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

Gabelli Direct, Inc. (“Gabelli Direct”), a wholly-owned subsidiary of GSI, and Gabelli Fixed Income Distributors, Inc. (“Fixed Income Distributors”), a wholly-owned subsidiary of
Fixed Income LLC, were voluntarily deregistered as broker-dealers with the SEC and as members of the NASD in October 2006 and January 2007, respectively.
Cash and Cash Equivalents
Cash equivalents primarily consist of affiliated money market mutual funds which are highly liquid. At December 31, 2005 and 2006, approximately $2.5 million and $2.1 million,
respectively, of cash and cash equivalents was held as part of the collateral to secure a $51.3 million letter of credit originally issued on August 14, 2002, in favor of the holder of
the 6% convertible note, and these amounts are disclosed as restricted cash on the consolidated statements of financial condition. The $51.3 million letter of credit is due to expire
on May 22, 2007.
Securities Transactions and Commissions Revenue and Clearing Charges
Investments in securities are accounted for as either “trading securities” or “available for sale” and are stated at quoted market values. Securities that are not readily marketable are
stated at their estimated fair values as determined by our management. The resulting unrealized gains and losses for trading securities are included in net gain from investments, and
the unrealized gains and losses for available for sale securities, net of management fees and tax, are reported as a separate component of stockholders’ equity. Securities
transactions and any related gains and losses are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost
basis. Commissions revenue and related clearing charges are recorded on a trade date basis.
At December 31, 2005 and 2006, approximately $52.2 million and $52.1 million, respectively, of investments in securities were held as collateral to secure a $51.3 million letter of
credit originally issued on August 14, 2002 in favor of the holder of the 6% convertible note, and these amounts are disclosed as restricted investments in securities on the
consolidated statements of financial condition. The $51.3 million letter of credit is due to expire on May 22, 2007.
Securities sold, but not yet purchased are recorded at trade date, and are stated at quoted market values and represent obligations of GBL to purchase the securities at prevailing
market prices. Therefore, the future satisfaction of such obligations may be for an amount greater or less than the amounts recorded on the consolidated statements of financial
condition. The ultimate gains or losses recognized are dependent upon the prices at which these securities are purchased to settle the obligations under the sales commitments.
Investments in Partnerships and Affiliates
Investments in partnerships and affiliates, whose underlying assets consist mainly of marketable securities, are accounted for as consolidated subsidiaries or equity investments in
accordance with FIN 46R and EITF 04-5 effective as January 1, 2006. Please refer to Note C included herein. Prior to January 1, 2006, Investments in Partnerships and Affiliates
were accounted for using the equity method under which our share of net earnings or losses of these partnerships and affiliated entities was reflected in income as earned, capital
contributions were recorded when paid, and distributions received were reductions of the investments. Investments in partnerships and affiliates for which market values were not
readily available were stated at their estimated fair values as determined by our management. Depending on the terms of the investment, the Company may be restricted as to the
timing and amounts of withdrawals.
Receivables from and Payables to Brokers
Receivables from and payables to brokers consist of amounts arising primarily from the purchases and sales of securities.
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 and amounts receivable are
included in investment advisory fees receivable in the consolidated statements of financial condition. Advisory fees from Separate Accounts are generally computed quarterly based
on account values as of the end of the preceding quarter and accrued monthly and amounts receivable are included in investment advisory fees receivable in the consolidated
statements of financial condition. 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 statements of financial condition.
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