Edgar Filing: GAMCO INVESTORS, INC. ET AL

form10q063011.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 June 30, 2011

[ ]	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) 921-3700
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 July 31, 2011
Class A Common Stock, .001 par value		6,644,812
Class B Common Stock, .001 par value		20,142,640

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 June 30, 2011 and 2010
	- Six months ended June 30, 2011 and 2010

	Condensed Consolidated Statements of Financial Condition:
	- June 30, 2011
	- December 31, 2010
	- June 30, 2010

	Condensed Consolidated Statements of Equity and Comprehensive Income:
	- Six months ended June 30, 2011 and 2010

	Condensed Consolidated Statements of Cash Flows:
	- Six months ended June 30, 2011 and 2010

	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						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Revenues
Investment advisory and incentive fees	$	69,252		$	50,271		$	132,163		$	99,613
Institutional research services		4,241			4,524			7,890			7,948
Distribution fees and other income		11,588			7,704			21,933			14,936
Total revenues		85,081			62,499			161,986			122,497
Expenses
Compensation		34,365			25,871			67,782			52,084
Management fee		3,626			1,380			6,739			3,828
Distribution costs		9,588			7,099			23,017			14,130
Other operating expenses		7,005			5,569			13,191			10,505
Total expenses (a)		54,584			39,919			110,729			80,547

Operating income		30,497			22,580			51,257			41,950
Other income (expense)
Net gain/(loss) from investments		3,669			(7,797	)		12,409			(2,565	)
Interest and dividend income		1,861			1,089			3,797			1,904
Interest expense		(3,403	)		(3,406	)		(6,270	)		(6,698	)
Total other income (expense), net		2,127			(10,114	)		9,936			(7,359	)
Income before income taxes		32,624			12,466			61,193			34,591
Income tax provision		11,945			4,401			22,233			12,695
Net income		20,679			8,065			38,960			21,896
Net income attributable to noncontrolling interests		32			16			670			121
Net income attributable to GAMCO Investors, Inc.'s shareholders	$	20,647		$	8,049		$	38,290		$	21,775

Net income attributable to GAMCO Investors, Inc.'s shareholders
per share:
Basic	$	0.77		$	0.30		$	1.43		$	0.80

Diluted	$	0.77		$	0.30		$	1.42		$	0.80

Weighted average shares outstanding:
Basic		26,665			26,979			26,783			27,081

Diluted		26,733			27,219			26,872			27,306

Dividends declared:	$	0.04		$	0.03		$	0.07		$	0.06
(a) Six months ended June 30, 2011 includes $5.6 million in costs directly related to the launch of a new closed-end fund.

See accompanying notes.

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

	June 30,			December 31,			June 30,
	2011			2010			2010
ASSETS
Cash and cash equivalents, including restricted cash of $0, $0 and $62,287, respectively	$	260,839		$	169,601		$	321,029
Investments in securities		363,305			305,486			213,079
Investments in partnerships		98,598			82,871			74,107
Receivable from brokers		35,968			46,621			54,548
Investment advisory fees receivable		25,746			44,660			16,844
Income tax receivable and deferred tax assets		238			325			3,436
Other assets		25,964			23,172			20,445
Total assets	$	810,658		$	672,736		$	703,488

LIABILITIES AND EQUITY
Payable to brokers	$	2,950		$	1,554		$	3,351
Income taxes payable and deferred tax liabilities		21,622			23,225			-
Capital lease obligation		5,126			5,182			5,219
Compensation payable		29,484			23,771			18,613
Securities sold, not yet purchased		10,244			19,299			13,652
Mandatorily redeemable noncontrolling interests		1,478			1,444			1,632
Accrued expenses and other liabilities		34,620			23,089			28,146
Sub-total		105,524			97,564			70,613

5.5% Senior notes (due May 15, 2013)		99,000			99,000			99,000
5.875% Senior notes (due June 1, 2021)		100,000			-			-
6% Convertible note (due August 14, 2011; repaid September 30, 2010)		-			-			19,948
6.5% Convertible note (due October 2, 2018; repaid October 13, 2010)		-			-			60,000
Zero coupon subordinated debentures, Face value: $86.4 million (due December 31, 2015)		61,814			59,580			-
Total liabilities		366,338			256,144			249,561

Redeemable noncontrolling interests		35,519			26,984			7,773
Commitments and contingencies (Note J)
Equity
GAMCO Investors, Inc. stockholders' equity
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized;
13,569,703, 13,255,503 and 13,203,330 issued, respectively; 6,647,212,
6,763,221 and 6,984,351 outstanding, respectively		13			13			13
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;
24,000,000 shares issued; 20,142,640, 20,290,140 and 20,292,263 shares
outstanding, respectively		20			20			20
Additional paid-in capital		263,371			262,108			254,444
Retained earnings		406,666			370,272			430,605
Accumulated comprehensive income		26,349			25,389			15,960
Treasury stock, at cost (6,922,491, 6,492,282 and 6,218,979 shares, respectively)		(291,287	)		(271,773	)		(258,956	)
Total GAMCO Investors, Inc. stockholders' equity		405,132			386,029			442,086
Noncontrolling interests		3,669			3,579			4,068
Total equity		408,801			389,608			446,154

Total liabilities and equity	$	810,658		$	672,736		$	703,488

See accompanying notes.

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

For the six months ended June 30, 2011
			GAMCO Investors, Inc. shareholders
					Additional					Accumulated								Redeemable
	Noncontrolling		Common		Paid-in		Retained			Comprehensive		Treasury						Noncontrolling			Comprehensive
	Interests		Stock		Capital		Earnings			Income		Stock			Total			Interests			Income
Balance at December 31, 2010	$	3,579	$	33	$	262,108	$	370,272		$	25,389	$	(271,773	)	$	389,608		$	26,984		$	-
Redemptions of redeemable
noncontrolling interests		-		-		-		-			-		-			-			(839	)		-
Contributions from redeemable
noncontrolling interests		-		-		-		-			-		-			-			12,897			-
Deconsolidation of
Partnership		-		-		-		-			-		-			-			(4,103	)		-
Net income		90		-		-		38,290			-		-			38,380			580			38,960
Net unrealized gains on
securities available for sale,
net of income tax ($550)		-		-		-		-			937		-			937			-			937
Foreign currency translation		-		-		-		-			23		-			23			-			23
Dividends declared ($0.07 per
share)		-		-		-		(1,896	)		-		-			(1,896	)		-			-
Stock based compensation
expense		-		-		1,263		-			-		-			1,263			-			-
Purchase of treasury stock		-		-		-		-			-		(19,514	)		(19,514	)		-			-
Balance at June 30, 2011	$	3,669	$	33	$	263,371	$	406,666		$	26,349	$	(291,287	)	$	408,801		$	35,519		$	39,920
Comprehensive income attributable
to noncontrolling interest																						(670	)
Total comprehensive income
attributable to GAMCO Investors, Inc.																					$	39,250

See accompanying notes.

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

For the six months ended June 30, 2010
			GAMCO Investors, Inc. shareholders
					Additional					Accumulated									Redeemable
	Noncontrolling		Common		Paid-in		Retained			Comprehensive			Treasury						Noncontrolling			Comprehensive
	Interests		Stock		Capital		Earnings			Income			Stock			Total			Interests			Income
Balance at December 31, 2009	$	4,043	$	33	$	251,591	$	410,473		$	19,088		$	(241,567	)	$	443,661		$	1,464		$	-
Redemptions of redeemable
noncontrolling interests		-		-		-		-			-			-			-			(475	)		-
Contributions from redeemable
noncontrolling interests		-		-		-		-			-			-			-			6,688			-
Net income		25		-		-		21,775			-			-			21,800			96			21,896
Net unrealized losses on
securities available for sale,
net of income tax benefit ($1,821)		-		-		-		-			(3,101	)		-			(3,101	)		-			(3,101	)
Foreign currency translation		-		-		-		-			(27	)		-			(27	)		-			(27	)
Dividends declared ($0.06 per
share)		-		-		-		(1,643	)		-			-			(1,643	)		-			-
Stock based compensation
expense		-		-		2,805		-			-			-			2,805			-			-
Exercise of stock options
including tax benefit		-		-		48		-			-			-			48			-			-
Purchase of treasury stock		-		-		-		-			-			(17,389	)		(17,389	)		-			-
Balance at June 30, 2010	$	4,068	$	33	$	254,444	$	430,605		$	15,960		$	(258,956	)	$	446,154		$	7,773		$	18,768
Comprehensive income attributable
to noncontrolling interest																							(121	)
Total comprehensive income
attributable to GAMCO Investors, Inc.																						$	18,647

See accompanying notes.

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

	Six Months Ended
	June 30,
	2011			2010
Operating activities
Net income	$	38,960		$	21,896
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in net gains from partnerships		(3,094	)		(1,037	)
Depreciation and amortization		456			343
Stock based compensation expense		1,263			2,805
Deferred income taxes		1,220			2,934
Tax benefit from exercise of stock options		-			8
Foreign currency translation gain/(loss)		23			(27	)
Fair value of donated securities		56			(608	)
Gains on sales of available for sale securities		(584	)		(13	)
Amortization of discount on convertible debt		-			297
Accretion of zero coupon debentures		2,234			-
(Increase) decrease in assets:
Investments in trading securities		(70,979	)		(59,206	)
Investments in partnerships:
Contributions to partnerships		(10,683	)		(15,807	)
Distributions from partnerships		3,226			5,392
Receivable from brokers		4,966			(24,476	)
Investment advisory fees receivable		19,044			18,841
Income tax receivable and deferred tax assets		87			-
Other assets		(2,312	)		667
Increase (decrease) in liabilities:
Payable to brokers		1,396			2,956
Income taxes payable and deferred tax liabilities		(3,108	)		(13,073	)
Compensation payable		5,710			5,313
Mandatorily redeemable noncontrolling interests		35			10
Accrued expenses and other liabilities		12,776			2,972
Total adjustments		(38,268	)		(71,709	)
Net cash provided by (used in) operating activities	$	692		$	(49,813	)

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

	Six Months Ended
	June 30,
	2011			2010
Investing activities
Purchases of available for sale securities	$	(4,370	)	$	(9	)
Proceeds from sales of available for sale securities		5,685			2,014
Return of capital on available for sale securities		777			1,306
Increase in restricted cash		-			(29	)
Net cash provided by investing activities		2,092			3,282

Financing activities
Contributions from redeemable noncontrolling interests		12,897			6,213
Redemptions of redeemable noncontrolling interests		(839	)		-
Issuance of 5.875% Senior notes due June 1, 2021		100,000			-
Issuance costs on the 5.875% Senior notes due June 1, 2021		(934	)
Repayment of 6% Convertible note due August 14, 2011		-			(20,200	)
Proceeds from exercise of stock options		-			40
Dividends paid		(1,896	)		(1,643	)
Purchase of treasury stock		(19,514	)		(17,389	)
Net cash provided by (used in) financing activities		89,714			(32,979	)
Effect of exchange rates on cash and cash equivalents		(9	)		(18	)
Net increase (decrease) in cash and cash equivalents		92,489			(79,528	)
Cash and cash equivalents at beginning of period		169,601			338,270
Decrease in cash from deconsolidation of partnership		(1,251	)		-
Cash and cash equivalents at end of period	$	260,839		$	258,742
Supplemental disclosures of cash flow information:
Cash paid for interest	$	3,267		$	6,800
Cash paid for taxes	$	23,433		$	22,441

Non-cash activity:
- On January 1, 2011, GAMCO Investors, Inc. was no longer deemed to have control over a certain partnership which resulted in the deconsolidation of that partnership and
decreases of approximately $1,251 of cash and cash equivalents , $2,852 of net assets and $4,103 of noncontrolling interests.
- For the six months ended June 30, 2011 and June 30, 2010, the Company accrued restricted stock award dividends of $17 and $23, respectively.
See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

(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 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, including our new broker-dealer, G.distributors, LLC, a wholly-owned subsidiary of GAMCO, which became the distributor for the Gabelli/GAMCO family of funds on August 1, 2011. 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, 2010 from which the accompanying condensed consolidated financial statements were derived.

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

Subsequent to the issuance of the Company’s second quarter 2010 Form 10-Q, filed with the SEC on August 5, 2010, the Company determined that pursuant to ASC 810, Consolidation, it should have presented the amount of comprehensive income attributable to noncontrolling interests and comprehensive income attributable to GAMCO in its consolidated statement of equity and comprehensive income. The affected period includes the period ended June 30, 2010. The accompanying consolidated statement of equity and comprehensive income for the period ended June 30, 2010 has been corrected to also include such information. The Company believes this correction was not material to the consolidated financial statements taken as a whole.

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 in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Developments

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to improve disclosures about fair value measurements. The guidance affects all entities that are required to make disclosures about recurring and nonrecurring fair value measurements. The guidance requires new disclosures regarding purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company adopted the applicable portions of this guidance on January 1, 2011 without a material impact to the consolidated financial statement disclosures.

In May 2011, the FASB issued guidance on fair value measurement which expands existing disclosure requirements for fair value measurements and makes other amendments. The guidance requires, for level 3 fair value measurements, (1) a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, (2) a description of the valuation processes in place, and (3) a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs. Additionally, the guidance requires disclosure of the level in the fair value hierarchy of items that are not measured at fair value in the statement of financial position but whose fair value must be disclosed and clarifies that the valuation premise and highest and best use concepts are not relevant to financial instruments. The guidance is effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years. The application of this guidance will result in enhanced footnote disclosure upon adoption on January 1, 2012.

In June 2011, the FASB issued guidance which revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires entities to report comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used currently, and the second statement would include components of other comprehensive income (“OCI”). The guidance does not change the items that must be reported in OCI. The guidance is effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years. The application of this guidance is not expected to be material to the condensed consolidated financial statements.

B. Investment in Securities

Investments in securities at June 30, 2011, December 31, 2010 and June 30, 2010 consisted of the following:

	June 30, 2011				December 31, 2010				June 30, 2010
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Government obligations	$	7,924	$	7,925	$	27,327	$	27,288	$	1,388	$	1,223
Common stocks		238,689		251,118		158,455		170,374		122,071		118,167
Mutual funds		1,096		1,525		1,205		1,554		1,194		1,229
Convertible bonds		-		-		574		620		1,123		1,161
Preferred stocks		-		-		1,783		1,973		1,783		1,685
Other investments		459		487		1,559		1,350		818		552
Total trading securities		248,168		261,055		190,903		203,159		128,377		124,017

Available for sale securities:
Common stocks		16,780		35,296		16,835		37,139		16,918		32,827
Mutual funds		42,199		66,954		43,707		65,188		46,156		56,235
Total available for sale securities		58,979		102,250		60,542		102,327		63,074		89,062

Total investments in securities	$	307,147	$	363,305	$	251,445	$	305,486	$	191,451	$	213,079

Securities sold, not yet purchased at June 30, 2011, December 31, 2010 and June 30, 2010 consisted of the following:

	June 30, 2011				December 31, 2010				June 30, 2010
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Trading securities:	(In thousands)
Common stocks	$	9,416	$	10,238	$	19,071	$	19,299	$	15,528	$	13,537
Other		1		6		-		-		224		115
Total securities sold, not yet purchased	$	9,417	$	10,244	$	19,071	$	19,299	$	15,752	$	13,652

Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of each balance sheet date. Investments in United States Treasury Bills and Notes with maturities of greater than three months at the time of purchase are classified as investments in securities, and those with maturities of three months or less at time of purchase are classified as cash equivalents. A substantial portion of investments in securities are held for resale in anticipation of short-term market movements and therefore are classified as trading securities. Trading securities are stated at fair value, with any unrealized gains or losses, reported in current period earnings. Available for sale (“AFS”) investments are stated at fair value, with any unrealized gains or losses, net of 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. There was no impairment of AFS securities for the three or six month periods ended June 30, 2011 and June 30, 2010.

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 and six months ended June 30, 2011, the Company had no derivative transactions. For the three months ended June 30, 2010, the Company had derivative transactions in equity derivatives which resulted in net losses of $66,000. For the six months ended June 30, 2010, the Company had derivative transactions in equity derivatives which resulted in net losses of $118,000. At December 31, 2010 and June 30, 2010, we held derivative contracts on 403,000 equity shares and 21,000 equity shares, respectively, and the fair value was $1.0 million and $201,000, respectively; these are included in investments in securities in the condensed consolidated statements of financial condition. At June 30, 2011, the Company did not hold any derivatives. 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.

At June 30, 2011, December 31, 2010 and June 30, 2010, the fair value of common stock investments available for sale was $35.3 million, $37.1 million and $32.8 million, respectively. The total unrealized gains for common stock investments available for sale securities with unrealized gains was $18.5 million, $20.3 million and $15.9 million at June 30, 2011, December 31, 2010 and June 30, 2010, respectively. There were no unrealized losses for common stock investments available for sale at June 30, 2011, December 31, 2010 or June 30, 2010. At June 30, 2011, December 31, 2010 and June 30, 2010, the fair value of mutual fund investments available for sale with unrealized gains was $67.0 million, $65.2 million and $56.2 million, respectively. At June 30, 2011 and December 31, 2010, there were no unrealized losses for mutual fund investments available for sale. At June 30, 2010, the fair value of mutual fund investments available for sale with unrealized losses was $4,000. The total unrealized gains for mutual fund investments available for sale securities with unrealized gains at June 30, 2011, December 31, 2010 and June 31, 2010 was $24.8 million, $21.5 million and $10.1 million, respectively. The total unrealized losses for available for sale securities with unrealized losses was $1,000 at June 30, 2010.

Unrealized changes to fair value, net of taxes, for the three months ended June 30, 2011 and June 30, 2010 of $1.5 million in losses and $4.9 million in losses, respectively, have been included in other comprehensive income, a component of equity, at June 30, 2011 and June 30, 2010. Return of capital on available for sale securities for the three months ended June 30, 2011 and June 30, 2010 was $0.2 million and $0.6 million, respectively. Proceeds from sales of investments available for sale were approximately $5.6 million and $2.0 million for the three month periods ended June 30, 2011 and June 30, 2010, respectively. For the three months ended June 30, 2011 and June 30, 2010, gross gains on the sale of investments available for sale amounted to $483,000 and $13,000, respectively; there were no gross losses on the sale of investments available for sale. Unrealized changes to fair value, net of taxes, for the six months ended June 30, 2011 and June 30, 2010 of $0.9 million in gains and $3.1 million in losses, respectively, have been included in other comprehensive income, a component of equity, at June 30, 2011 and June 30, 2010. Return of capital on available for sale securities for the six months ended June 30, 2011 and June 30, 2010 was $0.8 million and $1.3 million, respectively. Proceeds from sales of investments available for sale were approximately $5.7 million and $2.0 million for the six month periods ended June 30, 2011 and June 30, 2010, respectively. For the six months ended June 30, 2011 and June 30, 2010, gross gains on the sale of investments available for sale amounted to $584,000 and $13,000, respectively; there were no gross losses on the sale of investments available for sale.

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:

	June 30, 2011						December 31, 2010						June 30, 2010
			Unrealized						Unrealized						Unrealized
	Cost		Losses		Fair Value		Cost		Losses		Fair Value		Cost		Losses			Fair Value
(in thousands)
Mutual Funds	$	-	$	-	$	-	$	-	$	-	$	-	$	5	$	(1	)	$	4

At June 30, 2010, there were three holdings in loss positions which were not deemed to be other-than-temporarily impaired because they passed scrutiny in our evaluation of the length of time that they had been in a loss position and our evaluation of issuer-specific and industry-specific considerations. In these specific instances, the investments at June 30, 2010 were mutual funds with diversified holdings across multiple companies and in most cases across multiple industries. One holding was impaired for one month, one holding was impaired for five consecutive months and one holding was impaired for twelve consecutive months. The fair value of these holdings at June 30, 2010 was $4,000.

C. Investments in Partnerships

The Company is general partner or co-general partner of various sponsored limited partnerships and the investment manager of various sponsored offshore funds whose underlying assets consist primarily of marketable securities (the “affiliated entities”). We also have investments in unaffiliated partnerships, offshore funds and other entities. Certain of the affiliated entities are consolidated, generally because a majority of the equity is owned by the Company. Other investment partnerships for which we serve as the general partner but have only a minority ownership interest are not consolidated because the limited partners have substantive rights to replace the Company as general partner. Our balance sheet caption “investments in partnerships” includes those investments, in both affiliated and unaffiliated entities, which the Company accounts for under the equity method of accounting and certain investments in consolidated feeder funds that the Company accounts for at fair value, as described below. The Company reflects the equity in earnings of these equity method investees and the change in fair value of the consolidated feeder funds under the caption net gain/(loss) from investments on the condensed consolidated statements of income.

We also have sponsored a number of investment vehicles where we are the investment manager in which we do not have an equity investment. These vehicles are considered VIEs, and we are not the primary beneficiary because we do not absorb a majority of the entities’ expected losses or expected returns. The Company has not provided any financial or other support to these entities. The total assets of these entities at June 30, 2011, December 31, 2010 and June 30, 2010 were $23.5 million, $13.3 million and $10.8 million, respectively. Our maximum exposure to loss as a result of our involvement with the VIEs is limited to the deferred carried interest that we have in one of the VIEs. On June 30, 2011, December 31, 2010 and June 30, 2010, we had a deferred carried interest in one of the VIE offshore funds of approximately $49,000, $325,000 and $288,000, respectively, and it 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 for performing these roles. These revenues are dependent upon the AUM levels in the VIEs, would vary depending on these AUMs and would be reflected in the condensed consolidated statements of income, condensed consolidated statements of financial condition and condensed consolidated statements of cash flows.

In the case of two VIEs, we have determined that we are the primary beneficiary of each because we absorb a majority of each entity’s expected losses; therefore they are consolidated in the financial statements. The Company has not provided any financial support to these VIEs but does earn fees as the investment manager. The assets of these VIEs may only be used to satisfy obligations of the VIEs. The following table presents the balances related to these VIEs that were included on the condensed consolidated statements of financial condition as well as GAMCO’s net interest in these VIEs:

	June 30,
	2011
(In thousands)
Cash and cash equivalents	$	1
Investments in securities		73,047
Investments in partnerships		1,576
Receivable from brokers		22,881
Other assets		57
Securities sold, not yet purchased		(7,334	)
Accrued expenses and other liabilities		(327	)
Redeemable noncontrolling interests		(34,794	)
GAMCO's net interests in consolidated VIEs	$	55,107

On January 1, 2011, upon analysis of several factors, including the additional contribution of capital from unrelated third parties into a partnership that we consolidated for the year ended and as of December 31, 2010, we determined that the Company was no longer deemed to control the partnership, resulting in the deconsolidation of this partnership, effective January 1, 2011. The deconsolidation did not result in the recognition of any gain or loss. The Company continues to serve as the general partner and earns fees for this role, and it also maintains an investment in the deconsolidated partnership which is included in investments in partnerships on the condensed consolidated statements of financial condition and is accounted for under the equity method (which approximates fair value).

At June 30, 2011, December 31, 2010 and June 30, 2010, and for the three and six months ended June 30, 2011 and June 30, 2010, the Company consolidated two limited partnerships and one offshore fund (the “consolidated feeder funds”) that owned 100% of their offshore master funds. The Company retained the specialized investment company accounting of the consolidated feeder funds in the Company’s consolidated financial statements. Included in the investment in partnerships on the Company’s consolidated statement of financial condition as of June 30, 2011, December 31, 2010 and June 30, 2010, are $28.0 million $27.7 million, and $25.6 million, respectively, which represent the consolidated feeder fund’s proportionate investment in the master funds carried at fair value at those dates.

D. Fair Value

All of the instruments within cash and cash equivalents, investments in securities and securities sold, not yet purchased are measured at fair value. Certain investments in partnerships are also measured at fair value.

The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with the FASB’s guidance on fair value measurement. The levels of the fair value hierarchy and their applicability to the Company are described below:

-	Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities at the reporting date. Level 1 assets include cash equivalents, government obligations, open and closed end funds and equities.
-	Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities that are not active and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly-quoted intervals. Assets that generally are included in this category may include certain limited partnership interests in private funds in which the valuations for substantially all of the investments within the fund are based upon Level 1 or Level 2 inputs and over the counter derivatives that have inputs to the valuations that can generally be corroborated by observable market data.
-	Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Assets included in this category generally include equities that trade infrequently and direct private equity investments held within consolidated partnerships.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Investments are transferred into or out of any level at their beginning period values.

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3.

In the absence of a closing price, an average of the bid and ask price is used. Bid prices reflect the highest price that the market is willing to pay for an asset. Ask prices represent the lowest price that the market is willing to accept for an asset.

Cash equivalents – Cash equivalents primarily consist of an affiliated money market mutual fund which is invested solely in U.S. Treasuries. U.S. Treasury Bills and Notes with maturities of three months or less at the time of purchase are also considered cash equivalents. Cash equivalents are valued using quoted market prices.

Investments in securities and securities sold, not yet purchased – Investments in securities and securities sold, not yet purchased are generally valued based on quoted prices from an exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in Level 1 of the fair value hierarchy. Securities categorized in Level 2 investments are valued using other observable inputs. Nonpublic and infrequently traded investments are included in Level 3 of the fair value hierarchy because significant inputs to measure fair value are unobservable.

Investments in Partnerships – The Company’s investments include limited partner investments in consolidated feeder funds. The Company considers the net asset value of the consolidated feeder fund to be the best estimate of fair value. Investments in private funds that are redeemable at the measurement date or within the near term, are categorized in Level 2 of the fair value hierarchy. These funds primarily invest in long and short investments in debt and equity securities that are traded in public and over-the-counter exchanges in the United States and are classified as Level 1 assets or liabilities in the funds’ financial statements. We may redeem our investments in these funds monthly with 30 days’ notice.

The following table presents information about the Company’s assets and liabilities by major categories measured at fair value on a recurring basis as of June 30, 2011, December 31, 2010 and June 30, 2010 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 June 30, 2011 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Balance as of
	Markets for Identical		Observable		Unobservable		June 30,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		2011
Cash equivalents	$	260,177	$	-	$	-	$	260,177
Investments in partnerships		-		27,977		-		27,977
Investments in securities:
AFS - Common stocks		35,296		-		-		35,296
AFS - Mutual funds		66,954		-		-		66,954
Trading - Gov't obligations		7,925		-		-		7,925
Trading - Common stocks		250,524		10		584		251,118
Trading - Mutual funds		1,525		-		-		1,525
Trading - Other		118		-		369		487
Total investments in securities		362,342		10		953		363,305
Total investments		362,342		27,987		953		391,282
Total assets at fair value	$	622,519	$	27,987	$	953	$	651,459
Liabilities
Trading - Common stocks	$	10,238	$	-	$	-	$	10,238
Trading - Other		6		-		-		6
Securities sold, not yet purchased	$	10,244	$	-	$	-	$	10,244

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2010 (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)		2010
Cash equivalents	$	167,548	$	-	$	-	$	167,548
Investments in partnerships		-		27,690		-		27,690
Investments in securities:
AFS - Common stocks		37,139		-		-		37,139
AFS - Mutual funds		65,188		-		-		65,188
Trading - Gov't obligations		27,288		-		-		27,288
Trading - Common stocks		170,204		23		147		170,374
Trading - Mutual funds		1,554		-		-		1,554
Trading - Convertible bonds		620		-		-		620
Trading - Preferred stocks		1,973		-		-		1,973
Trading - Other		72		1,000		278		1,350
Total investments in securities		304,038		1,023		425		305,486
Total investments		304,038		28,713		425		333,176
Total assets at fair value	$	471,586	$	28,713	$	425	$	500,724
Liabilities
Trading - Common stocks	$	19,299	$	-	$	-	$	19,299
Securities sold, not yet purchased	$	19,299	$	-	$	-	$	19,299

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2010 (in thousands)

	Quoted Prices in Active		Significant Other		Significant			Balance as of
	Markets for Identical		Observable		Unobservable			June 30,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)			2010
Cash equivalents	$	320,575	$	-	$	-		$	320,575
Investments in partnerships		-		25,553		-			25,553
Investments in securities:
AFS - Common stocks		32,827		-		-			32,827
AFS - Mutual funds		56,235		-		-			56,235
Trading - Gov't obligations		1,223		-		-			1,223
Trading - Common stocks		117,617		278		272			118,167
Trading - Mutual funds		1,229		-		-			1,229
Trading - Convertible bonds		1,161		-		-			1,161
Trading - Preferred stocks		1,674		-		11			1,685
Trading - Other		143		316		93			552
Total investments in securities		212,109		594		376			213,079
Total investments		212,109		26,147		376			238,632
Total assets at fair value	$	532,684	$	26,147	$	376		$	559,207
Liabilities
Trading - Common stocks	$	13,537	$	-	$	-		$	13,537
Trading - Other		-		115		-			115
Securities sold, not yet purchased	$	13,537	$	115	$	-	<