SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2013March 31, 2014
or
o                  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 YorkDelaware
 
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   No 
 
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).
Yes  No

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
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes             No 
 
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 October 31, 2013April 30, 2014
Class A Common Stock, .001 par value 6,586,6496,610,015
Class B Common Stock, .001 par value 19,424,17419,345,820


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 September 30,March 31, 2014 and 2013 and 2012
 
-    Nine months ended September 30, 2013 and 2012
 
Condensed Consolidated Statements of Comprehensive Income:
 
-    Three months ended September 30,March 31, 2014 and 2013 and 2012
-    Nine months ended September 30, 2013 and 2012
 
 
 Condensed Consolidated Statements of Financial Condition:
 -    September 30, 2013March 31, 2014
 -    December 31, 20122013
 -    September 30, 2012March 31, 2013
  
 Condensed Consolidated Statements of Equity:
 -    NineThree months ended September 30,March 31, 2014 and 2013 and 2012
  
 Condensed Consolidated Statements of Cash Flows:
 -    NineThree months ended September 30,March 31, 2014 and 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 


2

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

 Three Months Ended  Nine Months Ended  Three Months Ended 
 September 30,  September 30,  March 31, 
 2013  2012  2013  2012  2014  2013 
Revenues     
  
     
Investment advisory and incentive fees $80,438  $67,790  $230,488  $202,783  $87,797  $72,607 
Distribution fees and other income  13,545   11,139   37,420   33,768   14,873   11,353 
Institutional research services  2,394   3,302   6,940   8,453   1,807   2,221 
Total revenues  96,377   82,231   274,848   245,004   104,477   86,181 
Expenses                        
Compensation  39,803   32,948   113,214   100,423   43,897   35,652 
Management fee  5,629   3,056   14,455   9,855   4,728   3,980 
Distribution costs  12,769   10,386   35,650   30,575   13,963   11,010 
Other operating expenses  5,448   6,829   16,290   17,760   5,390   4,812 
Total expenses  63,649   53,219   179,609   158,613   67,978   55,454 
                        
Operating income  32,728   29,012   95,239   86,391   36,499   30,727 
Other income (expense)                        
Net gain from investments  19,334   7,525   43,903   17,234   6,944   12,291 
Extinguishment of debt  -   (6,305)  (137)  (6,307)
Interest and dividend income  1,134   920   4,986   3,938   1,141   1,345 
Interest expense  (2,164)  (3,586)  (8,448)  (12,419)  (1,992)  (3,488)
Shareholder-designated contribution  (313)  -   (5,313)  -   -   (5,000)
Total other income (expense), net  17,991   (1,446)  34,991   2,446 
Total other income, net  6,093   5,148 
Income before income taxes  50,719   27,566   130,230   88,837   42,592   35,875 
Income tax provision  17,515   8,467   46,434   30,909   14,616   13,195 
Net income  33,204   19,099   83,796   57,928   27,976   22,680 
Net income/(loss) attributable to noncontrolling interests  106   95   260   (17)
Net income attributable to noncontrolling interests  22   135 
Net income attributable to GAMCO Investors, Inc.'s shareholders $33,098  $19,004  $83,536  $57,945  $27,954  $22,545 
                        
Net income attributable to GAMCO Investors, Inc.'s shareholders per share:                        
Basic $1.29  $0.72  $3.25  $2.20  $1.10  $0.88 
                        
Diluted $1.29  $0.72  $3.25  $2.19  $1.09  $0.88 
                        
Weighted average shares outstanding:                        
Basic  25,625   26,250   25,682   26,309   25,481   25,742 
                        
Diluted  25,700   26,439   25,717   26,480   25,684   25,758 
                        
Dividends declared: $0.06  $0.30  $0.16  $0.63  $0.06  $0.05 

See accompanying notes.
3

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

 Three Months Ended  Nine Months Ended  Three Months Ended 
 September 30,  September 30,  March 31, 
 2013  2012  2013  2012  2014  2013 
 
  
  
  
  
  
 
Net income $33,204  $19,099  $83,796  $57,928  $27,976  $22,680 
Other comprehensive income, net of tax:                        
Foreign currency translation  49   (34)  1   (29)  8   (49)
Net unrealized gains/(losses) on securities available for sale (a)  (2,170)  2,938   (3,030)  3,816   (2,697)  6,040 
Other comprehensive income  (2,121)  2,904   (3,029)  3,787 
Other comprehensive income / (loss)  (2,689)  5,991 
                        
Comprehensive income  31,083   22,003   80,767   61,715   25,287   28,671 
Less: Comprehensive income/(loss) attributable to noncontrolling interests  (106)  (95)  (260)  17   (22)  (135)
                        
Comprehensive income attributable to GAMCO Investors, Inc. $30,977  $21,908  $80,507  $61,732  $25,265  $28,536 

(a) Net of income tax expense or (benefit) /  expense of ($1,274), $1,726, ($1,780)1,584) and $2,241,$3,547 for 2014 and 2013, respectively.

See accompanying notes.
4

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

 September 30,  December 31,  September 30,  March 31,  December 31,  March 31, 
 2013  2012  2012  2014  2013  2013 
ASSETS            
Cash and cash equivalents $245,411  $190,608  $288,685  $243,142  $210,451  $273,353 
Investments in securities  237,744   218,843   235,445   234,414   231,228   229,286 
Investments in sponsored registered investment companies  43,688   61,872   64,223   42,433   44,042   64,294 
Investments in partnerships  97,752   97,549   102,604   105,849   95,992   94,260 
Receivable from brokers  43,854   50,655   55,159   54,084   49,461   44,583 
Investment advisory fees receivable  31,151   42,429   29,187   33,035   51,506   29,624 
Income tax receivable  433   1,018   1,018   445   445   917 
Other assets  34,589   27,759   22,250   26,418   26,360   24,312 
Total assets $734,622  $690,733  $798,571  $739,820  $709,485  $760,629 
                        
LIABILITIES AND EQUITY                        
Payable to brokers $14,675  $14,346  $28,039  $11,370  $10,765  $15,059 
Income taxes payable and deferred tax liabilities  28,726   25,398   16,445   41,427   39,846   34,292 
Capital lease obligation  5,331   4,949   4,982   5,307   5,323   4,914 
Compensation payable  86,174   10,535   33,998   41,447   34,663   34,676 
Securities sold, not yet purchased  7,725   3,136   3,856   10,788   6,178   6,377 
Mandatorily redeemable noncontrolling interests  1,327   1,342   1,356   1,337   1,355   1,343 
Accrued expenses and other liabilities  28,906   26,365   30,175   30,658   32,511   34,537 
Sub-total  172,864   86,071   118,851   142,334   130,641   131,198 
                        
5.5% Senior notes (repaid May 15, 2013)  -   99,000   99,000   -   0   99,000 
5.875% Senior notes (due June 1, 2021)  100,000   100,000   100,000   100,000   100,000   100,000 
Zero coupon subordinated debentures, Face value: $20.5 million at September 30, 2013, $21.7            
million at December 31, 2012 and $21.8 million at September 30, 2012 (due December 31, 2015)  17,347   17,366   17,118 
Zero coupon subordinated debentures, Face value: $13.8 million at March 31, 2014 and            
December 31, 2013 and $21.7 million at March 31, 2013 (due December 31, 2015)  12,098   11,911   17,688 
Total liabilities  290,211   302,437   334,969   254,432   242,552   347,886 
                        
Redeemable noncontrolling interests  5,765   17,362   20,228   8,464   6,751   16,414 
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;                        
14,833,469, 14,203,146 and 13,904,190 issued, respectively; 6,592,649,            
6,121,585 and 6,685,414 outstanding, respectively  14   13   13 
15,071,087, 15,012,719 and 14,265,769 issued, respectively; 6,639,106,            
6,701,930 and 6,147,532 outstanding, respectively  14   14   13 
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;                        
24,000,000 shares issued; 19,424,174, 19,624,174 and 19,920,730 shares            
24,000,000 shares issued; 19,345,706, 19,384,174 and 19,564,174 shares            
outstanding, respectively  19   20   20   19   19   20 
Additional paid-in capital  281,194   280,089   267,914   285,215   282,496   280,196 
Retained earnings  487,702   408,295   450,326   532,839   506,441   429,553 
Accumulated other comprehensive income  23,271   26,300   26,307   27,550   30,239   32,291 
Treasury stock, at cost (8,240,820, 8,081,561 and 7,218,776 shares, respectively)  (356,343)  (347,109)  (304,567)
Treasury stock, at cost (8,431,981, 8,310,789 and 8,118,237 shares, respectively)  (371,525)  (361,878)  (349,074)
Total GAMCO Investors, Inc. stockholders' equity  435,857   367,608   440,013   474,112   457,331   392,999 
Noncontrolling interests  2,789   3,326   3,361   2,812   2,851   3,330 
Total equity  438,646   370,934   443,374   476,924   460,182   396,329 
                        
Total liabilities and equity $734,622  $690,733  $798,571  $739,820  $709,485  $760,629 

See accompanying notes.
5

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

For the ninethree months ended September 30, 2013March 31, 2014

 
  GAMCO Investors, Inc. stockholders  
  
  GAMCO Investors, Inc. stockholders  
 
 
  
  
  
  Accumulated  
  
  
  
  
  
  
  Accumulated  
  
  
 
 
  
  Additional  
  Other  
  
  Redeemable  
  
  Additional  
  Other  
  
  Redeemable 
 Noncontrolling  Common  Paid-in  Retained  Comprehensive  Treasury  
  Noncontrolling  Noncontrolling  Common  Paid-in  Retained  Comprehensive  Treasury  
  Noncontrolling 
 Interests  Stock  Capital  Earnings  Income  Stock  Total  Interests  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 
Balance at December 31, 2013 $2,851  $33  $282,496  $506,441  $30,239  $(361,878) $460,182  $6,751 
Redemptions of                                                                
noncontrolling interests  (524)  -   -   -   -   -   (524)  (15,356)  -   -   -   -   -   -   -   - 
Contributions from                                                                
noncontrolling                                                                
interests  -   -   -   -   -   -   -   3,486   -   -   -   -   -   -   -   1,652 
Net income (loss)  (13)  -   -   83,536   -   -   83,523   273   (39)  -   -   27,954   -   -   27,915   61 
Net unrealized gains on                                                                
securities available for sale,                                                                
net of income tax ($5,479)  -   -   -   -   9,331   -   9,331   - 
net of income tax ($175)  -   -   -   -   297   -   297   - 
Amounts reclassified from                                                                
accumulated other                                                                
comprehensive income,                                                                
net of income tax benefit ($7,259)  -   -   -   -   (12,361)  -   (12,361)  - 
Income tax effect of transaction                                
with shareholder  -   -   243   -   -   -   243   - 
net of income tax benefit ($1,759)  -   -   -   -   (2,994)  -   (2,994)  - 
Foreign currency translation  -   -   -   -   1   -   1   -   -   -   -   -   8   -   8   - 
Dividends declared ($0.16 per                                
Dividends declared ($0.06 per                                
share)  -   -   -   (4,129)  -   -   (4,129)  -   -   -   -   (1,556)  -   -   (1,556)  - 
Stock based compensation                                                                
expense  -   -   770   -   -   -   770   -   -   -   1,700   -   -   -   1,700   - 
Exercise of stock options                                                                
including tax benefit ($16)  -   -   92   -   -   -   92   - 
including tax benefit ($173)  -   -   1,019   -   -   -   1,019   - 
Purchase of treasury stock  -   -   -   -   -   (9,234)  (9,234)  -   -   -   -   -   -   (9,647)  (9,647)  - 
Balance at September 30, 2013 $2,789  $33  $281,194  $487,702  $23,271  $(356,343) $438,646  $5,765 
Balance at March 31, 2014 $2,812  $33  $285,215  $532,839  $27,550  $(371,525) $476,924  $8,464 

See accompanying notes.
6
GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(In thousands)

For the ninethree months ended September 30, 2012March 31, 2013

   GAMCO Investors, Inc. stockholders      GAMCO Investors, Inc. stockholders   
 
  
  
  
  Accumulated  
  
  
  
  
  
  
  Accumulated  
  
  
 
 
  
  Additional  
  Other  
  
  Redeemable  
  
  Additional  
  Other  
  
  Redeemable 
 Noncontrolling  Common  Paid-in  Retained  Comprehensive  Treasury  
  Noncontrolling  Noncontrolling  Common  Paid-in  Retained  Comprehensive  Treasury  
  Noncontrolling 
 Interests  Stock  Capital  Earnings  Income  Stock  Total  Interests  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 
Balance at December 31, 2012 $3,326  $33  $280,089  $408,295  $26,300  $(347,109) $370,934  $17,362 
Redemptions of noncontrolling                                                                
interests  -   -   -   -   -   -   -   (8,566)  -   -   -   -   -   -   -   (2,298)
Contributions from                                                                
noncontrolling                                                                
interests  -   -   -   -   -   -   -   22,662   -   -   -   -   -   -   -   1,219 
Net income (loss)  (78)  -   -   57,945   -   -   57,867   61   4   -   -   22,545   -   -   22,549   131 
Net unrealized gains on                                                                
securities available for sale,                                                                
net of income tax ($2,241)  -   -   -   -   3,816   -   3,816   - 
net of income tax ($3,823)  -   -   -   -   6,511   -   6,511   - 
Amount reclassed from                                
accumulated other                                
comprehensive income,                                
net of income tax benefit ($276)  -   -   -   -   (471)  -   (471)  - 
Foreign currency translation  -   -   -   -   (29)  -   (29)  -   -   -   -   -   (49)  -   (49)  - 
Dividends declared ($0.63 per                                
Dividends declared ($0.05 per                                
share)  -   -   -   (16,810)  -   -   (16,810)  -   -   -   -   (1,287)  -   -   (1,287)  - 
Stock based compensation                                                                
expense  -   -   2,615   -   -   -   2,615   -   -   -   15   -   -   -   15   - 
Exercise of stock options                                                                
including tax benefit ($108)  -   -   890   -   -   -   890   - 
including tax benefit  -   -   92   -   -   -   92   - 
Purchase of treasury stock  -   -   -   -   -   (12,386)  (12,386)  -   -   -   -   -   -   (1,965)  (1,965)  - 
Balance at September 30, 2012 $3,361  $33  $267,914  $450,326  $26,307  $(304,567) $443,374  $20,228 
Balance at March 31, 2013 $3,330  $33  $280,196  $429,553  $32,291  $(349,074) $396,329  $16,414 

See accompanying notes.
7

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

 Nine Months Ended  Three Months Ended 
 September 30,  March 31, 
 2013  2012  2014  2013 
Operating activities        
Net income $83,796  $57,928  $27,976  $22,680 
Adjustments to reconcile net income to net cash provided by operating activities:                
Equity in net gains from partnerships  (1,211)  (4,445)  (426)  795 
Depreciation and amortization  605   580   169   202 
Stock based compensation expense  770   2,615   1,700   15 
Deferred income taxes  1,495   1,708   (1,318)  1,471 
Tax benefit from exercise of stock options  16   108   173   16 
Foreign currency translation gain/(loss)  1   (29)  8   (49)
Other-than-temporary loss on available for sale securities  14   20 
Fair value of donated securities  1,880   393 
Cost basis of donated securities  1,267   148 
Gains on sales of available for sale securities  (16,191)  (1,503)  (1,612)  (597)
Accretion of zero coupon debentures  964   2,908   223   323 
Loss on extinguishment of debt  137   6,307   5   - 
(Increase) decrease in assets:                
Investments in trading securities  (11,730)  (60)  (324)  (5,538)
Investments in partnerships:                
Contributions to partnerships  (10,124)  (26,893)  (9,448)  (3,492)
Distributions from partnerships  11,134   29,627   17   5,987 
Receivable from brokers  6,801   (34,246)  (4,623)  6,071 
Investment advisory fees receivable  11,278   2,970   18,471   12,804 
Income tax receivable and deferred tax assets  584   (979)  -   97 
Other assets  (7,436)  6,045   (222)  3,227 
Increase (decrease) in liabilities:                
Payable to brokers  329   17,268   606   713 
Income taxes payable and deferred tax liabilities  3,613   (2,802)  4,482   3,881 
Compensation payable  75,639   16,301   6,783   24,141 
Mandatorily redeemable noncontrolling interests  (15)  (30)  (18)  1 
Accrued expenses and other liabilities  3,144   5,394   (1,898)  8,136 
Total adjustments  71,697   21,257   14,015   58,352 
Net cash provided by operating activities $155,493  $79,185  $41,991  $81,032 

8

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

 Nine Months Ended  Three Months Ended 
 September 30,  March 31, 
 2013  2012  2014  2013 
Investing activities        
Purchases of available for sale securities $(8,427) $(1,264) $(4,782) $(4)
Proceeds from sales of available for sale securities  32,422   3,068   3,880   5,343 
Return of capital on available for sale securities  1,094   1,650   323   611 
Net cash provided by investing activities  25,089   3,454 
Net cash (used in) provided by investing activities  (579)  5,950 
                
Financing activities                
Contributions from redeemable noncontrolling interests  3,486   22,662   1,652   1,219 
Redemptions of redeemable noncontrolling interests  (15,356)  (8,566)  -   (2,298)
Redemption of 5.5% Senior Notes  (99,000)  - 
Redemptions of noncontrolling interests  (524)  - 
Proceeds from exercise of stock options  76   781   846   76 
Repurchase of zero coupon subordinated debentures  (1,119)  (56,215)  (41)  - 
Dividends paid  (4,108)  (16,558)  (1,528)  (1,287)
Purchase of treasury stock  (9,234)  (12,386)  (9,647)  (1,965)
Net cash (used in) provided by financing activities  (125,779)  (70,282)
Net cash used in financing activities  (8,718)  (4,255)
Effect of exchange rates on cash and cash equivalents  -   (12)  (3)  18 
Net increase in cash and cash equivalents  54,803   12,345   32,691   82,745 
Cash and cash equivalents at beginning of period  190,608   276,340   210,451   190,608 
Cash and cash equivalents at end of period $245,411  $288,685  $243,142  $273,353 
Supplemental disclosures of cash flow information:                
Cash paid for interest $6,607  $4,684  $294  $285 
Cash paid for taxes $40,500  $31,639  $10,662  $7,272 
                
Non-cash activity:                
- For the nine months ended September 30, 2013 and September 30, 2012, the Company accrued dividends on restricted stock awards of $21 and $203, respectively. 
- For the three months ended March 31, 2014 and March 31, 2013, the Company accrued dividends on restricted stock awards of $28 and $0, respectively.- For the three months ended March 31, 2014 and March 31, 2013, the Company accrued dividends on restricted stock awards of $28 and $0, respectively. 

See accompanying notes.
9

GAMCO INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013March 31, 2014
(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, 20122013 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,We have considered all newly issued accounting guidance that is applicable to our operations and the Financial Accounting Standards Board ("FASB") issuedpreparation of our condensed consolidated statements, including that which we have not yet adopted. We do not believe that any such 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 onhas 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 withoutwill have a material impact to theeffect on our financial statements.

position or results of operations.
10

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 September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012March 31, 2013 consisted of the following:

 September 30, 2013  December 31, 2012  September 30, 2012  March 31, 2014  December 31, 2013  March 31, 2013 
 Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value 
 (In thousands)  (In thousands) 
Trading securities:                        
Government obligations $20,993  $21,000  $42,973  $42,989  $28,731  $28,742  $25,989  $25,999  $37,986  $37,994  $49,970  $49,990 
Common stocks  143,731   166,443   125,697   138,478   160,027   170,846   113,508   141,276   96,225   124,634   119,918   139,503 
Mutual funds  11,073   12,010   1,072   1,484   1,064   1,461   21,131   23,404   21,074   23,285   1,073   1,655 
Other investments  406   419   328   630   382   484   544   749   287   582   315   1,179 
Total trading securities  176,203   199,872   170,070   183,581   190,204   201,533   161,172   191,428   155,572   186,495   171,276   192,327 
                                                
Available for sale securities:                                                
Common stocks  16,372   36,297   14,822   33,560   14,931   32,239   15,003   41,538   13,389   43,046   14,312   35,225 
Mutual funds  843   1,575   1,105   1,702   1,105   1,673   700   1,448   843   1,687   1,014   1,734 
Total available for sale securities  17,215   37,872   15,927   35,262   16,036   33,912   15,703   42,986   14,232   44,733   15,326   36,959 
                                                
Total investments in securities $193,418  $237,744  $185,997  $218,843  $206,240  $235,445  $176,875  $234,414  $169,804  $231,228  $186,602  $229,286 

Securities sold, not yet purchased at September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012March 31, 2013 consisted of the following:

 September 30, 2013  December 31, 2012  September 30, 2012  March 31, 2014  December 31, 2013  March 31, 2013 
 Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value 
Trading securities: (In thousands)  (In thousands) 
Common stocks $6,411  $7,003  $2,593  $2,867  $3,044  $3,816  $8,837  $10,469  $5,319  $6,023  $5,163  $5,650 
Other investments  526   722   184   269   -   40   85   319   -   155   86   727 
Total securities sold, not yet purchased $6,937  $7,725  $2,777  $3,136  $3,044  $3,856  $8,922  $10,788  $5,319  $6,178  $5,249  $6,377 
11

Investments in sponsored registered investment companies at September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012March 31, 2013 consisted of the following:

 September 30, 2013  December 31, 2012  September 30, 2012  March 31, 2014  December 31, 2013  March 31, 2013 
 Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value 
 (In thousands)  (In thousands) 
Trading securities:                        
Mutual funds $19  $12  $19  $20  $19  $24  $19  $12  $19  $10  $19  $17 
Total trading securities  19   12   19   20   19   24   19   12   19   10   19   17 
                                                
Available for sale securities:                                                
Closed-end funds  23,850   40,272   35,868   58,511   36,721   60,731   22,565   38,980   23,100   40,624   31,014   60,895 
Mutual funds  2,031   3,404   2,055   3,341   2,080   3,468   1,939   3,441   1,951   3,408   2,047   3,382 
Total available for sale securities  25,881   43,676   37,923   61,852   38,801   64,199   24,504   42,421   25,051   44,032   33,061   64,277 
                                                
Total investments in sponsored                                                
registered investment companies $25,900  $43,688  $37,942  $61,872  $38,820  $64,223  $24,523  $42,433  $25,070  $44,042  $33,080  $64,294 

Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of the date of each balance sheet date.statement of financial condition.  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 unrealizedrealized losses in the condensed consolidated statements of income.

The following table identifies all reclassifications out of accumulated other comprehensive income for the three and nine months ended September 30,March 31, 2014 and 2013  (in thousands):
 
AmountAmount Affected Line Item inReason forAmount Affected Line ItemReason for
ReclassifiedReclassified in the StatementsReclassificationReclassified in the StatementsReclassification
from AOCIfrom AOCI Of Incomefrom AOCIfrom AOCI Of Incomefrom AOCI
Three months ended Nine months ended    
September 30, 2013 September 30, 2013 
 
  
Three months ended March 31,Three months ended March 31,    
20142014 2013 
 
  
  
 
 
      
$1,612  $597  Net gain from investments Realized gain / (loss) on sale of AFS securities
$5,745  $16,191  Net gain from investments Realized gain / (loss) on sale of AFS securities 3,141   150  Other operating expenses Realized gain / (loss) on donation of AFS securities
 3,112   3,443  Other operating expenses Donation of AFS securities 4,753   747  Income before income taxes 
 -   (14) Net gain from investments Other than temporary impairment of AFS securities (1,759)  (276) Income tax provision 
 8,857   19,620  Income before income taxes $2,994  $471  Net income 
 (3,277)  (7,259) Income tax provision               
$5,580  $12,361  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 September 30,March 31, 2014 and 2013, and 2012, the Company had transactions in equity derivatives which resulted in net gains of $191,000 and net losses of ($411,000), respectively.  For the nine months ended September 30, 2013$190,000 and 2012, the Company had transactions in equity derivatives which resulted in net gains of $471,000 and net losses of ($425,000),$281,000, respectively.  At September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012,March 31, 2013, we held derivative contracts on 1.61.9 million equity shares, 1.21.3 million equity shares and 1.1 million222,000 equity shares, respectively, with aand the fair value ofwas ($143,000)107,000), ($121,000)$120,000 and ($6,000),$61,000, respectively; thatthese 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. 
12

The Company is a party to enforceable master netting arrangements for swaps entered into as part of the investment strategy of the Company's investment strategy.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 condensed consolidated statements of financial condition. 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 Condition 
 
 Gross  Gross Amounts  Net Amounts of  
  
  
 
 
 Amounts of  Offset in the  Assets Presented  
  
  
 
 
 Recognized  Statements of  in the Statements of  Financial  Cash Collateral  
 
 
 Assets  Financial Condition  Financial Condition  Instruments  Received  Net Amount 
Swaps: (in thousands) 
September 30, 2013 $101  $-  $101  $(101) $-  $- 
December 31, 2012  148   -   148   (132)  -   16 
September 30, 2012 $197  $-  $197  $(197) $-  $- 
 
                        
 
             Gross Amounts Not Offset in the 
 
             Statements of Financial Condition 
 
 Gross  Gross Amounts  Net Amounts of             
 
 Amounts of  Offset in the  Liabilities Presented             
 
 Recognized  Statements of  in the Statements of  Financial  Cash Collateral     
 
 Liabilities  Financial Condition  Financial Condition  Instruments  Pledged  Net Amount 
Swaps: (in thousands) 
September 30, 2013 $135  $-  $135  $(101) $-  $34 
December 31, 2012  132   -   132   (132)  -   - 
September 30, 2012 $200  $-  $200  $(197) $-  $3 
 
 
  
  
  Gross Amounts Not Offset in the 
 
 
  
  
  Statements of Financial Condition 
 
 Gross  Gross Amounts  Net Amounts of  
  
  
 
 
 Amounts of  Offset in the  Assets Presented  
  
  
 
 
 Recognized  Statements of  in the Statements of  Financial  Cash Collateral  
 
 
 Assets  Financial Condition  Financial Condition  Instruments  Received  Net Amount 
Swaps: (in thousands) 
March 31, 2014 $198  $-  $198  $(198) $-  $- 
December 31, 2013  275   -   275   (155)  -   120 
March 31, 2013 $788  $-  $788  $(703) $-  $85 
 
                        
 
             Gross Amounts Not Offset in the 
 
             Statements of Financial Condition 
 
 Gross  Gross Amounts  Net Amounts of             
 
 Amounts of  Offset in the  Liabilities Presented             
 
 Recognized  Statements of  in the Statements of  Financial  Cash Collateral     
 
 Liabilities  Financial Condition  Financial Condition  Instruments  Pledged  Net Amount 
Swaps: (in thousands) 
March 31, 2014 $277  $-  $277  $(198) $-  $79 
December 31, 2013  155   -   155   (155)  -   - 
March 31, 2013 $703  $-  $703  $(703) $-  $- 

13
The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of available for sale investments as of September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012:March 31, 2013:

 September 30, 2013  March 31, 2014 
 
  Gross  Gross  
  
  Gross  Gross  
 
 
  Unrealized  Unrealized  
  
  Unrealized  Unrealized  
 
 Cost  Gains  Losses  Fair Value  Cost  Gains  Losses  Fair Value 
 (In thousands)  (In thousands) 
Common stocks $16,372  $19,925  $-  $36,297  $15,003  $26,535  $-  $41,538 
Closed-end Funds  23,850   16,545   (123)  40,272   22,565   16,477   (62)  38,980 
Mutual funds  2,874   2,141   (36)  4,979   2,639   2,250   -   4,889 
Total available for sale securities $43,096  $38,611  $(159) $81,548  $40,207  $45,262  $(62) $85,407 

 December 31, 2012  December 31, 2013 
 
  Gross  Gross  
  
  Gross  Gross  
 
 
  Unrealized  Unrealized  
  
  Unrealized  Unrealized  
 
 Cost  Gains  Losses  Fair Value  Cost  Gains  Losses  Fair Value 
 (In thousands)  (In thousands) 
Common stocks $14,822  $18,738  $-  $33,560  $13,389  $29,657  $-  $43,046 
Closed-end Funds  35,868   22,645   (2)  58,511   23,100   17,654   (130)  40,624 
Mutual funds  3,160   1,883   -   5,043   2,794   2,325   (24)  5,095 
Total available for sale securities $53,850  $43,266  $(2) $97,114  $39,283  $49,636  $(154) $88,765 

  September 30, 2012 
 
 
  Gross  Gross  
 
 
 
  Unrealized  Unrealized  
 
  Cost  Gains  Losses  Fair Value 
  (In thousands) 
Common stocks $14,931  $17,308  $-  $32,239 
Closed-end Funds  36,721   24,010   -   60,731 
Mutual funds  3,185   1,956   -   5,141 
Total available for sale securities $54,837  $43,274  $-  $98,111 
13
  March 31, 2013 
 
 
  Gross  Gross  
 
 
 
  Unrealized  Unrealized  
 
  Cost  Gains  Losses  Fair 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 

Unrealized changes in fair value, net of taxes, for the three months ended September 30,March 31, 2014 and March 31, 2013 and September 30, 2012 of ($2.2)2.7) million in losses and $2.9$6.0 million in gains, respectively, have been included in other comprehensive income, a component of equity, at September 30, 2013March 31, 2014 and September 30, 2012.March 31, 2013.  Return of capital on available for sale securities was $0.5$0.3 million and $0.8$0.6 million for the three months ended September 30,March 31, 2014 and March 31, 2013, and September 30, 2012, respectively.  Proceeds from sales of investments available for sale were approximately $10.4$3.9 million and $2.3$5.3 million for the three months ended September 30,March 31, 2014 and March 31, 2013, and September 30, 2012, respectively.  For the three months ended September 30,March 31, 2014 and March 31, 2013, and September 30, 2012, gross gains on the sale of investments available for sale amounted to $5.7$1.6 million and $1.1$0.6 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 September 30, 2013March 31, 2014 or September 30, 2012.  Unrealized changes in fair value, net of taxes, for the nine months ended September 30, 2013 and September 30, 2012 of ($3.0) million in losses and $3.8 million in gains, respectively, have been included in other comprehensive income, a component of equity, at September 30, 2013 and September 30, 2012.  Return of capital on available for sale securities was $1.1 million and $1.7 million for the nine months ended September 30, 2013 and September 30, 2012, respectively.  Proceeds from sales of investments available for sale were approximately $32.4 million and $3.1 million for the nine months ended September 30, 2013 and September 30, 2012, respectively.  For the nine months ended September 30, 2013 and September 30, 2012, gross gains on the sale of investments available for sale amounted to $16.2 million and $1.5 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 nine months ended September 30, 2013 or September 30, 2012.March 31, 2013.  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:

 September 30, 2013  December 31, 2012  September 30, 2012  March 31, 2014  December 31, 2013  March 31, 2013 
 
  Unrealized  
  
  Unrealized  
  
  Unrealized  
  
  Unrealized  
  
  Unrealized  
  
  Unrealized  
 
 Cost  Losses  Fair Value  Cost  Losses  Fair Value  Cost  Losses  Fair Value  Cost  Losses  Fair Value  Cost  Losses  Fair Value  Cost  Losses  Fair Value 
(in thousands) 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
Cosed-end funds $941  $(123) $818  $73  $(2) $71  $-  $-  $-  $828  $(62) $766  $912  $(130) $782  $-  $-  $- 
Mutual Funds  365   (36)  329   -   -   -   -   -   -   -   -   -   303   (24)  279   216   (3)  213 
Total $1,306  $(159) $1,147  $73  $(2) $71  $-  $-  $-  $828  $(62) $766  $1,215  $(154) $1,061  $216  $(3) $213 

At September 30, 2013,March 31, 2014, there were fourtwo 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 these specific instances, the investments at September 30, 2013March 31, 2014 were open and closed-end funds with diversified holdings across multiple companies and across multiple industries.  All holdings wereOne holding was impaired for fourseven months and one holding was impaired for ten months at September 30, 2013.March 31, 2014.  The value of these holdings at September 30, 2013March 31, 2014 was $1.1$0.8 million.  If these holdings were to continue to be impaired, we may need to record an impairment in a future period on the condensed consolidated statement of income for the amount of the unrealized loss, which at September 30, 2013 was $159,000.

14
At December 31, 20122013 there was onefour 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 investmentinvestments at December 31, 2012 was a2013 were open-end funds and closed-end fundfunds with diversified holdings across multiple companies and across multiple industries.  The oneOne holding was impaired for one month, one for two months, one for four months and one for seven month at December 31, 20122013 . The value of this holdingthese holdings at December 31, 20122013 was $0.1$1.1 million.

At September 30, 2012,March 31, 2013, there were no available for saletwo holdings in loss positions.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 holdings at March 31, 2013 was $0.2 million.

For the ninethree months ended September 30,March 31, 2014 and 2013, and September 30, 2012, there was $14,000 and $20,000 ofwere no losses respectively, on available for sale securities deemed to be other than temporary.  There were no losses for the three months ended September 30, 2013 and September 30, 2012.
1415

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 September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012March 31, 2013 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 September 30, 2013March 31, 2014 (in thousands)

 Quoted Prices in Active  Significant Other  Significant  Balance as of  Quoted Prices in Active  Significant Other  Significant  Balance as of 
 Markets for Identical  Observable  Unobservable  September 30,  Markets for Identical  Observable  Unobservable  March 31, 
Assets Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2013  Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2014 
Cash equivalents $244,144  $-  $-  $244,144  $242,917  $-  $-  $242,917 
Investments in partnerships  -   23,146   -   23,146   -   24,080   -   24,080 
Investments in securities:                                
AFS - Common stocks  36,297   -   -   36,297   41,538   -   -   41,538 
AFS - Mutual funds  1,575   -   -   1,575   1,448   -   -   1,448 
Trading - Gov't obligations  21,000   -   -   21,000   25,999   -   -   25,999 
Trading - Common stocks  165,776   -   667   166,443   140,575   1   700   141,276 
Trading - Mutual funds  12,010   -   -   12,010   23,404   -   -   23,404 
Trading - Other  32   104   283   419   253   212   284   749 
Total investments in securities  236,690   104   950   237,744   233,217   213   984   234,414 
Investments in sponsored registered investment companies:Investments in sponsored registered investment companies:             Investments in sponsored registered investment companies:             
AFS - Closed-end Funds  40,272   -   -   40,272   38,980   -   -   38,980 
AFS - Mutual Funds  3,404   -   -   3,404   3,441   -   -   3,441 
Trading - Mutual funds  12   -   -   12   12   -   -   12 
Total investments in sponsored                                
registered investment companies  43,688   -   -   43,688   42,433   -   -   42,433 
Total investments  280,378   23,250   950   304,578   275,650   24,293   984   300,927 
Total assets at fair value $524,522  $23,250  $950  $548,722  $518,567  $24,293  $984  $543,844 
Liabilities                                
Trading - Common stocks $7,003  $-  $-  $7,003  $10,469  $-  $-  $10,469 
Trading - Other  -   722   -   722   -   319   -   319 
Securities sold, not yet purchased $7,003  $722  $-  $7,725  $10,469  $319  $-  $10,788 

1516
Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 20122013 (in thousands)

 Quoted Prices in Active  Significant Other  Significant  Balance as of  Quoted Prices in Active  Significant Other  Significant  Balance as of 
 Markets for Identical  Observable  Unobservable  December 31,  Markets for Identical  Observable  Unobservable  December 31, 
Assets Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2012  Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2013 
Cash equivalents $190,475  $-  $-  $190,475  $209,913  $-  $-  $209,913 
Investments in partnerships  -   26,128   -   26,128   -   25,253   -   25,253 
Investments in securities:                                
AFS - Common stocks  33,560   -   -   33,560   43,046   -   -   43,046 
AFS - Mutual funds  1,702   -   -   1,702   1,687   -   -   1,687 
Trading - Gov't obligations  42,989   -   -   42,989   37,994   -   -   37,994 
Trading - Common stocks  137,796   7   675   138,478   123,927   7   700   124,634 
Trading - Mutual funds  1,484   -   -   1,484   23,285   -   -   23,285 
Trading - Other  120   148   362   630   23   275   284   582 
Total investments in securities  217,651   155   1,037   218,843   229,962   282   984   231,228 
Investments in sponsored registered investment companies:Investments in sponsored registered investment companies:             Investments in sponsored registered investment companies:             
AFS - Closed-end Funds  58,511   -   -   58,511   40,624   -   -   40,624 
AFS - Mutual Funds  3,341   -   -   3,341   3,408   -   -   3,408 
Trading - Mutual funds  20   -   -   20   10   -   -   10 
Total investments in sponsored                                
registered investment companies  61,872   -   -   61,872   44,042   -   -   44,042 
Total investments  279,523   26,283   1,037   306,843   274,004   25,535   984   300,523 
Total assets at fair value $469,998  $26,283  $1,037  $497,318  $483,917  $25,535  $984  $510,436 
Liabilities                                
Trading - Common stocks $2,867  $-  $-  $2,867  $6,023  $-  $-  $6,023 
Trading - Other  -   269   -   269   -   155   -   155 
Securities sold, not yet purchased $2,867  $269  $-  $3,136  $6,023  $155  $-  $6,178 

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2012March 31, 2013 (in thousands)

 Quoted Prices in Active  Significant Other  Significant  Balance as of  Quoted Prices in Active  Significant Other  Significant  Balance as of 
 Markets for Identical  Observable  Unobservable  September 30,  Markets for Identical  Observable  Unobservable  March 31, 
Assets Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2012  Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2013 
Cash equivalents $288,450  $-  $-  $288,450  $272,653  $-  $-  $272,653 
Investments in partnerships  -   24,976   -   24,976   -   23,772   -   23,772 
Investments in securities:                                
AFS - Common stocks  32,239   -   -   32,239   35,225   -   -   35,225 
AFS - Mutual funds  1,673   -   -   1,673   1,734   -   -   1,734 
Trading - Gov't obligations  28,742   -   -   28,742   49,990   -   -   49,990 
Trading - Common stocks  170,159   10   677   170,846   138,829   7   667   139,503 
Trading - Mutual funds  1,461   -   -   1,461   1,655   -   -   1,655 
Trading - Other  59   77   348   484   92   788   299   1,179 
Total investments in securities  234,333   87   1,025   235,445   227,525   795   966   229,286 
Investments in sponsored registered investment companies:Investments in sponsored registered investment companies:             Investments in sponsored registered investment companies:             
AFS - Closed-end Funds  60,731   -   -   60,731   60,895   -   -   60,895 
AFS - Mutual Funds  3,468   -   -   3,468   3,382   -   -   3,382 
Trading - Mutual funds  24   -   -   24   17   -   -   17 
Total investments in sponsored                                
registered investment companies  64,223   -   -   64,223   64,294   -   -   64,294 
Total investments  298,556   25,063   1,025   324,644   291,819   24,567   966   317,352 
Total assets at fair value $587,006  $25,063  $1,025  $613,094  $564,472  $24,567  $966  $590,005 
Liabilities                                
Trading - Common stocks $3,816  $-  $-  $3,816  $5,650  $-  $-  $5,650 
Trading - Other  -   40   -   40   -   727   -   727 
Securities sold, not yet purchased $3,816  $40  $-  $3,856  $5,650  $727  $-  $6,377 
1617

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 September 30, 2013March 31, 2014 (in thousands)

 
  
  Total  
  
  
  
  
  
  
  Total  
  
  
  
  
 
 
  
  Unrealized  
  
  
  
  
  
  
  Unrealized  
  
  
  
  
 
 
  
  Gains or  Total  
  
  
  
  
  
  Gains or  Total  
  
  
  
 
 
  Total Realized and  (Losses)  Realized  
  
  
  
  
  Total Realized and  (Losses)  Realized  
  
  
  
 
 June  Unrealized Gains or  Included in  and  
  
  Transfers  
  December  Unrealized Gains or  Included in  and  
  
  Transfers  
 
 30, 2013  (Losses) in Income  Other  Unrealized      In and/or  
  31, 2013  (Losses) in Income  Other  Unrealized      In and/or  
 
 Beginning  
  AFS  Comprehensive  Gains or  
  
  (Out) of  Ending  Beginning  
  AFS  Comprehensive  Gains or  
  
  (Out) of  Ending 
Asset Balance  Trading  Investments  Income  (Losses)  Purchases  Sales  Level 3  Balance  Balance  Trading  Investments  Income  (Losses)  Purchases  Sales  Level 3  Balance 
Financial                                      
instruments owned:                                      
                    
Trading - Common stocks $669  $(2) $-  $-  $(2) $-  $-  $-  $667 Trading - Common stocks$700  $-  $-  $-  $-  $-  $-  $-  $700 
Trading - Other  284   (1)  -   -   (1)  -   -   -   283   284   -   -   -   -   -   -   -   284 
Total $953  $(3) $-  $-  $(3)  -  $-  $-  $950  $984  $-  $-  $-  $-   -  $-  $-  $984 

There were no transfers between any Levels during the three months ended September 30, 2013.March 31, 2014.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2012March 31, 2013 (in thousands)

 
  
  Total  
  
  
  
  
  
  
  Total  
  
  
  
  
 
 
  
  Unrealized  
  
  
  
  
  
  
  Unrealized  
  
  
  
  
 
 
  
  Gains or  Total  
  
  
  
  
  
  Gains or  Total  
  
  
  
 
 
  Total Realized and  (Losses)  Realized  
  
  
  
  
  Total Realized and  (Losses)  Realized  
  
  
  
 
 June  Unrealized Gains or  Included in  and  
  
  Transfers  
  December  Unrealized Gains or  Included in  and  
  
  Transfers  
 
 30, 2012  (Losses) in Income  Other  Unrealized      In and/or  
  31, 2012  (Losses) in Income  Other  Unrealized      In and/or  
 
 Beginning  
  AFS  Comprehensive  Gains or  
  
  (Out) of  Ending  Beginning  
  AFS  Comprehensive  Gains or  
  
  (Out) of  Ending 
Asset Balance  Trading  Investments  Income  (Losses)  Purchases  Sales  Level 3  Balance  Balance  Trading  Investments  Income  (Losses)  Purchases  Sales  Level 3  Balance 
Financial                                      
instruments owned:     
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
Trading - Common stocks $671  $6  $-  $-  $6  $-  $-  $-  $677 Trading - Common stocks$675  $(8) $-  $-  $(8) $-  $-  $-  $667 
Trading - Other  351   15   -   -   15   -   (18)  -   348   362   1   -   -   1   -   (64)  -   299 
Total $1,022  $21  $-  $-  $21  $-  $(18) $-  $1,025  $1,037  $(7) $-  $-  $(7) $-  $(64) $-  $966 

There were no transfers between any Levels during the three months ended September 30, 2012.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 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   (3)  -   -   (3)  3   (79)  -   283 
Total $1,037  
$ 
(11) $-  $-  
$ 
(11) $3  
$ 
(79) $-  $950 

There were no transfers between any Levels during the nine months ended September 30,March 31, 2013.
17
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 2012 (in thousands)

 
 
  
  Total  
  
  
  
  
 
 
 
  
  Unrealized  
  
  
  
  
 
 
 
  
  Gains or  Total  
  
  
  
 
 
 
  Total Realized and  (Losses)  Realized  
  
  
  
 
 
 December  Unrealized Gains or  Included in   and  
  
  Transfer  
 
  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  $30  $-  $-  $30  $57  
$ 
(80) $-   677 
Trading - Other  284   72   -   -   72   18   (26)  -   348 
Total $954  $102  $-  $-  $102  $75  
$ 
(106) $-   1,025 

There were no transfers between any Levels during the nine months ended September 30, 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 $84.3$91.1 million, $83.9$82.0 million and $88.3$80.8 million at September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012,March 31, 2013, respectively, and whose underlying assets consist primarily of marketable securities (the "affiliated entities"). We also have investments in unaffiliated entities of $14.7 million, $14.0 million and $13.5 million $13.6 million and $14.3 million at September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012,March 31, 2013, 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 condensed consolidated 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.

18
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 in consolidation, partnerships and offshore funds.

Entities consolidated
                        
 CFFs Partnerships Offshore Funds Total CFFs Partnerships Offshore Funds Total
 VIEsVOEs VIEsVOEs VIEsVOEs VIEsVOEs VIEsVOEs VIEsVOEs VIEsVOEs VIEsVOEs
Entities consolidated at December 31, 2011 12
 
-1
 
-1
 
14
Additional consolidated entities --
 
--
 
--
 
--
Deconsolidated entities --
 
--
 
--
 
--
Entities consolidated at September 30, 2012 12
 
-1
 
-1
 
14
Additional consolidated entities --
 
--
 
--
 
--
Deconsolidated entities --
 
--
 
--
 
--
Entities consolidated at December 31, 2012 12
 
-1
 
-1
 
14 12
 
-1
 
-1
 
14
Additional consolidated entities --
 
--
 
--
 
-- --
 
--
 
--
 
--
Deconsolidated entities --
 
--
 
--
 
-- --
 
--
 
--
 
--
Entities consolidated at September 30, 2013 12
 
-1
 
-1
 
14
Entities consolidated at March 31, 2013 12
 
-1
 
-1
 
14
Additional consolidated entities --
 
--
 
--
 
--
Deconsolidated entities --
 
--
 
--
 
--
Entities consolidated at December 31, 2013 12
 
-1
 
-1
 
14
Additional consolidated entities --
 
--
 
--
 
--
Deconsolidated entities --
 
--
 
--
 
--
Entities consolidated at March 31, 2014 12
 
-1
 
-1
 
14
18

At and for the ninethree months ended September 30,March 31, 2014 and 2013 and 2012 and at December 31, 2012,2013, 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 ninethree months ended September 30,March 31, 2014 and 2013 and 2012 and at December 31, 2012,2013, 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.type (in thousands):

 September 30, 2013  March 31, 2014 
 Investment Type  Investment Type 
 Affiliated  Unaffiliated    Affiliated  Unaffiliated   
 Consolidated  
  
  
  
  
  Consolidated  
  
  
  
  
 
Accounting method Feeder Funds  Partnerships  Offshore Funds  Partnerships  Offshore Funds  Total  Feeder Funds  Partnerships  Offshore Funds  Partnerships  Offshore Funds  Total 
                        
Fair Value $23,146  $-  $-  $-  $-  $23,146  $24,080  $-  $-  $-  $-  $24,080 
Equity Method  -   26,717   34,460   6,080   7,349   74,606   -   30,266   36,779   6,677   8,047   81,769 
                                                
Total $23,146  $26,717  $34,460  $6,080  $7,349  $97,752  $24,080  $30,266  $36,779  $6,677  $8,047  $105,849 

 December 31, 2012  December 31, 2013 
 Investment Type  Investment Type 
 Affiliated  Unaffiliated    Affiliated  Unaffiliated   
 Consolidated  
  
  
  
  
  Consolidated  
  
  
  
  
 
Accounting method Feeder Funds  Partnerships  Offshore Funds  Partnerships  Offshore Funds  Total  Feeder Funds  Partnerships  Offshore Funds  Partnerships  Offshore Funds  Total 
                        
Fair Value $26,128  $-  $-  $-  $-  $26,128  $25,253  $-  $-  $-  $-  $25,253 
Equity Method  -   28,158   29,679   6,505   7,079   71,421   -   21,669   35,030   6,509   7,531   70,739 
                                                
Total $26,128  $28,158  $29,679  $6,505  $7,079  $97,549  $25,253  $21,669  $35,030  $6,509  $7,531  $95,992 

 September 30, 2012  March 31, 2013 
 Investment Type  Investment Type 
 Affiliated  Unaffiliated    Affiliated  Unaffiliated   
 Consolidated  
  
  
  
  
  Consolidated  
  
  
  
  
 
Accounting method Feeder Funds  Partnerships  Offshore Funds  Partnerships  Offshore Funds  Total  Feeder Funds  Partnerships  Offshore Funds  Partnerships  Offshore Funds  Total 
                        
Fair Value $24,976  $-  $-  $-  $-  $24,976  $23,772  $-  $-  $-  $-  $23,772 
Equity Method  -   32,475   30,901   7,518   6,734   77,628   -   27,477   29,551   6,427   7,033   70,488 
                                                
Total $24,976  $32,475  $30,901  $7,518  $6,734  $102,604  $23,772  $27,477  $29,551  $6,427  $7,033  $94,260 
19

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):

 September 30, 2013  March 31, 2014 
 Prior to  
  
  Offshore  
  Prior to  
  
  Offshore  
 
 Consolidation  CFFs  Partnerships  Funds  As Reported  Consolidation  CFFs  Partnerships  Funds  As Reported 
Assets                    
Cash and cash equivalents $243,995  $1,082  $334  $-  $245,411  $242,826  $1  $315  $-  $243,142 
Investments in securities  240,113   -   7,400   (9,769)  237,744   234,628   -   7,708   (7,922)  234,414 
Investments in sponsored investment companies  43,677   -   11   -   43,688   42,422   -   11   -   42,433 
Investments in partnerships  104,010   3,253   (9,511)  -   97,752   110,330   4,636   (9,117)  -   105,849 
Receivable from brokers  26,981   -   2,115   14,758   43,854   39,163   -   1,411   13,510   54,084 
Investment advisory fees receivable  31,241   (8)  (1)  (81)  31,151   33,112   2   -   (79)  33,035 
Other assets  34,947   -   -   75   35,022   26,749   8   -   106   26,863 
Total assets $724,964  $4,327  $348  $4,983  $734,622  $729,230  $4,647  $328  $5,615  $739,820 
Liabilities and equity                                        
Securities sold, not yet purchased $7,577  $-  $-  $148  $7,725  $10,531  $-  $-  $257  $10,788 
Accrued expenses and other liabilities  161,394   1,146   32   2,567   165,139   129,677   88   37   1,744   131,546 
Total debt  117,347   -   -   -   117,347   112,098   -   -   -   112,098 
Redeemable noncontrolling interests  -   3,181   316   2,268   5,765   -   4,559   291   3,614   8,464 
Total equity  438,646   -   -   -   438,646   476,924   -   -   -   476,924 
Total liabilities and equity $724,964  $4,327  $348  $4,983  $734,622  $729,230  $4,647  $328  $5,615  $739,820 

 December 31, 2012  December 31, 2013 
 Prior to  
  
  Offshore  
  Prior to  
  
  Offshore  
 
 Consolidation  CFFs  Partnerships  Funds  As Reported  Consolidation  CFFs  Partnerships  Funds  As Reported 
Assets                    
Cash and cash equivalents $189,743  $-  $865  $-  $190,608  $209,667  $450  $334  $-  $210,451 
Investments in securities  213,639   -   6,944   (1,740)  218,843   232,211   -   7,464   (8,447)  231,228 
Investments in sponsored investment companies  61,852   -   20   -   61,872   44,033   -   9   -   44,042 
Investments in partnerships  100,164   5,388   (8,003)  -   97,549   98,494   6,517   (9,019)  -   95,992 
Receivable from brokers  25,972   -   1,480   23,203   50,655   35,151   -   -   14,310   49,461 
Investment advisory fees receivable  42,425   9   (5)  -   42,429   52,509   (24)  (14)  (965)  51,506 
Other assets  32,673   (2,986)  (1,000)  90   28,777   27,433   (2,339)  1,592   119   26,805 
Total assets $666,468  $2,411  $301  $21,553  $690,733  $699,498  $4,604  $366  $5,017  $709,485 
Liabilities and equity                                        
Securities sold, not yet purchased $3,033  $-  $-  $103  $3,136  $6,049  $-  $-  $129  $6,178 
Accrued expenses and other liabilities  76,135   384   21   6,395   82,935   121,356   165   29   2,913   124,463 
Total debt  216,366   -   -   -   216,366   111,911   -   -   -   111,911 
Redeemable noncontrolling interests  -   2,027   280   15,055   17,362   -   4,439   337   1,975   6,751 
Total equity  370,934   -   -   -   370,934   460,182   -   -   -   460,182 
Total liabilities and equity $666,468  $2,411  $301  $21,553  $690,733  $699,498  $4,604  $366  $5,017  $709,485 

 September 30, 2012  March 31, 2013 
 Prior to  
  
  Offshore  
  Prior to  
  
  Offshore  
 
 Consolidation  CFFs  Partnerships  Funds  As Reported  Consolidation  CFFs  Partnerships  Funds  As Reported 
Assets                    
Cash and cash equivalents $287,806  $-  $879  $-  $288,685  $272,454  $534  $365  $-  $273,353 
Investments in securities  222,489   -   6,908   6,048   235,445   214,627   -   7,733   6,926   229,286 
Investments in sponsored investment companies  64,223   -   -   -   64,223   64,278   -   16   -   64,294 
Investments in partnerships  109,801   1,540   (8,737)  -   102,604   99,500   3,423   (8,663)  -   94,260 
Receivable from brokers  27,597   -   1,255   26,307   55,159   30,569   -   866   13,148   44,583 
Investment advisory fees receivable  29,182   6   (1)  -   29,187   29,717   (6)  (2)  (85)  29,624 
Other assets  23,047   9   -   212   23,268   26,136   (1,000)  -   93   25,229 
Total assets $764,145  $1,555  $304  $32,567  $798,571  $737,281  $2,951  $315  $20,082  $760,629 
Liabilities and equity                                        
Securities sold, not yet purchased $3,879  $-  $-  $(23) $3,856  $5,864  $-  $-  $513  $6,377 
Accrued expenses and other liabilities  100,774   68   30   14,123   114,995   118,401   614   34   5,772   124,821 
Total debt  216,118   -   -   -   216,118   216,688   -   -   -   216,688 
Redeemable noncontrolling interests  -   1,487   274   18,467   20,228   (1)  2,337   281   13,797   16,414 
Total equity  443,374   -   -   -   443,374   396,329   -   -   -   396,329 
Total liabilities and equity $764,145  $1,555  $304  $32,567  $798,571  $737,281  $2,951  $315  $20,082  $760,629 
20

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 September 30, 2013  Three Months Ended March 31, 2014 
 Prior to  
  
  Offshore  
  Prior to  
  
  Offshore  
 
 Consolidation  CFFs  Partnerships  Funds  As Reported  Consolidation  CFFs  Partnerships  Funds  As Reported 
Total revenues $96,620  $(8) $(1) $(234) $96,377  $104,701  $(7) $(1) $(216) $104,477 
Total expenses  63,400   46   11   192   63,649   67,712   34   12   220   67,978 
Operating income  33,220   (54)  (12)  (426)  32,728   36,989   (41)  (13)  (436)  36,499 
Total other income, net  17,404   94   31   462   17,991   5,541   76   4   472   6,093 
Income before income taxes  50,624   40   19   36   50,719   42,530   35   (9)  36   42,592 
Income tax provision  17,515   -   -   -   17,515   14,616   -   -   -   14,616 
Net income  33,109   40   19   36   33,204   27,914   35   (9)  36   27,976 
Net income attributable to noncontrolling interests  11   40   19   36   106   (40)  35   (9)  36   22 
Net income attributable to GAMCO $33,098  $-  $-  $-  $33,098  $27,954  $-  $-  $-  $27,954 

  Three Months Ended September 30, 2012 
  Prior to  
  
  Offshore  
 
 
 Consolidation  CFFs  Partnerships  Funds  As Reported 
Total revenues $82,489  $(2) $(1) $(255) $82,231 
Total expenses  52,976   28   11   204   53,219 
Operating income  29,513   (30)  (12)  (459)  29,012 
Total other income, net  (2,032)  78   34   474   (1,446)
Income before income taxes  27,481   48   22   15   27,566 
Income tax provision  8,467   -   -   -   8,467 
Net income  19,014   48   22   15   19,099 
Net income attributable to noncontrolling interests  10   48   22   15   95 
Net income attributable to GAMCO $19,004  $-  $-  $-  $19,004 

  Nine Months Ended September 30, 2013 
  Prior to  
  
  Offshore  
 
 
 Consolidation  CFFs  Partnerships  Funds  As Reported 
Total revenues $275,689  $(20) $(2) $(819) $274,848 
Total expenses  178,858   134   36   581   179,609 
Operating income  96,831   (154)  (38)  (1,400)  95,239 
Total other income, net  33,125   228   79   1,559   34,991 
Income before income taxes  129,956   74   41   159   130,230 
Income tax provision  46,434   -   -   -   46,434 
Net income  83,522   74   41   159   83,796 
Net income attributable to noncontrolling interests  (14)  74   41   159   260 
Net income attributable to GAMCO $83,536  $-  $-  $-  $83,536 

 Nine Months Ended September 30, 2012  Three Months Ended March 31, 2013 
 Prior to  
  
  Offshore  
  Prior to  
  
  Offshore  
 
 Consolidation  CFFs  Partnerships  Funds  As Reported  Consolidation  CFFs  Partnerships  Funds  As Reported 
Total revenues $245,771  $(4) $(2) $(761) $245,004  $86,456  $(6) $(1) $(268) $86,181 
Total expenses  158,146   76   30   361   158,613   55,215   53   10   176   55,454 
Operating income  87,625   (80)  (32)  (1,122)  86,391   31,241   (59)  (11)  (444)  30,727 
Total other income, net  1,151   175   51   1,069   2,446   4,502   110   15   521   5,148 
Income before income taxes  88,776   95   19   (53)  88,837   35,743   51   4   77   35,875 
Income tax provision  30,909   -   -   -   30,909   13,195   -   -   -   13,195 
Net income  57,867   95   19   (53)  57,928   22,548   51   4   77   22,680 
Net income attributable to noncontrolling interests  (78)  95   19   (53)  (17)  3   51   4   77   135 
Net income attributable to GAMCO $57,945  $-  $-  $-   57,945  $22,545  $-  $-  $-  $22,545 

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 September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012March 31, 2013 were $77.7$74.1 million, $75.0$72.7 million and $78.6$77.8 million, respectively.  Our maximum exposure to loss as a result of our involvement with the nonconsolidatednon-consolidated VIEs is limited to the investment in one VIEtwo VIEs and the deferred carried interest that we have in another.  On September 30, 2013,March 31, 2014, we had an investment in two of the non-consolidated VIE offshore funds of approximately $10.9 million.  On December 31, 20122013 and September 30, 2012,March 31, 2013, we had an investment in one of the non-consolidated VIE offshore funds of approximately $9.9 million, $7.7$10.0 million and $8.2$8.3 million, respectively, which was included in investments in partnerships on the condensed consolidated statements of financial condition.  On September 30, 2013,For each of the three month periods ended March 31, 2014, December 31, 20122013 and September 30, 2012,March 31, 2013, we had a deferred carried interest in one of the non-consolidated VIE offshore funds of approximately $45,000 $45,000 and $42,000, 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.
21

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:VIE.  Only one VIE was consolidated at March 31, 2014, December 31, 2013 and March 31, 2013:

 September 30, 2013  December 31, 2012  September 30, 2012  March 31, 2014  December 31, 2013  March 31, 2013 
(In thousands)            
Cash and cash equivalents $1,082  $-  $-  $-  $-  $21 
Investments in partnerships  13,782   18,507   23,086   13,798   15,540   15,484 
Accrued expenses and other liabilities  (1,088)  (3,010)  (15)  (16)  (2,022)  (1,041)
Redeemable noncontrolling interests  -   (411)  (962)  (1,103)  (1,120)  - 
GAMCO's net interests in consolidated VIE $13,776  $15,086  $22,109  $12,679  $12,398  $14,464 

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E. Income Taxes
 
The effective tax rate for the three months ended September 30, 2013March 31, 2014 was 34.5%34.3% compared to 30.7%36.8% for the prior year three month period.  TheDuring the quarter ended March 31, 2014 we benefitted from the donation of appreciated securities used to fund our shareholder designated charitable contribution program.  We expect the effective tax rate for the nine months ended September 30, 2013 was 35.7% comparedremainder of 2014 to 34.8% forapproximate the prior year nine month period.  The third quarter 2012 rate included a benefit of 5.1% resulting from the difference between the tax and book basis of Subordinated Debentures repurchased, including the tender offer completed in July 2012.  The 2012 nine month rate included a benefit of 1.6% resulting from the difference between the tax and book basis of Subordinated Debentures repurchased, including the tender offer completed in July 2012.year.


F. Earnings Per Share

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

 
 Three Months Ended September 30,  Nine Months Ended September 30, 
(in thousands, except per share amounts) 2013  2012  2013  2012 
Basic:     
  
 
Net income attributable to GAMCO Investors, Inc.'s shareholders $33,098  $19,004  $83,536  $57,945 
Weighted average shares outstanding  25,625   26,250   25,682   26,309 
Basic net income attributable to GAMCO Investors, Inc.'s                
shareholders per share $1.29  $0.72  $3.25  $2.20 
                 
Diluted:                
Net income attributable to GAMCO Investors, Inc.'s shareholders $33,098  $19,004  $83,536  $57,945 
                 
Weighted average share outstanding  25,625   26,250   25,682   26,309 
Dilutive stock options and restricted stock awards  75   189   35   171 
Total  25,700   26,439   25,717   26,480 
Diluted net income attributable to GAMCO Investors, Inc.'s                
shareholders per share $1.29  $0.72  $3.25  $2.19 
22
 
 Three Months Ended March 31, 
(in thousands, except per share amounts) 2014  2013 
Basic:    
Net income attributable to GAMCO Investors, Inc.'s shareholders $27,954  $22,545 
Weighted average shares outstanding  25,481   25,742 
Basic net income attributable to GAMCO Investors, Inc.'s        
shareholders per share $1.10  $0.88 
         
Diluted:        
Net income attributable to GAMCO Investors, Inc.'s shareholders $27,954  $22,545 
         
Weighted average share outstanding  25,481   25,742 
Dilutive stock options and restricted stock awards  203   16 
Total  25,684   25,758 
Diluted net income attributable to GAMCO Investors, Inc.'s        
shareholders per share $1.09  $0.88 

G. Debt

Debt consists of the following:

 September 30, 2013  December 31, 2012  September 30, 2012  March 31, 2014  December 31, 2013  March 31, 2013 
 Carrying  Fair Value  Carrying  Fair Value  Carrying  Fair Value  Carrying  Fair Value  Carrying  Fair Value  Carrying  Fair Value 
 Value  Level 2  Value  Level 2  Value  Level 2  Value  Level 2  Value  Level 2  Value  Level 2 
(In thousands) 
  
  
  
  
  
  
  
  
  
  
  
 
5.5% Senior notes $-  $-  $99,000  $100,485  $99,000  $100,832  $-  $-  $-  $-  $99,000  $99,581 
5.875% Senior notes  100,000   108,000   100,000   106,250   100,000   104,458   100,000   106,540   100,000   108,500   100,000   109,969 
0% Subordinated debentures  17,347   19,349   17,366   19,638   17,118   19,612   12,098   13,777   11,911   13,819   17,688   19,635 
Total $117,347  $127,349  $216,366  $226,373  $216,118  $224,902  $112,098  $120,317  $111,911  $122,319  $216,688  $229,185 

5.5% Senior notes

On May 15, 2003, the Company issued 10-year, $100 million senior notes, of which $99 million was outstanding at DecemberMarch 31, 2012 and September 30, 2012.  These2013.  The senior notes, which matured and were fully repaid on May 15, 2013.  They2013, paid 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.

22
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.  There were no repurchases duringDuring the three month periodperiods ended September 30, 2013.  During the three months ended September 30, 2012,March 31, 2014 and March 31, 2013 the Company repurchased 645,779 Debentures having a face value of $64.6 million.  The redemption was accounted for as an extinguishment of debt and resulted in a loss of $6.3 million, which was included in extinguishment of debt on the condensed consolidated statements of income.  During the nine month periods ended September 30, 2013 and September 30, 2012, the Company repurchased 11,974416 Debentures and 646,00832 Debentures, respectively, having a face value of $1.2 million$41,600 and $64.6 million, respectively.$3,200.  The redemptions were accounted for as extinguishments of debt and resulted in a losslosses of $137,000$5,000 and a loss of $6.3 million, respectively.  Gains and losses from the extinguishment of debt areless than $1,000, respectively, which were included in net gain/(loss)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 September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012,March 31, 2013, the debt was recorded at its accreted value of $17.3$12.1 million, $17.4$11.9 million and $17.1$17.7 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 expired in July 2012.  As of September 30, 2013,March 31, 2014, $400 million is available on the shelf, which will expire in May 2015.shelf.
23

H. Stockholders' Equity
 
Shares outstanding were 26.0 million, 26.1 million and 25.7 million and 26.6 million on September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012,March 31, 2013, respectively.

Dividends

 Payment DateRecord Date Amount Type
     
     
Three months ended March 31, 2013March 26, 2013March 12, 2013 $0.05 Regular
Three months ended June 30, 2013June 25, 2013June 11, 2013 $0.05 Regular
Three months ended September 30, 2013September 24, 2013September 10, 2013 $0.06 Regular
Nine months ended September 30, 2013
 
  
 $0.16 
 
 
 
 
    
     
Three months ended March 31, 2012March 27, 2012March 13, 2012 $0.04 Regular
Three months ended June 30, 2012June 26, 2012June 12, 2012 $0.04 Regular
Three months ended June 30, 2012June 26, 2012June 12, 2012 $0.25 Special
Three months ended September 30, 2012September 25, 2012September 11, 2012 $0.05 Regular
Three months ended September 30, 2012September 25, 2012September 11, 2012 $0.25 Special
Nine months ended September 30, 2012
 
  
 $0.63 
 
 Payment DateRecord Date Amount 
     
Three months ended March 31, 2014March 25, 2014March 11, 2014 $0.06 
Three months ended March 31, 2013March 26, 2013March 12, 2013 $0.05 

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, the 1999 Plan and the 2002 Plan, 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 both the 1999 and 2002 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 beenwere originally reserved for issuance under each of the 1999 and 2002 Plans by a committee of the Board of Directors responsible for administering the Plans ("Compensation Committee").  In November 2013, the shareholders approved an amendment to the Company's 2002 Stock Award and Incentive Plan to increase the number of shares of Class A Stock authorized and reserved for issuance by 2 million.  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 prior to 2013 vestedtypically vest 30% after three years and 100% after five years while RSAs granted during 2013 vest 30% after three years and 10% each year after years four through ten.years.

23
On August 6, 2013,January 9, 2014, the Company approved the granting of 431,7002,100 RSA shares at a grant date fair value of $57.86 per share.  On January 3, 2012, the Company approved the granting of 105,300 RSA shares at a grant date fair value of $43.49$81.99 per share.  As of September 30,March 31, 2014 and December 31, 2013, and September 30, 2012, there were 427,700566,850 RSA shares and 371,500566,950 RSA shares outstanding, respectively, that were previously issued at an average weighted grant price of $57.86$63.97 and $45.15,$63.93, respectively.  All grants of the RSA shares were recommended by the Company's Chairman, who did not receive a RSA, award, and approved by the Compensation Committee.  For the RSA grant issued in 2013 thisThis expense, net of estimated forfeitures, wasis 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, except for the August 2013 grant which is 30% over three years from the date of grant and 10% each year over years four through ten from the date of grant.  For the RSA grants issued prior to 2013 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 beingare held for them until the RSA vesting dates and wereare forfeited if the grantee wasis no longer employed by the Company on the vesting dates.  Dividends declared on these RSAs, less estimated forfeitures, wereare 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 DecemberMarch 31, 2012.
24
2013.

For the three months ended September 30,March 31, 2014 and March 31, 2013, and September 30, 2012, we recognized stock-based compensation expense of $0.7$1.7 million and $0.9 million, respectively.  For the nine months ended September 30, 2013 and September 30, 2012, we recognized stock-based compensation expense of $0.8 million and $2.6 million,$15,000, respectively.  Actual and projected stock-based compensation expense for RSA shares and options for the years ended December 31, 20122014 through December 31, 2023 (based on awards currently issued or granted) is as follows ($ in thousands):

  2012  2013  2014  2015  2016  2017 
  2013  2014  2015  2016  2017  2018 
Q1  $871  $15  $1,096  $1,090  $1,089  $558 Q1  $15  $1,700  $1,695  $1,694  $903  $771 
Q2   869   15   1,092   1,089   1,089   558 Q2   15   1,697   1,694   1,694   903   771 
Q3   875   741   1,092   1,089   735   471 Q3   741   1,697   1,694   1,339   816   702 
Q4   10,968   1,104   1,092   1,089   558   428 Q4   1,301   1,697   1,694   1,078   773   554 
Full YearFull Year  $13,583  $1,875  $4,372  $4,357  $3,471  $2,015 Full Year  $2,072  $6,791  $6,777  $5,805  $3,395  $2,798 
                                                    
    2018   2019   2020   2021   2022   2023     2019   2020   2021   2022   2023     
Q1  $428  $325  $240  $168  $105  $50 Q1  $325  $240  $168  $105  $50     
Q2   428   325   240   168   105   50 Q2   325   240   168   105   50     
Q3   359   268   192   126   68   17 Q3   268   192   126   68   17     
Q4   325   240   168   105   50   - Q4   240   168   105   50   -     
Full YearFull Year  $1,540  $1,158  $840  $567  $328  $117 Full Year  $1,158  $840  $567  $328  $117     
                                                    

The total compensation cost related to non-vested options not yet recognized is approximately $19.9$26.9 million as of September 30, 2013.  There were no options exercised for the three months ended September 30, 2013.March 31, 2014.  For the three months ended September 30, 2012,March 31, 2014 and 2013, proceeds from the exercise of 24,97720,000 stock options were $723,000 resulting in a tax benefit to GAMCO of $84,000.  For the nine months ended September 30, 2013 and 2012, proceeds from the exercise of 2,623 and 26,977 stock options, respectively, were $76,000$846,000 and $781,000,$76,000, respectively, resulting in a tax benefit to GAMCO of $173,000 and $16,000, and $87,000, respectively.  The Company recognized $21,000 in tax benefits from 3,900 RSAs that vested during the nine months ended September 30, 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 September 30,March 31, 2014 and March 31, 2013, and September 30, 2012, the Company repurchased 40,857121,192 shares and 47,42636,676 shares, respectively, at an average price per share of $72.40$79.59 and $47.79, respectively.  For the nine months ended September 30, 2013 and September 30, 2012, the Company repurchased 159,259 shares and 275,528 shares, respectively, at an average price per share of $57.97 and $44.94,$53.57, respectively.  From the inception of the program through September 30, 2013, 8,641,624March 31, 2014, 8,832,785 shares have been repurchased at an average price of $41.95$42.76 per share.  At September 30, 2013,March 31, 2014, the total shares available under the program to be repurchased in the future were 493,184.802,023.

I. Goodwill and Identifiable Intangible Assets

At September 30, 2013,March 31, 2014, $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 94%-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 September 30,March 31, 2014 or March 31, 2013, or September 30, 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 in 2008 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 September 30, 2013,March 31, 2014, December 31, 20122013 and September 30, 2012.March 31, 2013.  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 2014.2015.  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 September 30,March 31, 2014 or March 31, 2013, or September 30, 2012, and as such there was no impairment analysis performed or charge recorded.
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J. Commitments and Contingencies

From time to time, the Company may be 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.  For allany such matters, 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 September 30, 2013,March 31, 2014, 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 2013, the Company established a Shareholder Designated Charitable Contribution program.  Under the program, each shareholder is eligible to designate a charity to which the Company would make a donation based upon the actual number of shares registered in the shareholder's name.  Shares held in nominee or street name were not eligible to participate.  The Board of Directors approved two contributions during 2013 of $0.25 per registered share each.  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 a charity tocontributions 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.  Annually, the Board of Directors determines amounts, if any, which will be contributed per registered share.  The Board approved an initial contribution for 2013 of $0.25 per registered share.  The Company recorded the initial $5.0 million charge, which iswas included in accrued expenses and other liabilitiesshareholder-designated contribution in the condensed consolidated statements of financial condition, based onincome.

During the number of registered shares at the adoption of the program.  Based upon the number of registered shares that participated in the program, the Company recorded an additional charge of $0.3 million, or $0.01 per diluted share, net of management fee and tax benefit, during the thirdfourth quarter of 2013.  For the nine months ended September 30, 2013, the Company recorded a charge of $5.3 million, or $0.12 per diluted share, net of management fee and tax benefit.benefit, as an estimate of the expected contribution to be made relating to the $0.25 per share contribution approved by the Board in November 2013.  If all registered shareholders at March 31, 2014, the record date for the November 2013 contribution, participate and respond on a timely basis, the Company would record an additional charge to earnings of $149,000.  The Company will not know the final amount until after May 31, 2014, the date to return completed forms.

L. Subsequent Events
 
From OctoberApril 1, 20132014 to NovemberMay 6, 2013,2014, the Company repurchased 7,00038,895 shares at $70.24$76.06 per share.

On NovemberMay 6, 2013,2014, the Board of Directors increased the authorization under the Stock Repurchase Program by an additional 500,000 shares.  As a result, there are 986,184 shares available to be repurchased under this existing buyback plan at November 6, 2013.

The Company filed a proxy on October 29, 2013 to approve changing the Company's state of incorporation to Delaware from New York and to approve an amendment to the Company's 2002 Stock Award and Incentive Plan to increase the number of shares of Class A Common Stock authorized and reserved for issuance thereunder by 2 million shares.

On November 6, 2013, GAMCO's Board of Directors declared a special dividend of $0.50 per share and a regular quarterly dividend of $0.06 per share bothto all of its shareholders, payable on DecemberJune 24, 20132014 to its Class A and Class B shareholders of record on DecemberJune 10, 2013.2014.

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On November 6, 2013, GAMCO's Board of Directors approved a contribution under its Shareholder Designated Charitable Contribution program of $0.25 per share for all eligible shares of record on December 31, 2013.  Based on the estimated participation of shareholders in this program, the Company expects to record a $5.3 million charge during the fourth quarter of 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 Investors, Inc. ("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 mutualopen and closed-end 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.  Stated another way,At times, the performance of our ability to enhance client assets on a risk-adjusted basis,equity products may differ markedly from popular market indices, and for taxable provate wealth clients, on a tax adjusted basis,this can also impact our revenues.  General stock market trends will continue to have anthe 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)(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 $43.5a record $47.6 billion as of September 30, 2013,March 31, 2014, an increase of 7.5%1.2% from AUM of $40.5$47.0 billion at June 30,December 31, 2013 and an increase of 17.8%up 18.6% from the September 30, 2012March 31, 2013 AUM of $36.9$40.1 billion.  The thirdfirst quarter 20132014 AUM increased $3.0 billionrose $545 million and consisted of market appreciation of $2.6 billion,$625 million, net cash inflows of $618$63 million and recurring distributions, net of reinvestments, from open-end and closed-end funds of $146$143 million.  Average total AUM was $42.6$47.0 billion in the 20132014 quarter versus $36.4$38.4 billion in the prior year period, an increase of 17.0%22.4%.  Average AUM in our open-end equity funds, a key driver to our investment advisory fees, was $15.1$17.1 billion in the thirdfirst quarter of 2013,2014, rising 19.8%29.5% from the 20122013 quarter average AUM of $12.6$13.2 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 September 30, 2013,March 31, 2014, assets with incentive based fees were $4.1$4.5 billion, 5.1%an increase of $0.2 billion, or 4.7%, from the $4.3 billion at December 31, 2013 and 18.4% higher than the $3.9$3.8 billion on June 30, 2013 and 2.5% higher than the $4.0 billion on September 30, 2012.March 31, 2013. 
 
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The Company reported Assets Under Management as follows (in millions):
The Company reported Assets Under Management as follows (in millions):
  
  
  
 
The Company reported Assets Under Management as follows (in millions):
  
  
  
 
 
  
  
  
  
  
  
  
  
  
 
Table I: Fund Flows - 3rd Quarter 2013         
Table I: Fund Flows - 1st Quarter 2014Table I: Fund Flows - 1st Quarter 2014         
       Fund          Fund   
   Market    distributions,      Market    distributions,   
 June 30,  appreciation/  Net cash  net of  September 30,  December 31,  appreciation/  Net cash  net of  March 31, 
 2013  (depreciation)  flows  reinvestments  2013  2013  (depreciation)  flows  reinvestments  2014 
Equities:                    
Open-end Funds $14,188  $924  $497  $(28) $15,581  $17,078  $229  $254  $(30) $17,531 
Closed-end Funds  6,409   374   56   (118)  6,721   6,945   140   (5)  (113)  6,967 
Institutional & PWM - direct  14,069   946   11   -   15,026   16,486   196   (279)  -   16,403 
Institutional & PWM - sub-advisory  3,185   294   24   -   3,503   3,797   52   (27)  -   3,822 
Investment Partnerships  778   17   10   -   805   811   7   47   -   865 
SICAV (a)  93   2   (1)  -   94   96   1   (6)  -   91 
Total Equities  38,722   2,557   597   (146)  41,730   45,213   625   (16)  (143)  45,679 
Fixed Income:                                        
Money-Market Fund  1,689   -   25   -   1,714   1,735   -   77   -   1,812 
Institutional & PWM  67   -   (4)  -   63   62   -   2   -   64 
Total Fixed Income  1,756   -   21   -   1,777   1,797   -   79   -   1,876 
Total Assets Under Management $40,478  $2,557  $618  $(146) $43,507 ��$47,010  $625  $63  $(143) $47,555 
                                        

The Company reported Assets Under Management as follows (in millions):  
  
  
 
 
  
  
  
  
 
Table II: Fund Flows - Nine months ended September 30, 2013       
       Fund   
   Market    distributions,   
Table II: Assets Under Management
Table II: Assets Under Management
     
 December 31,  appreciation/  Net cash  net of  September 30,  March 31,  March 31,  % 
 2012  (depreciation)  flows  reinvestments  2013  2013  2014  Inc.(Dec.) 
Equities:                
Open-end Funds $12,502  $2,053  $1,116  $(90) $15,581  $13,813  $17,531   26.9%
Closed-end Funds  6,288   627   152   (346)  6,721   6,557   6,967   6.3 
Institutional & PWM - direct  12,030   2,789   207   -   15,026   13,690   16,403   19.8 
Institutional & PWM - sub-advisory  2,924   679   (100)  -   3,503   3,299   3,822   15.9 
Investment Partnerships  801   30   (26)  -   805   796   865   8.7 
SICAV (a)  119   4   (29)  -   94   113   91   (19.5)
Total Equities  34,664   6,182   1,320   (436)  41,730   38,268   45,679   19.4 
Fixed Income:                                
Money-Market Fund  1,681   -   33   -   1,714   1,758   1,812   3.1 
Institutional & PWM  60   -   3   -   63   64   64   - 
Total Fixed Income  1,741   -   36   -   1,777   1,822   1,876   3.0 
Total Assets Under Management $36,405  $6,182  $1,356  $(436) $43,507  $40,090  $47,555   18.6%
                                

Table III: Assets Under Management by Quarter
           
            % Increase/ 
            (decrease) from 
   3/13   6/13   9/13   12/13   3/14   3/13   12/13 
Equities:                            
Open-end Funds $13,813  $14,188  $15,581  $17,078  $17,531   26.9%  2.7%
Closed-end Funds  6,557   6,409   6,721   6,945   6,967   6.3   0.3 
Institutional & PWM - direct  13,690   14,069   15,026   16,486   16,403   19.8   (0.5)
Institutional & PWM - sub-advisory  3,299   3,185   3,503   3,797   3,822   15.9   0.7 
Investment Partnerships  796   778   805   811   865   8.7   6.7 
SICAV (a)  113   93   94   96   91   (19.5)  (5.2)
Total Equities  38,268   38,722   41,730   45,213   45,679   19.4   1.0 
Fixed Income:                            
Money-Market Fund  1,758   1,689   1,714   1,735   1,812   3.1   4.4 
Institutional & PWM  64   67   63   62   64   -   3.2 
Total Fixed Income  1,822   1,756   1,777   1,797   1,876   3.0   4.4 
Total Assets Under Management $40,090  $40,478  $43,507  $47,010  $47,555   18.6%  1.2%
                             
(a) Includes $99 million, $90 million, $92 million, $94 million and $88 million of proprietary seed capital at March 31, 2013,     
June 30, 2013, September 30, 2013, December 31, 2013 and March 31, 2014, respectively.     

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Table III: Assets Under Management
     
  September 30,  September 30,  % 
  2012  2013  Inc.(Dec.) 
Equities:      
Open-end Funds $12,758  $15,581   22.1%
Closed-end Funds  6,365   6,721   5.6 
Institutional & PWM - direct  12,189   15,026   23.3 
Institutional & PWM - sub-advisory  2,912   3,503   20.3 
Investment Partnerships  785   805   2.5 
SICAV (a)  121   94   (22.3)
Total Equities  35,130   41,730   18.8 
Fixed Income:            
Money-Market Fund  1,752   1,714   (2.2)
Institutional & PWM  63   63   - 
Total Fixed Income  1,815   1,777   (2.1)
Total Assets Under Management $36,945  $43,507   17.8%
             

Table IV: Assets Under Management by Quarter
           
            % Increase/ 
            (decrease) from 
   9/12   12/12   3/13   6/13   9/13   9/12   6/13 
Equities:                            
Open-end Funds $12,758  $12,502  $13,813  $14,188  $15,581   22.1%  9.8%
Closed-end Funds  6,365   6,288   6,557   6,409   6,721   5.6   4.9 
Institutional & PWM - direct  12,189   12,030   13,690   14,069   15,026   23.3   6.8 
Institutional & PWM - sub-advisory  2,912   2,924   3,299   3,185   3,503   20.3   10.0 
Investment Partnerships  785   801   796   778   805   2.5   3.5 
SICAV (a)  121   119   113   93   94   (22.3)  1.1 
Total Equities  35,130   34,664   38,268   38,722   41,730   18.8   7.8 
Fixed Income:                            
Money-Market Fund  1,752   1,681   1,758   1,689   1,714   (2.2)  1.5 
Institutional & PWM  63   60   64   67   63   -   (6.0)
Total Fixed Income  1,815   1,741   1,822   1,756   1,777   (2.1)  1.2 
Total Assets Under Management $36,945  $36,405  $40,090  $40,478  $43,507   17.8%  7.5%
                             
(a) Includes $102 million, $104 million, $99 million, $90 million and $92 million of proprietary seed capital at September 30, 2012,     
December 31, 2012, March 31, 2013, June 30, 2013 and September 30, 2013, respectively.     

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

RESULTS OF OPERATIONS
 
Three Months Ended September 30, 2013March 31, 2014 Compared To Three Months Ended September 30, 2012March 31, 2013
 
(Unaudited; in thousands, except per share data)
    
 2013  2012  2014  2013 
Revenues        
Investment advisory and incentive fees $80,438  $67,790  $87,797  $72,607 
Distribution fees and other income  13,545   11,139   14,873   11,353 
Institutional research services  2,394   3,302   1,807   2,221 
Total revenues  96,377   82,231   104,477   86,181 
Expenses                
Compensation  39,803   32,948   43,897   35,652 
Management fee  5,629   3,056   4,728   3,980 
Distribution costs  12,769   10,386   13,963   11,010 
Other operating expenses  5,448   6,829   5,390   4,812 
Total expenses  63,649   53,219   67,978   55,454 
Operating income  32,728   29,012   36,499   30,727 
Other income (expense)                
Net gain from investments  19,334   7,525   6,944   12,291 
Extinguishment of debt  -   (6,305)
Interest and dividend income  1,134   920   1,141   1,345 
Interest expense  (2,164)  (3,586)  (1,992)  (3,488)
Shareholder-designated contribution  (313)  -   -   (5,000)
Total other income (expense), net  17,991   (1,446)
Total other income, net  6,093   5,148 
Income before income taxes  50,719   27,566   42,592   35,875 
Income tax provision  17,515   8,467   14,616   13,195 
Net income  33,204   19,099   27,976   22,680 
Net income attributable to noncontrolling interests  106   95   22   135 
Net income attributable to GAMCO Investors, Inc.'s shareholders $33,098  $19,004  $27,954  $22,545 
                
Net income attributable to GAMCO Investors, Inc.'s shareholders per share:                
Basic $1.29  $0.72  $1.10  $0.88 
Diluted $1.29  $0.72  $1.09  $0.88 
                

Overview

Net income attributable to shareholders of GAMCO for the quarter was $33.1$28.0 million, or $1.29$1.09 per fully diluted share, versus $19.0$22.5 million, or $0.72$0.88 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 the shareholder designated charitable contribution program.  Excluding this charge, earnings for the quarter rose 10.2% from $25.4 million or $0.99 per diluted share in the 2013 quarter.  The quarter to quarter comparison was positively impacted by higher revenues and lower interest expense offset by increased stock compensation costs and higherlower income from gains realized from certain of our proprietary investments.

Revenues
 
Investment advisory and incentive fees for the thirdfirst quarter 20132014 were $80.4$87.8 million, 18.6%20.9% above the comparable 20122013 comparative figure of $67.8$72.6 million.  Open-end fund revenues increased by 19.6%27.5% to $37.3$40.8 million from $31.2$32.0 million in thirdfirst quarter 20122013 driven by a 19.8%29.3% increase in average open-end equity AUM.  Our closed-end fund revenues excluding incentive fees, rose 13.5%7.4% to $14.3$14.6 million in the thirdfirst quarter 20132014 from $12.6$13.6 million in 20122013 due to a 13.9%7.8% increase in non-performance fee based average AUM.  During the third quarter of 2012, we earned $0.5 million in performance based fees.  There were no such fees earned during the 2013 quarter.  Institutional and private wealth management account revenues, excluding incentive fees, which are generally based on beginning of quarter AUM, increased $5.2$7.4 million, or 24.1%32.2%, to $26.8$30.4 million from $21.6$23.0 million in thirdfirst quarter 2012.2013.  Incentive fees

30
increased declined $1.9 million quarter to $0.5quarter at $0.4 million in the 20132014 quarter from $0.3versus $2.3 million in the prior year period.  Investment partnership revenues were $1.6 million, an increase of 6.7% from $1.5 million a decrease of 6.3%in first quarter 2013 due to an increase in average AUM resulting from $1.6 million in third quarter 2012.net inflows.
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Open-end fund distribution fees and other income were $13.5$14.9 million for the thirdfirst quarter 2013,2014, an increase of $2.4$3.5 million or 21.6%30.7% from $11.1$11.4 million in the prior year period, primarily due to higher quarterly average AUM in open-end equity funds that generate distribution fees and increased level of sales of load shares of mutual funds.

Our institutional research revenues were $2.4$1.8 million in the thirdfirst quarter 20132014 versus $3.3$2.2 million in the prior year period.  Although commission revenues were higher in most areas of that business, dealer manager fee revenues from underwriting closed-end fund offerings declined $1.2$0.1 million from the prior year period.

Expenses
 
Compensation costs, which are largely variable, were $39.8$43.9 million or 21.0%23.0% higher than prior year compensation costs of $32.9$35.7 million.  The quarter over quarter increase was comprised of variable compensation of $5.3$4.7 million related to the increased levels of AUM, and $1.7$1.8 million in fixed compensation partially offset byand a $0.1$1.7 million decreaseincrease in amortizationstock compensation expense for RSAs.RSAs issued in the second half of 2013.

Management fee expense, which is wholly variable and based on pretax income, increased to $5.6$4.7 million in the thirdfirst quarter of 20132014 from $3.1$4.0 million in the 20122013 period.
 
Distribution costs were $12.8$14.0 million, an increase of $2.4$3.0 million or 23.1%27.3% from $10.4$11.0 million in the prior year's period.  The increase in distribution costs was driven by increased AUM, largely from the direct to intermediary channel, which resulted in an increase in payments to third-party distributors of $2.2 million.
 
Other operating expenses were $5.4 million in the thirdfirst quarter of 2013, a decrease2014, an increase of $1.4$0.6 million, or 20.6%12.5%, from $6.8$4.8 million in the thirdfirst quarter of 2012.2013.  The quarter to quarter comparison was impacted by decreases in charitable contributions as well as higher insurance reimbursements for legal and regulatory costs previously incurred and expensed.

Operating income for the third quarter of 2013 was $32.7 million, an increase of $3.7 million, or 12.8%, from the third quarter 2012's $29.0 million.  Operating income, as a percentage of revenues, was 34.0% in the 2013 quarter as compared to 35.3% in the 2012 quarter.

Other
Total other income, net of interest expense, was $18.0 million for the third quarter 2013 versus an expense of $1.4 million in the prior year's quarter.  Realized and unrealized gains in our trading portfolio were $19.3 million in the 2013 quarter, an increase of $11.8 million from the $7.5 million reported in the 2012 quarter.  Included in the 2012 results are $6.3 million in charges related to total purchases of $64.6 million (face value) of the Company's 0% Subordinated Debentures due 2015.  We had repurchased $64.1 million (face value) of these 0% Subordinated Debentures through a tender offer which was completed in July 2012.  Interest and dividend income increased by $0.2 million.  Interest expense decreased by $1.4 million to $2.2 million in the third quarter of 2013 from $3.6 million in third quarter of 2012 due to a decrease in total average debt outstanding.  On May 15, 2013, the $99 million of 5.5% Senior notes matured and were repaid.
The effective tax rate ("ETR") for the three months ended September 30, 2013 and September 30, 2012 were 34.5% and 30.7%, respectively.  The 2012 ETR included a benefit of 5.1% resulting from the difference between the tax and book basis of Subordinated Debentures repurchased, largely through a tender offer completed in July 2012.  In 2013 the ETR benefitted from an increase in donations of appreciated securities.
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Nine Months Ended September 30, 2013 Compared To Nine Months Ended September 30, 2012
(Unaudited; in thousands, except per share data)  
  2013  2012 
Revenues    
  Investment advisory and incentive fees $230,488  $202,783 
  Distribution fees and other income  37,420   33,768 
  Institutional research services  6,940   8,453 
Total revenues  274,848   245,004 
Expenses        
  Compensation  113,214   100,423 
  Management fee  14,455   9,855 
  Distribution costs  35,650   30,575 
  Other operating expenses  16,290   17,760 
Total expenses  179,609   158,613 
Operating income  95,239   86,391 
Other income (expense)        
  Net gain from investments  43,903   17,234 
  Extinguishment of debt  (137)  (6,307)
  Interest and dividend income  4,986   3,938 
  Interest expense  (8,448)  (12,419)
  Shareholder-designated contribution  (5,313)  - 
Total other income, net  34,991   2,446 
Income before income taxes  130,230   88,837 
Income tax provision  46,434   30,909 
Net income  83,796   57,928 
Net income/(loss) attributable to noncontrolling interests  260   (17)
Net income attributable to GAMCO Investors, Inc.'s shareholders $83,536  $57,945 
         
Net income attributable to GAMCO Investors, Inc.'s shareholders per share:        
Basic $3.25  $2.20 
Diluted $3.25  $2.19 
         

Overview

Net income attributable to shareholders of GAMCO for the first nine months of 2013 was $83.5 million or $3.25 per fully diluted share versus $57.9 million or $2.19 per fully diluted share in the prior year's first nine months.   Included in the 2013 results is a $5.3 million charge, or $0.12 per diluted share, net of management fee and tax benefit, for our shareholder designated charitable contribution program.  The period to period comparison, excluding this charge, benefitted from higher revenues, lower interest expense, lower loss on extinguishment of debt and higher income from gains realized from certain of our proprietary investments.

Revenues
Investment advisory and incentive fees for the nine months ended September 30, 2013 were $230.5 million, 13.7% above the comparable 2012 figure of $202.8 million.  Open-end fund revenues increased by 11.3% to $103.8 million from $93.3 million in first nine months of 2012 driven by a 12.0% increase in average open-end equity AUM.  Our closed-end fund revenues, excluding incentive fees, rose 13.9% to $41.8 million in the first nine months of 2013 from $36.7 million in 2012 due to a 13.9% increase in non-performance fee based average AUM.  During the third quarter of 2012, we earned $0.5 million in performance based fees.  There were no such fees earned during the 2013 quarter.  Institutional and private wealth management account revenues, excluding incentive fees, which are generally based on beginning of quarter AUM, increased $11.2 million, or 17.5%, to $75.3 million from $64.1 million in first nine months of 2012.  During the 2013 period, we earned $5.2 million in incentive fees, an increase of $1.3 million from $3.9 million earned in the 2012 period.  Investment partnership revenues were $4.4 million, an increase of 2.3% from $4.3 million for the nine months ended September 30, 2012 resulting from an increase in average AUM.

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Open-end fund distribution fees and other income were $37.4 million for the first nine months of 2013, an increase of $3.6 million or 10.7% from $33.8 million in the prior year period, primarily due to higher quarterly average AUM in open-end equity funds that generate distribution fees and an increased level of sales of load shares of mutual funds.

Our institutional research revenues were $6.9 million in the first nine months of 2013 versus $8.5 million in the prior year period.  Revenues were lower despite an increase in commissions from trading activities of $0.5 million due to decreased dealer manager fees from underwriting closed-end fund offerings which totaled $2.1 million.

Expenses
Compensation costs, which are largely variable, were $113.2 million or 12.7% higher than prior year compensation costs of $100.4 million.  The period over period increase was comprised of variable compensation of $11.5 million related to the increased levels of AUM and $3.1 million in fixed compensation partially offset by $1.8 million decrease in amortization expense for RSAs.

Management fee expense, which is wholly variable and based on pretax income, increased to $14.5 million for the nine months ended September 30, 2013 from $9.9 million in the 2012 period.
Distribution costs were $35.7 million, an increase of $5.1 million or 16.7% from $30.6 million in the prior year's period.  This increase in distribution costs was largely due to an increase in payments to third-party distributors of $6.2 million partially offset by lower amortization of upfront commissions paid to third-party distributors of $0.9 million and a reduction in expense reimbursements to our open-end funds of $0.4 million.
Other operating expenses were $16.3 million in the first nine months of 2013, a decrease of $1.5 million, or 8.4%, from $17.8 million in the first nine months of 2012.  The decrease was principally the result of decreases in charitable contributions as well as higher insurance reimbursements for legal and regulatory costs previously incurred and expensed.

Operating income for the first nine monthsquarter of 20132014 was $95.2$36.5 million, an increase of $8.8$5.8 million, or 10.2%18.9%, from 2012's $86.4the first quarter 2013's $30.7 million.  Operating income, as a percentage of revenues, was 34.7%34.9% in the 2014 quarter as compared to 35.7% in the 2013 period as compared to 35.3% in the 2012 period.quarter.

Other
 
Total other income, net of interest expense, was $35.0$6.1 million for the first nine months of 2013quarter 2014 versus $2.4$5.1 million in the prior year's period.quarter.  Realized and unrealized gains in our trading portfolio were $43.9$6.9 million in the 2013 period, $26.72014 quarter, $5.4 million higherlower than the $17.2$12.3 million reported in the 2012 period.2013 quarter.  Interest and dividend income was higherlower by $1.1$0.2 million.  Interest expense decreased by $4.0$1.5 million to $8.4$2.0 million in the 2013 periodfirst quarter of 2014 from $12.4$3.5 million in 2012first quarter of 2013 due to a decrease in total average debt outstanding.    On May 15, 2013, the $99 million of 5.5% Senior notes matured, and were repaid.  Additionally, 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") incurring a $6.3 million loss on extinguishment of debt.  The 2013 periodquarter includes a $5.3$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 501(c)(3) organizationscharities will receive company contributions.
 
The effective tax rates ("ETR") for the three months ended March 31, 2014 and March 31, 2013 were 34.3% and 36.8%, respectively.  During the 2014 quarter we benefitted from the donation of appreciated securities used to fund our shareholder designated charitable contribution program.  We expect the effective tax rate for the nine months ended September 30, 2013 and 2012 were 35.7% and 34.8%, respectively.  The 2012 ETR included a benefitremainder of 1.6% resulting from2014 to approximate the difference between the tax and book basis of Subordinated Debentures repurchased, including those acquired through the tender offer completed in July 2012.  In 2013 the ETR benefitted from an increase in donations of appreciated securities.prior year.

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 open- and closed-end 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 onas to 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.

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Summary cash flow data is as follows:
 Nine months ended  Three months ended 
 September 30,  March 31, 
 2013  2012  2014  2013 
Cash flows provided by (used in): (in thousands)  (in thousands) 
Operating activities $155,493  $79,185  $41,991  $81,032 
Investing activities  25,089   3,454   (579)  5,950 
Financing activities  (125,779)  (70,282)  (8,718)  (4,255)
Effect of exchange rates on cash and cash equivalents  -   (12)  (3)  18 
Net increase  54,803   12,345   32,691   82,745 
Cash and cash equivalents at beginning of period  190,608   276,340   210,451   190,608 
Cash and cash equivalents at end of period $245,411  $288,685  $243,142  $273,353 
                

Cash and liquidity requirements have historically been met through cash generated by operating income and our borrowing capacity.  We filed a shelf registration statement with the SEC in 2012 which, among other things, provides us theopportunistic 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$400 million.  The shelf has $400 million which remainsis available through May 30, 2015.2015, at which time it may be renewed.

At September 30, 2013,March 31, 2014, we had total cash and cash equivalents of $245.4$243.1 million, an increase of $54.8$32.7 million from December 31, 2012.2013.  Cash and cash equivalents of $1.4$0.3 million and investments in securities of $7.4$7.7 million held by consolidated investment partnerships and offshore funds may not be readily available for the Company to access.  Total debt outstanding at September 30, 2013March 31, 2014 was $117.3$112.1 million, consisting of $17.3$12.1 million in Debentures, with a face value of $20.5$13.8 million and $100 million of 5.875% senior notes due 2021.
 
For the ninethree months ended September 30, 2013,March 31, 2014, cash provided by operating activities was $155.5$42.0 million, an increasea decrease of $76.3$39.0 million from cash provided in the prior year period of $79.2$81.0 million.  Cash was provided through an increase in net income of $25.9$5.3 million, an increase in investment advisory fees receivables collected of $5.7 million, a $59.3$5.2 million decrease in trading securities, a $1.7 million increase in stock compensation and an increase of $1.1 million in donated securities.  Reducing cash was a decrease in compensation payable of $17.4 million, an $11.9 million increase in net contributions to partnerships, a $41.0 million decrease in receivable from brokers a decrease in contributions to partnerships of $16.8$10.7 million, a $8.3$10.0 million decreasereduction to accrued expenses and other liabilities, increase of $3.4 million in investment advisory fees receivableother assets and a $6.5 million increase in income taxes payable and deferred tax liabilities.  Reducing cash was an $18.5 million decrease in distributions from partnerships, a $14.7 million increase in gains from sales of available for sale securities and a $16.9 million decrease in payable to brokers, an $11.7 million increase in trading investments and $19.7$4.6 million from other sources.  Cash provided byused in investing activities, related to purchases and proceeds from sales of available for sale securities, was $25.1$0.6 million in the first ninethree months of 2013.2014.  Cash used in financing activities in the first ninethree months of 20132014 was $125.8$8.7 million, including $99.0 million used to repay the 5.5% Senior notes that matured on May 15, 2013, $4.1$1.5 million paid in dividends, $9.2and $9.6 million paid for the purchase of treasury stock and $11.9less $1.6 million in net redemptionscontributions from redeemable noncontrolling interests.interests and $0.8 million in proceeds from exercise of stock options.

For the ninethree months ended September 30, 2012,March 31, 2013, cash provided by operating activities was $79.2$81.0 million.  Cash provided by investing activities, related to purchases and proceeds from sales of available for sale securities, was $3.5$6.0 million in the first ninethree months of 2012.  Cash used in financing activities in the first ninethree months of 2012 was $70.3$4.3 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 September 30, 2013.March 31, 2014.  At September 30, 2013,March 31, 2014, G.research had net capital, as defined, of approximately $4.6$3.6 million, exceeding the regulatory requirement by approximately $4.4$3.4 million, and G.distributors had net capital, as defined, of approximately $3.5$3.8 million, exceeding the regulatory requirement by approximately $3.2$3.5 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.

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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 $237.7$234.4 million and investments in sponsored registered investment companies of $43.7$42.4 million at September 30, 2013March 31, 2014 were investments in United States Treasury Bills and Notes of $21.0$26.0 million, mutualopen-end funds and closed-end funds, largely invested in equity products, of $57.3$67.3 million, a selection of common and preferred stocks totaling $202.7$182.8 million, and other investments of approximately $0.4$0.7 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 the Chief Investment Officer.management.  Of the approximately $202.7$182.8 million invested in common and preferred stocks at September 30, 2013, $36.3March 31, 2014, $41.5 million represented our investment in Westwood Holdings Group Inc., and $72.4$49.0 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.  Riskpricing, which typically involve less market risk than common stocks held in a trading portfolio.  The principal risk associated with risk arbitrage has many risks including, but not limitedtransactions is the inability of the companies involved to (i) deals not being completed, (ii) changes in terms, (iii) regulatory or country risk and (iv) delays in closing.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 September 30, 2013,March 31, 2014, the fair value of securities sold, not yet purchased was $7.7$10.8 million.  Investments in partnerships totaled $97.8$105.8 million at September 30, 2013, $52.0March 31, 2014, $54.9 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 September 30, 2013March 31, 2014 and December 31, 2012.2013.  The sensitivity analysis assumes a 10% increase or decrease in the value of these investments (in thousands):


   Fair Value  Fair Value    Fair Value  Fair Value 
   assuming  assuming    assuming  assuming 
   10% decrease in  10% increase in    10% decrease in  10% increase in 
(unaudited) Fair Value  equity prices  equity prices  Fair Value  equity prices  equity prices 
At September 30, 2013:      
At March 31, 2014:      
Equity price sensitive investments, at fair value $254,815  $229,334  $280,297  $280,807  $252,726  $308,888 
At December 31, 2012:            
At December 31, 2013:            
Equity price sensitive investments, at fair value $273,271  $245,944  $300,598  $291,346  $262,211  $320,481 
                        

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 September 30, 2013March 31, 2014 cash and cash equivalent balance of $245.4$243.1 million, a 1% increase in interest rates would increase our interest income by $2.5$2.4 million annually.  Given that our current return on these cash equivalent investments is approximately 0.01%0.0% annually, an analysis of a 1% decrease is not meaningful.

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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 20122013 Annual Report on Form 10-K filed with the SEC on March 8, 20136, 2014 for details on SignificantCritical 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 September 30, 2013,March 31, 2014, we had equity investments, including mutualopen-end funds largely invested in equity products, of $281.4$276.8 million.  Investments in mutualopen-end funds and closed-end funds, $57.3$67.3 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 $97.8$105.8 million, of which $52.0$54.9 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.  This portfolio holds stocks which have specific attributes which,value and will move in part, are influenced by changes inline 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 September 30, 2013.March 31, 2014.  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 September 30, 2013,March 31, 2014, 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.
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Part II:  Other Information

Item 1.Legal Proceedings

From time to time, the Company may be 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.  For allany such matters, 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.

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 September 30, 2013:March 31, 2014:

 
     (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 
7/01/13 - 7/31/13  -  $-   -   534,041 
8/01/13 - 8/31/13  1,945   58.14   1,945   532,096 
9/01/13 - 9/30/13  38,912   73.11   38,912   493,184 
Totals  40,857  $72.40   40,857     
                 
 
     (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 
1/01/14 - 1/31/14  17,900  $85.33   17,900   905,315 
2/01/14 - 2/28/14  51,088   75.80   51,088   854,227 
3/01/14 - 3/31/14  52,204   81.33   52,204   802,023 
Totals  121,192  $79.59   121,192     
                 

Item 6.(a) Exhibits

 31.1Certification of CEO pursuant to Rule 13a-14(a).

 31.2Certification of CFO pursuant to Rule 13a-14(a).

 32.1Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 32.2Certification 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

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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 CaterinaName: Diane M. LaPointe
Title:   Co-Chief Accounting OfficerTitle:   Co-Chief Accounting Officer
  
Date: NovemberMay 6, 20132014Date: NovemberMay 6, 20132014
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