GAMCO Reports 1st Quarter 2010 Fully Diluted Earnings of $0.50 Per Share

GAMCO Investors, Inc. (GAMCO) (NYSE: GBL) announced first quarter 2010 earnings of $0.50 per fully diluted share versus $0.30 per fully diluted share in the first quarter 2009. Net income was $13.7 million in the first quarter of 2010 compared to $8.2 million in the first quarter of 2009. Assets Under Management (AUM) were $28.0 billion as of March 31, 2010, 6.2% higher than December 31, 2009 AUM of $26.3 billion and 51.3% higher than March 31, 2009 AUM of $18.5 billion. Equity AUM increased 6.6% to $26.2 billion at March 31, 2010 from $24.6 billion at December 31, 2009 and 57.2% higher than the $16.7 billion at March 31, 2009.

Revenues increased 38.4% to $60.0 million in the first quarter of 2010 from $43.4 million a year ago. Operating income before management fee was $21.8 million in 2010, up 69.8% from the $12.9 million in 2009. Operating margin, excluding management fee, increased to 36.4% in the first quarter of 2010 from 29.6% in 2009.

The Company had adjusted cash and investments, net of $199 million of debt, noncontrolling interests and mandatorily redeemable shares of $465.0 million or $16.95 per share at March 31, 2010. Book value was $447.7 million or $16.32 per share at March 31, 2010 excluding noncontrolling interests of $4.1 million.

During the first quarter 2010 we experienced positive net AUM cash flows of $345 million, including $281 million in open-end equity funds, $52 million in our closed-end funds and $29 million in our Investment Partnerships.

Assets Under Management – Up 51.3% from March 31, 2009

Assets Under Management (AUM) were $28.0 billion as of March 31, 2010, 51.3% greater than March 31, 2009 AUM of $18.5 billion and 6.2% higher than December 31, 2009 AUM of $26.3 billion. Equity AUM were $26.2 billion on March 31, 2010, 57.2% above the $16.7 billion on March 31, 2009 and 6.6% above the December 31, 2009 equity AUM of $24.6 billion. Highlights are as follows:

• Our open-end equity funds AUM were $9.2 billion on March 31, 2010, 62.7% higher than the $5.6 billion on March 31, 2009 and 8.0% above the $8.5 billion on December 31, 2009. During the first quarter of 2010 we had net cash inflow of $281 million.
• Our institutional and private wealth management business ended the quarter with $12.0 billion in separately managed accounts, up 60.0% from the $7.5 billion on March 31, 2009 and 7.1% higher than the December 31, 2009 level of $11.2 billion. During the first quarter of 2010 we had net cash outflow of $22 million.
• Our closed-end funds had AUM of $4.8 billion on March 31, 2010, climbing nearly 42% from the $3.4 billion on March 31, 2009 and 3.4% above the $4.6 billion on December 31, 2009. During the first quarter of 2010 we had net cash inflow of $52 million.
• Our investment partnerships AUM were $341 million on March 31, 2010 versus $265 million on March 31, 2009 and $305 million on December 31, 2009. During the first quarter of 2010 we had net cash inflow of $29 million.
• AUM in The Gabelli U.S. Treasury Money Market Fund, our 100% U.S. Treasury money market fund, ranked #1 by Lipper based on total return among 71 U.S. Treasury Money Market Funds for the twelve month period ended March 31, 2010, was flat at $1.7 billion at March 31, 2010 as compared to December 31, 2009 and slightly lower than the March 31, 2009 AUM of $1.8 billion.
• We have the opportunity to earn base fees and incentive fees for certain institutional client assets, assets attributable to preferred issues for our closed-end funds, our Gabelli Global Deal Fund (NYSE: GDL) and investment partnership assets. As of March 31, 2010, assets with incentive based fees were $2.9 billion, 16.0% higher than the $2.5 billion on March 31, 2009 and 3.6% above the $2.8 billion on December 31, 2009. Most of the incentive fees are booked in the fourth quarter when the uncertainty is removed at the end of the annual measurement period. Incentive fees recorded in the fourth quarter of 2009 and 2008 were $0.26 per share and $0.01, respectively, after estimated costs and taxes. Unearned performance fees relating solely to the first quarter of 2010 were $0.07 per share after estimated costs and taxes. Again, such fees as well as fees for the remaining quarters of the year, would be recorded in the fourth quarter.

The Gabelli U.S. Treasury Money Market Fund ranked #1 out of 72 funds for the first quarter of 2010, #1 out of 71 funds for the one-year period, #2 out of 65 funds for the five-year period and #2 out of 45 funds for the ten-year period. The rankings are based on total return over the length of the period. Past performance is not indicative of future results. Investment returns and yield will fluctuate. Income will be subject to federal income tax. An investment in the Fund is not guaranteed nor insured by the Federal Deposit Insurance Corporation or any government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. During the respective periods, the Adviser has waived certain fees and reimbursed expenses. Without such reimbursements or waivers return and rankings would have been lower.

Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. The prospectus, which contains more complete information about this and other matters, should be read carefully before investing. You can obtain a prospectus by calling Gabelli & Company, Inc. at 1-800-GABELLI (1-800-422-3554), or by visiting http://www.gabelli.com. Distributed by Gabelli & Company, Inc. One Corporate Center, Rye, NY 10580

Revenues

For the Quarter

Investment advisory fees for the first quarter 2010 were $49.3 million, an increase of 40.2% from the $35.2 million in the 2009 first quarter:

• Open-end fund revenues were $22.0 million versus $15.7 million in first quarter 2009, an increase of 40.1% primarily due to higher average AUM.

• Our closed-end fund revenues rose 50.0% to $8.7 million in the first quarter 2010 from $5.8 million in 2009.

• Institutional and private wealth management account revenues, which are based primarily upon beginning of quarter AUM, increased 35.6% to $17.9 million from $13.2 million in first quarter 2009.

• Investment partnership revenues were $0.8 million, nearly double the $0.5 million in 2009.

Our institutional research services subsidiary achieved revenues of $3.4 million in the first quarter 2010, declining slightly from the first quarter 2009 amount of $3.7 million.

Open-end fund distribution fees and other income were $7.2 million for the first quarter 2010, an increase of $2.7 million, or 60.4% from the prior year quarter of $4.5 million. The main driver of this increase was higher quarterly average assets in our open-end equity funds that generate such fees.

Operating Income and Margin

Operating income before management fee was $21.8 million in the first quarter 2010, increasing $8.9 million from the first quarter 2009 amount of $12.9 million, or 69.9%. For the first quarter 2010, the operating margin before management fee increased to 36.4%, versus 29.6% in the first quarter of 2009.

Other Income / (Expense)

Other income/(expense) (net of interest expense) was $2.8 million in the first quarter 2010 versus $0.6 million in the prior year’s first quarter.

Income Taxes

The effective tax rate for the first quarter 2010 was 37.5%, compared to the 2009 quarter’s effective rate of 32.9%. The 2009 quarter’s rate included a reduction to prior period income tax reserves.

Investment Highlights

• The Gabelli Equity Income Fund, which has a five-star overall rating as well as for the three, five and ten year periods, was highlighted in a Morningstar article in March discussing how well the Fund has performed in recent market ups and downs.
• Barron’s, in a March 1, 2010, article on Green investing, opined that actively managed funds may be the safest way to play the Green sector and noted The Gabelli SRI Green Fund’s strong performance of 63.9% during the one-year period ended February 24, 2010. Through March 31, 2010 the 1 year and inception to date total returns for The Gabelli SRI Green Fund Class AAA shares were 70.31% and 1.83%, respectively. The current expense ratio (after reimbursement by the Adviser, Gabelli Funds, LLC) for The Gabelli SRI Green Fund is 2.01% for the Class AAA shares.

Past performance is no guarantee of future results. The average annual returns and total returns shown above are historical and reflect changes in share price, reinvested dividends and capital gains and are net of expenses. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. As a non-diversified fund, the Gabelli SRI Green Fund may have a larger portion of its assets in a single issuer than a more diversified fund. Stocks are subject to market, economic and business risks that cause their prices to fluctuate. Call 1-800-GABELLI for performance as of the most recent month-end. Investors should consider the investment objectives, risks, sales charges and expense of the fund carefully before investing. The prospectus contains more complete information about this and other matters. The prospectus should be read carefully before investing. Distributed by Gabelli & Company, Inc. The performance results are for the Class AAA shares, other share classes have different performance characteristics.

Business Highlights

• Howard Ward, team leader of the GAMCO Growth strategy and the portfolio manager of The GAMCO Growth Fund (GABGX) since 1994, has made numerous on-air appearances and been quoted in several articles, including CNBC, FOX Business, The Wall Street Journal, Reuters and Bloomberg.com.
• The Gabelli Global Gold, Natural Resources & Income Trust ("GGN”) filed a shelf registration, which was declared effective in April and will allow GGN to raise $350 million of assets in the form of common or preferred shares.
• Expanding on our expertise in mergers and acquisitions strategy, we launched a new merger arbitrage partnership specifically for ERISA clients.
• During May we will be holding our twenty-fifth annual meeting for institutional and private wealth management clients at the Hotel Pierre in New York.

Other Financial Highlights

Statement of Financial Condition – Liquidity and Flexibility

Our liquid balance sheet provides access to financial markets and the flexibility to opportunistically add operating resources to our firm, repurchase our stock and consider strategic initiatives, including acquisitions and lift-outs. We have a BBB rating from Standard & Poor’s and a Baa3 rating from Moody’s.

The Company’s shelf registration provides GAMCO with the flexibility of issuing any combination of senior and subordinate debt securities, convertible debt securities and equity securities (including common and preferred securities) up to a total amount of $400 million.

We ended the quarter with approximately $671.0 million in cash and investments versus $640.7 million at December 31, 2009. This included approximately $85.0 million of our investments in The Gabelli Dividend & Income Trust, The Gabelli Global Deal Fund and Westwood Holdings Group, as well as other investments of $13.8 million, all classified as available for sale securities.

Our debt at March 31, 2010 consisted of $99 million of 5.5% senior notes due May 2013, a $40 million 6% convertible note (convertible at $53 per share) due August 2011 and a $60 million 6.5% convertible note (convertible at $66.89 per share) due October 2018. We had adjusted cash and investments in securities, net of debt, noncontrolling interests and mandatorily redeemable shares, of $16.95 per share on March 31, 2010 compared with $15.75 per share on December 31, 2009. We caution that this metric, while correct from a mathematical point of view, is not always the same as investors would view cash-on-hand.

During April, we gave notice to the holder of the 6% convertible note due August 2011 that we will be redeeming $20 million of the $40 million on May 31, 2010. The redemption is at 101% of par value. The action will have limited impact on the second quarter of 2010 but the interest savings will add about one cent per share over the last 6 months of 2010.

Book value was $447.7 million or $16.32 per share on March 31, 2010 compared to $439.6 million or $15.93 per share on December 31, 2009.

Shareholder Compensation

Dividends

On February 9, 2010, our Board of Directors declared a quarterly dividend of $.03 per share to all of its Class A and Class B shareholders, payable on March 30, 2010 to shareholders of record on March 16, 2010. We returned $0.8 million in dividends during both the first quarter of 2010 and 2009.

GAMCO announced that on May 4, 2010 its Board of Directors declared a quarterly dividend of $.03 per share to all of its Class A and Class B shareholders, payable on June 29, 2010 to shareholders of record on June 15, 2010.

Share Repurchase and Stockholders’ Equity

From January 1, 2010 to May 3, 2010, the Company repurchased 212,900 of the Company’s shares at an average investment of $44.81.

Since our IPO of six million shares at a price of $17.50 per share in 1999, the Company has repurchased 6,421,983 shares at an average price of $40.07 per share for an investment of $257 million and has paid cumulative dividends of $205.1 million or $7.28 per share.

On May 4, 2010, the Board of Directors authorized an additional 500,000 shares to the current buyback authorization, bringing the remaining authorization to approximately 995,000.

Shares outstanding on March 31, 2010 were 27.4 million, down 0.7% from 27.6 million at December 31, 2009 and 1.4% below the 27.8 million shares outstanding on March 31, 2009. The decline in the outstanding shares from March 2009 to March 2010 primarily reflects open market repurchases. Fully diluted shares outstanding for the first quarter of 2010 were 28.1 million, 2.8% higher than the first quarter 2009’s level of 27.4 million and 3.4% lower than the fourth quarter 2009’s level of 29.1 million, largely due to the dilution effect of the convertible notes in during first quarter 2010 and fourth quarter 2009. The convertible notes are assumed to be converted when such assumption dilutes earnings per share in a period. When that occurs, the interest expense is added back to net income for EPS purposes. Whether a convertible note is dilutive is dependent on the level of earnings in a given period. The $20 million redemption will add about two cents per year to EPS.

At March 31, 2010, the company had 359,100 shares of restricted stock held by our officers and staff. Such restricted stock awards vest over the next four years. The Chairman does not hold any restricted stock.

On February 9, 2010, the Board approved the granting of 88,800 restricted stock awards to be issued on June 1, 2010.

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Our disclosure and analysis in this press release 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-K 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.