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

As in prior years, we experienced client “churn” in 2006. In the institutional and high net worth space, over one half of the assets lost were subadvisory assets where the advisor
underwent a change in control, for instance, a spin-off from the parent organization or the sale of the advisor to a third party. The successor advisor assumed management of the
assets.
In January 2006, as part of a firm-wide branding initiative, the names of eight mutual funds managed by Gabelli Funds, LLC, a subsidiary of GAMCO Investors, Inc., were changed
to GAMCO. The GAMCO brand more appropriately differentiates the various investment strategies offered to investors including growth, gold, convertible securities and
contrarian. Funds continuing to use the Gabelli name primarily represent value portfolios managed in the absolute return, research-driven Private Market Value (PMV) with a
Catalyst TM investment approach.
Our $400 million "shelf" registration statement on Form S-3 filed with the Securities and Exchange Commission (SEC) became effective in May 2006. Under this shelf registration,
we may, from time to time, issue any combination of senior and subordinate debt securities, convertible debt securities and equity securities (including common and preferred
securities) up to a total amount of $520 million. This includes the remaining $120 million available under our previous shelf registration filed in 2001.
On June 30, 2006, we and Cascade Investment L.L.C. ("Cascade") agreed to amend the terms of the $50 million convertible note issued by us (the "Note") and maturing in August
2011, as follows: increase the coupon rate of interest to 6% from 5% and raise the conversion price to $53 per GBL share from $52 per share, both effective on September 15,
2006. In addition, we and Cascade agreed to extend the exercise date for Cascade's put option until May 15, 2007. The expiration date of the related letter of credit was extended
to May 22, 2007 and a call option was included giving us the right to redeem the note at 101% of its principal amount together with all accrued but unpaid interest thereon upon at
least 30 days prior written notice, subject to certain provisions.
Our research and institutional sales team at Gabelli & Company, Inc. hosted seven industry symposiums and conferences during 2006. These symposiums and conferences
provided an opportunity for the firm’s institutional clients to meet with the senior management teams of leading companies and gain insight on the dynamics within these
industries. Our events in 2006 included our 30th annual Automotive Aftermarket Symposium, our 17 th Pump Valve & Motor Symposium, our 12 th annual Aircraft Supplier
Conference, Fourth annual Dental Conference, our second annual RFID (Radio Frequency Identification) Conference, and our first annual Water Infrastructure conference.
Business Strategy
Our business strategy targets global growth of the franchise through continued leveraging of our proven asset management strengths including our brand name, long-term
performance record, diverse product offerings and experienced investment, research and client service professionals. In order to achieve growth in assets under management and
profitability, we are pursuing a strategy which includes the following key elements:
· Incentive Fees and Fulcrum Fees.Our investment strategy is focused on adding stock specific alpha through our proprietary Private Market Value (PMV) with a
Catalyst TM equity research efforts. We expect to receive an increasing portion of ourrevenues and earnings through various products with incentive and fulcrum fees. Since we
envision that a growing percentage of the firm's revenues will be directly linked to performance-based fees, this will also increase the variability of our revenues and profits. As
of December 31, 2006, over $1.5 billion of separate account assets are managed on a performance fee basis along with $1.18 billion of preferred issues and $491 million of
investment partnership assets. Unlike most money management firms, we elected not to receive a management fee on preferred offerings in closed -end funds until the fund’s
overall performance exceeds each preferred’s nominal cost of capital. In January 2007, we launched the Gabelli Global Deal Fund, a new closed-end fund that earns a base
fee plus a fulcrum performance fee of one quarter percent for each percentage point the fund's return exceeds the 90 day U. S. Treasury Bill rate, up to a maximum of 2
percent. In addition, the incubation of new product strategies using proprietary capital will compensate the investment team with a performance fee model to reinforce our payfor-performance
approach.
· Corporate Branding Initiative. We have undertaken a series of branding initiatives to enhance long-term shareholder value. On August 29, 2005, our corporate name
change to GAMCO Investors, Inc. became effective. Since the firm was founded in 1977, GAMCO has been the name of our asset management business, representing our
institutional and high net worth effort. We believe changing our corporate name to GAMCO helps us achieve our vision for assets entrusted to us, that is, to earn a superior
return for our clients by providing various value-added (alpha) products. GAMCO is a more inclusive parent company name and more appropriately represents the various
investment strategies and asset management brands contributing to the continued growth of our company. The Gabelli brand will continue to represent our absolute return,
research-driven value style that focuses on our unique Private Market Value (PMV) with a Catalyst investment approach.
· Establishing Research and Relationship Centers. In addition to our corporate office in Rye NY, we have six offices which conduct portfolio management, research and
marketing activities in the United States and abroad in the following cities: Greenwich CT, Chicago IL, Minneapolis MN, Palm Beach FL, Reno NV, and London UK. Our
offices in Chicago and Minneapolis were established as the result of acquisitions of on-going investment advisory operations. The London office was opened in January 2000 to
provide a geographic presence overseas and to coordinate investment research and marketing activities for our investment offerings in the European markets.
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