875		15		3		-
	Q4		10,968		15		3		-
Full Year		$	13,583	$	60	$	16	$	1

The total compensation cost related to non-vested options not yet recognized is approximately $62,000 as of March 31, 2013. For the three months ended March 31, 2013, proceeds from the exercise of 2,623 stock options were $76,000 resulting in a tax benefit to GAMCO of $16,000. There were no options exercised in the three month period ended March 31, 2012.

Stock Repurchase Program

In March 1999, GAMCO's Board of Directors established the Stock Repurchase Program to grant management the authority to repurchase shares of our Class A Common Stock. On February 5, 2013, our Board of Directors authorized an incremental 500,000 shares to be added to the current buyback authorization. For the three months ended March 31, 2013 and March 31, 2012, the Company repurchased 36,676 shares and 224,733 shares, respectively, at an average price per share of $53.57 and $44.35, respectively. From the inception of the program through March 31, 2013, 8,520,041 shares have been repurchased at an average price of $41.70 per share. At March 31, 2013, the total shares available under the program to be repurchased in the future were 614,767.

I. Goodwill and Identifiable Intangible Assets

At March 31, 2013, $3.5 million of goodwill is reflected within other assets on the condensed consolidated statements of financial condition with $3.3 million related to a 93%-owned subsidiary, Gabelli Securities, Inc. and $0.2 million related to G.distributors, LLC. The Company assesses the recoverability of goodwill at least annually, or more often should events warrant, using a qualitative assessment of whether it is more likely than not that an impairment has occurred to determine if a quantitative analysis is required. There were no indicators of impairment for the three months ended March 31, 2013 or March 31, 2012, and as such there was no impairment analysis performed or charge recorded.

As a result of becoming the advisor to the Gabelli Enterprise Mergers and Acquisitions Fund and the associated consideration paid, the Company maintains an identifiable intangible asset of $1.9 million within other assets on the condensed consolidated statements of financial condition at March 31, 2013, December 31, 2012 and March 31, 2012. The investment advisory agreement is subject to annual renewal by the fund's Board of Directors, which the Company expects to be renewed, and the Company does not expect to incur additional expense as a result, which is consistent with other investment advisory agreements entered into by the Company. The advisory contract is next up for renewal in February 2014. The Company assesses the recoverability of this intangible asset at least annually, or more often should events warrant. There were no indicators of impairment for the three months ended March 31, 2013 or March 31, 2012, and as such there was no impairment analysis performed or charge recorded.

J. Commitments and Contingencies

From time to time, the Company is named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. The Company is also subject to governmental or regulatory examinations or investigations. The examinations or investigations could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief. The Company cannot predict the ultimate outcome of such matters. With respect to one such matter, a subsidiary of the Company has agreed in principle, subject to an acceptable settlement document, to resolve an outstanding matter with FINRA regarding lapses in the subsidiary’s supervision of certain registered representatives in their role as general partners of outside private partnerships. The condensed consolidated financial statements include the necessary provisions for losses that the Company believes are probable and estimable. Furthermore, the Company evaluates whether there exist losses which may be reasonably possible and, if material, makes the necessary disclosures. Such amounts, both those that are probable and those that are reasonably possible, are not considered material to the Company’s financial condition, operations or cash flows.

The Company indemnifies the clearing brokers of G.research, Inc. (formerly known as Gabelli & Company, Inc.), our broker-dealer subsidiary, for losses they may sustain from the customer accounts that trade on margin introduced by it. At March 31, 2013, the total amount of customer balances subject to indemnification (i.e. unsecured margin debits) was immaterial. The Company also has entered into arrangements with various other third parties many of which provide for indemnification of the third parties against losses, costs, claims and liabilities arising from the performance of obligations under the agreements. The Company has had no claims or payments pursuant to these or prior agreements and believes the likelihood of a claim being made is remote. The Company’s estimate of the value of such agreements is de minimis, and therefore an accrual has not been made on the condensed consolidated financial statements.

K. Shareholder-Designated Contribution Plan

During the first quarter of 2013, the Company recorded a charge of $5.0 million, or $0.11 per diluted share, net of management fee and tax benefit, related to a newly adopted Shareholder Designated Charitable Contribution program. Under the program, each shareholder will be eligible to designate charities to which the company will make a donation based upon the actual number of shares registered in the shareholder’s name. Shares held in nominee or street name are not eligible to participate. The Board of Directors will determine, annually, amounts to be contributed per registered share. The Board approved an initial contribution for 2013 of $0.25 per registered share. If all shareholders participate, register their shares, and respond on a timely basis, the total charge to earnings would increase to $6.4 million. The Company recorded the charge, which is included in accrued expenses and other liabilities in the condensed consolidated statements of financial condition, based on the current number of registered shares.

L. Subsequent Events

From April 1, 2013 to May 7, 2013, the Company repurchased 10,747 shares at $48.35 per share.

On May 7, 2013, the Board of Directors declared a regular quarterly dividend of $0.05 per share to all of its shareholders, payable on June 25, 2013 to shareholders of record on June 11, 2013.

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

Overview

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

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

We conduct our investment advisory business principally through the following subsidiaries: GAMCO Asset Management Inc. (Institutional and High Net Worth), Gabelli Funds, LLC (Mutual Funds) and Gabelli Securities, Inc. (Investment Partnerships). We also act as an underwriter and provide institutional research through G.research, one of our broker-dealer subsidiaries. The distribution of our open-end funds is conducted through G.distributors, our other broker-dealer subsidiary.

Assets under management (“AUM”) were a record $40.1 billion as of March 31, 2013, an increase of 10.1% from AUM of $36.4 billion at December 31, 2012 and up 9.3% from the March 31, 2012 AUM of $36.7 billion. The first quarter 2013 AUM rose $3.7 billion and consisted of market appreciation of $3.3 billion, net cash inflows of $498 million and recurring distributions, net of reinvestments, from open-end and closed-end funds of $145 million. Average total AUM was $38.4 billion in the 2013 quarter versus $35.9 billion in the prior year period, an increase of 7.0%. Average AUM in our open-end equity funds, a key driver to our investment advisory fees, was $13.2 billion in the first quarter of 2013, rising 3.1% from the 2012 quarter average AUM of $12.8 billion.

In addition to management fees, we earn incentive fees for certain institutional client assets, certain assets attributable to preferred issues of our closed-end funds and to our GDL Fund (NYSE: GDL) and investment partnership assets. As of March 31, 2013, assets with incentive based fees were $3.8 billion, 2.7% higher than the $3.7 billion on December 31, 2012 and unchanged from the $3.8 billion on March 31, 2012.

The Company reported Assets Under Management as follows (in millions):

Table I: Fund Flows - 1st Quarter 2013
								Fund
			Market					distributions,
	December 31,		appreciation/		Net cash			net of			March 31,
	2012		(depreciation)		flows			reinvestments			2013
Equities:
Open-end Funds	$	12,502	$	1,140	$	202		$	(31	)	$	13,813
Closed-end Funds		6,288		381		2			(114	)		6,557
Institutional & PWM - direct		12,030		1,485		175			-			13,690
Institutional & PWM - sub-advisory		2,924		316		59			-			3,299
Investment Partnerships		801		8		(13	)		-			796
SICAV (a)		119		2		(8	)		-			113
Total Equities		34,664		3,332		417			(145	)		38,268
Fixed Income:
Money-Market Fund		1,681		-		77			-			1,758
Institutional & PWM		60		-		4			-			64
Total Fixed Income		1,741		-		81			-			1,822
Total Assets Under Management	$	36,405	$	3,332	$	498		$	(145	)	$	40,090

Table II: Assets Under Management
	March 31,		March 31,		%
	2012		2013		Inc.(Dec.)
Equities:
Open-end Funds	$	12,996	$	13,813		6.3	%
Closed-end Funds		6,067		6,557		8.1
Institutional & PWM - direct		12,031		13,690		13.8
Institutional & PWM - sub-advisory		2,924		3,299		12.8
Investment Partnerships		594		796		34.0
SICAV (a)		118		113		(4.2	)
Total Equities		34,730		38,268		10.2
Fixed Income:
Money-Market Fund		1,922		1,758		(8.5	)
Institutional & PWM		26		64		146.2
Total Fixed Income		1,948		1,822		(6.5	)
Total Assets Under Management	$	36,678	$	40,090		9.3	%

Table III: Assets Under Management by Quarter
											% Increase/
											(decrease) from
		3/12		6/12		9/12		12/12		3/13		3/12		12/12
Equities:
Open-end Funds	$	12,996	$	12,496	$	12,758	$	12,502	$	13,813		6.3	%	10.5	%
Closed-end Funds		6,067		5,860		6,365		6,288		6,557		8.1		4.3
Institutional & PWM - direct		12,031		11,655		12,189		12,030		13,690		13.8		13.8
Institutional & PWM - sub-advisory		2,924		2,788		2,912		2,924		3,299		12.8		12.8
Investment Partnerships		594		781		785		801		796		34.0		(0.6	)
SICAV (a)		118		126		121		119		113		(4.2	)	(5.0	)
Total Equities		34,730		33,706		35,130		34,664		38,268		10.2		10.4
Fixed Income:
Money-Market Fund		1,922		1,893		1,752		1,681		1,758		(8.5	)	4.6
Institutional & PWM		26		63		63		60		64		146.2		6.7
Total Fixed Income		1,948		1,956		1,815		1,741		1,822		(6.5	)	4.7
Total Assets Under Management	$	36,678	$	35,662	$	36,945	$	36,405	$	40,090		9.3	%	10.1	%

(a) Includes $102 million, $101 million, $102 million, $104 million and $99 million of proprietary seed capital at March 31, 2012, June 30, 2012,
September 30, 2012, December 31, 2012 and March 31, 2013, respectively.

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

RESULTS OF OPERATIONS

Three Months Ended March 31, 2013 Compared To Three Months Ended March 31, 2012

(Unaudited; in thousands, except per share data)
	2013			2012
Revenues
Investment advisory and incentive fees	$	72,607		$	67,783
Distribution fees and other income		11,353			11,623
Institutional research services		2,221			2,343
Total revenues		86,181			81,749
Expenses
Compensation		35,652			34,554
Management fee		3,980			4,184
Distribution costs		11,010			10,177
Other operating expenses		4,812			5,822
Total expenses		55,454			54,737
Operating income		30,727			27,012
Other income (expense)
Net gain from investments		12,291			13,878
Interest and dividend income		1,345			1,236
Interest expense		(3,488	)		(4,404	)
Shareholder-designated contribution		(5,000	)		-
Total other income, net		5,148			10,710
Income before income taxes		35,875			37,722
Income tax provision		13,195			13,756
Net income		22,680			23,966
Net income attributable to noncontrolling interests		135			130
Net income attributable to GAMCO Investors, Inc.'s shareholders	$	22,545		$	23,836

Net income attributable to GAMCO Investors, Inc.'s shareholders per share:
Basic	$	0.88		$	0.90
Diluted	$	0.88		$	0.90

Overview

Net income attributable to shareholders of GAMCO Investors, Inc. for the quarter was $22.5 million or $0.88 per fully diluted share versus $23.8 million or $0.90 per fully diluted share in the prior year’s quarter. Included in the 2013 results is a $5.0 million charge, or $0.11 per diluted share, net of management fee and tax benefit, for our recently adopted shareholder designated charitable contribution program. Excluding this charge earnings for the quarter rose 7% to $25.4 million or $0.99 per diluted share. The quarter to quarter comparison, excluding this charge, was positively impacted by higher revenues, improved operating margins and lower interest expense partially offset by lower income from our proprietary investments.

Revenues

Investment advisory and incentive fees for the first quarter 2013 were $72.6 million, 7.1% above the 2012 comparative figure of $67.8 million. Open-end mutual fund revenues increased by 1.6% to $32.0 million from $31.5 million in first quarter 2012 driven by a 3.0% increase in average open-end equity AUM. Our closed-end fund revenues rose 10.6% to $13.6 million in the first quarter 2013 from $12.3 million in 2012 due to a 10.9% increase in non-performance fee based average AUM. Institutional and private wealth management account revenues, excluding incentive fees, which are generally based on beginning of quarter AUM, increased $2.9 million, or 14.4%, to $23.0 million from $20.1 million in first quarter 2013. Incentive fees were largely flat quarter to quarter at $2.4 million in the 2013 quarter versus $2.5 million in the prior year period. Investment partnership revenues were $1.5 million, an increase of 15.4% from $1.3 million in first quarter 2012 due to an increase in average AUM resulting from net inflows.

Open-end fund distribution fees and other income were $11.4 million for the first quarter 2013, a decrease of $0.2 million or 1.7% from $11.6 million in the prior year period, primarily due to a decreased level of sales of load shares of mutual funds, partially offset by higher quarterly average AUM in open-end equity mutual funds that generate distribution fees.

Our institutional research revenues were $2.2 million in the first quarter 2013 versus $2.3 million in the prior year period.

Expenses

Compensation costs, which are largely variable, were $35.7 million or 3.2% higher than prior year compensation costs of $34.6 million. The quarter over quarter increase was comprised of variable compensation of $1.4 million related to the increased levels of AUM and $0.6 million in fixed compensation partially offset by $0.9 million decrease in amortization expense for RSAs issued in prior years.

Management fee expense, which is wholly variable and based on pretax income, decreased to $4.0 million in the first quarter of 2013 from $4.2 million in the 2012 period.

Distribution costs were $11.0 million, an increase of $0.8 million or 7.8% from $10.2 million in the prior year’s period. This increase in distribution costs was mostly due to an increase in payments to third-party distributors of $1.7 million partially offset by lower amortization of upfront commissions paid to third-party distributors of $0.7 million and a reduction in expense reimbursements to our open-end mutual funds of $0.3 million.

Other operating expenses were $4.8 million in the first quarter of 2013, a decrease of $1.0 million, or 17.2%, from $5.8 million in the first quarter of 2012. The decrease was the result of reimbursements from insurance carriers for legal fees previously incurred and expensed.

Operating income for the first quarter of 2013 was $30.7 million, an increase of $3.7 million, or 13.7%, from the first quarter 2012’s $27.0 million. Operating income, as a percentage of revenues, was 35.7% in the 2013 quarter as compared to 33.0% in the 2012 quarter.

Other

Total other income, net of interest expense, was $5.1 million for the first quarter 2013 versus $10.7 million in the prior year’s quarter. Realized and unrealized gains in our trading portfolio were $12.3 million in the 2013 quarter, $1.6 million lower than the $13.9 million reported in the 2012 quarter. Interest and dividend income was higher by $0.1 million. Interest expense decreased by $0.9 million to $3.5 million in the first quarter of 2013 from $4.4 million in first quarter of 2012 due to a decrease in total average debt outstanding. During the third quarter of 2012, we reduced our overall debt through the repurchase of $64.1 million (face value) five year zero coupon subordinated debentures due 2015 (“Debentures”). The 2013 quarter includes a $5.0 million charge related to the newly established Shareholder-designated charitable contribution program in which registered shareholders have the opportunity to participate in determining which charities will receive company contributions.

The effective tax rate for the three months ended March 31, 2013 was 36.8% as compared to the prior year period’s effective rate of 36.5%.

LIQUIDITY AND CAPITAL RESOURCES

Our principal assets are highly liquid in nature and consist of cash and cash equivalents, short-term investments, securities held for investment purposes, investments in mutual funds and investment partnerships. Cash and cash equivalents are comprised primarily of 100% U.S. Treasury money market funds managed by GAMCO. Although investments in partnerships and offshore funds are subject to restrictions on the timing of distributions, the underlying investments of such partnerships or funds are, for the most part, liquid, and the valuations of these products reflect that underlying liquidity.

Summary cash flow data is as follows:

	Three months ended
	March 31,
	2013			2012
Cash flows provided by (used in):	(in thousands)
Operating activities	$	81,032		$	47,611
Investing activities		5,950			1,092
Financing activities		(4,255	)		(404	)
Effect of exchange rates on cash and cash equivalents		18			(9	)
Net increase		82,745			48,290
Cash and cash equivalents at beginning of period		190,608			276,340
Cash and cash equivalents at end of period	$	273,353		$	324,630

Cash and liquidity requirements have historically been met through cash generated by operating income and our borrowing capacity. We filed a shelf registration with the SEC in 2012 which, among other things, provides us opportunistic flexibility to sell any combination of senior and subordinate debt securities, convertible debt securities, equity securities (including common and preferred stock), and other securities up to a total amount of $500 million. The shelf has $400 million which remains available through May 30, 2015.

At March 31, 2013, we had total cash and cash equivalents of $273.4 million, an increase of $82.7 million from December 31, 2012. Cash and cash equivalents of $0.9 million and investments in securities of $14.7 million held by consolidated investment partnerships and offshore funds may not be readily available for the Company to access. Total debt outstanding at March 31, 2013 was $216.7 million, consisting of $17.7 million in Debentures, with a face value of $21.7 million, $100 million of 5.875% senior notes due 2021 and $99 million of 5.5% senior notes due 2013. We expect to fund the maturity of the 5.5% senior notes due May 15, 2013 from available cash balances.

For the three months ended March 31, 2013, cash provided by operating activities was $81.0 million, an increase of $33.4 million from cash provided in the prior year period of $47.6 million. Cash was provided through a decrease in contributions to partnerships of $19.8 million, a $14.5 million decrease in receivable from brokers, a $13.0 million increase in compensation payable, a $7.8 million decrease in investment advisory fees receivable, a $8.1 million decrease in trading investments and $2.3 million from other sources. Reducing cash was a $19.9 million decrease in distributions from partnerships, a $10.9 million decrease in payable to brokers and a $1.3 million decrease in net income. Cash provided by investing activities, related to purchases and proceeds from sales of available for sale securities, was $6.0 million in the first three months of 2013. Cash used in financing activities in the first three months of 2013 was $4.3 million, including $1.3 million paid in dividends, $2.0 million paid for the purchase of treasury stock and $1.1 million in net redemptions from redeemable noncontrolling interests less $0.1 million in proceeds from exercise of stock options.

For the three months ended March 31, 2012, cash provided by operating activities was $47.6 million. Cash provided by investing activities, related to purchases and proceeds from sales of available for sale securities, was $1.1 million in the first three months of 2012. Cash used in financing activities in the first three months of 2012 was $0.4 million.

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

We have two broker-dealers, G.research and G.distributors, which are subject to certain net capital requirements. Both broker-dealers compute their net capital under the alternative method permitted, which requires minimum net capital of the greater of $250,000 or 2% of the aggregate debit items in the reserve formula for those broker-dealers subject to Rule 15c3-3 promulgated under the Securities Exchange Act of 1934. The requirement was $250,000 for each broker-dealer at March 31, 2013. At March 31, 2013, G.research had net capital, as defined, of approximately $6.8 million, exceeding the regulatory requirement by approximately $6.6 million, and G.distributors had net capital, as defined, of approximately $4.2 million, exceeding the regulatory requirement by approximately $4.0 million. Net capital requirements for our affiliated broker-dealers may increase in accordance with rules and regulations to the extent they engage in other business activities.

Market Risk

Our primary market risk exposure is to changes in equity prices and interest rates. Since over 90% of our AUM are equities, our financial results are subject to equity-market risk as revenues from our investment management services are sensitive to stock market dynamics. In addition, returns from our proprietary investment portfolio are exposed to interest rate and equity market risk.

The Company’s Chief Investment Officer oversees the proprietary investment portfolios and allocations of proprietary capital among the various strategies. The Chief Investment Officer and the Board of Directors review the proprietary investment portfolios throughout the year. Additionally, the Company monitors its proprietary investment portfolios to ensure that they are in compliance with the Company’s guidelines.

Equity Price Risk

The Company earns substantially all of its revenue as advisory and distribution fees from our affiliated open-end and closed-end funds, Institutional and Private Wealth Management assets, and Investment Partnership assets. Such fees represent a percentage of AUM, and the majority of these assets are in equity investments. Accordingly, since revenues are proportionate to the value of those investments, a substantial increase or decrease in equity markets overall will have a corresponding effect on the Company's revenues.

With respect to our proprietary investment activities, included in investments in securities of $229.3 million and investments in sponsored registered investment companies of $64.3 million at March 31, 2013 were investments in United States Treasury Bills and Notes of $50.0 million, mutual funds and closed-end funds, largely invested in equity products, of $67.7 million, a selection of common and preferred stocks totaling $174.7 million, and other investments of approximately $1.2 million. 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 $174.7 million invested in common and preferred stocks at March 31, 2013, $35.2 million represented our investment in Westwood Holdings Group Inc., and $38.5 million was invested by the Company in risk arbitrage opportunities in connection with mergers, consolidations, acquisitions, tender offers or other similar transactions. Risk arbitrage generally involves 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. Securities sold, not yet purchased are stated at fair value and are subject to market risks resulting from changes in price and volatility. At March 31, 2013, the fair value of securities sold, not yet purchased was $6.4 million. Investments in partnerships totaled $94.3 million at March 31, 2013, $47.1 million of which consisted of investment partnerships and offshore funds which invest in risk arbitrage opportunities.

The following table provides a sensitivity analysis for our investments in equity securities and partnerships and affiliates which invest primarily in equity securities, excluding arbitrage products for which the principal exposure is to deal closure and not overall market conditions, as of March 31, 2013 and December 31, 2012. The sensitivity analysis assumes a 10% increase or decrease in the value of these investments (in thousands):

			Fair Value		Fair Value
			assuming		assuming
			10% decrease in		10% increase in
(unaudited)	Fair Value		equity prices		equity prices
At March 31, 2013:
Equity price sensitive investments, at fair value	$	295,870	$	266,283	$	325,457
At December 31, 2012:
Equity price sensitive investments, at fair value	$	273,271	$	245,944	$	300,598

Interest Rate Risk

Our exposure to interest rate risk results, principally, from our investment of excess cash in a sponsored money market fund that holds U.S. Government securities. These investments are primarily short term in nature, and the carrying value of these investments generally approximates fair value. Based on March 31, 2013 cash and cash equivalent balance of $273.4 million, a 1% increase in interest rates would increase our interest income by $2.7 million annually. Given that our current return on these cash equivalent investments is approximately 0.02% annually, an analysis of a 1% decrease is not meaningful.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates. See Note A and the Company’s Critical Accounting Policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations in GAMCO’s 2012 Annual Report on Form 10-K filed with the SEC on March 8, 2013 for details on Significant Accounting Policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of its business, GAMCO is exposed to risk of loss due to fluctuations in the securities market and general economy. Management is responsible for identifying, assessing and managing market and other risks.

Our exposure to pricing risk in equity securities is directly related to our role as financial intermediary and advisor for AUM in our affiliated open-end and closed-end funds, institutional and private wealth management accounts, and investment partnerships as well as our proprietary investment and trading activities. At March 31, 2013, we had equity investments, including mutual funds largely invested in equity products, of $293.6 million. Investments in mutual funds and closed-end funds, $67.7 million, usually generate lower market risk through the diversification of financial instruments within their portfolios. In addition, we may alter our investment holdings from time to time in response to changes in market risks and other factors considered appropriate by management. We also hold investments in partnerships which invest primarily in equity securities and which are subject to changes in equity prices. Investments in partnerships totaled $94.3 million, of which $47.1 million were invested in partnerships which invest in risk arbitrage. Risk arbitrage is primarily dependent upon deal closure rather than the overall market environment. The equity investment portfolio is at fair value and will move in line with the equity markets. The trading portfolio changes are recorded as net gain from investments in the condensed consolidated statements of income while the available for sale portfolio changes are recorded in other comprehensive income in the condensed consolidated statements of financial condition.

Item 4. Controls and Procedures

We evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2013. Disclosure controls and procedures as defined under the Exchange Act Rule 13a-15(e), are designed to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in SEC rules and regulations. Disclosure controls and procedures include, without limitation, controls and procedures accumulated and communicated to our management, including our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and Co-Chief Accounting Officers (“CAOs”), to allow timely decisions regarding required disclosure. Our CEO, CFO, and CAOs participated in this evaluation and concluded that, as of the date of March 31, 2013, our disclosure controls and procedures were effective.

There have been no changes in our internal control over financial reporting as defined by Rule 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Forward-Looking Information

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

Part II: Other Information

Item 1.	Legal Proceedings

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

	The following table provides information with respect to the repurchase of Class A Common Stock of GAMCO during the three months ended March 31, 2013:

					(c) Total Number of		(d) Maximum
	(a) Total		(b) Average		Shares Repurchased as		Number of Shares
	Number of		Price Paid Per		Part of Publicly		That May Yet Be
	Shares		Share, net of		Announced Plans		Purchased Under
Period	Repurchased		Commissions		or Programs		the Plans or Programs
1/01/13 - 1/31/13		-	$	-		-		152,443
2/01/13 - 2/28/13		772		56.71		772		651,671
3/01/13 - 3/31/13		35,904		53.50		35,904		615,767
Totals		36,676	$	53.57		36,676

The Board of Directors increased the buyback authorization by 500,000 shares on February 5, 2013. Our stock repurchase programs are not subject to expiration dates.

Item 6.	(a) Exhibits

31.1

Certification of CEO pursuant to Rule 13a-14(a).

31.2

Certification of CFO pursuant to Rule 13a-14(a).

32.1

Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

	101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

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

GAMCO INVESTORS, INC.

(Registrant)

By: /s/ Kieran Caterina		By: /s/ Diane M. LaPointe
Name: Kieran Caterina		Name: Diane M. LaPointe
Title: Co-Chief Accounting Officer		Title: Co-Chief Accounting Officer

Date: May 7, 2013		Date: May 7, 2013