FORM 10-K/A GAMCO Investors, Inc. - Gabelli

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Certain Relationships and Related Transactions The following is a summary of certain related party transactions. Further details regarding these and other relationships appear in our Proxy Statement for our 2007 Annual Meeting of Shareholders. GGCP, Inc. owns a majority of the outstanding shares of class B common stock of GAMCO Investors, Inc., which ownership represented approximately 95% of the combined voting power of the outstanding common stock and approximately 72% of the equity interest on December 31, 2006. On May 31, 2006, we entered into an Exchange and Standstill Agreement with Frederick J. Mancheski pursuant to which, among other things, he agreed to exchange his 2,071,635 shares of our class B common stock for an equal number of shares of our class A common stock. Certain shareholders of GGCP, including two of our officers and a director, who received shares of our class B common stock in a distribution from GGCP, also agreed to exchange their shares of our class B common stock for an equal number of shares of our class A common stock. Pursuant to a Registration Rights Agreement that we entered into with Mr. Mancheski, we filed a shelf registration statement on August 8, 2006 for the sale by Mr. Mancheski and others, including certain of our officers, employees and a director, of up to 2,486,763 shares of our class A common stock. Prior to its initial public offering in February 1999, GBL and GGCP entered into a Management Services Agreement, with a one-year term and renewable annually, under which GBL provides certain services for GGCP, including furnishing office space and equipment, providing insurance coverage, overseeing the administration of its business and providing personnel to perform certain administrative services. Pursuant to the Management Services Agreement, GGCP pays GBL for services provided. As of December 5, 1997, GGCP entered into a master lease agreement with an entity controlled by members of Mr. Gabelli’s immediate family, for a 60,000 square foot building, of which approximately 9,000 square feet are currently subleased to other tenants. The master lease for the building and property, which is located at 401 Theodore Fremd Avenue, Rye, New York (the "Building"), expires on April 30, 2013. As of February 9, 1999, GGCP assigned all of its rights and obligations under the master lease to GBL. GBL leases space in the Building to a company for which Mr. Gabelli serves as Chairman and is a significant stockholder. Pursuant to the Employment Agreement, Mr. Gabelli has agreed that, while he is employed by GBL, he will not provide investment management services outside of GBL, except for certain permitted accounts managed by MJG Associates, Inc., for which he serves as Chairman. MJG Associates, Inc., which is wholly-owned by Mr. Gabelli, serves as a general partner or investment manager of various investment funds and other accounts. For these investment funds and other accounts, any management or incentive fees related to new investors after the date of GBL’s initial public offering in 1999 are due to GBL in accordance with a resolution adopted by GBL’s Board of Directors in 1999. GBL has entered into agreements to provide advisory and administrative services to MJG Associates, Inc. and to GSI, with respect to the private investment funds managed by each of them. Pursuant to such agreements, GSI and MJG Associates, Inc. pay GBL for services provided. Mr. Gabelli and Gabelli Securities, Inc. serve as co-general partners of Gabelli Associates Fund. Mr. Gabelli receives relationship manager and portfolio manager compensation through an incentive fee allocation directly from the partnership. Gabelli Securities International Limited ("Gabelli Securities International") was formed in 1994 to provide management and investment advisory services to offshore funds and accounts. Marc Gabelli, a son of Mr. Gabelli, owns 55% of Gabelli Securities International and GSI owns the remaining 45%. In April 1999, Gabelli Global Partners, Ltd., an offshore investment fund, was incorporated. Gabelli Securities International and Gemini Capital Management, LLC ("Gemini"), an entity owned by Marc Gabelli, were engaged by the fund as investment advisors as of July 1, 1999. Gemini receives half of the management and incentive fees as co-investment advisor. In April 1999, GSI formed Gabelli Global Partners, L.P., an investment limited partnership for which GSI and Gemini are the general partners. In March 2002, Gabelli Global Partners, L.P. changed its name to Gemini Global Partners, L.P. Gemini receives half of the management fee and incentive allocation paid by the partnership to the general partners. GBL reimburses GGCP for GGCP's incremental costs (but not the fixed costs) relating to GBL’s use of an airplane in which GGCP owns a fractional interest. Mr. Gabelli’s brother, spouse and a son were employed by GBL during 2006. 60
Critical Accounting Policies In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with U.S. generally accepted accounting principles. We base our estimates on historical experience, when available, and on other various assumptions that are believed to be reasonable under the circumstances. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the critical assumptions and estimates are those applied to revenue recognition, the valuation of investments, partnerships, and offshore funds, goodwill and other longlived intangibles, income taxes, and stock based compensation accounting. Revenue Recognition Advisory fees from the open-end mutual funds, closed-end funds and sub-advisory accounts are computed daily or weekly based on average net assets. Advisory fees from the Separate Accounts are generally computed quarterly based on account values as of the end of the preceding quarter and accrued monthly. Management fees from Investment Partnerships are computed either monthly or quarterly and accrued monthly, and amounts receivable are included in other receivables from affiliates in the consolidated statement of financial condition. Revenues from Investment Partnerships also generally include an incentive allocation or a fee of 20% of the economic profit. The incentive allocation or fee is generally based on the absolute gain in a portfolio, is recognized at the end of the measurement period, and amounts receivable are included in other receivables from affiliates in the consolidated statement of financial condition. Fulcrum fees from certain institutional Separate Accounts, which are based upon meeting or exceeding specific benchmark index or indices are recognized at the end of the stipulated contract period for the respective account and receivables due from fulcrum fees are included in investment advisory fees receivable on the consolidated statement of financial condition. There were $4.4 million in fulcrum fees receivable as of December 31, 2006. Management fees on closed-end preferred shares are received at year-end if the total return to common shareholders of the closed-end fund for the calendar year exceeds the dividend rate of the preferred shares. These fees are recognized at the end of the measurement period. Receivables due on management fees on closed-end funds are included in investment advisory fees receivable on the consolidated statement of financial condition. Distribution fees from the open-end mutual funds are computed daily based on average net assets, are accrued monthly, and amounts receivable are included in other receivables from affiliates on the consolidated statement of financial condition. Investments in Partnerships and Affiliates Beginning January 1, 2006, the provisions of FIN 46R and EITF 04-5 require consolidation of the majority of our investment partnerships and offshore funds managed by our subsidiaries into our consolidated financial statements. However, since we amended the agreements of certain investment partnerships and an offshore fund on March 31, 2006, FIN 46R and EITF 04-5 only required us to consolidate these entities on our consolidated statement of income and consolidated statement of cash flows for the first quarter 2006. We were not required to consolidate these entities on our consolidated statement of financial condition at March 31, 2006. In addition, these partnerships and offshore funds, for which the agreements were amended, are not required to be consolidated within our consolidated statement of income and consolidated statement of cash flows or on our consolidated statement of financial condition in the second quarter or future periods as long as GBL continues to not maintain direct or indirect control over the investment partnerships and offshore funds. For the year ended December 31, 2006, the consolidation of these entities for the first quarter 2006 had no effect on net income but does affect the classification of income between operating and other income. 61
Page 1 and 2:
UNITED STATES SECURITIES AND EXCHAN
Page 3 and 4:
The aggregate market value of the c
Page 5 and 6:
Our assets under management are org
Page 7 and 8:
- GAM GAMCO Equity Fund, managed by
Page 9 and 10: As in prior years, we experienced c
Page 11 and 12: To further extend “value investin
Page 13 and 14: · Diversified Product Offerings: S
Page 15 and 16: Open-end Funds On December 31, 2006
Page 17 and 18: Assets Under Management The followi
Page 19 and 20: The following table lists the Mutua
Page 21 and 22: Net Assets as of December 31, Fund
Page 23 and 24: Net Assets as of December 31, Fund
Page 25 and 26: Shareholders of the open-end Funds
Page 27 and 28: Gabelli & Company also offers our o
Page 29 and 30: Investments by GBL on behalf of our
Page 31 and 32: ITEM 1A: RISK FACTORS Business Risk
Page 33 and 34: Catastrophic and unpredictable even
Page 35 and 36: During 2006, as in prior years, we
Page 37 and 38: Our businesses are subject to exten
Page 39 and 40: PART II ITEM 5: MARKET FOR THE REGI
Page 41 and 42: The following table shows informati
Page 43 and 44: December 31, 2002 (a) 2003 (a) 2004
Page 45 and 46: As a result of the first material w
Page 47 and 48: Consolidated Statements of Income I
Page 49 and 50: Our liquid balance sheet, coupled w
Page 51 and 52: For the three years ended December
Page 53 and 54: Expenses Compensation: Compensation
Page 55 and 56: Mutual fund revenues increased $3.9
Page 57 and 58: Liquidity and Capital Resources Our
Page 59: Our revenues are primarily driven b
Page 63 and 64: Recent Accounting Developments In F
Page 65 and 66: ITEM 8: FINANCIAL STATEMENTS AND SU
Page 67 and 68: REPORT OF INDEPENDENT REGISTERED PU
Page 69 and 70: GAMCO INVESTORS, INC. AND SUBSIDIAR
Page 71 and 72: (In thousands) See accompanying not
Page 73 and 74: GAMCO INVESTORS, INC. AND SUBSIDIAR
Page 75 and 76: Gabelli Direct, Inc. (“Gabelli Di
Page 77 and 78: Goodwill Goodwill pertains to the c
Page 79 and 80: Restatement As discussed within the
Page 81 and 82: In February 2007, the FASB issued F
Page 83 and 84: We were not required to consolidate
Page 85 and 86: E. Debt Debt consists of the follow
Page 87 and 88: The table below represents for vari
Page 89 and 90: Shelf Registration On December 28,
Page 91 and 92: We serve as the investment advisor
Page 93 and 94: N. Goodwill In accordance with SFAS
Page 95 and 96: As a result of the first material w
Page 97 and 98: ITEM 14: PRINCIPAL ACCOUNTANT FEES
Page 99 and 100: POWER OF ATTORNEY Each person whose
Page 101 and 102: Exhibit 21.1 Subsidiaries of GAMCO
Page 103 and 104: Exhibit 31.1 Certifications I, Mari
Page 105 and 106: Certifications Exhibit 31.3 I, Dian
Page 107: Exhibit 32.2 Certification of Actin
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FORM 10-K/A GAMCO Investors, Inc. - Gabelli

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