Gamco Investors, Inc. et al – IPO: ‘424B1’ on 2/11/99

As of:  Thursday, 2/11/99   ·   Accession #:  950123-99-999   ·   File #:  333-51023

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Initial Public Offering (IPO):  Prospectus   —   Rule 424(b)(1)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Filed Pursuant to Rule 424(B)(1)                      98    596K 

Document Table of Contents

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                                                Filed Pursuant to Rule 424(b)(1)
                                          Registration no. 333-51023

PROSPECTUS                                                                      

6,000,000 SHARES
GABELLI ASSET MANAGEMENT INC. 
CLASS A COMMON STOCK
------------------------

  All of the 6,000,000 shares of Class A Common Stock (the "Class A Common
Stock") offered hereby (the "Offering") are being offered by Gabelli Asset      
Management Inc. (the "Company"). The Company has two classes of authorized      
common stock, consisting of Class A Common Stock and Class B Common Stock (the  
"Class B Common Stock" and, together with the Class A Common Stock, the "Common 
Stock"). Each share of Class A Common Stock entitles its holder to one vote, and
each share of Class B Common Stock entitles its holder to ten votes.            

  Following the Offering, Mario J. Gabelli ("Mr. Gabelli") will indirectly
beneficially own shares of Common Stock having approximately 97.6% of the       
combined voting power of the outstanding shares of Common Stock (97.2% if the   
Underwriters' over-allotment option is exercised in full). See "Ownership of the
Common Stock."                                                                  

Prior to the Offering, there has been no public market for the Class A
Common Stock. For a discussion of the factors considered in determining the     
initial public offering price, see "Underwriting." The Class A Common Stock has 
been approved for listing, subject to official notice of issuance, on the New   
York Stock Exchange under the symbol "GBL."                                     

     SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK 
OFFERED HEREBY.                                                                 
------------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. 

                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
                                                    PRICE TO                UNDERWRITING              PROCEEDS TO     
                                                     PUBLIC                 DISCOUNT(1)                COMPANY(2)     
                                                                                                                      
----------------------------------------------------------------------------------------------------------------------
Per Share...................................         $17.50                    $1.225                   $16.275       
----------------------------------------------------------------------------------------------------------------------
Total(3)....................................      $105,000,000               $7,350,000               $97,650,000     
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------

(1) The Company has agreed to indemnify the several Underwriters against  
     certain liabilities, including certain liabilities under the Securities
Act of 1933, as amended. See "Underwriting."                      

   (2) Before deducting expenses payable by the Company estimated at $1,850,000.

 (3) The Company has granted the Underwriters an option to purchase up to an
      additional 900,000 shares of Class A Common Stock, exercisable within 30
     days after the date hereof, solely to cover over-allotments, if any. If
       such option is exercised in full, the total Price to Public, Underwriting
   Discount and Proceeds to Company will be $120,750,000, $8,452,500 and
$112,297,500, respectively. See "Underwriting."                   

------------------------

     The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject  
to approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or     
modify such offer and to reject orders in whole or in part. It is expected that 
delivery of the shares of Class A Common Stock will be made in New York, New    
York on or about February 17, 1999.                                             
------------------------
Joint Book-Running Managers 
MERRILL LYNCH & CO.                                         SALOMON SMITH BARNEY
------------------

GABELLI & COMPANY, INC. 
------------------------
The date of this Prospectus is February 10, 1999. 

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[Bar Graph depicting year end assets under management in the Mutual Funds for   
each of the years ended December 31, 1994, 1995, 1996, 1997 and 1998 and        
compound annual growth rate of 23%.]                                            

[Bar Graph depicting year end assets under management in the Separate Accounts &
other for each of the years ended December 31, 1994, 1995, 1996, 1997 and 1998  
and compound annual growth rate of 17%.]                                        

[Pie chart depicting Morningstar Open-End Mutual Fund ratings as a percent of   
assets in rated funds at December 31, 1998.]                                    

[Pie chart depicting composition of assets under management as a percent of     
total assets under management at December 31, 1998.]                            

[Chart depicting Morningstar overall, 3-year, 5-year and 10-year ratings for    
selected Mutual Funds at December 31, 1998.]                                    

[Individual photos of Mario J. Gabelli and various portfolio managers and group 
photos of selected members of the Mutual Fund management team and the selected  
managing directors of the Separate Accounts team.]                              

[Table depicting Open-End Mutual Fund Performance as of December 31, 1998 for 1 
year, 3 year average annual, 5 year average annual, 10 year average annual and  
since inception average annual.]                                                

  CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON   
STOCK OF THE COMPANY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
THE CLASS A COMMON STOCK OF THE COMPANY TO COVER SYNDICATE SHORT POSITIONS AND  
THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE      
"UNDERWRITING."                                                                 

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PROSPECTUS SUMMARY

   The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements     
(including notes) appearing elsewhere in this Prospectus. The Company was formed
in connection with a reorganization of Gabelli Funds, Inc. ("GFI"), whereby     
prior to the Offering, the Company issued 24 million shares of its Class B      
Common Stock, representing all of its then issued and outstanding shares of     
Common Stock, to GFI and two of GFI's subsidiaries for substantially all of the 
operating assets and liabilities of GFI relating to its institutional and retail
asset management, mutual fund advisory, underwriting and brokerage business.    
Following the Offering, GFI will be renamed "Gabelli Group Capital Partners,    
Inc." Unless otherwise indicated, the information (other than historical        
financial information) contained in this Prospectus (i) gives effect to the     
Formation Transactions described under "Certain Relationships and Related       
Transactions -- The Formation Transactions," which will have been consummated   
prior to or concurrently with the Offering, and (ii) assumes no exercise of the 
Underwriters' over-allotment option. Unless the context otherwise requires, (i) 
the "Company" means Gabelli Asset Management Inc., its predecessors and its     
consolidated subsidiaries and (ii) "GFI" means Gabelli Funds, Inc. (which will  
be renamed "Gabelli Group Capital Partners, Inc." after the Offering) and its   
consolidated subsidiaries.                                                      

THE COMPANY 

The Company is a widely recognized provider of investment advisory and
brokerage services to mutual fund, institutional and high net worth investors,  
primarily in the United States. The Company generally manages assets on a       
discretionary basis and invests in a variety of U.S. and international          
securities through various investment styles. The Company's revenues are largely
based on the level of assets under management in its business, rather than its  
total assets, as well as the level of fees associated with its various          
investment products. At September 30, 1998, the Company had total assets under  
management of approximately $13.9 billion. On a pro forma basis after giving    
effect to the Formation Transactions, for the nine months ended September 30,   
1998, the Company had total revenues of approximately $102.3 million and net    
income of approximately $21.7 million. On a pro forma basis after giving effect 
to the Formation Transactions, at September 30, 1998, the Company had total     
assets of approximately $111.5 million.                                         

     At December 31, 1998, the Company had approximately $16.3 billion of assets
under management, 88% of which were invested in equity securities. The Company's
assets under management are organized principally in three groups: Mutual Funds,
Separate Accounts and Partnerships.                                             

- MUTUAL FUNDS:  At December 31, 1998, the Company had $8.2 billion of assets   
under management in open-end mutual funds and closed-end funds, representing
 approximately 50% of the Company's total assets under management. The Company
  currently provides advisory services to (i) the Gabelli family of funds, which
consists of 14 open-end mutual funds and three closed-end funds; (ii) The   
Treasurer's Fund, consisting of three open-end money market funds (the      
"Treasurer's Funds"); and (iii) the Gabelli Westwood family of funds,       
consisting of six open-end mutual funds, five of which are managed on a     
day-to-day basis by an unaffiliated subadviser (collectively, the "Mutual   
Funds"). The Mutual Funds have a long-term record of achieving high returns,
relative to similar investment products. At December 31, 1998, approximately
99% of the assets under management in the open-end Mutual Funds having an   
 overall rating from Morningstar, Inc. ("Morningstar") were in open-end Mutual
Funds ranked "three stars" or better, with 36% of such assets in open-end   
Mutual Funds ranked "five stars" and 38% of such assets in open-end Mutual  
Funds ranked "four stars" on an overall basis (i.e., based on three-, five- 
and ten-year risk adjusted average returns). The Gabelli family of funds was
 honored as the top performing mutual fund family by Mutual Funds Magazine for
1997.                                                                       

- SEPARATE ACCOUNTS:  At December 31, 1998, the Company had $8.0 billion of     
 assets in approximately 975 separate accounts, representing approximately 49%
  of the Company's total assets under management. The Company currently provides
advisory services to a broad range of investors, including corporate pension
and profit sharing plans, foundations, endowments, jointly trusteed plans,  
 municipalities, and high net worth individuals, and also serves as subadviser
to certain other third-party investment funds (collectively, the "Separate  
Accounts"). At December 31, 1998, high net worth accounts (accounts of      
  individuals and related parties in general having a minimum account balance of
$1 million) comprised approximately 79%                                     

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of the number of Separate Accounts and approximately 25% of the assets, with    
institutional investors comprising the balance. Each Separate Account portfolio 
is managed to meet the specific needs and objectives of the particular client by
utilizing investment strategies and techniques within the Company's areas of
expertise.                                                                  

- PARTNERSHIPS:  The Company also provides alternative investments through its  
  majority-owned subsidiary, Gabelli Securities, Inc. ("GSI"). These alternative
investment products consist primarily of risk arbitrage and merchant banking
limited partnerships and offshore companies (collectively, the              
  "Partnerships"). The Partnerships had $146 million of assets, or approximately
1% of total assets under management, at December 31, 1998.                  

  Investment advisory and incentive fees relating to the Mutual Funds, the
Separate Accounts, and the Partnerships generated approximately 84% and 85% of  
the Company's total revenues for the nine months ended September 30, 1998 and   
the year ended December 31, 1997, respectively.                                 

 The following table sets forth total assets under management by product
type as of the dates shown and the compound annual growth rates ("CAGR"):       

ASSETS UNDER MANAGEMENT 

BY PRODUCT TYPE 
(DOLLARS IN MILLIONS) 

                                                        [Enlarge/Download Table]

                                                                                     DECEMBER 31, 1994
                                                     AT DECEMBER 31,                        TO        
                                       --------------------------------------------  DECEMBER 31, 1998
                                        1994     1995     1996     1997      1998         CAGR(A)     
                                       ------   ------   ------   -------   -------  -----------------
                                                                                                      
EQUITY:                                                                                               
  Mutual Funds........................ $3,391   $3,875   $3,969   $ 5,313   $ 7,159        20.5%      
  Separate Accounts...................  4,276    5,051    5,200     6,085     7,133        13.7       
                                       ------   ------   ------   -------   -------        ----       
          Total Equity................  7,667    8,926    9,169    11,398    14,292        16.9       
                                       ------   ------   ------   -------   -------        ----       
FIXED INCOME:                                                                                         
  Money Market Mutual Funds...........    208      236      235       827     1,030        49.2       
  Bond Mutual Funds...................      5        5        5         6         8        12.5       
  Separate Accounts...................     --       --       --       928       824          --       
                                       ------   ------   ------   -------   -------        ----       
          Total Fixed Income..........    213      241      240     1,761     1,862        71.9       
                                       ------   ------   ------   -------   -------        ----       
PARTNERSHIPS:                                                                                         
  Partnerships........................    103      112      116       138       146         9.1       
                                       ------   ------   ------   -------   -------        ----       
    Total Assets Under Management(b).. $7,983   $9,279   $9,525   $13,297   $16,300       19.5%       
                                       ======   ======   ======   =======   =======        ====       
BREAKDOWN OF TOTAL ASSETS                                                                             
  UNDER MANAGEMENT:                                                                                   
  Mutual Funds........................ $3,604   $4,116   $4,209   $ 6,146   $ 8,197       22.8%       
  Separate Accounts...................  4,276    5,051    5,200     7,013     7,957        16.8       
  Partnerships........................    103      112      116       138       146         9.1       
                                       ------   ------   ------   -------   -------        ----       
    Total Assets Under Management(b).. $7,983   $9,279   $9,525   $13,297   $16,300        19.5%      
                                       ======   ======   ======   =======   =======        ====       

---------------                                                                 
(a) Compound annual growth rate.                                                

(b) Effective April 14, 1997 the Company increased its ownership of Gabelli     
   Fixed Income L.L.C. from 50% to 80.1%, thereby causing Gabelli Fixed Income
   L.L.C. to become a consolidated subsidiary of the Company. Accordingly, for
periods after April 14, 1997, the assets managed by Gabelli Fixed Income
   L.L.C. are included in the Company's assets under management. If the assets
managed by Gabelli Fixed Income L.L.C. had been included for all periods
presented, assets under management would have been $9,004, $10,793 and  
   $11,082 at December 31, 1994, 1995 and 1996, respectively, and the CAGR for
total assets would have been 16.0%.                                     

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     The Company's subsidiary, Gabelli & Company, Inc. ("Gabelli & Company"), is
a registered broker-dealer and a member of the National Association of          
Securities Dealers, Inc. (the "NASD") and acts as underwriter and distributor of
the open-end Mutual Funds and provides brokerage, trading, underwriting and     
research services.                                                              

 The Company was incorporated in April 1998 as "Alpha G, Inc." under the
laws of the state of New York. In February 1999, the Company was renamed        
"Gabelli Asset Management Inc." The Company's principal executive offices are   
located at One Corporate Center, Rye, New York 10580 and the telephone number is
(914) 921-3700.                                                                 

BUSINESS DESCRIPTION

The Company was originally founded in 1976 as an institutional        
broker-dealer and entered the separate accounts business in 1977 and the mutual 
fund business in 1986. In its early years, the Company's investment philosophy  
was value-oriented. Starting in the mid-1980s, the Company began building upon  
its core of value-oriented equity investment products by adding new investment  
strategies designed for clients seeking to invest in growth-oriented equities,  
convertible securities and fixed income products. Since then, the Company has   
continued to build its franchise by expanding its investment management         
capabilities through the addition of industry specific, international, global,  
and real asset oriented product offerings. Throughout its 22-year history, the  
Company has marketed most of its products under the "Gabelli" brand name.       

 The Company manages assets in the following wide spectrum of investment
products and strategies, many of which are focused on fast-growing areas:       

SUMMARY OF INVESTMENT PRODUCTS AND STRATEGIES 
--------------------------------------------------- 

                                                                [Download Table]

       U.S. EQUITIES:  U.S. FIXED INCOME:  GLOBAL AND INTERNATIONAL EQUITIES:
       --------------  ------------------  ----------------------------------
                                                                             
All Cap Value          Corporate           International Growth              
Large Cap Value        Government          Global Value                      
Large Cap Growth       Municipals          Global Telecommunications         
Mid Cap Value          Asset-backed        Global Multimedia                 
Small Cap Value        Intermediate        Gold(b)                           
Small Cap Growth       Short-term                                            
Micro Cap                                                                    
Real Estate(a)                                                               

                                                                [Download Table]

   CONVERTIBLE SECURITIES:       U.S. BALANCED:          ALTERNATIVE PRODUCTS:
   -----------------------       --------------          ---------------------
                                                                              
U.S. Convertible Securities    Balanced Growth     Risk Arbitrage             
Global Convertible Securities  Balanced Value      Merchant Banking           
                                                   Fund of Funds              

---------------                                                                 
(a) Invested primarily in publicly-traded real estate investment trusts and     
managed by Westwood Management.                                         
(b) Invested primarily in publicly-traded equities of U.S. and international    
gold companies.                                                         

     The Company believes that its growth to date can be largely credited to the
following:                                                                      

- LONG-TERM FUND PERFORMANCE:  The Company has a long-term record of achieving  
 relatively high returns for its Mutual Fund and Separate Account clients when
compared to similar investment products. The Company believes that its      
performance record is a competitive advantage and a recognized component of 
its franchise.                                                              

- WIDELY RECOGNIZED "GABELLI" BRAND NAME:  For much of its history, the Company 
has advertised in a variety of financial print media, including in          
publications such as the Wall Street Journal, Money Magazine,               

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 Barron's and Investor's Business Daily. The Company believes that the breadth
and consistency of its advertising has enhanced investor awareness of its   
product offerings and of the "Gabelli" brand name.                          

- DIVERSIFIED PRODUCT OFFERINGS:  Since the inception of its investment         
management activities, the Company has sought to expand the breadth of its  
 product offerings. The Company currently offers a wide spectrum of investment
products and strategies, including product offerings in U.S. equities, U.S. 
 fixed income, global and international equities, convertible securities, U.S.
balanced and alternative products.                                          

- STRONG INDUSTRY FUNDAMENTALS:  According to data compiled by the U.S. Federal 
Reserve, the investment management industry has grown faster than more      
  traditional segments of the financial services industry, including the banking
  and insurance industries. The Company believes that demographic trends and the
growing role of money managers in the placement of capital compared to the  
traditional role played by banks and life insurance companies will result in
continued growth of the investment management industry.                     

BUSINESS STRATEGY 

 The Company intends to grow its franchise by leveraging its competitive
asset management strengths, including its long-term performance record, brand   
name, diverse product offerings and experienced research, client service and    
investment staff. In order to achieve continued growth in assets under          
management and profitability, the Company will continue to pursue its business  
strategy, the key elements of which include:                                    

- BROADENING AND STRENGTHENING THE GABELLI BRAND.  The Company believes that the
Gabelli brand name is one of the more widely recognized brand names in the  
U.S. investment management industry. The Company intends to continue to     
strengthen its brand name identity by, among other things, increasing its   
marketing and advertising to provide a uniform global image. The Company    
believes that with its brand name recognition, it has the capacity to create
new products and services around the core Gabelli brand to complement its   
existing product offerings. For example, in 1998, the Company launched the  
Gabelli Global Opportunity Fund, a global equity fund, and the Gabelli      
Westwood Mighty Mites(SM) Fund, a micro cap equity fund.                    

- EXPANDING MUTUAL FUND DISTRIBUTION.  The Company intends to continue expanding
its distribution network through programs sponsored by third-party          
intermediaries that offer their mutual fund customers a variety of competing
products and administrative services ("Third-Party Distribution Programs"), 
including, in particular, programs with no transaction fees payable by the  
customer ("NTF Programs"), also commonly referred to as "mutual fund        
  supermarkets." In recent years, the Company has realized significant growth in
its mutual fund assets under management through alliances with "mutual fund 
supermarkets" and other Third-Party Distribution Programs, through which its
Mutual Funds are made available to investors. As of December 31, 1998, the  
Company was participating in 63 Third-Party Distribution Programs, including
the Charles Schwab and Fidelity Investments "mutual fund supermarket"       
 programs. In addition, the Company intends to develop a marketing strategy to
  increase its presence in the 401(k) market for its Mutual Funds. Additionally,
the Company expects to soon offer investors the ability to purchase mutual  
fund shares directly through the Internet. The Company has also entered into
various marketing alliances and distribution arrangements with leading      
national brokerage and investment houses and has commenced development of   
 additional classes of shares for several of its mutual funds for sale through
national brokerage and investment houses and other third-party distribution 
channels on a commission basis.                                             

- INCREASING PENETRATION IN HIGH NET WORTH MARKET.  The Company's high net worth
business focuses, in general, on serving clients who have established an    
account relationship of $1 million or more with the Company. According to   
certain industry estimates, the number of households with over $1 million in
 investable assets will grow from approximately 2.5 million in 1996 to over 15
million by 2010. With the Company's 22-year history of serving this segment,
its long-term performance record and brand name recognition, the Company    
 believes that it is well positioned to capitalize on the growth opportunities
in this market.                                                             

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- INCREASING MARKETING FOR INSTITUTIONAL SEPARATE ACCOUNTS.  The institutional  
Separate Accounts business has been primarily developed through direct      
marketing channels. Historically, third-party pension consultants and       
financial consultants have not been a major source of new institutional     
Separate Accounts business for the Company. However, these consultants have 
significantly increased their presence among institutional investors. As a  
 result, the Company intends both to add marketing personnel to target pension
and financial consultants and to expand its efforts through its traditional 
marketing channels.                                                         

- ATTRACTING AND RETAINING EXPERIENCED PROFESSIONALS.  Following the Offering,  
 the availability of the publicly-traded Class A Common Stock will enhance the
Company's ability to attract and retain top performing investment           
  professionals. The ability to attract and retain highly experienced investment
and other professionals with a long-term commitment to the Company and its  
clients has been, and will continue to be, a significant factor in its      
long-term growth. As the Company continues to increase the breadth of its   
investment management capabilities, it plans to add portfolio managers and  
other investment personnel in order to foster expansion of its products.    

- CAPITALIZING ON ACQUISITIONS AND STRATEGIC ALLIANCES.  The Company intends to 
 selectively and opportunistically pursue acquisitions and alliances that will
  broaden its product offerings and add new sources of distribution. The Company
believes that it will be better positioned to pursue acquisitions and       
alliances after the Offering because it will be one of a relatively few     
publicly-traded investment management firms. At present, the Company has no 
  plans, arrangements or understandings relating to any specific acquisitions or
alliances.                                                                  

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THE OFFERING

Class A Common Stock Offered....    6,000,000 shares                            

Common Stock to be Outstanding                                                  
After the Offering..............    6,000,000 shares of Class A Common Stock(1) 
                             and 24,000,000 shares of Class B Common
Stock(2)  

                                  ----------------------------------------------

          30,000,000 shares(1)
                                  ----------------------------------------------

                                  ----------------------------------------------

Use of Proceeds.................   The Company intends to use the net proceeds  
                             from the Offering for general corporate
                                 purposes, including working capital and the
                           expansion of its business through new
                            investment product offerings, enhanced
                            distribution and marketing of existing
                              investment products, upgraded management
                       information systems and strategic
                              acquisitions as opportunities arise. The
                                  Company currently does not intend to use any
                                  of the net proceeds from the Offering to pay
                                debt service on the $50 million payable to
                                   Mr. Gabelli under the terms of his Employment
                       Agreement. See "Use of Proceeds."

Voting Rights...................   The rights of holders of shares of Common    
                               Stock are substantially identical, except
                                  that holders of Class B Common Stock will be
                            entitled to ten votes per share, while
                             holders of Class A Common Stock will be
                     entitled to one vote per share.

NYSE Symbol.....................   GBL                                          
---------------                                                                 
(1) Excludes 1,500,000 shares of Class A Common Stock reserved for issuance     
under the 1999 Stock Award and Incentive Plan of the Company, including 
approximately 1,200,000 shares of Class A Common Stock subject to       
  outstanding options that will be granted at an exercise price equal to the
initial public offering price of the Class A Common Stock (net of the   
  discount payable to the Underwriters). See "Management -- 1999 Stock Award
and Incentive Plan."                                                    

(2) All of the Class B Common Stock is owned by GFI, which is approximately     
two-thirds owned by Mr. Gabelli, with the balance owned by the Company's
professional staff and other individuals.                               

RISK FACTORS

 Purchasers of the Class A Common Stock in the Offering should carefully
consider the risk factors set forth under the caption "Risk Factors" and the    
other information included in this Prospectus prior to making an investment     
decision. See "Risk Factors" beginning on page 12.                              

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA 

General                                                                     

  The following is a summary of certain consolidated financial information
relating to the Company. The summary has been derived in part from, and should  
be read in conjunction with, the audited Consolidated Financial Statements of   
Gabelli Funds, Inc. and subsidiaries ("GFI") and "Management's Discussion and   
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus. All financial information for the nine months ended September  
30, 1997 and 1998, which has not been audited, has been derived from the        
unaudited Consolidated Financial Statements of GFI included elsewhere in this   
Prospectus, and, in the opinion of management, reflects all adjustments, which  
are of a normal recurring nature, necessary to present fairly such information  
for the periods presented. Operating results for the nine months ended September
30, 1998 are not necessarily indicative of the results that may be expected for 
the year ended December 31, 1998.                                               

The unaudited pro forma income statement data gives effect to (i) the 
Formation Transactions, including the reduction in net gain from investments,   
the reduction in interest and dividend income, the lower management fee and the 
increase in interest expense as if the Employment Agreement (as defined herein) 
(see Note P to the Consolidated Financial Statements) had been in effect for the
year ended December 31, 1997 and nine months ended September 30, 1998, and (ii) 
the additional income taxes which would have been recorded if GFI had been a "C"
corporation instead of an "S" corporation based on tax laws in effect for the   
respective periods.                                                             

  The unaudited pro forma financial data does not purport to represent the
results of operations or the financial position of the Company which actually   
would have occurred had the Formation Transactions been consummated on the      
aforesaid dates, or project the results of operations or the financial position 
of the Company for any future date or period. See "Selected Historical and Pro  
Forma Financial Data" and "Certain Relationships and Related Transactions -- The
Formation Transactions" and the Unaudited Pro Forma Consolidated Statements of  
Income and Financial Condition of the Company included elsewhere in this        
Prospectus.                                                                     

  Impact of $50 Million Non-Recurring Charge ($1.10 per share) to be Recorded in
First Quarter of 1999                                                           

  Under the terms of the Employment Agreement, Mr. Gabelli, who indirectly
beneficially owns shares of Common Stock having 97.6% of the combined voting    
power of the Company, will receive, in addition to his portfolio management     
compensation and account executive fees, an annual incentive-based management   
fee of 10% of the aggregate pre-tax profits of the Company (before consideration
of the management fee or the $50 million deferred payment described below or any
employment taxes thereon) and a deferred payment of $50 million on January 2,   
2002, with interest payable quarterly on such deferred amount at an annual rate 
of 6%. The $50 million deferred payment will be charged to the Company's        
earnings upon the effective date of the Employment Agreement, which occurred in 
the first quarter of 1999. This payment, net of tax benefit, will reduce        
earnings by $1.10 per share (based on the expected weighted average number of   
shares outstanding in the first quarter of 1999 of 27.3 million). The $50       
million payment is not reflected in the pro forma income statement data because 
it is a one-time event directly related to the Offering; however, it is         
reflected, net of tax benefit, in pro forma stockholders' equity.               

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GABELLI FUNDS, INC. AND SUBSIDIARIES SUMMARY HISTORICAL AND PRO FORMA DATA

                                                        [Enlarge/Download Table]

                                                                                        NINE MONTHS ENDED  
                                                YEAR ENDED DECEMBER 31,                   SEPTEMBER 30,    
                                  ---------------------------------------------------   ------------------ 
                                    1993       1994       1995      1996       1997     1997(1)   1998(1)  
                                  --------   --------   --------   -------   --------   -------   -------- 
                                                               (IN THOUSANDS)                              
                                                                                                           
INCOME STATEMENT DATA                                                                                      
Revenues:                                                                                                  
  Investment advisory and                                                                                  
    incentive fees..............  $ 61,110   $ 71,759   $ 77,302   $84,244   $ 89,684   $64,107   $ 86,302 
  Commission revenue............     5,555      5,003      5,706     6,667      7,496     5,613      6,197 
  Distribution fees and other                                                                              
    income......................     3,716      4,683      6,302     7,257      8,096     5,100      9,810 
                                  --------   --------   --------   -------   --------   -------   -------- 
    Total revenues..............    70,381     81,445     89,310    98,168    105,276    74,820    102,309 
                                  --------   --------   --------   -------   --------   -------   -------- 
Expenses:                                                                                                  
  Compensation costs............    31,750     36,235     39,384    41,814     45,260    33,138     41,702 
  Management fee................     3,618      6,904      9,423    10,192     10,580     7,425      8,533 
  Other operating expenses......    12,592     16,435     18,709    19,274     18,690    13,943     18,072 
                                  --------   --------   --------   -------   --------   -------   -------- 
    Total expenses..............    47,960     59,574     67,516    71,280     74,530    54,506     68,307 
                                  --------   --------   --------   -------   --------   -------   -------- 
Operating income................    22,421     21,871     21,794    26,888     30,746    20,314     34,002 
                                  --------   --------   --------   -------   --------   -------   -------- 
Other income:                                                                                              
  Net gain (loss) from                                                                                     
    investments.................     9,199     (1,724)    10,105     8,783      7,888     6,803     (3,910)
  Gain on sale of PCS licenses, net..       --       --       --        --         --        --     17,430 
  Interest and dividend                                                                                    
    income......................     2,596      4,692      5,853     5,406      4,634     3,168      3,252 
  Interest expense..............      (337)      (868)      (679)     (879)    (1,876)   (1,183)    (1,355)
  Other.........................       195        119        147       331       (109)      (52)        79 
                                  --------   --------   --------   -------   --------   -------   -------- 
    Total other income, net.....    11,653      2,219     15,426    13,641     10,537     8,736     15,496 
                                  --------   --------   --------   -------   --------   -------   -------- 
Income before income taxes and                                                                             
  minority interest.............    34,074     24,090     37,220    40,529     41,283    29,050     49,498 
  Income taxes..................    12,831      9,198      7,769     7,631      3,077     2,369      3,004 
  Minority interest.............     1,750      2,060      2,555     2,727      1,529       759      1,043 
                                  --------   --------   --------   -------   --------   -------   -------- 
Net income......................  $ 19,493   $ 12,832   $ 26,896   $30,171   $ 36,677   $25,922   $ 45,451 
                                  ========   ========   ========   =======   ========   =======   ======== 

                                                        [Enlarge/Download Table]

                                                      DECEMBER 31,                          SEPTEMBER 30,   
                                  -----------------------------------------------------  -------------------
                                    1993        1994       1995       1996       1997    1997(1)    1998(1) 
                                  --------    --------   --------   --------   --------  --------   --------
                                                                 (IN MILLIONS)                              
                                                                                                            
OTHER FINANCIAL DATA (UNAUDITED)                                                                            
  Assets under management (at                                                                               
    period end)(2):                                                                                         
      Mutual Funds............... $  3,684    $  3,604   $  4,116   $  4,209   $  6,146  $  5,892   $  7,034
      Separate Accounts..........    4,460       4,276      5,051      5,200      7,013     6,760      6,720
      Partnerships...............       67         103        112        116        138       134        147
                                  --------    --------   --------   --------   --------  --------   --------
         Total................... $  8,211    $  7,983   $  9,279   $  9,525   $ 13,297  $ 12,786   $ 13,901
                                  ========    ========   ========   ========   ========  ========   ========

                                                        [Enlarge/Download Table]

                                                                       SEPTEMBER 30, 1998                    
                                                   ----------------------------------------------------------
                                                                      PRO FORMA FOR            PRO FORMA FOR 
                                                   ACTUAL(1)   FORMATION TRANSACTIONS(1)(3)   OFFERING(1)(3) 
                                                   ---------   ----------------------------   ---------------
                                                                         (IN THOUSANDS)                      
                                                                                                             
BALANCE SHEET DATA                                                                                           
  Investment in securities........................ $ 78,597              $ 23,233                $ 23,233    
  Investment in partnerships......................   47,081                15,163                  15,163    
  PCS licenses....................................   33,985                    --                      --    
  Total assets....................................  241,487               111,501                 208,501    
  Total liabilities and minority interest.........   61,385                96,671                  96,671    
  Total stockholders' equity......................  180,102                14,830                 110,630    

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                                                        [Enlarge/Download Table]

                                                                              NINE MONTHS 
                                                              YEAR ENDED         ENDED    
                                                             DECEMBER 31,    SEPTEMBER 30,
                                                                 1997            1998     
                                                             ------------    -------------
                                                                 (IN THOUSANDS, EXCEPT    
                                                                    PER SHARE DATA)       
                                                                                          
UNAUDITED PRO FORMA DATA(1)(3)(4)                                                         

  Revenues:                                                                               
    Investment advisory and incentive fees..................   $ 89,684         $ 86,302  
    Commission revenue......................................      7,496            6,197  
    Distribution fees and other income......................      8,096            9,810  
                                                               --------         --------  
         Total revenues.....................................    105,276          102,309  
  Expenses:                                                                               
    Compensation costs......................................     45,260           41,702  
    Management fee..........................................      4,424            4,216  
    Other operating expenses................................     16,901           17,541  
                                                               --------         --------  
         Total expenses.....................................     66,585           63,459  
    Operating income........................................     38,691           38,850  
                                                               --------         --------  
  Other income:                                                                           
    Net gain from investments...............................      3,004              756  
    Interest and dividend income............................      1,115              605  
    Interest expense........................................     (3,000)          (2,271) 
                                                               --------         --------  
         Total other income, net............................      1,119             (910) 
                                                               --------         --------  
  Income before income taxes and minority interest..........     39,810           37,940  
    Income taxes............................................     15,735           15,047  
    Minority interest.......................................      1,677            1,228  
                                                               --------         --------  
  Net income................................................   $ 22,398         $ 21,665  
                                                               ========         ========  

---------------                                                                 
(1) Unaudited.                                                                  

(2) Effective April 14, 1997, Gabelli Fixed Income L.L.C. was restructured such 
 that the Company's ownership increased from 50% to 80.1%, thereby causing
Gabelli Fixed Income L.L.C. to become a consolidated subsidiary of the  
  Company. Accordingly, for periods after April 14, 1997, the assets managed
 by Gabelli Fixed Income L.L.C. are included in the Company's assets under
 management. If the assets managed by Gabelli Fixed Income L.L.C. had been
   included for all periods presented, assets under management for 1993, 1994,
1995 and 1996 would have been approximately $11.1 billion, $9.0 billion,
$10.8 billion and $11.1 billion, respectively.                          

(3) The unaudited pro forma data presented above gives effect to the Formation  
  Transactions and the additional income taxes payable if GFI had been a "C"
  corporation instead of an "S" corporation, but does not give effect to the
   use of the proceeds received from the Offering. See the Unaudited Pro Forma
Consolidated Financial Statements.                                      

(4) The disclosure requirements of Statements of Financial Accounting Standards 
    No. 123 require the use of an option valuation model to compute a fair value
  of employee stock options. The valuation model used by the Company was not
developed for use in valuing employee stock options and the Company's   
employee stock option characteristics vary significantly from those of  
    traded options. As a result, changes in the subjective input assumptions can
materially affect the fair value estimate. The pro forma compensation   
  expense, net of tax benefit, related to the Stock Award and Incentive Plan
    for the year ended December 31, 1997 and the nine months ended September 30,
   1998 is $1,600,000 and $1,200,000, respectively, based on 1,200,000 options
outstanding on the date of consummation of the Offering.                

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RISK FACTORS

In addition to the other information contained in this Prospectus,    
prospective investors should consider carefully the following factors relating  
to the Company and the Class A Common Stock before making an investment in the  
Class A Common Stock offered by this Prospectus.                                

CONTROL BY MR. GABELLI; CONFLICTS OF INTEREST                                   

 Upon completion of the Offering, Mr. Gabelli, through his approximately
two-thirds ownership of GFI, will beneficially own all of the Company's         
outstanding Class B Common Stock, representing approximately 97.6% of the       
combined voting power of all classes of voting stock of the Company (97.2% if   
the Underwriters' over-allotment option is exercised in full). As long as Mr.   
Gabelli indirectly beneficially owns a majority of the combined voting power of 
the Common Stock, he will have the ability to elect all of the members of the   
Board of Directors and thereby control the management and affairs of the        
Company, including determinations with respect to acquisitions, dispositions,   
borrowings, issuances of Common Stock or other securities of the Company, and   
the declaration and payment of dividends on the Common Stock. In addition, Mr.  
Gabelli will be able to determine the outcome of matters submitted to a vote of 
the Company's shareholders for approval and will be able to cause or prevent a  
change in control of the Company. As a result of Mr. Gabelli's control of the   
Company, none of the Company's agreements with Mr. Gabelli and other companies  
controlled by him have been arrived at through "arm's-length" negotiations,     
although the Company believes that the parties endeavored to implement          
market-based terms. There can be no assurance that the Company would not have   
received more favorable terms from an unaffiliated party. See "Certain          
Relationships and Related Transactions."                                        

     In order to minimize conflicts and potential competition with the Company's
investment management business, Mr. Gabelli has entered into a written agreement
to limit his activities outside of the Company. Mr. Gabelli has undertaken that 
so long as he is associated with the Company or for a period of five years from 
the consummation of the Offering, whichever is longer, he shall not provide     
investment management services for compensation other than in his capacity as an
officer or employee of the Company except for (a) those investment funds and    
accounts currently managed by Mr. Gabelli outside the Company under performance 
fee arrangements, but only to the extent that any such investment fund or       
account consists solely of one or more of the persons who were investors as of  
the date of the consummation of the Offering and (b) successor funds and        
accounts which serve no investors other than those in the funds and accounts    
referred to in clause (a) or those investors' successors, heirs, donees or      
immediate families, which funds and accounts operate according to an investment 
style similar to such other accounts or funds, which style is not used at the   
Company as of the date of consummation of the Offering, and which are subject to
performance fee arrangements. References to the "Permissible Accounts" mean the 
funds and accounts managed outside the Company which are permitted under the    
agreement described above in this paragraph. To the extent that such activities 
are not prohibited under the foregoing agreement, Mr. Gabelli intends to        
continue devoting time to activities outside the Company, including managing his
own assets and his family's assets, managing or controlling companies in other  
industries and managing assets for other investors through the Permissible      
Accounts (approximately $110 million as of September 30, 1998). These activities
may present conflicts of interest or compete with the Company. The Certificate  
of Incorporation of the Company expressly provides in general that Mr. Gabelli, 
members of his immediate family who are officers or directors of the Company and
entities controlled by such persons have an obligation to present corporate     
opportunities to the Company and resolve conflicts of interest through one of   
the processes described in the Certificate of Incorporation, which include      
independent director or independent shareholder approval. See "Description of   
Capital Stock -- Certificate of Incorporation and Bylaw Provisions -- Overview  
of Corporate Opportunity and Conflict of Interest Policies." As of the date of  
the consummation of the Offering, it is expected that there will be no members  
of Mr. Gabelli's immediate family who are officers or directors of the Company. 

    The Company will not derive any income from activities outside the Company
by Mr. Gabelli or members of his immediate family who are officers or directors 
of the Company and may not be able to take advantage of business and investment 
opportunities that could later prove to be beneficial to the Company and its    
shareholders, either because such opportunities were not Company opportunities  
at the time they arose or                                                       

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because the Company did not pursue them. Where a conflict of interest involves a
transaction between Mr. Gabelli or members of his immediate family who are      
officers or directors of the Company or their affiliates and the Company, there 
can be no assurance that the Company would not receive more favorable terms if  
it were dealing with an unaffiliated party, although the Company will seek to   
achieve market-based terms in all such transactions. See "Description of Capital
Stock -- Certificate of Incorporation and Bylaw Provisions -- Overview of       
Corporate Opportunity and Conflict of Interest Policies."                       

DEPENDENCE ON MARIO J. GABELLI AND OTHER KEY PERSONNEL                          

     The Company is dependent on the efforts of Mr. Gabelli, its Chairman of the
Board, Chief Executive Officer, Chief Investment Officer and the primary        
portfolio manager for a significant majority of the Company's assets under      
management. The loss of Mr. Gabelli's services would have a material adverse    
effect on the Company.                                                          

    In addition to Mr. Gabelli, the future success of the Company depends to a
substantial degree on its ability to retain and attract other qualified         
personnel to conduct its investment management business. The market for         
qualified portfolio managers is extremely competitive and has grown more so in  
recent periods as the investment management industry has experienced growth. The
Company anticipates that it will be necessary for it to add portfolio managers  
and investment analysts as the Company further diversifies its investment       
products and strategies. See "Business -- Business Strategy." There can be no   
assurance, however, that the Company will be successful in its efforts to       
recruit and retain the required personnel. In addition, the investment          
professionals as well as the senior marketing personnel have direct contact with
the Company's Separate Account clients, which can lead to a strong client       
relationship. The loss of these personnel could jeopardize the Company's        
relationships with certain Separate Account clients, and result in the loss of  
such accounts. The loss of key management professionals or the inability to     
recruit and retain sufficient portfolio managers and marketing personnel could  
have a material adverse effect on the Company's business.                       

POTENTIAL ADVERSE EFFECTS ON THE COMPANY'S PERFORMANCE PROSPECTS FROM A DECLINE 
IN THE PERFORMANCE OF THE SECURITIES MARKETS                                    

    The Company's results of operations are affected by many economic factors,
including the performance of the securities markets. During recent years,       
unusually favorable and sustained performance of the U.S. securities markets,   
and the U.S. equity market, in particular, has attracted substantial inflows of 
new investments in these markets and has contributed to significant market      
appreciation which has, in turn, led to an increase in assets under management  
and revenues for the Company. At September 30, 1998, approximately 88% of the   
Company's assets under management were invested in portfolios consisting        
primarily of equity securities. More recently, the securities markets in general
have experienced significant volatility, with declines in value experienced     
during the third quarter of 1998. Any further decline in the securities markets,
in general, and the equity markets, in particular, could further reduce the     
Company's assets under management and consequently reduce the Company's         
revenues. In addition, any such continuing decline in the equity markets,       
failure of these markets to sustain their prior levels of growth, or continued  
short-term volatility in these markets could result in investors withdrawing    
from the equity markets or decreasing their rate of investment, either of which 
would be likely to further adversely affect the Company. The Company's growth   
rate has varied from year to year, and there can be no assurance that the       
average growth rates sustained in the recent past will continue. From time to   
time, a relatively high proportion of the assets managed by the Company may be  
concentrated in particular industry sectors. A general decline in the           
performance of securities in those industry sectors could have an adverse effect
on the Company's assets under management and revenues.                          

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FUTURE INVESTMENT PERFORMANCE COULD REDUCE REVENUES AND OTHER INCOME            

Success in the investment management and mutual fund businesses is    
dependent on investment performance as well as distribution and client          
servicing. Good performance generally stimulates sales of the Company's         
investment products and tends to keep withdrawals and redemptions low, which    
generates higher management fees (which are based on the amount of assets under 
management). Conversely, relatively poor performance tends to result in         
decreased sales, increased withdrawals and redemptions in the case of the open- 
end Mutual Funds, and in the loss of Separate Accounts, with corresponding      
decreases in revenues to the Company. Many analysts of the mutual fund industry 
believe that investment performance is the most important factor for the growth 
of no-load Mutual Funds, such as those offered by the Company. Failure of the   
Company's investment products to perform well could, therefore, have a material 
adverse effect on the Company.                                                  

LOSS OF SIGNIFICANT SEPARATE ACCOUNTS COULD AFFECT REVENUES                     

 The Company had approximately 950 Separate Accounts as of September 30,
1998, of which the ten largest accounts generated approximately 7% of the       
Company's total revenues during the nine months ended September 30, 1998. Loss  
of these accounts for any reason would have an adverse effect on the Company's  
revenues. Notwithstanding good performance, the Company has from time to time   
lost large Separate Accounts as a result of corporate mergers and               
restructurings, and the Company could continue to lose accounts under these or  
other circumstances.                                                            

COMPLIANCE FAILURES AND CHANGES IN REGULATION COULD ADVERSELY AFFECT THE COMPANY

The Company's investment management activities are subject to client  
guidelines and its Mutual Fund business involves compliance with numerous       
investment, asset valuation, distribution and tax requirements. A failure to    
adhere to these guidelines or satisfy these requirements could result in losses 
which could be recovered by the client from the Company in certain              
circumstances. Although the Company has installed procedures and utilizes the   
services of experienced administrators, accountants and lawyers to assist it in 
adhering to these guidelines and satisfying these requirements, and maintains   
insurance to protect it in the case of client losses, there can be no assurance 
that such precautions or insurance will protect the Company from potential      
liabilities.                                                                    

    The Company's businesses are subject to extensive regulation in the United
States, including by the Securities and Exchange Commission (the "Commission")  
and the NASD. The Company is also subject to the laws of non-U.S. jurisdictions 
and non-U.S. regulatory agencies or bodies. The failure of the Company to comply
with applicable laws or regulations could result in fines, suspensions of       
personnel or other sanctions, including revocation of the registration of the   
Company or any of its subsidiaries as an investment adviser or broker-dealer.   
Changes in laws or regulations or in governmental policies could have a material
adverse effect on the Company. See "Business -- Regulation."                    

THE COMPANY'S SOURCES OF REVENUE ARE SUBJECT TO TERMINATION ON SHORT NOTICE     

 Substantially all of the Company's revenues are derived from investment
management agreements and distribution arrangements. Investment management      
agreements and distribution arrangements with the Mutual Funds are terminable   
without penalty on 60 days' notice (subject to certain additional procedural    
requirements in the case of termination by a Mutual Fund) and must be           
specifically approved at least annually, as required by law. Such annual renewal
requires, among other things, approval by the disinterested members of each     
Mutual Fund's board of directors or trustees. See "Business -- Brokerage and    
Mutual Fund Distribution." Investment advisory agreements with the Separate     
Accounts are typically terminable by the client without penalty on 30 days'     
notice or less. Any failure to renew or termination of a significant number of  
these agreements or arrangements would have a material adverse effect on the    
Company.                                                                        

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COMPETITION AND COMPETITORS WITH GREATER RESOURCES                              

The investment management business is intensely competitive with low  
barriers to entry and is undergoing substantial consolidation. Many             
organizations in this industry are attempting to market to and service the same 
clients as the Company, not only with mutual fund products and services, but    
also with a wide range of other financial products and services. Many of the    
Company's competitors have greater distribution capabilities, offer more product
lines and services, and may also have a substantially greater amount of assets  
under management and financial resources. These competitors would tend to have a
substantial advantage over the Company during periods when the Company's        
investment performance is not strong enough to counter these competitors'       
greater marketing resources. See "Business -- Competition."                     

RELIANCE ON THIRD-PARTY DISTRIBUTION PROGRAMS                                   

 The Company has recently experienced significant growth in sales of its
open-end Mutual Funds through Third-Party Distribution Programs, most of which  
is from NTF Programs. Approximately $900 million of the Company's assets under  
management in the open-end Mutual Funds as of September 30, 1998 were obtained  
through NTF Programs. The cost of participating in Third-Party Distribution     
Programs is higher than the Company's direct distribution costs, and there can  
be no assurance that the cost of Third-Party Distribution Programs will not     
increase in the future. Any increase would be likely to have an adverse effect  
on the Company's profit margins and results of operations. In addition, there   
can be no assurance that the Third-Party Distribution Programs will continue to 
distribute the Mutual Funds. At September 30, 1998, approximately 89% of the NTF
Program net assets in the Gabelli and Gabelli Westwood families of funds are    
attributable to two NTF Programs. Further, 89% of the total assets in The       
Treasurer's Funds are attributable to one Third-Party Distribution Program. The 
decision by these Third-Party Distribution Programs to discontinue distribution 
of the Mutual Funds could have an adverse effect on the Company's growth of     
assets under management.                                                        

FEE PRESSURES COULD REDUCE PROFIT MARGINS                                       

     There has been a trend toward lower fees in some segments of the investment
management industry. In order for the Company to maintain its fee structure in a
competitive environment, the Company must be able to provide clients with       
investment returns and service that will encourage them to be willing to pay    
such fees. Accordingly, there can be no assurance that the Company will be able 
to maintain its current fee structure. Fee reductions on existing or future new 
business could have an adverse impact on the Company's profit margins and       
results of operations.                                                          

POSSIBILITY OF LOSSES ASSOCIATED WITH UNDERWRITING, TRADING AND MARKET-MAKING   
ACTIVITIES                                                                      

The Company's underwriting, trading and market-making activities are  
primarily conducted through its subsidiary, Gabelli & Company, both as principal
and agent. Such activities subject the Company's capital to significant risks of
loss. The risks of loss include those resulting from ownership of securities,   
extension of credit, leverage, liquidity, counterparty failure to meet          
commitments, client fraud, employee errors, misconduct and fraud (including     
unauthorized transactions by traders), failures in connection with the          
processing of securities transactions and litigation. The Company has procedures
and internal controls to address such risks but there can be no assurance that  
these procedures and controls will prevent losses from occurring.               

DEPENDENCE ON INFORMATION SYSTEMS                                               

The Company operates in an industry that is highly dependent on its   
information systems and technology. The Company outsources a significant portion
of its information systems operations to third parties who are responsible for  
providing the management, maintenance and updating of such systems. There can be
no assurance, however, that the Company's information systems and technology    
will continue to be able to accommodate the Company's growth, or that the cost  
of maintaining such outsourcing arrangements will not increase from its current 
level. Such a failure to accommodate growth, or an increase in costs related to 
these information systems, could have a material adverse effect on the Company. 

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FAILURE TO ACHIEVE YEAR 2000 COMPATIBILITY WOULD CAUSE SIGNIFICANT LOSSES       

     With the new millennium approaching, many institutions around the world are
reviewing and modifying their computer systems to ensure that they are Year 2000
compliant. The issue, in general terms, is that many existing computer systems  
and microprocessors with date functions (including those in non-information     
technology equipment and systems) use only two digits to identify a year in the 
date field with the assumption that the first two digits of the year are always 
"19". Consequently, on January 1, 2000, computers that are not Year 2000        
compliant may read the year as 1900. Systems that calculate, compare or sort    
using the incorrect date may malfunction.                                       

  Because the Company is dependent, to a very substantial degree, upon the
proper functioning of its computer systems, a failure of its systems to be Year 
2000 compliant could have a material adverse effect on the Company. For example,
a failure of this kind could lead to incomplete or inaccurate accounting or     
recording of trades in securities or result in the generation of erroneous      
results or give rise to uncertainty about the Company's exposure to trading     
risks and its need for liquidity. If not remedied, potential risks include      
business interruption or shutdown, financial loss, regulatory actions,          
reputational harm and legal liability.                                          

   In addition, the Company depends primarily upon the proper functioning of
third-party computer and non-information technology systems. These parties      
include trading counterparties; financial intermediaries such as stock          
exchanges, depositories, clearing agencies, clearing houses and commercial      
banks; subcontractors such as third-party administrators; and vendors such as   
providers of telecommunication services, quotation equipment and other          
utilities. If the third parties with whom the Company interacts have Year 2000  
problems that are not remedied, the following problems could result: (i) in the 
case of subcontractors, in disruption of critical services such as              
administration, valuation and record keeping services for its mutual funds; (ii)
in the case of vendors, in disruption of important services upon which the      
Company depends, such as telecommunications and electrical power; (iii) in the  
case of third-party data providers, in the receipt of inaccurate or out-of-date 
information that would impair the Company's ability to perform critical data    
functions, such as pricing its securities or other assets; (iv) in the case of  
financial intermediaries such as exchanges and clearing agents, in failed trade 
settlements, an inability to trade in certain markets and disruption of funding 
flows; (v) in the case of banks and other financial institutions, in the        
disruption of capital flows potentially resulting in liquidity stress; and (vi) 
in the case of counterparties and customers, in financial and accounting        
difficulties for those parties that expose the Company to increased credit risk 
and lost business. Disruption or suspension of activity in the world's financial
markets is also possible. In addition, uncertainty about the success of         
remediation efforts generally may cause many market participants to reduce the  
level of their market activities temporarily as they assess the effectiveness of
these efforts during a "phase-in" period beginning in late 1999. This in turn   
could result in a general reduction in trading and other market activities (and 
lost revenues). Management cannot predict the impact that such reduction would  
have on the Company's business.                                                 

   In order to ensure that the Company will continue to operate successfully
and be able to meet its fiduciary obligations to its clients after December 31, 
1999, the Company has taken numerous steps toward becoming Year 2000 compliant  
in both its information technology and non-information technology systems. See  
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations -- Year 2000 Program." The Company currently estimates that the total
cost of implementing its Year 2000 program will not have a material impact on   
the Company's results of operations, liquidity or capital resources. There can  
be no assurance, however, that the Company's Year 2000 program will be effective
or that the Company's estimates about the cost of completing its program will be
accurate. Neither the Company nor any of its affiliates has been reviewed by    
federal or state regulators for Year 2000 compliance.                           

POTENTIAL ADVERSE EFFECT ON CLASS A COMMON STOCK SHARE PRICE FROM DISPARATE     
VOTING RIGHTS                                                                   

     The holders of Class A Common Stock and Class B Common Stock have identical
rights except that (i) holders of Class A Common Stock are entitled to one vote 
per share, while holders of Class B Common 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 Common Stock are not eligible to vote on matters relating exclusively
to Class B Common Stock and vice versa. The differential in the voting rights   
and the ability of the Company to issue                                         

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additional Class B Common Stock could adversely affect the value of the Class A 
Common Stock to the extent that investors, or any potential future purchaser of 
the Company, view the superior voting rights of the Class B Common Stock to have
value.                                                                          

ABSENCE OF A PRIOR PUBLIC MARKET; VOLATILITY OF PRICE; NO ASSURANCE THAT AN     
ACTIVE TRADING MARKET WILL DEVELOP OR BE SUSTAINED                              

Prior to the Offering, there has been no public market for the Class A
Common Stock and there can be no assurance that an active trading market will   
develop or be sustained. The initial public offering price of the Class A Common
Stock was determined through negotiation among the Company and the Underwriters 
(other than Gabelli & Company) and may not be indicative of the market price for
the Class A Common Stock after the Offering. See "Underwriting." The market     
price for the Class A Common Stock may be highly volatile. The Company believes 
that factors such as announcements by the Company, or by its competitors, of    
quarterly variances in financial results could cause the market price of the    
Class A Common Stock to fluctuate substantially. In addition, the stock market  
may experience extreme price and volume fluctuations, which often are unrelated 
to the operating performance of specific companies. Market fluctuations or      
perceptions regarding the Company's industry, as well as general economic or    
political conditions, may adversely affect the market price of the Class A      
Common Stock.                                                                   

NO SPECIFIC USE OF PROCEEDS                                                     

   The Company has not designated any specific use for the net proceeds from
the sale by the Company of Class A Common Stock offered hereby. The Company     
intends to use the net proceeds primarily for general corporate purposes,       
including working capital and the expansion of its business through new         
investment product offerings, enhanced distribution, upgraded management        
information systems and strategic acquisitions as opportunities arise.          
Accordingly, management will have significant flexibility in applying the net   
proceeds of the Offering. At present, the Company has no plans, agreements or   
understandings relating to any specific acquisitions or alliances. Although part
of the Company's business strategy is to pursue acquisitions and alliances that 
will broaden its product offerings and add new sources of distribution, there   
can be no assurance that the Company will find strategic acquisition            
opportunities at favorable prices, that the Company will have sufficient capital
resources to finance its acquisition strategy, or that any such acquisitions, if
consummated, will be successfully integrated with the Company's business        
operations. See "Use of Proceeds."                                              

IMMEDIATE AND SUBSTANTIAL DILUTION                                              

Purchasers of Class A Common Stock in the Offering will experience    
immediate dilution in net tangible book value of $13.87 per share, based on the 
initial public offering price of $17.50 per share. To the extent that any       
options to be granted with respect to Class A Common Stock are exercised after  
the vesting period expires, purchasers of Class A Common Stock will experience  
additional dilution. See "Dilution" and "Management -- 1999 Stock Award and     
Incentive Plan."                                                                

SHARES AVAILABLE FOR FUTURE SALE OR DISTRIBUTION                                

Immediately after consummation of the Offering, the Company will have 
outstanding 6,000,000 shares of Class A Common Stock and 24,000,000 shares of   
Class B Common Stock. Subject to the restrictions described under "Shares       
Eligible for Future Sale" and applicable law and the lock-up agreement with GFI 
and two of its subsidiaries described below, GFI or such subsidiaries could sell
any or all of the shares of Class B Common Stock owned by them from time to time
for any reason. See "Shares Eligible for Future Sale." GFI and two of its       
subsidiaries have agreed with the Company that they will not offer, sell or     
otherwise dispose of any shares of Class B Common Stock for a period of three   
years after the date of this Prospectus without the prior written consent of the
Company (except for transfers among GFI and its two subsidiaries). In addition, 
without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith      
Incorporated and Salomon Smith Barney Inc., on behalf of the Underwriters, for a
period of 180 days after the date of this Prospectus (i) the Company, GFI and   
two of its subsidiaries have agreed with the Underwriters that they will not    
offer, sell or otherwise dispose of any shares of Common Stock or any security  
convertible into or exchangeable or exercisable for shares of Common Stock,     
except for the shares of Class A Common Stock to                                

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be sold in the Offering and options granted in the ordinary course of business  
under the Plan or for shares of Class B Common Stock transferred among GFI and  
its two subsidiaries and (ii) shareholders of GFI who are also officers and     
directors of the Company have agreed with the Underwriters that they will not   
offer, sell or otherwise dispose of any shares of capital stock of GFI or any   
security convertible into or exchangeable or exercisable for shares of capital  
stock of GFI, except in transactions between existing shareholders of GFI and   
through gifts, in each case, to persons who agree to be bound by similar        
restrictions. No prediction can be made as to the effect, if any, that future   
sales or distributions of Class B Common Stock by GFI will have on the market   
price of the Class A Common Stock prevailing from time to time. Sales or        
distributions of substantial amounts of Class A Common Stock or Class B Common  
Stock, or the perception that such sales or distributions could occur, could    
adversely affect the prevailing market price for the Class A Common Stock.      

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements under "Prospectus Summary," "Risk Factors,"        
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations," "Business," and elsewhere in this Prospectus constitute            
forward-looking statements, which involve known and unknown risks, uncertainties
and other factors that may cause the actual results, levels of activity,        
performance or achievements of the Company, or industry results, to be          
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. Such      
factors include, among others, those listed under "Risk Factors" and elsewhere  
in this Prospectus. As a result of the foregoing and other factors, no assurance
can be given as to future results, levels of activity or achievements, and      
neither the Company nor any other person assumes responsibility for the accuracy
and completeness of such statements.                                            

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THE COMPANY 

   The Company is a holding company that was newly formed in connection with
the Offering and, accordingly, has not previously engaged in any business       
operations, acquired any assets or incurred any liabilities other than in       
connection with the Offering. Prior to the closing of the Offering, the Company 
issued 24 million shares of its Class B Common Stock, representing all of its   
then issued and outstanding shares of common stock, to GFI for substantially all
of the operating assets and liabilities of GFI relating to its institutional and
retail asset management, mutual fund advisory, underwriting and brokerage       
business. Following the Offering, GFI will be renamed "Gabelli Group Capital    
Partners, Inc." As a result, GFI, which is approximately two-thirds owned by Mr.
Gabelli with the balance owned by the Company's professional staff and other    
individuals, will own all of the outstanding common stock of the Company prior  
to the consummation of the Offering. At such time, one of GFI's most significant
assets will be its investment in the Company.                                   

   Immediately following the Offering, the Company will conduct its business
operations through its subsidiaries. After the consummation of the Offering, GFI
will own all of the outstanding shares of Class B Common Stock, which will      
represent approximately 97.6% of the combined voting power of the outstanding   
Common Stock (97.2% if the Underwriters' over-allotment option is exercised in  
full). The Company will continue to be controlled by Mr. Gabelli. As part of the
Formation Transactions, the Company entered into an Employment Agreement with   
Mr. Gabelli and a Management Services Agreement with GFI. See                   
"Management -- Employment Agreements" and "Certain Relationships and Related    
Transactions -- The Formation Transactions."                                    

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    The following sets forth a simplified organizational chart for the Company
after consummation of the Offering:                                             

[GABELLI & COMPANY ORGANIZATIONAL CHART]
---------------                                                                 
 * The 23.4% ownership interest of GSI not held by the Company is owned by the
Company's professional staff (7.2%) and by unaffiliated stockholders    
(16.2%).                                                                

** The Company owns 51.1% of the Class B common stock of Gabelli Advisers,    
  Inc., which stock represents approximately 49.9% of the total voting power
and 40.9% of the economic interest. The remaining 48.9% of the Class B  
common stock of Gabelli Advisers, Inc. is owned by members of senior    
   management of the Company and by their affiliates. As a result, the Company
   effectively has voting control of Gabelli Advisers, Inc. All of the Class A
common stock of Gabelli Advisers, Inc., representing a 20% economic     
interest, is owned by Westwood Management Corporation ("Westwood        
Management"). See "Certain Relationships and Related                    
Transactions -- Transactions with Mr. Gabelli and Affiliates." Gabelli  
  Advisers, Inc. is the adviser and Westwood Management is the subadviser to
five of the six portfolios of the Gabelli Westwood family of funds.     

*** The 19.9% ownership interest of Gabelli Fixed Income L.L.C. not held by the 
Company is owned by members of senior management of Gabelli Fixed Income
L.L.C.                                                                  

   The Company was incorporated in April 1998 under the laws of the state of
New York. The Company's principal executive offices are located at One Corporate
Center, Rye, New York 10580 and the telephone number is (914) 921-3700.         

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USE OF PROCEEDS 

    The net proceeds to be received by the Company from the sale of the shares
of Class A Common Stock in the Offering after deducting underwriting commissions
and discounts and the estimated expenses of the Offering, are expected to be    
approximately $95.8 million ($110.4 million if the Underwriters' over-allotment 
option is exercised in full). The Company intends to use the net proceeds from  
the Offering for general corporate purposes, including working capital and the  
expansion of its business through new investment product offerings, enhanced    
distribution and marketing of existing investment products, upgraded management 
information systems and strategic acquisitions as opportunities arise. At       
present, the Company has no plans, arrangements or understandings relating to   
any specific acquisitions or alliances. The Company currently does not intend to
use any of the net proceeds from the Offering to pay debt service on the $50    
million payable to Mr. Gabelli under the terms of his Employment Agreement.     

DIVIDEND POLICY 

    The declaration and payment of dividends by the Company are subject to the
discretion of its Board of Directors. The Company currently intends to retain   
earnings to finance its growth and operations and does not anticipate paying    
dividends on the Common Stock in the foreseeable future. Any determination as to
the payment of dividends, including the level of dividends, will depend on,     
among other things, general economic and business conditions, the strategic     
plans of the Company, the Company's financial results and condition,            
contractual, legal and regulatory restrictions on the payment of dividends by   
the Company or its subsidiaries, and such other factors as the Board of         
Directors of the Company may consider to be relevant. The Company is a holding  
company, and as such, its ability to pay dividends is subject to the ability of 
the subsidiaries of the Company to provide cash to the Company. See             
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations -- Liquidity and Capital Resources."                                 

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DILUTION

    The pro forma net tangible book value of the Common Stock at September 30,
1998 after giving effect to the Formation Transactions, but before adjustment   
for the Offering, was $13.1 million, or $0.54 per share. Net tangible book value
per share represents the amount of total tangible assets less total liabilities,
divided by the number of shares of Common Stock outstanding. After giving effect
to the sale of the 6,000,000 shares of Class A Common Stock in the Offering, and
applying the estimated net proceeds therefrom as set forth in "Use of Proceeds,"
the pro forma net tangible book value of the Company at September 30, 1998 would
have been $108.9 million, or $3.63 per share, calculated as follows:            

                                                                [Download Table]
                                                                             
Initial public offering price per share (1).........................   $17.50
                                                                       ------
  Pro forma net tangible book value per share before the                     
     Offering...............................................  $ 0.54         
                                                              ------         
  Increase in pro forma net tangible book value per share                    
     attributable to the Offering...........................    3.09         
                                                              ------         
As adjusted pro forma net tangible book value per share after the            
  Offering..........................................................     3.63
                                                                       ------
Dilution in pro forma net tangible book value per share to new               
  investors (2)(3)..................................................   $13.87
                                                                       ======

---------------                                                                 
(1) Initial public offering price is before deduction of underwriting discounts 
and commissions and estimated expenses of the Offering to be paid by the
Company.                                                                

(2) Dilution is determined by subtracting the pro forma net tangible book value 
    per share of Class A Common Stock after the Offering from the initial public
offering price paid by purchasers in the Offering for a share of Class A
Common Stock.                                                           

(3) Assumes no exercise of outstanding stock options. As of the date of this    
 Prospectus, the Company expects that there will be options outstanding to
  purchase a total of approximately 1,200,000 shares of Class A Common Stock
    at an exercise price equal to the initial public offering price of the Class
A Common Stock (net of the discount payable to the Underwriters). See   
    "Management -- 1999 Stock Award and Incentive Plan." If any of these options
were exercised, there would be further dilution to purchasers of Class A
Common Stock in the Offering.                                           

    Assuming the Underwriters' over-allotment option is exercised in full, the
pro forma net tangible book value at September 30, 1998 would be $123.5 million 
or $4.00 per share, the immediate increase in pro forma net tangible book value 
of shares owned by existing shareholders would be $3.46 per share, and the      
immediate dilution to purchasers of shares of Class A Common Stock in the       
Offering would be $13.50 per share.                                             

   The following table summarizes at September 30, 1998, after giving effect
to the sale of the shares of Class A Common Stock in the Offering, (i) the      
number and percentage of shares of Common Stock issued by the Company, (ii) the 
total cash consideration paid for the Common Stock, and (iii) the average price 
per share of Common Stock paid by GFI prior to the Offering and by the public   
shareholders of Class A Common Stock in the Offering:                           

                                                        [Enlarge/Download Table]

                                SHARES OF COMMON                                                
                                  STOCK OWNED            TOTAL CONSIDERATION        AVERAGE     
                             ----------------------  ---------------------------     PRICE      
                              NUMBER     PERCENTAGE      AMOUNT       PERCENTAGE   PER SHARE    
                              ------     ----------      ------       ----------   ---------    
                                                                                                
GFI......................... 24,000,000        80%    $45,000,000(1)        30%   $      1.88(1)
Public Shareholders......... 6,000,000         20     105,000,000           70          17.50   
                             ---------     ------     -----------       ------                  
          Total............. 30,000,000       100%    $150,000,000         100%                 
                             =========     ======     ===========       ======                  

---------------                                                                 
(1) Represents the net assets transferred to the Company by GFI in exchange for 
 the 24 million shares of Class B Common Stock. Prior to the Offering, the
   Company entered into an Employment Agreement (see "Management -- Employment
Agreements") which, among other things, provides for a one time lump sum
   payment to Mr. Gabelli of $50 million on January 2, 2002. This payment, net
of tax benefit, will be charged to the Company's earnings in the first  
quarter of 1999. If it were treated as a distribution instead of being  
  charged to the Company's earnings, this payment would reduce Mr. Gabelli's
effective consideration to zero.                                        

    The calculations in the tables set forth above do not reflect an aggregate
of 1,500,000 shares of Class A Common Stock reserved for issuance under the 1999
Stock Award and Incentive Plan of the Company, including approximately 1,200,000
shares of Class A Common Stock subject to outstanding options that will be      
granted at the initial public offering price of the Class A Common Stock (net of
the discount payable to the Underwriters). See "Management -- 1999 Stock Award  
and Incentive Plan."                                                            

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CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1998 (i) on an historical basis and (ii) as adjusted for the      
Formation Transactions, the Offering and the Company's obligation under the     
Employment Agreement to pay Mr. Gabelli $50 million on January 2, 2002. See     
"Management -- Employment Agreements." This payment, net of tax benefit, will be
charged to the Company's earnings in the first quarter of 1999. This table      
should be read in conjunction with the Consolidated Financial Statements of GFI 
and related notes and other financial and operating data appearing elsewhere in 
this Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."                                                     

                                                                [Download Table]

                                                               SEPTEMBER 30, 1998   
                                                             -----------------------
                                                               GFI         COMPANY  
                                                              ACTUAL     AS ADJUSTED
                                                             --------    -----------
                                                                 (IN THOUSANDS)     
                                                                                    
Debt:                                                                               
  Payable to related party.................................. $     --     $ 50,000  
  Notes payable.............................................    5,876           --  
  Payable to Sub-S shareholders.............................   14,642           --  
  Capital lease obligation..................................    3,621        3,621  
                                                             --------     --------  
     Total debt.............................................   24,139       53,621  
Minority Interest...........................................   11,754       11,754  
Stockholders' Equity:                                                               
  Preferred Stock, $.001 par value; authorized 10,000,000                           
     shares; none issued....................................       --           --  
  Common Stock $.01 par value; authorized 1,000,000 Shares;                         
     issued and outstanding 196,537 shares..................        2           --  
  Class A Common Stock, $.001 par value; authorized                                 
     100,000,000 shares; issued and outstanding 6,000,000                           
     shares, as adjusted....................................       --            6  
  Class B Common Stock, $.001 par value; authorized                                 
     100,000,000 shares; issued and outstanding 24,000,000                          
     shares, as adjusted....................................       --           24  
  Additional paid-in capital................................   21,471      118,966  
  Retained earnings (accumulated deficit)...................  169,252       (8,366) 
  Notes receivable..........................................  (10,623)          --  
                                                             --------     --------  
     Total stockholders' equity.............................  180,102      110,630  
                                                             --------     --------  
          Total capitalization.............................. $215,995     $176,005  
                                                             ========     ========  

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SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

General                                                                     

    The selected historical financial data presented below has been derived in
part from, and should be read in conjunction with, the audited Consolidated     
Financial Statements of GFI and "Management's Discussion and Analysis of        
Financial Condition and Results of Operations," included elsewhere in this      
Prospectus. All financial information for the nine months ended September 30,   
1997 and 1998, which has not been audited, has been derived from the unaudited  
Consolidated Financial Statements of GFI included elsewhere in this Prospectus, 
and, in the opinion of management, reflects all adjustments, which are of a     
normal recurring nature, necessary to present fairly such information for the   
periods presented. Operating results for the nine months ended September 30,    
1998 are not necessarily indicative of the results that may be expected for the 
year ended December 31, 1998.                                                   

The unaudited pro forma income statement data gives effect to (i) the 
Formation Transactions, including the reduction in net gain from investments,   
the reduction in interest and dividend income, the lower management fee and the 
increase in interest expense as if the Employment Agreement (see Note P to the  
Consolidated Financial Statements) had been in effect for the year ended        
December 31, 1997 and nine months ended September 30, 1998, and (ii) the        
additional income taxes which would have been recorded if GFI had been a "C"    
corporation instead of an "S" corporation based on tax laws in effect for the   
respective periods.                                                             

  The unaudited pro forma adjustments are based upon available information
and certain assumptions that management of the Company believes are reasonable  
under the circumstances. The pro forma financial data does not purport to       
represent the results of operations or the financial position of the Company    
which actually would have occurred had the Formation Transactions been          
consummated on the aforesaid dates, or project the results of operations or the 
financial position of the Company for any future date or period. See "Certain   
Relationships and Related Transactions -- The Formation Transactions" and the   
Unaudited Pro Forma Consolidated Statements of Income and Financial Condition of
the Company included elsewhere in this Prospectus.                              

  Impact of $50 Million Non-Recurring Charge ($1.10 per share) to be Recorded in
First Quarter of 1999                                                           

  Under the terms of the Employment Agreement, Mr. Gabelli, who indirectly
beneficially owns shares of Common Stock having 97.6% of the combined voting    
power of the Company, will receive, in addition to his portfolio management     
compensation and account executive fees, an annual incentive-based management   
fee of 10% of the aggregate pre-tax profits of the Company (before consideration
of the management fee or the $50 million deferred payment described below or any
employment taxes thereon) and a deferred payment of $50 million on January 2,   
2002, with interest payable quarterly on such deferred amount at an annual rate 
of 6%. The $50 million deferred payment will be charged to the Company's        
earnings upon the effective date of the Employment Agreement, which occurred in 
the first quarter of 1999. This payment, net of tax benefit, will reduce        
earnings by $1.10 per share (based on the expected weighted average number of   
shares outstanding in the first quarter of 1999 of 27.3 million). The $50       
million payment is not reflected in the pro forma income statement data because 
it is a one-time event directly related to the Offering; however, it is         
reflected, net of tax benefit, in pro forma stockholders' equity.               

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GABELLI FUNDS, INC. AND SUBSIDIARIES SELECTED HISTORICAL AND PRO FORMA DATA 

                                                        [Enlarge/Download Table]

                                                                                       NINE MONTHS ENDED  
                                               YEAR ENDED DECEMBER 31,                   SEPTEMBER 30,    
                                 ---------------------------------------------------   ------------------ 
                                   1993       1994       1995      1996       1997     1997(1)   1998(1)  
                                 --------   --------   --------   -------   --------   -------   -------- 
                                                              (IN THOUSANDS)                              
                                                                                                          
INCOME STATEMENT DATA                                                                                     
Revenues:                                                                                                 
  Investment advisory and                                                                                 
    incentive fees.............. $ 61,110   $ 71,759   $ 77,302   $84,244   $ 89,684   $64,107   $ 86,302 
  Commission revenue............    5,555      5,003      5,706     6,667      7,496     5,613      6,197 
  Distribution fees and other                                                                             
    income......................    3,716      4,683      6,302     7,257      8,096     5,100      9,810 
                                 --------   --------   --------   -------   --------   -------   -------- 
    Total revenues..............   70,381     81,445     89,310    98,168    105,276    74,820    102,309 
                                 --------   --------   --------   -------   --------   -------   -------- 
Expenses:                                                                                                 
  Compensation costs............   31,750     36,235     39,384    41,814     45,260    33,138     41,702 
  Management fee................    3,618      6,904      9,423    10,192     10,580     7,425      8,533 
  Other operating expenses......   12,592     16,435     18,709    19,274     18,690    13,943     18,072 
                                 --------   --------   --------   -------   --------   -------   -------- 
    Total expenses..............   47,960     59,574     67,516    71,280     74,530    54,506     68,307 
                                 --------   --------   --------   -------   --------   -------   -------- 
Operating income................   22,421     21,871     21,794    26,888     30,746    20,314     34,002 
                                 --------   --------   --------   -------   --------   -------   -------- 
Other income:                                                                                             
  Net gain (loss) from                                                                                    
    investments.................    9,199     (1,724)    10,105     8,783      7,888     6,803     (3,910)
  Gain on sale of PCS licenses,                                                                           
    net.........................       --         --         --        --         --        --     17,430 
  Interest and dividend                                                                                   
    income......................    2,596      4,692      5,853     5,406      4,634     3,168      3,252 
  Interest expense..............     (337)      (868)      (679)     (879)    (1,876)   (1,183)    (1,355)
  Other.........................      195        119        147       331       (109)      (52)        79 
                                 --------   --------   --------   -------   --------   -------   -------- 
    Total other income, net.....   11,653      2,219     15,426    13,641     10,537     8,736     15,496 
                                 --------   --------   --------   -------   --------   -------   -------- 
Income before income taxes and                                                                            
  minority interest.............   34,074     24,090     37,220    40,529     41,283    29,050     49,498 
  Income taxes..................   12,831      9,198      7,769     7,631      3,077     2,369      3,004 
  Minority interest.............    1,750      2,060      2,555     2,727      1,529       759      1,043 
                                 --------   --------   --------   -------   --------   -------   -------- 
Net income...................... $ 19,493   $ 12,832   $ 26,896   $30,171   $ 36,677   $25,922   $ 45,451 
                                 ========   ========   ========   =======   ========   =======   ======== 

                                                        [Enlarge/Download Table]

                                                      DECEMBER 31,                           SEPTEMBER 30,   
                                  -----------------------------------------------------   -------------------
                                    1993        1994       1995       1996       1997     1997(1)    1998(1) 
                                  --------    --------   --------   --------   --------   --------   --------
                                                (IN THOUSANDS, EXCEPT ASSETS UNDER MANAGEMENT)               
                                                                                                             
BALANCE SHEET DATA                                                                                           
  Total assets................... $126,161(1) $141,887   $155,541   $182,524   $232,736   $231,076   $241,487
  Total liabilities and minority                                                                             
    interest.....................   30,612(1)   33,983     39,470     43,991     69,117     74,051     61,385
                                  --------    --------   --------   --------   --------   --------   --------
  Total stockholders' equity..... $ 95,549(1) $107,904   $116,071   $138,533   $163,619   $157,025   $180,102
                                  ========    ========   ========   ========   ========   ========   ========
OTHER FINANCIAL DATA (UNAUDITED)                                                                             
  Assets under management (at                                                                                
    period end, in millions)(2):                                                                             
      Mutual Funds............... $  3,684    $  3,604   $  4,116   $  4,209   $  6,146   $  5,892   $  7,034
      Separate Accounts..........    4,460       4,276      5,051      5,200      7,013      6,760      6,720
      Partnerships...............       67         103        112        116        138        134        147
                                  --------    --------   --------   --------   --------   --------   --------
         Total................... $  8,211    $  7,983   $  9,279   $  9,525   $ 13,297   $ 12,786   $ 13,901
                                  ========    ========   ========   ========   ========   ========   ========

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                                                                              NINE MONTHS 
                                                              YEAR ENDED         ENDED    
                                                             DECEMBER 31,    SEPTEMBER 30,
                                                                 1997            1998     
                                                             ------------    -------------
                                                                 (IN THOUSANDS, EXCEPT    
                                                                    PER SHARE DATA)       
                                                                                          
UNAUDITED PRO FORMA DATA(1)(3)(4)                                                         

  Revenues:                                                                               
    Investment advisory and incentive fees..................   $ 89,684         $ 86,302  
    Commission revenue......................................      7,496            6,197  
    Distribution fees and other income......................      8,096            9,810  
                                                               --------         --------  
         Total revenues.....................................    105,276          102,309  
  Expenses:                                                                               
    Compensation costs......................................     45,260           41,702  
    Management fee..........................................      4,424            4,216  
    Other operating expenses................................     16,901           17,541  
                                                               --------         --------  
         Total expenses.....................................     66,585           63,459  
    Operating income........................................     38,691           38,850  
                                                               --------         --------  
  Other Income:                                                                           
    Net gain from investments...............................      3,004              756  
    Interest and dividend income............................      1,115              605  
    Interest expense........................................     (3,000)          (2,271) 
                                                               --------         --------  
         Total other income, net............................      1,119             (910) 
                                                               --------         --------  
  Income before income taxes and minority interest..........     39,810           37,940  
    Income taxes............................................     15,735           15,047  
    Minority interest.......................................      1,677            1,228  
                                                               --------         --------  
  Net income................................................   $ 22,398         $ 21,665  
                                                               ========         ========  

---------------                                                                 
(1) Unaudited.                                                                  

(2) Effective April 14, 1997, Gabelli Fixed Income L.L.C. was restructured such 
 that the Company's ownership increased from 50% to 80.1%, thereby causing
Gabelli Fixed Income L.L.C. to become a consolidated subsidiary of the  
  Company. Accordingly, for periods after April 14, 1997, the assets managed
 by Gabelli Fixed Income L.L.C. are included in the Company's assets under
 management. If the assets managed by Gabelli Fixed Income L.L.C. had been
   included for all periods presented, assets under management for 1993, 1994,
1995 and 1996 would have been approximately $11.1 billion, $9.0 billion,
$10.8 billion and $11.1 billion, respectively.                          

(3) The unaudited pro forma data presented above gives effect to the Formation  
  Transactions and the additional income taxes payable if GFI had been a "C"
  corporation instead of an "S" corporation, but does not give effect to the
   use of the proceeds received from the Offering. See the Unaudited Pro Forma
Consolidated Financial Statements.                                      

(4) The disclosure requirements of SFAS No. 123 require the use of an option    
valuation model to compute a fair value of employee stock options. The  
valuation model used by the Company was not developed for use in valuing
employee stock options and the Company's employee stock option          
characteristics vary significantly from those of traded options. As a   
 result, changes in the subjective input assumptions can materially affect
the fair value estimate. The pro forma compensation expense, net of tax 
 benefit, related to the Stock Award and Incentive Plan for the year ended
    December 31, 1997 and the nine months ended September 30, 1998 is $1,600,000
   and $1,200,000, respectively, based on 1,200,000 options outstanding on the
date of consummation of the Offering.                                   

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the       
Consolidated Financial Statements of GFI and the notes thereto included         
elsewhere in this Prospectus. The Consolidated Financial Statements of GFI      
include the accounts of the following majority-owned or controlled subsidiaries 
of the Company: Funds Adviser (100%-owned), GAMCO (100%-owned), GSI             
(76.6%-owned), Gabelli & Company (76.6%-owned), Gabelli Fixed Income, Inc.      
(100%-owned), Gabelli Fixed Income L.L.C. (80.1%-owned) and Gabelli Advisers,   
Inc. (40.9%-owned, combined with the voting interests of affiliated parties,    
represents voting control).                                                     

     Prior to the Offering, GFI will transfer substantially all of the operating
assets and liabilities relating to its institutional and retail asset           
management, mutual fund advisory, underwriting and brokerage business to Gabelli
Asset Management Inc. in exchange for 24 million shares of Class B Common Stock.
After the Offering, the Company's financial statements will reflect the         
financial condition and results of operations of Gabelli Asset Management Inc.  
and the historical results of GFI will be shown as predecessor company financial
statements.                                                                     

OVERVIEW                                                                        

The Company's revenues are largely based on the level of assets under 
management in its businesses as well as the level of fees associated with its   
various investment products. Growth in revenues generally depends on good       
investment performance, which increases assets under management by increasing   
the value of existing assets under management, contributing to higher investment
and lower redemption rates and facilitating the ability to attract additional   
investors while maintaining current fee levels. Growth in assets under          
management is also dependent on being able to access various distribution       
channels, which is usually based on several factors, including performance and  
service. Historically, the Company depended primarily on direct distribution of 
its products and services, but since 1995 has increasingly participated in      
Third-Party Distribution Programs, particularly NTF Programs. Fluctuations in   
financial markets also have a substantial effect on assets under management and 
results of operations, although the Company's extensive use of variable         
compensation programs tends to moderate the effects of fluctuations in revenues.
The Company's largest source of revenues is investment advisory fees which are  
based on the amount of assets under management in its Mutual Funds and Separate 
Accounts businesses. Advisory fees from the Mutual Funds are computed daily or  
weekly, while advisory fees from the Separate Accounts are generally computed   
quarterly based on account values as of the end of the preceding quarter. These 
revenues vary depending upon the level of sales compared with redemptions,      
financial market conditions and the fee structure for assets under management.  
Revenues derived from the equity oriented portfolios generally have higher      
management fee rates than fixed income portfolios.                              

Commission revenues consist of brokerage commissions derived from     
securities transactions executed on an agency basis on behalf of mutual funds,  
institutional and high net worth clients as well as investment banking revenue, 
which consists of underwriting profits, selling concessions and management fees 
associated with underwriting activities.                                        

Distribution fees and other income primarily include distribution fees
payable in accordance with Rule 12b-1 ("12b-1") of the Investment Company Act of
1940, as amended (the "Investment Company Act"), along with sales charges and   
underwriting fees associated with the sale of the Mutual Funds plus other       
revenues. Distribution fees fluctuate based on the level of assets under        
management and the amount and type of Mutual Funds sold directly by the Company 
and through various distribution channels. During 1997, the 12b-1 plans for 15  
of the open-end Mutual Funds were restructured as compensation plans with annual
fees set at 25 basis points of average assets under management. Previously,     
these plans were structured to only reimburse the Company for actual            
distribution expenses incurred, up to 25 basis points of average assets under   
management.                                                                     

Compensation costs include variable and fixed compensation and related
expenses paid to the officers, portfolio managers, sales, trading, research and 
all other staff members of the Company.                                         

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    Other operating expenses include product distribution and promotion costs,
clearing charges and fees for GFI's brokerage operation, rental of office space 
and electronic data equipment and services, insurance, charitable contributions 
and other general and administrative operating costs.                           

Interest and dividend income net, as well as net gain from investments
(which includes both realized and unrealized gains) is derived from proprietary 
investments of GFI's capital in various public and private investments.         

Net gain from investments is derived primarily from the assets to be  
distributed to GFI and also includes the results of GFI's hedging activities. As
part of an overall hedge of the risks associated with GFI's proprietary         
investment portfolio, GFI entered into transactions in domestic equity index    
contracts. These financial instruments represent future commitments to sell an  
underlying index for specified amounts at specified future dates. In connection 
with the Formation Transactions, GFI will retain most of the proprietary        
investment portfolio (which includes GFI's hedging activities).                 

    In connection with the completion of the Offering, the Company will become
taxable as a "C" corporation for federal and state income tax purposes and will 
pay taxes at an effective rate considerably higher than when GFI and certain of 
its subsidiaries were treated as Subchapter "S" corporations.                   

  Minority interest represents the share of net income attributable to the
minority stockholders, as reported on a separate company basis, of GFI's        
consolidated majority-owned subsidiaries.                                       

IMPACT OF $50 MILLION NON-RECURRING CHARGE ($1.10 PER SHARE) TO BE RECORDED IN  
FIRST QUARTER OF 1999                                                           

  On an historical basis, the Company has paid to Mr. Gabelli a management
fee equal to 20% of the pre-tax profits of each of the Company's operating      
divisions, before consideration of the management fee. Prior to the Offering,   
the Company and Mr. Gabelli entered into an Employment Agreement (the           
"Employment Agreement"). Pursuant to the Employment Agreement, Mr. Gabelli will 
receive, in addition to his portfolio management compensation and account       
executive fees, an incentive-based management fee of 10% of the aggregate       
pre-tax profits of the Company as computed for financial reporting purposes in  
accordance with generally accepted accounting principles (before consideration  
of this fee or the $50 million deferred payment described below or any          
employment taxes thereon) so long as he is an executive of the Company and      
devoting the substantial majority of his working time to its business. Pursuant 
to the Employment Agreement, Mr. Gabelli will also receive a deferred payment of
$50 million on January 2, 2002, plus interest payable quarterly at an annual    
rate of 6%. See "Management -- Employment Agreements." The Company will incur a 
non-recurring charge of $50 million, before a tax benefit of approximately $20  
million, upon the effective date of the Employment Agreement, which occurred in 
the first quarter of 1999. This payment, net of tax benefit, will reduce        
earnings by $1.10 per share (based on the expected weighted average number of   
shares outstanding in the first quarter of 1999 of 27.3 million).               

OPERATING RESULTS FOR NINE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO NINE  
MONTHS ENDED SEPTEMBER 30, 1997                                                 

 Total revenues for the nine months ended September 30, 1998 were $102.3
million, an increase of $27.5 million, or 37%, compared to $74.8 million for the
nine months ended September 30, 1997. Investment advisory and incentive fees,   
comprising 84% of total revenues, increased $22.2 million, or 35%, to $86.3     
million, as GFI experienced strong growth in the level of average assets under  
management in both its Mutual Funds and Separate Accounts businesses. Total     
average assets under management, which is the basis for investment advisory and 
incentive fees, were $14.8 billion for the nine months ended September 30, 1998,
an increase of $3.7 billion, or 33%, compared to average assets under management
of $11.1 billion in the same period a year earlier. Total assets under          
management at September 30, 1998 were $13.9 billion, an increase of $1.1 billion
from assets under management of $12.8 billion at September 30, 1997. Assets     
under management in Mutual Funds were $7.0 billion at September 30, 1998, an    
increase of approximately $1.1 billion, or 19%, from September 30, 1997. This   
increase represents approximately $1.2 billion in net cash inflows offset by $56
million from market-related depreciation. Assets under management in Separate   
Accounts were $6.7 billion at September 30, 1998 and $6.8 billion at September  
30, 1997. Growth in revenues was greater than growth in assets due to a greater 
weighting of assets to higher fee equity portfolios.                            

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    Commission revenues for the nine months ended September 30, 1998 were $6.2
million, an increase of $0.6 million, or 10%, from commission revenues of $5.6  
million in the same period a year earlier. The increase principally resulted    
from increased agency trading activity for accounts managed by affiliated       
companies. Commission revenues derived from transactions on behalf of the Mutual
Funds and Separate Accounts clients totaled $4.9 million, or approximately 79%  
of total commission revenues for the first nine months of 1998.                 

    Distribution fees and other income increased more than 92% to $9.8 million
for the nine months ended September 30, 1998 from $5.1 million in the first nine
months of 1997. Increased 12b-1 fees, resulting from the growth in assets under 
management and restructuring of the Mutual Funds' 12b-1 plans as compensation   
plans, accounted for $4.1 million, or 88%, of the total increase in distribution
fees and other income during the first nine months of 1998 as compared to the   
same period a year earlier.                                                     

 Total expenses for the first nine months of 1998 were $68.3 million, an
increase of $13.8 million, or 25%, from $54.5 million in the comparable period  
of 1997. Total expenses as a percentage of total revenues declined to 67% from  
73% as fixed expenses were spread over a larger revenue base. Compensation      
costs, which are largely variable in nature and increase or decrease as revenues
grow or decline, rose approximately $8.6 million, or 26%, to $41.7 million for  
the nine months ended September 30, 1998 from $33.1 million for the nine months 
ended September 30, 1997. Management fee expense, which is totally variable and 
increases or decreases as operating profits grow or decline, was $8.5 million   
for the nine months ended September 30, 1998, an increase of $1.1 million, or   
15%, from $7.4 million for the nine months ended September 30, 1997. Other      
operating expenses, which include general operating expenses, as well as        
marketing, promotion and distribution costs, were $18.1 million for the nine    
months ended September 30, 1998, an increase of approximately $4.2 million, or  
30%, from $13.9 million for the comparable period in 1997. Mutual fund          
administration and distribution expenses accounted for more than $3.7 million,  
or 90%, of this increase and are directly related to GFI's growth of assets     
under management.                                                               

Net gain from investments, which is derived from GFI's proprietary    
investment portfolio, was approximately $13.5 million for the nine months ended 
September 30, 1998 compared to a net gain of $6.8 million for the nine months   
ended September 30, 1997. This increase reflects a net gain of approximately    
$17.4 million from the sale of certain Personal Communications Services ("PCS") 
licenses as well as lower losses from hedging activities, which losses declined 
to $0.6 million in 1998 from a loss of $7.6 million in 1997. These gains were   
partially reduced by market related losses from certain other public and private
investments. Interest and dividend income, net of interest expense, declined to 
$1.9 million for the first nine months of 1998 compared to $2.0 million in the  
same 1997 period. In connection with the Formation Transactions, GFI will retain
most of the proprietary investment portfolio (which includes GFI's remaining PCS
licenses and hedging activities). The net gain (loss) from the proprietary      
investment portfolio to be retained by GFI was ($4.7) million and $4.2 million  
for the nine months ended September 30, 1998 and 1997, respectively.            

    Income taxes increased to $3.0 million for the nine months ended September
30, 1998 from $2.4 million for the nine months ended September 30, 1997 in line 
with the increase in income before income taxes and minority interest.          

Minority interest increased to $1.0 million for the nine months ended 
September 30, 1998 up from $0.8 million in the comparable 1997 period. This     
increase is reflective of additional income attributable to the minority        
interests of GFI's 76.6%-owned subsidiary, GSI, and GFI's 40.9% economic        
interest in Gabelli Advisers, Inc.                                              

OPERATING RESULTS FOR YEAR ENDED DECEMBER 31, 1997 AS COMPARED TO YEAR ENDED    
DECEMBER 31, 1996                                                               

Total revenues for GFI in 1997 increased to $105.3 million compared to
$98.2 million in 1996, an increase of approximately $7.1 million or 7%. The     
largest component of revenues, investment advisory and incentive fees, increased
$5.4 million, or 6%, to $89.7 million, as total assets under management         
increased by $3.8 billion or 40% to $13.3 billion from $9.5 billion at the end  
of 1996. The improvements in revenues occurred as assets under management in the
Mutual Funds for 1997 increased approximately $1.9 billion, or 46% to $6.1      
billion at December 31, 1997 from $4.2 billion on December 31, 1996. In         
addition, assets under management in the Separate Accounts grew approximately   
35% to $7.0 billion at December 31, 1997 from                                   

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$5.2 billion at the end of the prior year. Approximately 39% of the increase in 
total assets under management for 1997 and 30% of the increase in investment    
advisory and incentive fees was due to Gabelli Fixed Income L.L.C. becoming a   
consolidated subsidiary on April 14, 1997 when GFI increased its ownership      
interest from 50% to 80.1%. The remaining 61% of the increase in total assets   
under management was primarily the result of investment performance of the      
equity portfolios throughout the year and net sales of the Mutual Funds from NTF
Programs in the second half of the year. Growth in assets was substantially     
greater than growth in revenues, due to the consolidation of Gabelli Fixed      
Income L.L.C. which charges relatively lower fees, the weighting of net sales   
toward the end of the year and increasingly strong investment performance in the
latter part of the year.                                                        

     As a result of increased agency trading activity for institutional clients,
including accounts managed by affiliated companies, commission revenues in 1997 
increased 12% to $7.5 million from $6.7 million in 1996. Commissions from the   
Mutual Funds and the Separate Account clients totaled $6.1 million, or          
approximately 81% of total commission revenues in 1997.                         

    Distribution fees and other income for 1997 increased approximately 12% to
$8.1 million from $7.3 million in 1996. This was the result of both increased   
assets under management and the restructuring of the Mutual Funds' 12b-1 plans  
as compensation plans.                                                          

   Total expenses for 1997 increased to $74.5 million, from $71.3 million in
1996, an increase of $3.2 million, or approximately 4%. Approximately half of   
this increase was associated with GFI's acquisition of a controlling interest in
Gabelli Fixed Income L.L.C. in April 1997 and the inclusion of its expenses in  
GFI's 1997 results. Compensation costs rose to $45.3 million in 1997 from       
$41.8 million in 1996, an increase of approximately 8%. Management fee expense  
rose in line with the increase in pre-tax profits to $10.6 million in 1997 from 
$10.2 million in 1996. Other operating expenses were $18.7 million in 1997      
compared to $19.3 million in 1996, a decline of approximately 3%. This decline  
in other operating expenses was generally due to lower mutual fund distribution 
costs.                                                                          

Net gain from investments, which is derived from GFI's proprietary    
investment portfolio, was approximately $7.9 million in 1997, compared to $8.8  
million for 1996, a decline of approximately $0.9 million. This decline was     
principally due to higher costs associated with hedging activities which in 1997
resulted in hedging losses of $8.1 million compared to hedging losses of $3.7   
million in 1996. Interest and dividend income, net of interest expense,         
decreased by approximately $1.7 million in 1997 to $2.8 million compared with   
$4.5 million in 1996. This decrease was primarily a result of GFI's change in   
its mix of investments from publicly-traded securities and mutual funds which   
paid interest and dividends to certain private investments which did not provide
a current return. In connection with the Formation Transactions, GFI will retain
most of the proprietary investment portfolio (which includes GFI's hedging      
activities). The net gain from the proprietary investment portfolio to be       
retained by GFI was $4.9 million and $7.6 million for 1997 and 1996,            
respectively.                                                                   

   Income taxes decreased to $3.1 million in 1997 from $7.6 million in 1996.
This was primarily a result of GAMCO's election of Subchapter "S" corporate     
status effective January 1, 1997.                                               

 Minority interest declined in 1997 by $1.2 million from $2.7 million in
1996 as a result of GAMCO becoming a wholly owned subsidiary of GFI on January  
1, 1997. Minority interest of $1.5 million in 1997 represents income            
attributable to the minority interests of GFI's then 76.1%-owned subsidiary,    
GSI, GFI's 80.1%-owned subsidiary, Gabelli Fixed Income L.L.C., and GFI's then  
51.1% economic interest in Gabelli Advisers, LLC (now Gabelli Advisers, Inc.).  

OPERATING RESULTS FOR YEAR ENDED DECEMBER 31, 1996 AS COMPARED TO YEAR ENDED    
DECEMBER 31, 1995                                                               

Total revenues for GFI increased to $98.2 million in 1996 from $89.3  
million in 1995, an increase of approximately $8.9 million or approximately 10%.
Investment advisory and incentive fees accounted for the largest portion of this
growth, increasing by $6.9 million or approximately 9% to $84.2 million in 1996 
as overall assets under management rose to $9.5 billion in 1996 from $9.3       
billion in the prior year. For 1996, assets under management in the Mutual Funds
increased to $4.2 billion at December 31, 1996 from $4.1 billion at the end of  
1995. Assets under management in the Separate Accounts were $5.2 billion        
compared to $5.1 billion at December 31, 1995.                                  

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     As a result of increased agency trading activity for institutional clients,
including accounts managed by affiliated companies, commission revenues         
increased to $6.7 million in 1996 from $5.7 million in 1995, an increase of     
approximately 17%. Commissions from the Mutual Funds and the Separate Accounts  
totaled $4.8 million in 1996, or approximately 72% of total commission revenues.

   Distribution fees and other income increased to $7.3 million in 1996 from
$6.3 million in 1995, an increase of approximately 15%, reflecting GFI's        
increased efforts to distribute its Mutual Funds. For 1996 and 1995,            
distribution revenues were closely tied to distribution expenses, as the 12b-1  
plans for the open-end Mutual Funds were then structured to reimburse GFI for   
distribution expenditures incurred on behalf of such funds, subject to a        
limitation of 25 basis points of average fund net assets for those funds with   
12b-1 plans.                                                                    

  Total expenses in 1996 increased to $71.3 million, from $67.5 million in
1995, an increase of $3.8 million, or approximately 6%, primarily as a result of
increased compensation costs and costs associated with the distribution of the  
Mutual Funds. Compensation costs, a significant portion of which are variable in
nature, rose approximately 6% from $39.4 million in 1995 to $41.8 million in    
1996. Other operating expenses increased approximately $0.6 million or 3% to    
$19.3 million in 1996 from $18.7 million in 1995.                               

Net gain from investments, which is derived from GFI's proprietary    
investment portfolio, was approximately $8.8 million in 1996 compared to $10.1  
million in 1995, a decline of approximately $1.3 million. This decline was      
attributable to lower investment and market related gains from GFI's investments
including losses from hedging activities of $3.7 million. Interest and dividend 
income, net of interest expense, decreased to $4.5 million in 1996 from $5.2    
million in 1995, a decrease of approximately 13%. This was primarily a result of
the use of capital for certain private investments in 1996 which did not provide
a current return. In connection with the Formation Transactions, GFI will retain
most of the proprietary investment portfolio (which includes GFI's hedging      
activities). The net gain from the proprietary investment portfolio to be       
retained by GFI was $7.6 million and $6.9 million in 1996 and 1995,             
respectively.                                                                   

   Higher net income reported on a separate company basis by both GFI's then
79.1%-owned subsidiary, GAMCO, and then 75.3%-owned subsidiary, GSI, resulted in
an increase in income attributable to the minority interests in GFI's           
consolidated subsidiaries.                                                      

LIQUIDITY AND CAPITAL RESOURCES                                                 

 The Company's principal assets consist of cash, short-term investments,
securities held for investment purposes and investments in partnerships in which
the Company is either a general or limited partner. Short-term investments are  
comprised primarily of United States treasury securities with maturities of less
than one year and money market funds managed by the Company. Although           
investments in investment partnerships are for the most part illiquid, the      
underlying investments of such partnerships are for the most part liquid and the
valuations of the investment partnerships reflect that underlying liquidity.    

The Company has historically met its cash requirements through cash   
generated by its operating activities. Based upon the Company's current level of
operations and anticipated growth in net revenues and net income as a result of 
implementing its business strategy, the Company expects that cash flows from its
operating activities will be sufficient to enable the Company to finance its    
working capital needs for the foreseeable future. The Company has no material   
commitments for capital expenditures.                                           

    Gabelli & Company is registered with the Commission as a broker-dealer and
is a member of the NASD. As such, it is subject to the minimum net capital      
requirements promulgated by the Commission. Gabelli & Company's net capital has 
historically exceeded these minimum requirements. Gabelli & Company computes its
net capital under the alternative method permitted by the Commission, which     
requires that minimum net capital be $250,000. As of September 30, 1998 and     
December 31, 1997 and 1996, Gabelli & Company had net capital, as defined, of   
approximately $12.3 million, $6.6 million and $8.1 million, respectively,       
exceeding the regulatory requirement by approximately $12.1 million, $6.3       
million and $7.8 million, respectively. Regulatory net capital requirements     
increase when Gabelli & Company is involved in underwriting activities.         

   The net proceeds of the Offering to be received by the Company, which are
expected to be approximately $95.8 million ($110.4 million if the Underwriters' 
overallotment option is exercised in full), will be used for general corporate  
purposes, including working capital and the expansion of its business through   
new                                                                             
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investment product offerings, enhanced distribution and marketing of existing   
investment products, upgraded management information systems and strategic      
acquisitions as opportunities arise. At present, the Company has no plans,      
arrangements or understandings relating to any specific acquisitions or         
alliances. The Company currently does not intend to use any of the net proceeds 
from the Offering to pay debt service on the $50 million payable to Mr. Gabelli 
under the terms of his Employment Agreement.                                    

RECENT ACCOUNTING DEVELOPMENTS                                                  

     In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130 ("Reporting Comprehensive    
Income") and SFAS No. 131 ("Disclosure about Segments of an Enterprise and      
Related Information"). These statements, which are effective for periods        
beginning after December 15, 1997, expand or modify disclosures. In addition, in
1998, the FASB issued SFAS No. 133 ("Accounting for Derivative Instruments and  
Hedging Activities"). SFAS No. 133 establishes standards for recognizing and    
fair valuing derivative financial instruments. SFAS No. 133 is required to be   
adopted for fiscal years beginning after June 15, 1999. The Company does not    
expect implementation to have any significant effect on the Company's reported  
financial position or results of operations.                                    

SEASONALITY AND INFLATION                                                       

The Company does not believe its operations are subject to significant
seasonal fluctuations. The Company does not believe inflation will significantly
affect its compensation costs as they are substantially variable in nature.     
However, the rate of inflation may affect Company expenses such as information  
technology and occupancy costs. To the extent inflation results in rising       
interest rates and has other effects upon the securities markets, it may        
adversely affect the Company's financial position and results of operations by  
reducing the Company's assets under management, revenues or otherwise. See "Risk
Factors -- Potential Adverse Effects on the Company's Performance Prospects from
a Decline in the Performance of the Securities Markets."                        

YEAR 2000 PROGRAM                                                               

     With the new millennium approaching, many institutions around the world are
reviewing and modifying their computer systems to ensure that they are Year 2000
compliant. The issue, in general terms, is that many existing computer systems  
and microprocessors with date functions (including those in non-information     
technology equipment and systems) use only two digits to identify a year in the 
date field with the assumption that the first two digits of the year are always 
"19". Consequently, on January 1, 2000, computers that are not Year 2000        
compliant may read the year as 1900. Systems that calculate, compare or sort    
using the incorrect date may malfunction.                                       

  Because the Company is dependent, to a very substantial degree, upon the
proper functioning of its computer systems, a failure of its systems to be Year 
2000 compliant could have a material adverse effect on the Company. For example,
a failure of this kind could lead to incomplete or inaccurate accounting or     
recording of trades in securities or result in the generation of erroneous      
results or give rise to uncertainty about the Company's exposure to trading     
risks and its need for liquidity. If not remedied, potential risks include      
business interruption or shutdown, financial loss, regulatory actions,          
reputational harm and legal liability.                                          

   In addition, the Company depends primarily upon the proper functioning of
third-party computer and non-information technology systems. These parties      
include trading counterparties; financial intermediaries such as stock          
exchanges, depositories, clearing agencies, clearing houses and commercial      
banks; subcontractors such as third-party administrators; and vendors such as   
providers of telecommunication services, quotation equipment and other          
utilities. If the third parties with whom the Company interacts have Year 2000  
problems that are not remedied, the following problems could result: (i) in the 
case of subcontractors, in disruption of critical services such as              
administration, valuation and record keeping services for its mutual funds; (ii)
in the case of vendors, in disruption of important services upon which the      
Company depends, such as telecommunications and electrical power; (iii) in the  
case of third-party data providers, in the receipt of inaccurate or out-of-date 
information that would impair the Company's ability to perform critical data    

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functions, such as pricing its securities or other assets; (iv) in the case of  
financial intermediaries such as exchanges and clearing agents, in failed trade 
settlements, an inability to trade in certain markets and disruption of funding 
flows; (v) in the case of banks and other financial institutions, in the        
disruption of capital flows potentially resulting in liquidity stress; and (vi) 
in the case of counterparties and customers, in financial and accounting        
difficulties for those parties that expose the Company to increased credit risk 
and lost business. Disruption or suspension of activity in the world's financial
markets is also possible. In addition, uncertainty about the success of         
remediation efforts generally may cause many market participants to reduce the  
level of their market activities temporarily as they assess the effectiveness of
these efforts during a "phase-in" period beginning in late 1999. This in turn   
could result in a general reduction in trading and other market activities (and 
thus, lost revenues). Management cannot predict the impact that such reduction  
would have on the Company's business.                                           

   In order to ensure that the Company will continue to operate successfully
and be able to meet its fiduciary obligations to its clients after December 31, 
1999, the Company has taken numerous steps toward becoming Year 2000 compliant  
in respect to both its information technology and non-information technology    
systems. The Company has established a comprehensive Year 2000 program and      
already has begun to implement it. To date, the Company has (i) taken inventory 
of all its technology systems; (ii) performed an analysis of all internal       
systems, all facilities and communications systems, and all third-party         
providers' software and hardware products; and (iii) updated its internal       
system, which is its only in-house developed system, for Year 2000 compliance.  

  In addition, the Company has identified and contacted 34 counterparties,
intermediaries, subcontractors and vendors with whom it has important financial 
or operational relationships (13 of which the Company has identified as mission 
critical) and has requested from them assurances that those systems either are  
already Year 2000 compliant or that they are taking the necessary steps to make 
such systems Year 2000 compliant. The Company has received both oral and written
responses to these requests from all third-party providers and 22 of them (6 of 
which the Company has identified as mission critical) have advised the Company  
that their systems are Year 2000 compliant. The remaining third parties have    
advised the Company that they are in the process of achieving compliance and are
currently in the testing phase.                                                 

     The Company intends to maintain ongoing communications with its third-party
providers and continue to monitor their compliance progress. The Company is also
currently in the process of testing its own updated internal system to ensure   
Year 2000 compliance. The Company's subsidiaries which are registered with the  
Commission as broker-dealers or investment advisers have made certain filings   
with the Commission and other regulatory agencies regarding their Year 2000     
compliance efforts and will be making additional filings in 1999. The Company   
does not anticipate encountering any technology issue which would impede its    
ability to become Year 2000 compliant; however, there has been no limitation,   
contractual or otherwise, on the Company's legal remedies in the event that any 
of the third parties should fail to remedy any Year 2000 problem relating to    
their systems.                                                                  

 The Company currently estimates that the total cost of implementing its
Year 2000 program will not have a material impact on the Company's results of   
operations, liquidity or capital resources. There can be no assurance, however, 
that the Company's Year 2000 program will be effective or that the Company's    
estimates about the cost of completing its program will be accurate. Neither the
Company nor any of its affiliates has been reviewed by federal or state         
regulators for Year 2000 compliance.                                            

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BUSINESS

The Company is a widely recognized provider of investment advisory and
brokerage services to mutual fund, institutional and high net worth investors,  
primarily in the United States. The Company generally manages assets on a       
discretionary basis and invests in a variety of U.S. and international          
securities through various investment styles. At December 31, 1998, the Company 
had approximately $16.3 billion of assets under management, 88% of which were   
invested in equity securities. The Company's assets under management are        
organized principally in three groups: Mutual Funds, Separate Accounts and      
Partnerships.                                                                   

-  MUTUAL FUNDS:  At December 31, 1998, the Company had $8.2 billion of assets  
  under management in open-end mutual funds and closed-end funds, representing
   approximately 50% of the Company's total assets under management. The Company
currently provides advisory services to (i) the Gabelli family of funds,  
 which consists of 14 open-end mutual funds and three closed-end funds; (ii)
The Treasurer's Fund, consisting of three open-end money market funds (the
"Treasurer's Funds"); and (iii) the Gabelli Westwood family of funds,     
consisting of six open-end mutual funds, five of which are managed on a   
day-to-day basis by an unaffiliated subadviser (collectively, the "Mutual 
  Funds"). The Mutual Funds have a long-term record of achieving high returns,
  relative to similar investment products. At December 31, 1998, approximately
99% of the assets under management in the open-end Mutual Funds having an 
   overall rating from Morningstar, Inc. ("Morningstar") were in open-end Mutual
Funds ranked "three stars" or better, with 36% of such assets in open-end 
Mutual Funds ranked "five stars" and 38% of such assets in open-end Mutual
 Funds ranked "four stars" on an overall basis (i.e., based on three-, five-
  and ten-year risk adjusted average returns). The Gabelli family of funds was
   honored as the top performing mutual fund family by Mutual Funds Magazine for
 1997. At December 31, 1998, approximately 60% of the Company's assets under
   management in open-end, no-load equity Mutual Funds had been obtained through
direct sales relationships. The Company has further expanded its product  
distribution by offering its open-end Mutual Funds through Third-Party    
Distribution Programs, particularly NTF Programs, and has commenced       
 development of additional classes of shares for several of its mutual funds
   for sale through additional third-party distribution channels on a commission
basis.                                                                    

-  SEPARATE ACCOUNTS:  At December 31, 1998, the Company had $8.0 billion of    
   assets in approximately 975 separate accounts, representing approximately 49%
of the Company's total assets under management. The Company currently     
   provides advisory services to a broad range of investors, including corporate
 pension and profit sharing plans, foundations, endowments, jointly trusteed
plans, municipalities, and high net worth individuals, and also serves as 
 subadviser to certain other third-party investment funds (collectively, the
   "Separate Accounts"). At December 31, 1998, high net worth accounts (accounts
of individuals and related parties in general having a minimum account    
  balance of $1 million) comprised approximately 79% of the number of Separate
Accounts and approximately 25% of the assets, with institutional investors
comprising the balance. Each Separate Account portfolio is managed to meet
the specific needs and objectives of the particular client by utilizing   
   investment strategies and techniques within the Company's areas of expertise.
 At December 31, 1998, over 95% of the Company's assets in Separate Accounts
(excluding subadvisory assets) had been obtained through direct sales     
relationships.                                                            

-  PARTNERSHIPS:  The Company also provides alternative investments through its 
majority-owned subsidiary, Gabelli Securities, Inc. ("GSI"). These        
alternative investment products consist primarily of risk arbitrage and   
 merchant banking limited partnerships and offshore companies (collectively,
the "Partnerships"). The Partnerships had $146 million of assets, or      
approximately 1% of total assets under management, at December 31, 1998.  

  Investment advisory and incentive fees relating to the Mutual Funds, the
Separate Accounts, and the Partnerships generated approximately 84% and 85% of  
the Company's total revenues for the nine months ended September 30, 1998 and   
the year ended December 31, 1997, respectively.                                 

     The Company's subsidiary, Gabelli & Company, Inc. ("Gabelli & Company"), is
a registered broker-dealer and a member of the NASD and acts as underwriter and 
distributor of the open-end Mutual Funds and provides brokerage, trading,       
underwriting and research services.                                             

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 As of December 31, 1998, the Company had approximately $16.3 billion of
assets under management, consisting of $8.2 billion in the Mutual Funds, $8.0   
billion in the Separate Accounts and $146 million in the Partnerships. The      
Company's total assets under management grew from $2.1 billion as of December   
31, 1987 to $16.3 billion as of December 31, 1998, which represents an average  
annual growth rate of approximately 20.5% over the corresponding eleven year    
period. The Company's growth of average assets under management has led to a    
corresponding increase in operating revenues and pre-tax profitability.         

 The following table sets forth total assets under management by product
type as of the dates shown and the compound annual growth rates ("CAGR").       

ASSETS UNDER MANAGEMENT 

BY PRODUCT TYPE 
(Dollars in millions) 

                                                        [Enlarge/Download Table]

                                                                                           DECEMBER 31,
                                                                                             1994 TO   
                                                           AT DECEMBER 31,                 DECEMBER 31,
                                             --------------------------------------------      1998    
                                              1994     1995     1996     1997      1998      CAGR(A)   
                                             ------   ------   ------   -------   -------  ------------
                                                                                                       
EQUITY:                                                                                                
  Mutual Funds.............................. $3,391   $3,875   $3,969   $ 5,313   $ 7,159      20.5%   
  Separate Accounts.........................  4,276    5,051    5,200     6,085     7,133      13.7    
                                             ------   ------   ------   -------   -------      ----    
    Total Equity............................  7,667    8,926    9,169    11,398    14,292      16.9    
                                             ------   ------   ------   -------   -------      ----    
FIXED INCOME:                                                                                          
  Money Market Mutual Funds.................    208      236      235       827     1,030      49.2    
  Bond Mutual Funds.........................      5        5        5         6         8      12.5    
  Separate Accounts.........................     --       --       --       928       824        --    
                                             ------   ------   ------   -------   -------      ----    
    Total Fixed Income......................    213      241      240     1,761     1,862      71.9    
                                             ------   ------   ------   -------   -------      ----    
PARTNERSHIPS:                                                                                          
  Partnerships..............................    103      112      116       138       146       9.1    
                                             ------   ------   ------   -------   -------      ----    
    Total Assets Under Management(b)........ $7,983   $9,279   $9,525   $13,297   $16,300      19.5%   
                                             ======   ======   ======   =======   =======      ====    
BREAKDOWN OF TOTAL ASSETS UNDER MANAGEMENT:                                                            
  Mutual Funds.............................. $3,604   $4,116   $4,209   $ 6,146   $ 8,197      22.8    
  Separate Accounts.........................  4,276    5,051    5,200     7,013     7,957      16.8    
  Partnerships..............................    103      112      116       138       146       9.1    
                                             ------   ------   ------   -------   -------      ----    
    Total Assets Under Management(b)........ $7,983   $9,279   $9,525   $13,297   $16,300      19.5%   
                                             ======   ======   ======   =======   =======      ====    

---------------                                                                 
(a) Compound annual growth rate.                                                

(b) Effective April 14, 1997, the Company increased its ownership of Gabelli    
   Fixed Income L.L.C. from 50% to 80.1%, thereby causing Gabelli Fixed Income
   L.L.C. to become a consolidated subsidiary of the Company. Accordingly, for
periods after April 14, 1997, the assets managed by Gabelli Fixed Income
   L.L.C. are included in the Company's assets under management. If the assets
managed by Gabelli Fixed Income L.L.C. had been included for all periods
presented, assets under management would have been $9,004, $10,793 and  
   $11,082 at December 31, 1994, 1995 and 1996, respectively, and the CAGR for
total assets would have been 16.0%.                                     

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 The Company manages assets in the following wide spectrum of investment
products and strategies, many of which are focused on fast-growing areas:       

SUMMARY OF INVESTMENT PRODUCTS AND STRATEGIES 

                                                        [Enlarge/Download Table]
                                                                                     
U.S. EQUITIES:                 U.S. FIXED INCOME:  GLOBAL AND INTERNATIONAL EQUITIES:
All Cap Value                  Corporate           International Growth              
Large Cap Value                Government          Global Value                      
Large Cap Growth               Municipals          Global Telecommunications         
Mid Cap Value                  Asset-backed        Global Multimedia                 
Small Cap Value                Intermediate        Gold(b)                           
Small Cap Growth               Short-term                                            
Micro Cap                                                                            
Real Estate(a)                                                                       
                               U.S. BALANCED:      ALTERNATIVE PRODUCTS:             
CONVERTIBLE SECURITIES:        Balanced Growth     Risk Arbitrage                    
U.S. Convertible Securities    Balanced Value      Merchant Banking                  
Global Convertible Securities                      Fund of Funds                     

---------------                                                                 
(a) Invested primarily in publicly-traded real estate investment trusts and     
managed by Westwood Management.                                         
(b) Invested primarily in publicly-traded equities of U.S. and international    
gold companies.                                                         

     The Mutual Funds have a long-term record of achieving high returns compared
against similar investment products. From December 31, 1987 through December 31,
1998, the Company's assets under management in Mutual Funds have increased at a 
compound annual growth rate of approximately 29%. As of December 31, 1998, two  
of the Gabelli funds were ranked by Morningstar as "five stars" (its highest    
rating) and three of the Gabelli funds and two of the Gabelli Westwood funds as 
"four stars", in each case, on an overall basis (i.e. based on three-, five- and
ten-year risk adjusted average returns). At December 31, 1998, approximately 99%
of the assets under management in the open-end Mutual Funds having an overall   
rating from Morningstar were in open-end Mutual Funds ranked "three stars" or   
better, with 36% of such assets in open-end Mutual Funds ranked "five stars" and
38% of such assets in open-end Mutual Funds ranked "four stars" on an overall   
basis. The Gabelli family of funds was honored as the top performing mutual fund
family by Mutual Funds Magazine for 1997. In addition, Mario J. Gabelli, Chief  
Investment Officer of the Company, was named as the Domestic Equity Fund Manager
of the Year for 1997 by Morningstar. There can be no assurance, however, that   
these funds will be able to maintain such ratings or that past performance will 
be indicative of future results.                                                

   The Company's long-term strategic goal is to continue to expand its asset
management capabilities in order to provide a range of products suitable to meet
the diverse requirements of its clients. The Company was originally founded in  
1976 as an institutional broker-dealer and entered the separate accounts        
business in 1977 and the mutual fund business in 1986. In its early years, the  
Company's investment philosophy was value-oriented. Starting in the mid-1980s,  
the Company began building upon its core of value-oriented equity investment    
products by adding new investment strategies designed for clients seeking to    
invest in growth-oriented equities, convertible securities and fixed income     
products. Since then, the Company has continued to build its franchise by       
expanding its investment management capabilities through the addition of        
industry specific, international, global and real asset oriented product        
offerings. Throughout its 22-year history, the Company has marketed most of its 
products under the "Gabelli" brand name.                                        

     The Company believes that its growth to date can be largely credited to the
following:                                                                      

- LONG-TERM FUND PERFORMANCE:  The Company has a long-term record of achieving  
 relatively high returns for its Mutual Fund and Separate Account clients when
compared to similar investment products. The Company believes that its      
performance record is a competitive advantage and a recognized component of 
its franchise.                                                              

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- WIDELY RECOGNIZED "GABELLI" BRAND NAME:  For much of its history, the Company 
has advertised in a variety of financial print media, including in          
publications such as the Wall Street Journal, Money Magazine, Barron's and  
Investor's Business Daily. The Company believes that the breadth and        
 consistency of its advertising has enhanced investor awareness of its product
offerings and of the "Gabelli" brand name.                                  

- DIVERSIFIED PRODUCT OFFERINGS:  Since the inception of its investment         
management activities, the Company has sought to expand the breadth of its  
 product offerings. The Company currently offers a wide spectrum of investment
products and strategies, including product offerings in U.S. equities, U.S. 
 fixed income, global and international equities, convertible securities, U.S.
balanced and alternative products.                                          

- STRONG INDUSTRY FUNDAMENTALS:  According to data compiled by the U.S. Federal 
Reserve, the investment management industry has grown faster than more      
  traditional segments of the financial services industry, including the banking
  and insurance industries. The Company believes that demographic trends and the
growing role of money managers in the placement of capital compared to the  
traditional role played by banks and life insurance companies will result in
continued growth of the investment management industry.                     

BUSINESS STRATEGY                                                               

 The Company intends to grow its franchise by leveraging its competitive
asset management strengths, including its long-term performance record, brand   
name, diverse product offerings and experienced research, client service and    
investment staff. In order to achieve continued growth in assets under          
management and profitability, the Company will continue to pursue its business  
strategy, the key elements of which include:                                    

- BROADENING AND STRENGTHENING THE GABELLI BRAND.  The Company believes that the
Gabelli brand name is one of the more widely recognized brand names in the  
U.S. investment management industry. The Company intends to continue to     
strengthen its brand name identity by, among other things, increasing its   
marketing and advertising to provide a uniform global image. The Company    
believes that with its brand name recognition, it has the capacity to create
new products and services around the core Gabelli brand to complement its   
existing product offerings. For example, in 1998, the Company launched the  
Gabelli Global Opportunity Fund, a global equity fund, and the Gabelli      
Westwood Mighty Mites(SM) Fund, a micro cap equity fund.                    

- EXPANDING MUTUAL FUND DISTRIBUTION.  The Company intends to continue expanding
its distribution network through Third-Party Distribution Programs,         
particularly NTF Programs. In recent years, the Company has realized        
significant growth in its mutual fund assets under management through       
alliances with "mutual fund supermarkets" and other Third-Party Distribution
Programs, through which its Mutual Funds are made available to investors. As
of December 31, 1998, the Company was participating in 63 Third-Party       
Distribution Programs, including the Charles Schwab and Fidelity Investments
"mutual fund supermarket" programs. In addition, the Company intends to     
  develop a marketing strategy to increase its presence in the 401(k) market for
its Mutual Funds. Additionally, the Company expects to soon offer investors 
 the ability to purchase mutual fund shares directly through the Internet. The
Company has also entered into various marketing alliances and distribution  
arrangements with leading national brokerage and investment houses and has  
commenced development of additional classes of shares for several of its    
mutual funds for sale through national brokerage and investment houses and  
other third-party distribution channels on a commission basis.              

- INCREASING PENETRATION IN HIGH NET WORTH MARKET.  The Company's high net worth
business focuses, in general, on serving clients who have established an    
account relationship of $1 million or more with the Company. According to   
certain industry estimates, the number of households with over $1 million in
 investable assets will grow from approximately 2.5 million in 1996 to over 15
million by 2010. With the Company's 22-year history of serving this segment,
its long-term performance record and brand name recognition, the Company    
 believes that it is well positioned to capitalize on the growth opportunities
in this market.                                                             

- INCREASING MARKETING FOR INSTITUTIONAL SEPARATE ACCOUNTS.  The institutional  
Separate Accounts business has been primarily developed through direct      
marketing channels. Historically, third-party pension consul-               

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tants and financial consultants have not been a major source of new             
institutional Separate Accounts business for the Company. However, these        
consultants have significantly increased their presence among institutional     
  investors. As a result, the Company intends both to add marketing personnel to
  target pension and financial consultants and to expand its efforts through its
traditional marketing channels.                                             

- ATTRACTING AND RETAINING EXPERIENCED PROFESSIONALS.  Following the Offering,  
the availability of publicly traded Class A Common Stock will enhance the   
Company's ability to attract and retain top performing investment           
  professionals. The ability to attract and retain highly experienced investment
and other professionals with a long-term commitment to the Company and its  
clients has been, and will continue to be, a significant factor in its      
long-term growth. As the Company continues to increase the breadth of its   
investment management capabilities, it plans to add portfolio managers and  
other investment personnel in order to foster expansion of its products.    

- CAPITALIZING ON ACQUISITIONS AND STRATEGIC ALLIANCES.  The Company intends to 
 selectively and opportunistically pursue acquisitions and alliances that will
  broaden its product offerings and add new sources of distribution. The Company
believes that it will be better positioned to pursue acquisitions and       
alliances after the Offering because it will be one of a relatively few     
publicly-traded investment management firms. At present, the Company has no 
  plans, arrangements or understandings relating to any specific acquisitions or
alliances.                                                                  

MUTUAL FUNDS                                                                    

The Mutual Funds include 23 open-end Mutual Funds and three closed-end
funds which had total assets as of September 30, 1998 of $7.0 billion. The      
open-end Mutual Funds are available to individuals and institutions primarily on
a no-load basis, while the closed-end funds are listed and traded on the NYSE.  
At September 30, 1998, the open-end funds had total assets of $5.5 billion and  
the closed-end funds had total assets of $1.5 billion. The assets managed in the
closed-end funds represent approximately 21% of the assets in the Mutual Funds  
and 11% of the total assets under management of the Company at September 30,    
1998. The Company's assets under management consist of a broad range of U.S. and
international stock, bond and money market mutual funds that meet the varied    
needs and objectives of its Mutual Fund shareholders. At September 30, 1998,    
over two-thirds of the Company's assets under management in open-end, no-load   
equity Mutual Funds had been obtained through direct sales relationships.       

   The Company, through its affiliates, acts as adviser to all of the Mutual
Funds, except with respect to the Gabelli Capital Asset Fund in which the       
Company acts as a subadviser and Guardian Investment Services Corporation, an   
unaffiliated company, acts as manager. As subadviser, the Company makes         
day-to-day investment decisions for the Gabelli Capital Asset Fund.             

Funds Adviser, a wholly owned subsidiary of the Company, acts as the  
investment adviser for all of the Mutual Funds other than the Gabelli Westwood  
family of funds and the Treasurer's Funds.                                      

   Gabelli Advisers, Inc. acts as investment adviser to the Gabelli Westwood
family of funds and has retained Westwood Management to act as subadviser for   
five of the six portfolios. Westwood Management is a wholly owned subsidiary of 
Southwest Securities Group, Inc., a publicly held securities brokerage firm. In 
its capacity as subadviser, Westwood Management makes day-to-day investment     
decisions and provides the portfolio management services for five of the six    
current Gabelli Westwood portfolios. The Gabelli Westwood Mighty Mites(SM) Fund,
launched in May 1998, is advised solely by Gabelli Advisers, Inc., using a team 
investment approach, without any subadvisers. Westwood Management owns 100% of  
the Class A common stock of Gabelli Advisers, Inc. (representing 20% of the     
economic interest), and is not an affiliate of the Company. The Company believes
that Gabelli Advisers, Inc. will serve as a platform for future growth and      
diversification of the Company's product line.                                  

Gabelli Fixed Income L.L.C. currently manages short-term and          
short-intermediate term fixed income securities for the Treasurer's Funds as    
well as for the Separate Accounts. In the future, the Company plans to further  
increase and diversify the number of fixed income products offered by Gabelli   
Fixed Income L.L.C. Certain members of senior management of Gabelli Fixed Income
L.L.C. own a 19.9% equity interest in it.                                       

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    The following table lists the Mutual Funds, together with the December 31,
1998 Morningstar overall rating, where rated (ratings are not available for the 
money-market Mutual Funds and other Mutual Funds, which collectively represent  
15% of the assets under management in the Mutual Funds), the portfolio          
manager(s) and associate portfolio managers(s) for such Mutual Fund, and        
provides a description of the primary investment objective, fund                
characteristics, fees, the date that the Mutual Fund was initially offered to   
investors and the assets under management in the Mutual Fund as of September 30,
1998 and December 31, 1998.                                                     

                                                        [Enlarge/Download Table]

                                                                                                NET ASSETS AS OF      
        FUND                                                                              ----------------------------
(MORNINGSTAR OVERALL                                           ADVISORY  12B-1  INITIAL   SEPTEMBER 30,   DECEMBER 31,
     RATING)(1)         PRIMARY INVESTMENT         FUND          FEES    FEES    OFFER        1998            1998    
PORTFOLIO MANAGER(S)         OBJECTIVE        CHARACTERISTICS    (%)      (%)     DATE          ($ IN MILLIONS)       
---------------------  ---------------------  ---------------  --------  -----  --------  ----------------------------
                                                                                                                      
GABELLI OPEN-END FUNDS:                                                                                               
The Gabelli Growth     Capital appreciation   No-load,           1.00     .25   04/10/87    $1,405.5        $1,864.0  
Fund                   from companies that    Open-end,                                                               
(GRAPHIC - 5 STARS)    have favorable, yet    Diversified                                                             
                       undervalued,                                                                                   
    Howard F. Ward     prospects for                                                                                  
                       earnings growth.                                                                               
                       Invests in equity                                                                              
                       securities of                                                                                  
                       companies that have                                                                            
                       above-average or                                                                               
                       expanding market                                                                               
                       shares and profit                                                                              
                       margins.                                                                                       
The Gabelli Global     High level of capital  No-load,           1.00     .25   02/07/94        62.7            74.0  
Interactive Couch      appreciation through   Open-end,                                                               
Potato(R) Fund         investment in a        Non-diversified                                                         
(GRAPHIC - 5 STARS)    portfolio of equity                                                                            
                       securities focused on                                                                          
    Marc J. Gabelli    the entertainment,                                                                             
                       media and                                                                                      
                       communications                                                                                 
                       sectors.                                                                                       
The Gabelli Asset      Growth of capital as   No-load,           1.00     .25   03/03/86     1,373.7         1,593.6  
Fund                   a primary investment   Open-end,                                                               
(GRAPHIC - 4 STARS)    objective, with        Diversified                                                             
                       current income as a                                                                            
    Mario J. Gabelli   secondary investment                                                                           
                       objective. Invests in                                                                          
                       equity securities of                                                                           
                       companies selling at                                                                           
                       a significant                                                                                  
                       discount to their                                                                              
                       private market value.                                                                          
The Gabelli Equity     High level of total    No-load,           1.00     .25   01/02/92        79.7            87.2  
Income Fund            return with an         Open-end,                                                               
(GRAPHIC - 4 STARS)    emphasis on income     Diversified                                                             
                       producing equities                                                                             
    Mario J. Gabelli   with yields greater                                                                            
    James Foung        than the S&P 500                                                                               
                       average.                                                                                       
Gabelli International  Capital appreciation   No-load,           1.00     .25   06/30/95        25.2            26.8  
Growth Fund            by investing           Open-end,                                                               
(GRAPHIC - 4 STARS)    primarily in equity    Diversified                                                             
                       securities of foreign                                                                          
    Caesar M.P. Bryan  companies with rapid                                                                           
                       growth in revenues                                                                             
                       and earnings.                                                                                  

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                                                        [Enlarge/Download Table]

                                                                                                NET ASSETS AS OF      
        FUND                                                                              ----------------------------
(MORNINGSTAR OVERALL                                           ADVISORY  12B-1  INITIAL   SEPTEMBER 30,   DECEMBER 31,
     RATING)(1)         PRIMARY INVESTMENT         FUND          FEES    FEES    OFFER        1998            1998    
PORTFOLIO MANAGER(S)         OBJECTIVE        CHARACTERISTICS    (%)      (%)     DATE          ($ IN MILLIONS)       
---------------------  ---------------------  ---------------  --------  -----  --------  ----------------------------
                                                                                                                      
The Gabelli Value      High level of capital  Load, Open-end,    1.00     .25   09/29/89       676.5           797.5  
Fund                   appreciation from      Non-diversified                                                         
(GRAPHIC - 3 STARS)    undervalued equity                                                                             
                       securities that are                                                                            
    Mario J. Gabelli   held in a                                                                                      
                       concentrated                                                                                   
                       portfolio.                                                                                     
The Gabelli Small Cap  High level of capital  No-load,           1.00     .25   10/22/91       277.8           321.3  
Growth Fund            appreciation from      Open-end,                                                               
(GRAPHIC - 3 STARS)    equity securities of   Diversified                                                             
                       smaller companies                                                                              
    Mario J. Gabelli   with market                                                                                    
                       capitalization of                                                                              
                       $500 million or less.                                                                          
The Gabelli Global     High level of capital  No-load,           1.00     .25   11/01/94       136.5           170.1  
Telecommunications     appreciation through   Open-end,                                                               
Fund                   worldwide investments  Non-diversified                                                         
(GRAPHIC - 3 STARS)    in equity securities,                                                                          
                       including the U.S.,                                                                            
    Mario J. Gabelli   primarily in the                                                                               
    Marc J. Gabelli    telecommunications                                                                             
                       industry.                                                                                      
The Gabelli ABC Fund   Total returns from     No-load,           1.00     .25   05/14/93        41.2            39.4  
(GRAPHIC - 3 STARS)    equity and debt        Open-end,                                                               
                       securities that are    Non-diversified                                                         
    Mario J. Gabelli   attractive to                                                                                  
                       investors in various                                                                           
                       market conditions                                                                              
                       without excessive                                                                              
                       risk of capital loss.                                                                          
The Gabelli Global     High level of total    No-load,           1.00     .25   02/03/94         6.9             7.3  
Convertible            return through a       Open-end,                                                               
Securities Fund        combination of         Non-diversified                                                         
(GRAPHIC - 2 STARS)    current income and                                                                             
                       capital appreciation                                                                           
   A. Hartswell        through investment in                                                                          
   Woodson, III        convertible                                                                                    
                       securities of U.S.                                                                             
                       and non-U.S. issuers.                                                                          
Gabelli Gold           Seeks capital          No-load,           1.00     .25   07/11/94        13.1            11.3  
Fund                   appreciation and       Open-end,                                                               
(GRAPHIC - 1 STAR)     employs a value        Diversified                                                             
                       approach to investing                                                                          
    Caesar M.P. Bryan  primarily in equity                                                                            
                       securities of gold-                                                                            
                       related companies                                                                              
                       worldwide.                                                                                     
Gabelli U.S. Treasury  High current income    Money Market,       .30     n/a   10/01/92       314.4           385.1  
Money Market Fund      with preservation of   Open-end,                                                               
(Not rated)            principal and          Diversified                                                             
                       liquidity, while                                                                               
    Judith A. Raneri   striving to keep                                                                               
                       expenses among the                                                                             
                       lowest of all U.S.                                                                             
                       Treasury money market                                                                          
                       funds.                                                                                         

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                                                                                                NET ASSETS AS OF      
        FUND                                                                              ----------------------------
(MORNINGSTAR OVERALL                                           ADVISORY  12B-1  INITIAL   SEPTEMBER 30,   DECEMBER 31,
     RATING)(1)         PRIMARY INVESTMENT         FUND          FEES    FEES    OFFER        1998            1998    
PORTFOLIO MANAGER(S)         OBJECTIVE        CHARACTERISTICS    (%)      (%)     DATE          ($ IN MILLIONS)       
---------------------  ---------------------  ---------------  --------  -----  --------  ----------------------------
                                                                                                                      
Gabelli Capital Asset  Capital appreciation   No-load,            .75     n/a   05/01/95       134.3           155.8  
Fund                   from equity            Open-end,                                                               
(Not rated)            securities of          Diversified                                                             
                       companies selling at   Variable                                                                
    Mario J. Gabelli   a significant          Annuity                                                                 
                       discount to their                                                                              
                       private market value.                                                                          
The Gabelli Global     High level of capital  No-load,           1.00     .25   05/11/98         5.0             5.9  
Opportunity Fund       appreciation through   Open-end,                                                               
(Not rated)            worldwide investments  Non-diversified                                                         
                       in equity securities.                                                                          
    Caesar M.P. Bryan                                                                                                 
    Marc J. Gabelli                                                                                                   
GABELLI WESTWOOD OPEN-END FUNDS:                                                                                      
Gabelli Westwood       Capital appreciation   Retail Class:      1.00     .25   01/02/87       177.9           202.1  
Equity Fund            through a diversified  No-load,                                                                
(GRAPHIC - 4 STARS)    portfolio of equity    Open-end,                   .50    1/28/94                              
                       securities using a     Diversified                                                             
    Susan M. Byrne     top- down approach     Service Class:                                                          
                       that begins with an    Load,                                                                   
                       analysis of the        Open-end,                                                               
                       broad, long-term       Diversified                                                             
                       trends in the economy                                                                          
                       and an assessment of                                                                           
                       the business cycle                                                                             
                       which identifies                                                                               
                       sectors that will                                                                              
                       benefit from that                                                                              
                       environment.                                                                                   
Gabelli Westwood       Both capital           Retail Class:       .75     .25   10/01/91       142.8           153.5  
Balanced Fund          appreciation and       No-load,                                                                
(GRAPHIC - 4 STARS)    current income using   Open-end,                   .50     4/6/93                              
                       portfolios containing  Diversified                                                             
    Susan M. Byrne     stocks, bonds, and     Service Class:                                                          
    Patricia K. Fraze  cash as appropriate    Load, Open-                                                             
                       in light of current    end,                                                                    
                       economic and business  Diversified                                                             
                       conditions.                                                                                    
Gabelli Westwood       Total return and       No-load,            .60     .25   04/06/93         7.6             7.9  
Intermediate Bond      current income, while  Open-end,                                                               
Fund                   limiting risk to       Diversified                                                             
(GRAPHIC - 3 STARS)    principal. Pursues                                                                             
                       higher yields than                                                                             
    Patricia K. Fraze  shorter maturity                                                                               
                       funds, and has more                                                                            
                       price stability than                                                                           
                       generally higher                                                                               
                       yielding long-term                                                                             
                       funds.                                                                                         

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                                                                                                NET ASSETS AS OF      
        FUND                                                                              ----------------------------
(MORNINGSTAR OVERALL                                           ADVISORY  12B-1  INITIAL   SEPTEMBER 30,   DECEMBER 31,
     RATING)(1)         PRIMARY INVESTMENT         FUND          FEES    FEES    OFFER        1998            1998    
PORTFOLIO MANAGER(S)         OBJECTIVE        CHARACTERISTICS    (%)      (%)     DATE          ($ IN MILLIONS)       
---------------------  ---------------------  ---------------  --------  -----  --------  ----------------------------
                                                                                                                      
Gabelli Westwood       Long-term capital      No-load,           1.00     .25   04/15/97        11.7            15.7  
SmallCap               appreciation,          Open-end,                                                               
Equity Fund            investing at least     Diversified                                                             
(Not rated)            65% of its assets in                                                                           
                       equity securities of                                                                           
    Lynda Calkin       companies with market                                                                          
                       capitalizations of $1                                                                          
                       billion or less.                                                                               
Gabelli Westwood       Long-term capital      No-load,           1.00     .25   05/11/98         4.8             6.1  
Mighty Mites(SM) Fund  appreciation by        Open-end,                                                               
(Not rated)            investing primarily    Diversified                                                             
                       in equity securities                                                                           
    Mario J. Gabelli   with market                                                                                    
    Marc J. Gabelli    capitalizations of                                                                             
    Laura K. Linehan   $300 million or less.                                                                          
    Walter K. Walsh                                                                                                   
Gabelli Westwood       Long-term capital      No-load,           1.00     .25   09/30/97         1.8             1.9  
Realty Fund            appreciation as well   Open-end,                                                               
(Not rated)            as current income,     Diversified                                                             
                       investing in equity                                                                            
    Susan M. Byrne     securities that are                                                                            
                       primarily engaged in                                                                           
                       or related to the                                                                              
                       real estate industry.                                                                          
THE TREASURER'S OPEN-END MONEY MARKET FUNDS:                                                                          
The Treasurer's Fund,  Current income with    No-load,            .30     n/a   01/01/88       345.0           357.9  
Inc. -- Domestic       preservation of        Open-end,                                                               
Prime Money Market     principal and          Diversified                                                             
Portfolio              liquidity through                                                                              
(Not rated)            investment in U.S.                                                                             
                       Treasury securities                                                                            
    Judith A. Raneri   and corporate bonds.                                                                           

The Treasurer's        Current income with    No-load,            .30     n/a   12/18/87       207.5           177.1  
Fund, Inc. -- Tax      preservation of        Open-end,                                                               
Exempt Money Market    principal and          Non-diversified                                                         
Portfolio              liquidity through                                                                              
(Not rated)            investment in U.S.                                                                             
                       municipal bond                                                                                 
    Judith A. Raneri   securities.                                                                                    

The Treasurer's        Current income with    No-load,            .30     n/a   07/25/90       111.6           109.8  
Fund, Inc. -- U.S.     preservation of        Open-end,                                                               
Treasury Money Market  principal and          Diversified                                                             
Portfolio              liquidity through                                                                              
(Not rated)            investment in U.S.                                                                             
                       Treasury securities.                                                                           
    Judith A. Raneri                                                                                                  

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                                                                                                NET ASSETS AS OF      
        FUND                                                                              ----------------------------
(MORNINGSTAR OVERALL                                           ADVISORY  12B-1  INITIAL   SEPTEMBER 30,   DECEMBER 31,
     RATING)(1)         PRIMARY INVESTMENT         FUND          FEES    FEES    OFFER        1998            1998    
PORTFOLIO MANAGER(S)         OBJECTIVE        CHARACTERISTICS    (%)      (%)     DATE          ($ IN MILLIONS)       
---------------------  ---------------------  ---------------  --------  -----  --------  ----------------------------
                                                                                                                      
GABELLI CLOSED-END FUNDS:                                                                                             
The Gabelli Global     Long-term capital      Closed-end,        1.00     n/a   11/15/94       141.2           163.8  
Multimedia Trust Inc.  appreciation from      Non-Diversified                                                         
(GRAPHIC - 5 STARS)    equity investments in  NYSE                                                                    
                       global telecommunica-  Symbol: GGT                                                             
    Mario J. Gabelli   tions, media,                                                                                  
                       publishing and                                                                                 
                       entertainment                                                                                  
                       holdings.                                                                                      
The Gabelli Equity     Long-term growth of    Closed-end,        1.00     n/a   08/14/86     1,212.8         1,341.5  
Trust Inc.(2)          capital by investing   Non-Diversified                                                         
(GRAPHIC - 3 STARS)    in equity securities.  NYSE                                                                    
                                              Symbol: GAB                                                             
    Mario J. Gabelli                                                                                                  
The Gabelli            High total return      Closed-end,        1.00     n/a   07/03/89       116.8           120.7  
Convertible            from investing         Diversified                                                             
Securities Fund, Inc.  primarily in           NYSE                                                                    
(GRAPHIC - 3 STARS)    convertible            Symbol: GCV                                                             
                       instruments.                                                                                   
    Mario J. Gabelli                                                                                                  

---------------                                                                 
(1) Morningstar proprietary ratings reflect historical risk adjusted performance
as of December 31, 1998 and are subject to change every month. Overall  
Morningstar ratings are calculated from the fund's three-, five- and    
 ten-year average annual returns, as available, in excess of 90 day T-bill
returns with appropriate fee adjustments and a risk factor that reflects
    fund performance below 90 day T-bill returns. The top 10% of the funds in an
  investment category receive five stars, the next 22.5% receive four stars,
  the next 35% receive three stars, the next 22.5% receive two stars and the
 last 10% receive one star. The ratings for the Gabelli Westwood funds are
for the retail classes.                                                 

(2) The Gabelli Equity Trust has announced its intention to spin-off            
    approximately $60 million to $80 million of its assets in the form of shares
of a new closed-end fund that will invest primarily in the securities of
    companies involved in the gas, electricity and water industries (the utility
sector).                                                                

   Shareholders of the no-load open-end Mutual Funds are allowed to exchange
shares among the funds as economic and market conditions and investor needs     
change at no additional cost. The Company periodically introduces new mutual    
funds designed to complement and expand its investment product offerings,       
respond to competitive developments in the financial marketplace, and meet the  
changing needs of clients.                                                      

    The Company's marketing efforts for the Mutual Funds are currently focused
on increasing the distribution and sales of its existing funds, as well as      
creating new products for sale through its distribution channels. The Company   
believes that its marketing efforts for the Mutual Funds will continue to       
generate additional revenues from investment advisory fees. The Company has     
traditionally distributed most of its open-end Mutual Funds by using a variety  
of direct response marketing techniques, including telemarketing and            
advertising, and as a result the Company maintains direct relationships with a  
majority of its no-load open-end Mutual Fund customers. Beginning in late 1995, 
the Company expanded its product distribution by offering additional open-end   
Mutual Funds through Third-Party Distribution Programs, including NTF Programs. 
In 1997 and through the first nine months of 1998, the Company further expanded 
these efforts to include substantially all of its open-end Mutual Funds in over 
60 Third-Party Distribution Programs. Although most of the assets under         
management in the open-end Mutual Funds are still attributable to the Company's 
direct response marketing efforts, Third-Party Distribution Programs,           
particularly NTF Programs, have become an increasingly important source of asset
growth for the Company. Of the $5.5 billion of assets under management in the   
open-end Mutual Funds as of September 30, 1998, approximately 16% were generated
from NTF Programs. Sales (net of redemptions) of the Company's open-end Mutual  
Funds through the NTF Programs were approximately $96 million, $194 million and 
$476 million for the first and second halves of 1997 and the first half of 1998,
respectively. In the first nine months of 1998, sales (net of redemptions) of   
the Mutual Funds were $1.0 billion, of which approximately 50% was generated    
from direct marketing and approximately 50% was generated from the NTF Programs.
Further, the Company has commenced development of additional classes of shares  
for several of its mutual funds for sale through national brokerage and         
investment houses and other third-party distribution channels on a commission   
basis.                                                                          

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In general, distribution through Third-Party Distribution Programs has greater  
variable cost components and lower fixed cost components than distribution      
through the Company's traditional direct sales methods.                         

   The Company provides investment advisory and management services pursuant
to an investment management agreement with each Mutual Fund. While the specific 
terms of the investment management agreements vary to some degree, the basic    
terms of the investment management agreements are similar. The investment       
management agreements with the Mutual Funds generally provide that the Company  
is responsible for the overall investment and administrative services, subject  
to the oversight of each Mutual Fund's board of directors and in accordance with
each Mutual Fund's fundamental investment objectives and policies. The          
investment management agreements permit the Company to enter into separate      
agreements for administrative and accounting services on behalf of the          
respective Mutual Funds.                                                        

     The Company provides the Mutual Funds with administrative services pursuant
to management contracts. Most of these administrative services are provided     
through subcontracts with unaffiliated third parties. Such services include,    
without limitation, calculation of net asset value, preparation of financial    
reports for shareholders of the Mutual Funds, internal accounting, tax          
accounting and reporting, regulatory filings, and other services. Transfer      
agency and custodial services are provided directly to the Mutual Funds by third
parties.                                                                        

    The Company's Mutual Fund investment management agreements may continue in
effect from year to year only if specifically approved at least annually by (i) 
the Mutual Fund's board of directors or trustees or (ii) the Mutual Fund's      
shareholders and, in either case, the vote of a majority of the Mutual Fund's   
directors or trustees who are not parties to the agreement or "interested       
persons" of any such party, within the meaning of the Investment Company Act.   
Each Mutual Fund may terminate its investment management agreement at any time  
upon 60 days' written notice by (i) a vote of the majority of the board of      
directors or trustees cast in person at a meeting called for the purpose of     
voting on such termination or (ii) a vote at a meeting of shareholders of the   
lesser of either 67% of the voting shares represented in person or by proxy or  
50% of the outstanding voting shares of such Mutual Fund. Each investment       
management agreement automatically terminates in the event of its assignment, as
defined in the Investment Company Act. The Offering will not constitute an      
"assignment" for the purposes of the Investment Company Act. The Company may    
terminate an investment management agreement without penalty on 60 days' written
notice.                                                                         

SEPARATE ACCOUNTS                                                               

     Since 1977, the Company has provided investment management services through
its subsidiary GAMCO to a broad spectrum of institutional and high net worth    
investors. As of September 30, 1998, the Company had approximately 950 Separate 
Accounts with an aggregate of approximately $6.7 billion of assets, which       
represent approximately 48% of the total assets under management of the Company 
at September 30, 1998. The ten largest Separate Accounts comprise approximately 
15% of the Company's total assets under management and 7% of the Company's total
revenues as of and for the period ended September 30, 1998. The Separate        
Accounts are invested in U.S. and international equity securities, U.S.         
fixed-income securities and convertible securities. At September 30, 1998, high 
net worth accounts (accounts of individuals and related parties in general      
having a minimum account balance of $1 million) comprised approximately 78% of  
the number of Separate Accounts and approximately 25% of the assets, with       
institutional investors accounting for the balance.                             

   Each Separate Account portfolio is managed to meet the specific needs and
objectives of the particular client by utilizing investment strategies and      
techniques within the Company's areas of expertise. Members of the sales and    
marketing staff for the Separate Accounts business have an average of           
approximately 10 years of experience with the Company and focus on developing   
and maintaining long-term relationships with their Separate Account clients in  
order to be able to understand and meet their individual clients' needs.        
Investment advisory agreements with the Separate Accounts are typically         
terminable by the client without penalty on 30 days' notice or less.            

    The Company's Separate Accounts business is marketed primarily through the
direct efforts of its in-house sales force. At September 30, 1998, over 95% of  
the Company's assets in Separate Accounts (excluding subadvisory assets) were   
obtained through direct sales relationships. Sales efforts are conducted on a   
regional and product specialist basis. Clients are generally serviced by a team 
of individuals, the core of which remain                                        

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assigned to a specific client from the onset of the client relationship. The    
Company's sales force maintains direct relationships with corporate pension and 
profit sharing plans, foundations, endowment funds, jointly trusteed plans,     
municipalities and high net worth individuals that comprise the Company's       
Separate Accounts business.                                                     

PARTNERSHIPS                                                                    

The Company offers alternative investment products through its        
majority-owned subsidiary, GSI. These alternative investments products consist  
primarily of risk arbitrage and merchant banking limited partnerships and       
offshore companies. The Partnerships had $147 million of assets at September 30,
1998. Gabelli Associates Fund had $115 million of assets under management as of 
September 30, 1998 and invests in merger arbitrage opportunities. Merchant      
banking activities are carried out through ALCE Partners, L.P. ("Alce"), and    
Gabelli Multimedia Partners, L.P. ("Multimedia"), both of which are closed to   
new investors. Aggregate assets for Alce and Multimedia as of September 30, 1998
were approximately $9 million and $6 million, respectively. Gabelli Associates  
Limited, which had approximately $17 million of assets as of September 30, 1998,
is an offshore investment company designed for non-U.S. investors seeking to    
participate in risk arbitrage opportunities utilizing the same investment       
objectives and strategies as the Gabelli Associates Fund. The Company also      
manages the Gabelli International Gold Fund Limited, which as of September 30,  
1998 had less than $1 million of assets. The Company's alternative investment   
products are marketed primarily through its direct sales force. The Company does
not expect that assets invested in the Partnerships or other alternative        
investment products will contribute significantly to the Company's future       
growth.                                                                         

BROKERAGE AND MUTUAL FUND DISTRIBUTION                                          

     The Company offers underwriting, execution and trading services through its
subsidiary, Gabelli & Company. Gabelli & Company is a broker-dealer registered  
under the Securities Exchange Act of 1934 and a member of the NASD. Gabelli &   
Company's revenues are derived primarily from distribution of the Mutual Funds, 
brokerage commissions and selling concessions on transactions in equity         
securities for the Mutual Funds, Separate Accounts and other customers, and from
underwriting fees and market-making activities.                                 

    The Company distributes the open-end Mutual Funds pursuant to distribution
agreements with each open-end Mutual Fund. Under each distribution agreement    
with an open-end Mutual Fund, the Company offers and sells such open-end Mutual 
Fund's shares on a continual basis and pays all of the costs of marketing and   
selling the shares of such open-end Mutual Fund, including printing and mailing 
prospectuses and sales literature, advertising and maintaining sales and        
customer service personnel and sales and services fulfillment systems, and      
payments to the sponsors of Third-Party Distribution Programs, financial        
intermediaries and sales personnel of the Company. The Company receives fees for
such services pursuant to distribution agreements adopted under provisions of   
Rule 12b-1. Distribution fees from the open-end Mutual Funds amounted to $4.7   
million and $8.8 million for the nine months ended September 30, 1997 and 1998, 
respectively, and $6.2 million, $7.1 million and $7.5 million for the years     
ended December 31, 1995, 1996 and 1997, respectively. The Company is the        
principal underwriter for several funds distributed with a sales charge,        
including shares of The Gabelli Value Fund Inc. and service class shares of the 
Gabelli Westwood Equity Fund and the Gabelli Westwood Balanced Fund.            

  Under the distribution agreements, the open-end Mutual Funds (except the
Treasurer's Funds, the Gabelli U.S. Treasury Money Market Fund and the Gabelli  
Capital Asset Fund) pay the Company a distribution fee of .25% per year (except 
the Service Class of the Gabelli Westwood Equity and Balanced Funds which pay   
.50% per year) on the average daily net assets of the fund. The Company's     
distribution agreements with the Mutual Funds may continue in effect from year  
to year only if specifically approved at least annually by (i) the Mutual Fund's
board of directors or trustees or (ii) the Mutual Fund's shareholders and, in   
either case, the vote of a majority of the Mutual Fund's directors or trustees  
who are not parties to the agreement or "interested persons" of any such party, 
within the meaning of the Investment Company Act. Each Mutual Fund may terminate
its distribution agreement, or any agreement thereunder, at any time upon 60    
days' written notice by (i) a vote of the majority of its directors or trustees 
cast in person at a meeting called for the purpose of voting on such termination
or (ii) a vote at a meeting of shareholders of the lesser of either 67% of the  
voting shares represented in person or by proxy or 50% of the outstanding voting
shares of such Mutual Fund. Each distribution agreement automatically terminates
in the event of its assignment, as                                              

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defined in the Investment Company Act. The Offering will not constitute an      
"assignment" for the purposes of the Investment Company Act. The Company may    
terminate a distribution agreement without penalty upon 60 days' written notice.

Gabelli & Company is involved in external syndicated underwriting     
activities. For the nine months ended September 30, 1998, Gabelli & Company     
participated as an underwriter in 28 syndicated underwritings with commitments  
totaling $96 million for public equity and debt offerings managed by major      
investment banks. During 1997, Gabelli & Company participated in 35 syndicated  
underwritings with commitments totaling $51 million.                            

COMPETITION                                                                     

The Company competes with mutual fund companies and other investment  
management firms, insurance companies, banks, brokerage firms and other         
financial institutions that offer products which have similar features and      
investment objectives to those offered by the Company. Many of the investment   
management firms with which the Company competes are subsidiaries of large      
diversified financial companies and many others are much larger in terms of     
assets under management and revenues and, accordingly, have much larger sales   
organizations and marketing budgets. Historically, the Company has competed     
primarily on the basis of the long-term investment performance of many of its   
funds. However, the Company has determined that competing primarily on the basis
of performance is inadequate and accordingly, the Company has taken steps over  
the past two years to substantially increase its distribution channels, brand   
name awareness and marketing efforts. Although there can be no assurance that   
the Company will be successful in these efforts, its net sales of Mutual Funds  
have increased significantly over the past year and the Company's strategy is to
continue to devote significant additional resources to its sales and marketing  
efforts.                                                                        

  The market for providing investment management services to institutional
and high net worth Separate Accounts is also highly competitive. Approximately  
41% and 43% of the Company's investment management fee revenues for the nine    
months ended September 30, 1998 and year ended December 31, 1997, respectively, 
was derived from its Separate Accounts. Selection of investment advisers by U.S.
institutional investors is often subject to a screening process and to favorable
recommendation by investment industry consultants. Many of these investors      
require their investment advisers to have a successful and sustained performance
record, often five years or longer, and also focus on one and three year        
performance records. The Company has significantly increased its assets under   
management on behalf of U.S. institutional investors since its entry into the   
institutional asset management business in 1977. At the current time, the       
Company believes that its investment performance record would be attractive to  
potential new institutional and high net worth clients and the Company has      
determined to devote additional resources to the institutional and high net     
worth investor markets. However, no assurance can be given that the Company's   
efforts to obtain new business will be successful.                              

INTELLECTUAL PROPERTY                                                           

 Service marks and brand name recognition are important to the Company's
business. The Company has rights to the service marks under which its products  
are offered. The Company has registered certain service marks in the United     
States and will continue to do so as new trademarks and service marks are       
developed or acquired. The Company has rights to use (i) the "Gabelli" name,    
(ii) the "GAMCO" name, (iii) the research triangle logo, (iv) the "Interactive  
Couch Potato" name, and (v) the "Mighty Mites" name. Pursuant to an assignment  
agreement, Mr. Gabelli has assigned to the Company, effective as of the         
Offering, all of his rights, title and interests in and to the "Gabelli" name   
for use in connection with investment management services, mutual funds and     
securities brokerage services. However, under the agreement, Mr. Gabelli will   
retain any and all right, title and interest he has or may have in the "Gabelli"
name for use in connection with (i) charitable foundations controlled by Mr.    
Gabelli or members of his family or (ii) entities engaged in private investment 
activities for Mr. Gabelli or members of his family. In addition, the funds     
managed by Mr. Gabelli outside the Company have entered into a license agreement
with the Company, effective as of the Offering, permitting them to continue     
limited use of the "Gabelli" name under specified circumstances. The Company has
taken, and will continue to take, action to protect its interests in these      
service marks.                                                                  

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STAFF                                                                           

  At December 31, 1998, the Company had a full-time staff of approximately
133 individuals, of whom 40 served in the portfolio management, research and    
trading areas, 47 served in the marketing and shareholder servicing areas and 46
served in the administrative area. As part of its staff, the Company employs ten
portfolio managers for the Mutual Funds, Separate Accounts and Partnerships.    
Additionally, Westwood Management employs three portfolio managers who advise   
five of the six portfolios of the Gabelli Westwood family of funds.             

PROPERTIES                                                                      

     As of December 31, 1998, the principal properties leased by the Company for
use in its business were as follows:                                            

                                                        [Enlarge/Download Table]

                         LOCATION                          LEASE EXPIRATION   SQUARE FOOTAGE
                         --------                          ----------------   --------------
                                                                                            
Gabelli Funds, Inc. ...................................... December 11, 2001      24,555    
One Corporate Center                                                                        
Rye, New York 10580                                                                         
Gabelli Funds, Inc. ......................................  April 30, 2013        60,055    
401 Theodore Fremd Avenue                                                                   
Rye, New York 10580                                                                         
Gabelli & Company, Inc. ..................................  month-to-month         4,177    
655 Third Avenue, Suite 1425                                                                
New York, New York 10017                                                                    
Gabelli Funds, Inc. ......................................  month-to-month         1,599    
165 West Liberty Street                                                                     
Reno, Nevada 89501                                                                          

   All of these properties are used or will be used by the Company as office
space. The building and property at 401 Theodore Fremd Avenue were leased from  
an entity controlled by members of Mr. Gabelli's family, and approximately      
35,000 square feet are currently subleased to other tenants. The Company has    
begun relocating certain departments of the Company to these premises and       
expects to completely relocate its principal executive office to these premises 
in the year 2001. See "Certain Relationships and Related                        
Transactions -- Transactions with Mr. Gabelli and Affiliates."                  

REGULATION                                                                      

  Virtually all aspects of the Company's businesses are subject to various
federal and state laws and regulations. These laws and regulations are primarily
intended to protect investment advisory clients and shareholders of registered  
investment companies. Under such laws and regulations, agencies that regulate   
investment advisers and broker-dealers such as the Company have broad           
administrative powers, including the power to limit, restrict or prohibit such  
an adviser or broker-dealer from carrying on its business in the event that it  
fails to comply with such laws and regulations. In such event, the possible     
sanctions that may be imposed include the suspension of individual employees,   
limitations on engaging in certain lines of business for specified periods of   
time, revocation of investment adviser and other registrations, censures, and   
fines. The Company believes that it is in substantial compliance with all       
material laws and regulations.                                                  

  The business of the Company is subject to regulation at both the federal
and state level by the Commission and other regulatory bodies. Subsidiaries of  
the Company are registered with the Commission under the Investment Advisers    
Act, and the Mutual Funds are registered with the Commission under the          
Investment Company Act. Two subsidiaries of the Company are also registered as  
broker-dealers with the Commission and are subject to regulation by the NASD and
various states.                                                                 

 The subsidiaries of the Company that are registered with the Commission
under the Investment Advisers Act (Funds Adviser, Gabelli Advisers, Inc.,       
Gabelli Fixed Income L.L.C. and GAMCO) are regulated by and subject to          
examination by the Commission. The Investment Advisers Act imposes numerous     
obligations on registered investment advisers including fiduciary duties, record
keeping requirements, operational requirements, marketing requirements and      
disclosure obligations. The Commission is authorized to institute proceedings   
and impose sanctions for violations of the Investment Advisers Act, ranging from
censure to termination of an investment adviser's registration. The failure of a
subsidiary of the Company to comply with                                        

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the requirements of the Commission could have a material adverse effect on the  
Company. The Company believes it is in substantial compliance with the          
requirements of the Commission.                                                 

    The Company derives a substantial majority of its revenues from investment
advisory services through its investment management agreements. Under the       
Investment Advisers Act, the Company's investment management agreements         
terminate automatically if assigned without the client's consent. Under the     
Investment Company Act, advisory agreements with registered investment companies
such as the Mutual Funds terminate automatically upon assignment. The term      
"assignment" is broadly defined and includes direct assignments as well as      
assignments that may be deemed to occur, under certain circumstances, upon the  
transfer, directly or indirectly, of a controlling interest in the Company. The 
Offering will not constitute an assignment for these purposes. Accordingly, the 
Company does not intend to seek approvals of new investment advisory agreements 
from the shareholders of the registered investment companies it manages or other
client consents in connection with these transactions.                          

In its capacity as a broker-dealer, Gabelli & Company is required to  
maintain certain minimum net capital and cash reserves for the benefit of its   
customers. Gabelli & Company's net capital, as defined, has consistently met or 
exceeded all minimum requirements. Under the rules and regulations of the       
Commission promulgated pursuant to the federal securities laws, the Company is  
subject to periodic examination by the Commission. Gabelli & Company is also    
subject to periodic examination by the NASD. The most recent examination by the 
Commission of the Gabelli family of funds was in June 1998 and of the Gabelli   
Westwood family of funds was in November 1997. The most recent examination of   
Gabelli & Company by the NASD was in September 1998. There were no material     
compliance issues reported by either the Commission or the NASD as a result of  
such examinations.                                                              

   Subsidiaries of the Company are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and to regulations promulgated      
thereunder, insofar as they are "fiduciaries" under ERISA with respect to their 
clients. ERISA and applicable provisions of the Internal Revenue Code of 1986,  
as amended (the "Code"), impose certain duties on persons who are fiduciaries   
under ERISA and prohibit certain transactions involving ERISA plan clients. The 
failure of the Company to comply with these requirements could have a material  
adverse effect on the Company.                                                  

Investments by the Company on behalf of its clients often represent a 
significant equity ownership position in an issuer's class of stock. As of      
September 30, 1998, the Company had five percent or more beneficial ownership   
with respect to more than 85 equity securities. This activity raises frequent   
regulatory and legal issues regarding the Company's aggregate beneficial        
ownership level with respect to portfolio securities, including issues relating 
to issuers' shareholder rights plans or "poison pills," state gaming laws and   
regulations, federal communications laws and regulations, public utility holding
company laws and regulations, federal proxy rules governing shareholder         
communications and federal laws and regulations regarding the reporting of      
beneficial ownership positions. The failure of the Company to comply with these 
requirements could have a material adverse effect on the Company.               

Mr. Gabelli is registered with the U.S. Commodity Futures Trading     
Commission/National Futures Association as a floor broker and commodity pool    
operator.                                                                       

The Company and certain of its affiliates are subject to the laws of  
non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies. In           
particular, the Company is subject to requirements in numerous jurisdictions    
regarding reporting of beneficial ownership positions in securities issued by   
companies whose securities are publicly traded in those countries. In addition, 
GAMCO is registered as an international adviser, investment counsel and         
portfolio manager with the Ontario Securities Commission in Canada in order to  
market its services to prospective clients which reside in Ontario. Gabelli     
Associates Limited is organized under the laws of the British Virgin Islands and
Gabelli International Gold Fund Limited is organized under the laws of Bermuda. 

LEGAL MATTERS                                                                   

From time to time, the Company is a defendant in various lawsuits     
incidental to its business. The Company does not believe that the outcome of any
current litigation will have a material effect on the financial condition of the
Company.                                                                        

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS                                                

   The following table sets forth certain information concerning the persons
who will serve as the Company's directors and executive officers upon           
consummation of the Offering. All directors will serve terms of one year or     
until the election of their respective successors.                              

                                                                [Download Table]

NAME                  AGE                            POSITION                      
----                  ---                            --------                      
                                                                                   
Mario J. Gabelli..... 56   Chairman of the Board, Chief Executive Officer and Chief
                           Investment Officer, Director                            
Stephen G. Bondi..... 40   Executive Vice President -- Finance and Administration  
James E. McKee....... 35   Vice President, General Counsel and Secretary           
Robert S. Zuccaro.... 42   Vice President and Chief Financial Officer              
Douglas R.                                                                         
  Jamieson........... 44   Executive Vice President and Chief Operating Officer of 
                           GAMCO                                                   
Bruce N. Alpert...... 47   Executive Vice President and Chief Operating Officer of 
                           Funds Adviser                                           
Charles C. Baum...... 57   Director                                                
Richard B. Black..... 65   Director                                                
Eamon M. Kelly....... 62   Director                                                
Karl Otto Pohl....... 69   Director                                                

    MARIO J. GABELLI has served as Chairman, Chief Executive Officer and Chief
Investment Officer of the Company since November 1976. In connection with those 
responsibilities, he serves as Chairman and/or President of thirteen registered 
investment companies managed by Funds Adviser and as the primary Portfolio      
Manager for a significant majority of the Company's assets under management. Mr.
Gabelli also serves as a Governor of the American Stock Exchange, Chairman and  
Chief Executive Officer of Lynch Corporation, a public company engaged in       
multimedia, specialized transportation and manufacturing and as a director of   
East/West Communications, Inc., a publicly-held communications services company.
In addition, Mr. Gabelli is the sole employee of MJG Associates, Inc., which    
acts as a general partner of an equity fund, Gabelli Performance Partnership    
L.P., and investment manager of various offshore investment companies and other 
accounts. Prior to founding the Company, Mr. Gabelli served as a research       
analyst at William D. Witter from 1975 through 1977 and as a Vice President of  
Loeb, Rhoades & Co. from 1967 through 1975. Mr. Gabelli received a B.S. from    
Fordham University and an M.B.A. from Columbia University Graduate School of    
Business.                                                                       

 STEPHEN G. BONDI joined the Company in 1982 and has served as Executive
Vice President -- Finance and Administration of the Company since 1997 and from 
1982 to 1997 as a financial officer in various capacities. Mr. Bondi also serves
as Vice President of GAMCO, GSI and Gabelli & Company and is a director of      
Gabelli & Company. Prior to joining the Company, Mr. Bondi was an accountant    
with the accounting firm of Spicer & Oppenheim. He holds a B.B.A. in Accounting 
from Hofstra University, received an M.B.A. from Columbia University Graduate   
School of Business and is a Certified Public Accountant.                        

    JAMES E. MCKEE has served as Vice President, General Counsel and Secretary
of the Company since August 1995 and as Vice President, General Counsel and     
Secretary of GAMCO since December 1993. Mr. McKee also serves as Secretary of   
the Company's subsidiaries and all of the Mutual Funds except the Treasurer's   
Funds. Prior to joining the Company, he was a Branch Chief with the Commission  
in New York from 1992 to 1993 and a Staff Attorney with the Commission from 1989
through 1992, where he worked on matters involving registered investment        
advisers and investment companies. Mr. McKee received a B.A. from the University
of Michigan and a J.D. from the University of Virginia School of Law.           

    ROBERT S. ZUCCARO has served as Vice President and Chief Financial Officer
of the Company since June 1, 1998. Prior to joining the Company, he was Vice    
President and Treasurer of Cybex International, Inc., an international, publicly
held manufacturer of medical, rehabilitative and fitness products, from 1992 to 
1997, and served as its Corporate Controller from 1984 to 1997. Mr. Zuccaro was 
previously with Shearson Lehman                                                 

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Bros. from 1983 to 1984 and with Ernst & Young from 1979 to 1983. Mr. Zuccaro   
received a B.S. in Accounting from C.W. Post College and is a Certified Public  
Accountant.                                                                     

DOUGLAS R. JAMIESON has served as Executive Vice President and Chief  
Operating Officer of GAMCO since 1986 and as a director since 1991. Mr. Jamieson
was an investment analyst with the Company from 1981 to 1986. Mr. Jamieson      
received a B.A. from Bucknell University and an M.B.A. from Columbia University 
Graduate School of Business.                                                    

     BRUCE N. ALPERT has served as Vice President and Chief Operating Officer of
Funds Adviser since June 1988 and was appointed Executive Vice President and    
Chief Operating Officer of Funds Adviser on January 1, 1999. Mr. Alpert is an   
officer of all of the Mutual Funds. Mr. Alpert is also a director of Gabelli    
Advisers, Inc. Prior to June 1988 he worked at the InterCapital Division of Dean
Witter from 1986 to 1988 as Vice President and Treasurer of the Mutual Funds    
sponsored by Dean Witter. From 1983 through 1986 he worked at Smith Barney      
Harris Upham & Co. as Vice President in the Financial Services Division and as  
Vice President and Treasurer of Mutual Funds sponsored by Smith Barney. Mr.     
Alpert also was an Audit Manager and Specialist at Price Waterhouse in the      
Investment Company Industry Services Group from 1975 through 1983. Mr. Alpert   
received a B.S. in Management Science and an M.B.A. from Rensselaer Polytechnic 
Institute and is a Certified Public Accountant.                                 

  CHARLES C. BAUM joined the Company's Board of Directors in October 1992.
Mr. Baum has also served since August 1992 as Chairman and Chief Executive      
Officer of The Morgan Group, Inc., a transportation services company and        
subsidiary of Lynch Corporation, and as Treasurer of United Holdings Co., Inc.  
and its predecessors and affiliates since 1973. United Holdings Co., Inc. was   
involved in the metal business until 1990 when it shifted focus to concentrate  
on investments in real estate and securities. Mr. Baum is also a director of    
United Holdings Co.; Shapiro Robinson & Associates, a firm which represents     
professional athletes; and Municipal Mortgage and Equity LLC, a company engaged 
in the business of mortgage financing. Mr. Baum received an A.B. from Princeton 
University, an M.B.A. from Harvard Business School and an LLB from Maryland Law 
School.                                                                         

RICHARD B. BLACK originally joined the Company's Board of Directors in
November 1982. He currently serves as President and director of Oak Technology, 
Inc., an international supplier of semiconductors, as well as Chairman and      
Director of ECRM, Incorporated, an international supplier of electronic imaging 
devices to the publishing and graphic arts industries. Mr. Black also serves as 
a director of Benedetto, Gartland & Greene, Inc.; General Scanning, Inc.; Grand 
Eagle Companies, Inc.; and The Morgan Group, Inc. Mr. Black was Chairman and    
Chief Executive Officer of AM International, Inc. from 1981 to 1982; President  
and Chief Executive Officer of Alusuisse of America (Swiss Aluminum of America) 
from 1979 to 1981; and Chairman of the Board, President and Chief Executive     
Officer of Maremont Corporation, an automotive parts manufacturer with          
world-wide distribution, from 1967 to 1979. Mr. Black received a B.S. in        
Engineering from Texas A&M University and an M.B.A. from Harvard University, and
he was awarded an Honorary Doctorate of Humane Letters Degree from Beloit       
College.                                                                        

     EAMON M. KELLY joined the Company's Board of Directors in October 1992. Dr.
Kelly is currently serving as a Professor at the Payson Center for International
Development and Technology Transfer as well as in other departments at Tulane   
University, New Orleans. From 1981 through July 1998, he served as President and
Chief Executive Officer of Tulane University. From 1974 to 1979, Dr. Kelly      
served in numerous positions, including Officer-in-Charge of Program Related    
Investments at the Ford Foundation, a philanthropic organization with           
initiatives in community and housing development, communications and public     
television, resources and environment, higher and public education, the arts and
minority enterprises. Dr. Kelly's career includes numerous appointments, most   
recently, the appointments by President Clinton in 1995 to the National Science 
Board (the governing board of the National Science Foundation) and in 1994 to   
the National Security Education Board. Dr. Kelly received a B.S. from Fordham   
University, and his M.S. and Ph.D. in Economics from Columbia University.       

   KARL OTTO POHL joined the Company's Board of Directors in April 1998. Mr.
Pohl is a member of the Shareholder Committee of Sal Oppenheim Jr., & Cie., a   
private investment bank. Currently Mr. Pohl is a director/trustee of all of the 
Mutual Funds and serves as a board member of Zurich Versicherungs-Gesellshaft   

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(Insurance), the International Council for J.P. Morgan & Co. and TrizecHahn     
Corp. Mr. Pohl is a former President of the Deutsche Bundesbank, Germany's      
Central Bank, and was Chairman of its Central Bank Council from 1980 to 1991. He
also served as German Governor of the International Monetary Fund from 1980 to  
1991 and as a Board Member to the Bank for International Settlements. Mr. Pohl  
also served as Chairman to the European Economic Community Central Bank         
Governors from 1990 to 1991. Mr. Pohl served as a director of Unilever (from    
1992 to 1998), Royal Dutch Shell (from 1992 to 1997) and other international    
companies. He received a "Dipl. Volkswirt" from Gottingen University and was    
awarded with honorary degrees from Georgetown University, London University,    
University of Tel-Aviv and others.                                              

COMMITTEES OF THE BOARD OF DIRECTORS                                            

The Company has established an Audit Committee comprised solely of    
independent directors, a Compensation Committee and a Nominating Committee. The 
Audit Committee, consisting of Richard B. Black and Eamon M. Kelly, will        
recommend the annual appointment of the Company's auditors, with whom the Audit 
Committee will review the scope of audit and non-audit assignments and related  
fees, accounting principles used by the Company in financial reporting, internal
auditing procedures and the adequacy of the Company's internal control          
procedures. The Compensation Committee, consisting of Richard B. Black and Eamon
M. Kelly, will administer the Company's 1999 Stock Award and Incentive Plan and 
1999 Annual Performance Incentive Plan and make recommendations to the Board of 
Directors regarding compensation for the Company's executive officers. The      
Nominating Committee, consisting of Mario J. Gabelli and Karl Otto Pohl, will   
review the qualifications of potential candidates for the Board of Directors,   
report its findings to the Board of Directors and propose nominations for Board 
memberships for approval by the Board of Directors and submission to the        
shareholders of the Company for approval.                                       

COMPENSATION OF DIRECTORS                                                       

Directors of the Company who are also employees receive no additional 
compensation for their services as a director. Non-employee directors do not    
currently receive fees for their service as directors, although it is           
anticipated that non-employee directors will receive fees in the future. The    
Company will reimburse all directors of the Company for travel expenses incurred
in attending meetings of the Board of Directors and its committees. See "Certain
Relationships and Related Transactions -- Transactions with Others."            

EXECUTIVE COMPENSATION                                                          

   The following table sets forth certain compensation awarded to, earned by
or paid to the Company's Chairman of the Board, Chief Executive Officer and     
Chief Investment Officer and the four other most highly paid executive officers 
of the Company who served as executive officers of the Company as of December   
31, 1998, for services rendered in all capacities to the Company and its        
subsidiaries during 1998.                                                       

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SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                       ANNUAL COMPENSATION                   
                                                  -----------------------------   ALL OTHER  
NAMES AND PRINCIPAL POSITIONS                     YEAR    SALARY        BONUS    COMPENSATION
-----------------------------                     ----  -----------    --------  ------------
                                                                                             
Mario J. Gabelli................................  1998  $42,351,316(1) $      0    $   955(2)
  Chairman of the Board, Chief Executive Officer                                             
  and Chief Investment Officer                                                               
Douglas R. Jamieson.............................  1998  $ 1,330,465    $ 75,000    $   955(3)
  Executive Vice President and Chief Operating                                               
  Officer of GAMCO                                                                           
Bruce N. Alpert.................................  1998  $   308,471    $600,000    $54,986(3)
  Executive Vice President and Chief Operating                                               
  Officer of Funds Adviser                                                                   
Stephen G. Bondi................................  1998  $   300,000    $ 75,000    $ 7,130(3)
  Executive Vice President -- Finance and                                                    
  Administration                                                                             
James E. McKee..................................  1998  $   300,000    $120,000    $ 7,130(3)
  Vice President, General Counsel and Secretary                                              

---------------                                                                 
(1) Represents the incentive-based management fee of $12,245,877 and portfolio  
management and other variable compensation of $30,105,439. Mr. Gabelli  
receives no fixed salary.                                               

(2) Represents contributions made by the Company under its profit sharing plan. 

(3) Represents contributions made by the Company under its profit sharing plan  
   in the amount of $955 and the fair value of subsidiary stock awards made to
Messrs. Alpert, Bondi and McKee worth $54,031, $6,175 and $6,175,       
respectively.                                                           

EMPLOYMENT AGREEMENTS                                                   

 Prior to the Offering, Mr. Gabelli entered into an Employment Agreement
with the Company relating to his service as Chairman of the Board, Chief        
Executive Officer, Chief Investment Officer of the Company, an executive for    
certain subsidiaries and Portfolio Manager for certain Mutual Funds and Separate
Accounts, effective as of the consummation of the Offering. Under the Employment
Agreement, Mr. Gabelli will receive, as compensation for managing or overseeing 
the management of investment companies and the Partnerships, attracting mutual  
fund accounts, attracting or managing Separate Accounts, providing investment   
banking services, acting as a broker or otherwise generating revenues for the   
Company, a percentage of revenues or net profits related to or generated by such
activities (which revenues or net profits are substantially derived from assets 
under management). Such payments will be made in a manner and at rates as agreed
to from time to time by Mr. Gabelli and the Company, which rates have been and  
generally will be the same as those received by other professionals in the      
Company performing similar services. With respect to the Company's institutional
and retail asset management, mutual fund advisory and brokerage business, the   
Company generally pays out up to 40% of the revenues or net profits to the      
portfolio managers, brokers and marketing staff who service or generate such    
business, with payments involving the Separate Accounts being typically based on
revenues and payments involving the Mutual Funds being typically based on net   
profits.                                                                        

    For example, during 1998, Mr. Gabelli received the following compensation:
(i) $15,760,084 (which represents approximately 52% of Mr. Gabelli's            
revenue-based or net profit-based compensation of $30,105,439) for acting as    
portfolio manager of several of the Mutual Funds; (ii) $9,280,798 (which        
represents approximately 31% of his $30,105,439 of revenue-based or net         
profit-based compensation) for acting as portfolio manager and/or attracting and
providing client service to a large number of the Separate Accounts; (iii)      
$5,064,557 (which represents the remaining 17% of his $30,105,439 of            
revenue-based or net profit-based compensation) for providing other services,   
including acting as portfolio manager of the Partnerships and as a broker; and  
(iv) $12,245,877 (which represents his historical incentive-based management fee
of 20% of the Company's pre-tax profits rather than the 10% incentive-based     
management fee receivable under the Employment Agreement discussed below).      

 Pursuant to the Employment Agreement, in addition to his revenue or net
profit-based compensation, Mr. Gabelli will receive an incentive-based          
management fee in the amount of 10% of the aggregate pre-tax profits, if any, of
the Company as computed for financial reporting purposes in accordance with     
generally                                                                       

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accepted accounting principles (before consideration of this fee or the $50     
million deferred payment described below or any employment taxes thereon) so    
long as he is an executive of the Company and devoting the substantial majority 
of his working time to its business. This incentive-based management fee will be
subject to review at least annually by an independent committee of the Board for
compliance with the terms hereof. Mr. Gabelli has agreed that while he is       
employed by the Company or for five years from the consummation of the Offering,
whichever is longer, he will not provide investment management services outside 
of the Company, except for the Permissible Accounts. Pursuant to the Employment 
Agreement, Mr. Gabelli will also receive a deferred payment of $50 million on   
January 2, 2002, plus interest payable quarterly at an annual rate of 6%.       
Because these compensation arrangements will be in existence before the         
completion of the Offering, the $1.0 million deductibility limit of Section     
162(m) is generally not expected to apply to the payments until the first       
meeting of the Company's shareholders at which directors will be elected after  
the close of the third calendar year following the calendar year in which the   
Offering occurs. Thereafter, while no assurance can be given, the Company       
believes that it will be able to take steps to allow for the continued          
deductibility of these payments pursuant to the Employment Agreement. The       
Employment Agreement may not be amended without the approval of an independent  
committee of the Board.                                                         

The Company has also entered into employment agreements and other     
arrangements with several of its other key investment professionals which are   
designed to retain them through variable compensation, equity ownership, stock  
options, other incentives and non-solicitation or non-compete provisions. For   
example, three of the Company's portfolio managers have employment agreements   
with terms extending beyond January 2000 setting forth their compensation and   
incentive arrangements and including certain restrictive covenants.             

1999 STOCK AWARD AND INCENTIVE PLAN                                             

In General                                                                  

    The Company has adopted the Gabelli Asset Management Inc. 1999 Stock Award
and Incentive Plan (the "Plan"). A maximum of 1,500,000 shares of Class A Common
Stock has been reserved for issuance under the Plan, generally subject to       
equitable adjustment upon the occurrence of any stock dividend or other         
distribution, recapitalization, stock split, reverse split, reorganization,     
merger, consolidation, spin-off, combination, share repurchase or exchange, or  
other similar corporate transaction or event.                                   

Pursuant to the Plan, there may be granted stock options (including   
"incentive stock options" and "nonqualified stock options"), stock appreciation 
rights (either in connection with stock options granted under the Plan or       
independent of options), restricted stock, restricted stock units, dividend     
equivalents and other stock- or cash-based awards ("Awards"). After the         
consummation of the Offering, the Plan is intended to satisfy any applicable    
requirements of Rule 16b-3 ("Rule 16b-3") promulgated under Section 16 of the   
Exchange Act and the deductions for amounts paid under the Plan are not expected
to be limited by Section 162(m) for federal income tax purposes.                

  The Plan will be administered by a committee established by the Board of
Directors, consisting of two or more persons each of whom is a "nonemployee     
director" within the meaning of Rule 16b-3 (the "Committee"). The Committee     
shall have full authority, subject to the provisions of the Plan, to, among     
other things, determine the persons to whom Awards will be granted, determine   
the terms and conditions (including any applicable performance criteria and the 
circumstances in which Awards may be cancelled or forfeited) of such Awards, and
prescribe, amend and rescind rules and regulations relating to the Plan.        

Grants of Awards may be made under the Plan to selected employees,    
independent contractors and directors of the Company and its present or future  
affiliates, at the discretion of the Committee.                                 

Stock Options and Appreciation Rights                                       

Stock options may be either "incentive stock options," as such term is
defined in Section 422 of the Code, or nonqualified stock options. The exercise 
price of a nonqualified stock option may be above, at or below the fair market  
value per share of Class A Common Stock on the date of grant; the exercise price
of an incentive stock option may not be less than the fair market value per     
share of Class A Common Stock on the date of                                    

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grant. The exercise price may be paid in cash, by the surrender or withholding  
of Class A Common Stock or through a "broker's cashless exercise" procedure     
meeting the requirements of 12 C.F.R. sec. 220 or any successor thereof.        

Stock appreciation rights may be granted alone or in tandem with stock
options. A stock appreciation right is a right to be paid an amount equal to the
excess of the fair market value of a share of Class A Common Stock on the date  
the stock appreciation right is exercised over either the fair market value of a
share of Class A Common Stock on the date of grant (in the case of a free       
standing stock appreciation right) or the exercise price of the related stock   
option (in the case of a tandem stock appreciation right), with payment to be   
made in cash, Class A Common Stock or both, as specified in the Award agreement 
or determined by the Committee.                                                 

 Stock options and stock appreciation rights will be exercisable at such
times and upon such conditions as the Committee may determine, as reflected in  
the applicable Award agreement. In addition, all stock options and stock        
appreciation rights will become exercisable in the event of a "change in        
control" of the Company. The exercise period shall be determined by the         
Committee except that such exercise period shall not exceed ten years from the  
date of grant of such incentive stock option.                                   

Except to the extent that the applicable Award agreement provides     
otherwise, in the event that the employment of a participant shall terminate,   
such participant's right to exercise stock options and stock appreciation rights
will cease.                                                                     

Restricted Stock and Restricted Stock Units                                 

   A restricted stock award is an award of Class A Common Stock ("Restricted
Stock") and a restricted stock unit award is an Award of the right to receive   
cash or Class A Common Stock ("Restricted Stock Unit") at a future date, in each
case, that is subject to such restrictions on transferability and other         
restrictions, if any, as the Committee may impose at the date of grant, which   
restrictions may lapse separately or in combination at such times, under such   
circumstances, in such installments or otherwise, as the Committee may          
determine. Except to the extent restricted under the Award agreement relating to
the Restricted Stock, a participant granted Restricted Stock shall have all of  
the rights of a shareholder, including without limitation the right to vote and 
the right to receive dividends thereon. The Committee has the authority to      
cancel all or any portion of any outstanding restrictions. In addition, all     
restrictions affecting the awarded shares or units will lapse in the event of a 
"change in control" of the Company.                                             

     Upon termination of employment or termination of the independent contractor
relationship during the applicable restriction period, Restricted Stock,        
Restricted Stock Units and any accrued but unpaid dividends or Dividend         
Equivalents (as defined below) that are at that time subject to restrictions    
will be forfeited unless the Committee provides, by rule or regulation or in any
Award agreement, or may determine in any individual case, that restrictions or  
forfeiture conditions relating to Restricted Stock will be waived in whole or in
part in the event of terminations resulting from specified causes, and the      
Committee may in other cases waive in whole or in part the forfeiture of        
Restricted Stock.                                                               

Other Awards                                                                

    The Committee may grant to a participant the right to receive cash in lieu
of Class A Common Stock equal in value to dividends paid with respect to a      
specified number of shares of Class A Common Stock ("Dividend Equivalents").    
Dividend Equivalents may be awarded on a free-standing basis or in connection   
with another Award, and may be paid currently or on a deferred basis. The       
Committee is also authorized to grant Class A Common Stock as a bonus or to     
grant other Awards in lieu of Company commitments to pay cash under other plans 
or compensatory arrangements, on such terms as shall be determined by the       
Committee.                                                                      

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Transferability                                                             

   Except as otherwise determined by the Committee, awards granted under the
Plan may not be transferred other than by will, or by the laws of descent and   
distribution, or if permitted under Rule 16b-3, pursuant to a qualified domestic
relation order.                                                                 

Amendment and Termination                                                   

The Plan may, at any time and from time to time, be altered, amended, 
suspended or terminated by the Board of Directors, in whole or in part, except  
that no amendment that requires shareholder approval in order for the Plan to   
avoid the application of Section 162(m) for federal income tax purposes, or for 
the Plan to comply with state law, stock exchange requirements or other         
applicable law will be effective (except as otherwise determined by the         
Committee) unless such amendment has received the requisite approval of         
shareholders. In addition, no amendment may be made which adversely affects any 
of the rights of a participant under any Award theretofore granted, without such
participant's consent.                                                          

Outstanding Awards                                                          

 Effective with the Offering, the Board of Directors of the Company will
grant to certain employees (excluding Mr. Gabelli) stock options to acquire     
approximately 1,200,000 shares of Class A Common Stock at an exercise price     
equal to the public offering price of the Class A Common Stock (net of the      
discount payable to the Underwriters). These stock options will vest three years
from the date of consummation of the Offering.                                  

ANNUAL PERFORMANCE INCENTIVE PLAN                                               

The Company has adopted the Gabelli Asset Management Inc. 1999 Annual 
Performance Incentive Plan (the "Annual Plan"), pursuant to which executive     
officers and professional staff members of the Company and its subsidiaries will
be eligible to receive annual incentive bonuses. The Annual Plan will be        
administered by the Compensation Committee or a subcommittee thereof. The Annual
Plan will be effective for 1999 and each of calendar years 2000, 2001 and 2002, 
after which time the Plan will terminate, unless extended or terminated earlier 
by the Board of Directors of the Company. Non-Employee Directors will not be    
eligible for awards under the Annual Plan.                                      

Each year the Company will establish target incentive bonuses for     
participants in the Annual Plan. Bonuses will be payable under the Annual Plan  
for a year if the Company meets the performance criteria for such year selected 
for a participant or group of participants by the compensation committee or such
subcommittee, which performance criteria may include, without limitation: (i)   
earnings per share growth; (ii) revenue growth; (iii) growth in assets under    
management; (iv) increase in consolidated net income; (v) return on equity; and 
(vi) controlling operating expenses. The actual bonus payable to a participant, 
which may equal, exceed or be less than the target bonus, will be determined    
based on whether the applicable performance targets are met, exceeded or not    
met, and may be decreased or increased based on individual performance and      
contributions, or such other factors as the Compensation Committee or such      
subcommittee may deem appropriate. Bonuses payable under the Annual Plan are not
subject to any predetermined limitations.                                       

   In addition, notwithstanding the foregoing, the Compensation Committee or
such subcommittee will have the right, in its discretion, to pay to any         
participant an annual bonus based on individual performance or any other        
criteria that the Compensation Committee deems appropriate and, in connection   
with the hiring of any person or otherwise, the Compensation Committee may      
provide for a minimum bonus amount in any calendar year, regardless of whether  
performance objectives are attained.                                            

Any such bonuses will be payable as soon as practicable after the     
Compensation Committee certifies that the applicable performance criteria have  
been obtained, or, in the case of bonuses that are not tied to such performance 
criteria, at such time as the Compensation Committee determines.                

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A portion of a participant's annual incentive bonus may be payable in 
Restricted Stock. Any such shares of Restricted Stock will generally vest over  
three years.                                                                    

   Because the Annual Plan will be in existence before the completion of the
Offering, the $1 million deductibility limit of Section 162(m) is generally not 
expected to apply to payments under the Annual Plan until the first meeting of  
the Company's stockholders at which directors will be elected after the close of
the third calendar year following the calendar year in which the Offering       
occurs. The Board or the Compensation Committee may, at any time, amend,        
suspend, discontinue or terminate the Annual Plan; provided, however, that no   
material modification to the Annual Plan will be effective without approval by  
the shareholders of the Company.                                                

OWNERSHIP OF THE COMMON STOCK 

  Immediately prior to the consummation of the Offering, Mario J. Gabelli,
One Corporate Center, Rye, New York, through his approximately two-thirds       
ownership of GFI, will beneficially own all of the outstanding shares of Class B
Common Stock of the Company. Immediately after consummation of the Offering,    
GFI, directly and indirectly through two of its subsidiaries, will beneficially 
own all of the 24,000,000 outstanding shares of Class B Common Stock, which     
ownership will represent approximately 97.6% of the combined voting power of the
outstanding shares of Common Stock of the Company (approximately 97.2% if the   
Underwriters' over-allotment option is exercised in full). Accordingly, Mr.     
Gabelli, through his approximately two-thirds ownership of GFI, will            
beneficially own approximately 97.6% of the combined voting power of the        
outstanding shares of Common Stock of the Company immediately following         
consummation of the Offering (approximately 97.2% if the Underwriters'          
over-allotment option is exercised in full). No other director or executive     
officer of the Company will beneficially own any shares of Common Stock, and no 
other person will beneficially own more than 5% of any class of the Common Stock
of the Company outstanding immediately after the consummation of the Offering.  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The following is a summary of certain arrangements between the Company and
Mr. Gabelli and members of his immediate family. Although the Company believes  
that these arrangements embody terms and conditions no less favorable to the    
Company than could be obtained in negotiations between independent parties,     
these arrangements were established before the Offering and were not the subject
of arm's-length negotiations. See "Risk Factors -- Control by Mr. Gabelli;      
Conflicts of Interest."                                                         

THE FORMATION TRANSACTIONS                                                      

   The Company is a holding company that was newly formed in connection with
the Offering and, accordingly, has not previously engaged in any business       
operations, acquired any assets or incurred any liabilities other than in       
connection with the Offering. Prior to the Offering, the Company issued 24      
million shares of its Class B Common Stock, representing all of its then issued 
and outstanding shares of Common Stock to GFI for substantially all of the      
operating assets and liabilities of GFI relating to its institutional and retail
asset management, mutual fund advisory, underwriting and brokerage business.    
Following the Offering, GFI will be renamed "Gabelli Group Capital Partners,    
Inc." As a result, GFI, which is approximately two-thirds owned by Mr. Gabelli  
with the balance owned by the Company's professional staff and other            
individuals, will own all of the outstanding common stock of the Company prior  
to the consummation of the Offering. At such time, one of GFI's most significant
assets will be its investment in the Company. Immediately following the         
Offering, the Company will conduct its business operations through its          
subsidiaries. After the consummation of the Offering, GFI will own all of the   
outstanding shares of Class B Common Stock, which will represent approximately  
97.6% of the combined voting power of the outstanding Common Stock of the       
Company (97.2% if the Underwriters' over-allotment option is exercised in full).
The Company will continue to be controlled by Mr. Gabelli, who through his      
approximately two-thirds ownership of GFI will indirectly beneficially own      
approximately 97.6% of the combined voting power of the outstanding Common Stock
of the Company (97.2% if the Underwriters' over-allotment option is exercised in
full).                                                                          

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Prior to the Offering, the Company and Mr. Gabelli entered into an    
Employment Agreement which provides that Mr. Gabelli will receive an            
incentive-based management fee of 10% of the aggregate pre-tax profits of the   
Company as computed for financial reporting purposes in accordance with         
generally accepted accounting principles before consideration of this fee so    
long as he is an executive of the Company and devoting the substantial majority 
of his working time to the business of the Company. The Employment Agreement    
further provides that Mr. Gabelli will receive a deferred payment of $50 million
on January 2, 2002, plus interest payable quarterly at an annual rate of 6%. See
"Management -- Employment Agreements."                                          

     The Company and GFI have entered into a Management Services Agreement, with
a one year term and renewable annually, under which the Company will provide    
certain services for GFI, including furnishing office space and equipment,      
providing insurance coverage, overseeing the administration of its business and 
providing personnel to perform certain administrative services.                 

    Effective with the Offering, the Company will enter into an agreement with
GFI (the "Tax Indemnification Agreement") to indemnify GFI and the shareholders 
of GFI (the "Tax Indemnitees"), against certain taxes due and payable by the Tax
Indemnitees on or after the Offering that relate to activities of GFI or certain
of its affiliates in respect of periods prior to the Offering ("Taxes").        
Generally, when a corporation owns assets and conducts a business prior to a    
public offering of its stock, such corporation continues to be liable for any   
unpaid taxes relating to its business operations prior to such offering.        
However, since the operations of the Company were conducted by GFI and not the  
Company prior to the Offering, the Company is not automatically liable for any  
unpaid taxes relating to such operations prior to the Offering. Consequently,   
the Tax Indemnification Agreement has been agreed to by the Company and GFI to  
require the Company, and not GFI or the shareholders of GFI, to bear the cost of
Taxes relating to the assets and operations of the Company prior to the         
Offering. The Company will be required to make additional payments to offset any
taxes payable by a Tax Indemnitee in respect of payments made pursuant to the   
Tax Indemnification Agreement. Any payment of Taxes by the Company will be      
offset by any tax benefit received by the Tax Indemnitee. The Tax               
Indemnification Agreement includes provisions that permit the Company to control
any tax proceeding or contest which might result in the Company being required  
to make a payment under the Tax Indemnification Agreement.                      

The foregoing transactions are collectively referred to herein as the 
"Formation Transactions."                                                       

TRANSACTIONS WITH MR. GABELLI AND AFFILIATES                                    

    Mr. Gabelli intends to continue devoting time to activities outside of the
Company, including managing his own assets and his family's assets, managing or 
controlling companies in other industries and managing assets for other         
investors through the Permissible Accounts (approximately $110 million as of    
September 30, 1998). These activities may present conflicts of interest or      
compete with the Company. In order to minimize conflicts and potential          
competition with the Company's investment management business, Mr. Gabelli has  
undertaken that so long as he is associated with the Company or for a period of 
five years from the consummation of the Offering, whichever is longer, he will  
not provide investment management services for compensation other than in his   
capacity as an officer or employee of the Company except for the Permissible    
Accounts. Prior to establishing any additional Permissible Accounts, Mr. Gabelli
has agreed to have a committee of independent directors review any proposed new 
Permissible Account for conformity with the specific undertakings set forth     
under "Risk Factors -- Control by Mr. Gabelli; Conflicts of Interests", and to  
accept the committee's determination as final. See "Risk Factors -- Control by  
Mr. Gabelli; Conflicts of Interest." The Certificate of Incorporation of the    
Company expressly provides that in general Mr. Gabelli, members of his immediate
family who are officers and directors of the Company and entities controlled by 
such persons have an obligation to present corporate opportunities to the       
Company and resolve conflicts of interests through one of the processes         
described in the Certificate of Incorporation, which include independent        
director or independent shareholder approval. See "Description of Capital       
Stock -- Certificate of Incorporation and Bylaw Provisions -- Overview of       
Corporate Opportunity and Conflict of Interest Policies." As of the completion  
of the Offering, it is expected that there will be no members of Mr. Gabelli's  
immediate family who are officers or directors of the Company.                  
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The Company will not derive any income from activities outside of the 
Company by Mr. Gabelli, members of his immediate family who are officers and    
directors of the Company and entities controlled by such persons, and the       
Company may not be able to take advantage of business and investment            
opportunities that could later prove to be beneficial to the Company and the    
shareholders. Where a conflict of interest involves a transaction between Mr.   
Gabelli, members of his immediate family who are officers and directors of the  
Company or entities controlled by such persons and the Company, there can be no 
assurance that the Company would not receive more favorable terms if it were    
dealing with an unaffiliated party although the Company will seek to achieve    
market-based terms in all such transactions. See "Risk Factors -- Control by Mr.
Gabelli; Conflicts of Interest" and "Description of Capital Stock -- Certificate
of Incorporation and Bylaw Provisions -- Overview of Corporate Opportunity and  
Conflict of Interest Policies."                                                 

Among the existing activities outside of the Company (including the   
Permissible Accounts) in which Mr. Gabelli is engaged, Mr. Gabelli will continue
to serve as Chairman of the Board, Chief Executive Officer and Chief Investment 
Officer of GFI, and as President and Chief Investment Officer of MJG Associates,
Inc. ("MJG Associates"), which is wholly owned by Mr. Gabelli and which acts as 
investment manager for Gabelli Performance Partnership L.P. (a domestic hedge   
fund), Gabelli International Limited (an offshore investment company), Gabelli  
International II Limited (an offshore investment company), Gabelli Fund, LDC (an
offshore limited duration company) and an account for an unaffiliated hedge     
fund. At September 30, 1998, such entities had assets under management of       
approximately $110 million from unaffiliated third parties. Mr. Gabelli will    
also continue to serve as managing member of Rivgam LMDS, LLC (a wireless       
communications company). Mr. Gabelli will also continue to serve as the general 
partner of MJG IV Limited Partnership (a family-controlled investment           
partnership), and as President and a trustee of the Gabelli Foundation, Inc. (an
accredited charitable foundation). Mr. Gabelli also expects to continue to serve
as Chairman and Chief Executive Officer of Lynch Corporation (a public company  
engaged in multimedia, specialized transportation and manufacturing businesses),
a director of East/West Communications, Inc. (a public company holding personal 
communications services licenses) and a Governor of the American Stock Exchange.

   Historically, the Company has been required to pay Mr. Gabelli as part of
his total compensation a management fee equal to 20% of the pre-tax profits of  
each of the Company's operating units before consideration of this management   
fee. This fee approximated $9,423,000, $10,192,000, $10,580,000 and $12,245,877 
for the years ended December 31, 1995, 1996, 1997 and 1998, respectively.       

   The Company has entered into an agreement with Mr. Gabelli which provides
that Mr. Gabelli will assign and transfer to the Company, effective as of the   
Offering, any and all right, title and interest he has in the "Gabelli" name as 
a trademark, service mark or corporate or trade name for use in connection with 
investment management services, mutual funds and securities brokerage services. 
However, under the agreement, Mr. Gabelli will retain any and all right, title  
and interest he has or may have in the "Gabelli" name for use in connection with
(i) charitable foundations controlled by Mr. Gabelli or members of his family or
(ii) entities engaged in private investment activities for Mr. Gabelli or       
members of his family. In addition, the funds managed by Mr. Gabelli outside the
Company have entered into a license agreement with the Company, effective as of 
the Offering, permitting them to continue limited use of the "Gabelli" name     
under specified circumstances.                                                  

     The Company and GAMCO made contributions to the Gabelli Foundation, Inc. of
approximately $1.0 million and $1.6 million in 1997 and 1996, respectively.     

   As of December 5, 1997, the Company entered into a master lease agreement
with M(4)E, LLC, which is owned by the children of Mr. Gabelli, for a 60,000    
square foot building, of which approximately 35,000 square feet are currently   
subleased to other tenants. The master lease for the building and property,     
which is located at 401 Theodore Fremd Avenue, Rye, New York 10580, expires on  
April 30, 2013. From December 5, 1997 through December 31, 2002, the Company has
agreed to pay rent equal to $720,000 per year. From January 1, 2003 through     
December 31, 2003, the rent will increase to $756,000 per year. From January 1, 
2004 through April 30, 2013, the rent will be a minimum of $756,000, adjusted   
for inflation. The Company is responsible under the lease agreement for all     
operating expenses, costs of electricity and other utilities and taxes. In      
connection with the purchase of this building, the Company loaned M(4)E, LLC    
$3.6 million in December                                                        

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1997, which loan accrued interest at an annual rate of 7%. Such loan and        
interest thereon was repaid in March 1998.                                      

As of December 5, 1997, the Company subleased to Lynch Corporation, an
entity for which Mario J. Gabelli serves as Chairman and Chief Executive Officer
and is an approximately 23% stockholder, approximately 5,000 square feet in the 
building located at 401 Theodore Fremd Avenue, Rye, New York 10580. The sublease
has a five-year term. Lynch Corporation pays rent to the Company at the rate of 
$18 per square foot, subject to adjustment for increases in taxes and other     
operating expenses, plus a minimum payment of $2.50 per square foot for         
electricity.                                                                    

 On August 12, 1996, the Company made a secured loan of $11.8 million to
Lynch Corporation, which accrued interest at the annual rate of 10% and a 1%    
commitment fee. Such loan and interest thereon was repaid in August 1997. The   
Company also received a special fee equal to a 10% net profits interest (after a
capital charge) in an entity now known as East/West Communications, Inc., which 
interest was converted into a 10% equity interest in December 1997.             

  GAMCO has entered into agreements to provide advisory and administrative
services to MJG Associates, Inc., which is wholly owned by Mr. Gabelli, and to  
GSI with respect to the private investment funds managed by each of them.       
Pursuant to such agreements, GSI and MJG Associates, Inc. each paid GAMCO       
$50,000 (excluding reimbursement of expenses) in 1997.                          

    In March 1997, the Company made a loan of $10 million to Lynch Corporation
which accrued interest at the prime rate and a 1% commitment fee. Such loan and 
interest thereon was repaid in June 1997.                                       

 In February 1998, the Company guaranteed a $30 million loan made by The
Chase Manhattan Bank to Rivgam LMDS, LLC, an entity for which Mr. Gabelli is the
Managing Member and in which he has a 71% ownership interest. Such loan and     
interest thereon was repaid in April 1998.                                      

    Gabelli Advisers, Inc. has two classes of stock. The Company owns 51.1% of
the Class B common stock of Gabelli Advisers, Inc. (representing approximately  
40.9% of the total equity interest and 49.9% of the total voting power). The    
remainder of the Class B common stock is owned by the Company's staff, including
34.9% owned by a limited partnership controlled by Mr. Gabelli and owned by him 
and his children, 7% owned by Mr. Alpert, 1% owned by Mr. Jamieson, 1% owned by 
Mr. Bondi and the remaining 5% owned by the other staff members. Westwood       
Management, a wholly owned subsidiary of Southwest Securities Group, Inc., owns 
all of the Class A common stock (representing 20% of the total equity interest  
and 2.4% of the total voting power). In February 1998, Gabelli Advisers, Inc.   
offered all of its shareholders the opportunity to subscribe to a $3 million    
short-term debt offering in proportion to their economic ownership interest. In 
lieu of interest, Gabelli Advisers, Inc. offered a total of 60,000 warrants     
expiring in three years to acquire Class A common stock of Gabelli Advisers,    
Inc. at $5 per share. The majority of the shareholders participated in this     
offering, including GFI, the above-mentioned limited partnership and Messrs.    
Alpert, Bondi and Jamieson.                                                     

Gabelli Securities International Limited ("Gabelli Securities         
International") was formed in 1994 to provide management and investment advisory
services to the Gabelli International Gold Fund Limited ("GIGFL"), an offshore  
investment company investing primarily in securities of issuers with            
gold-related activities. One of Mr. Gabelli's children owns 55% of Gabelli      
Securities International and GSI owns the remaining 45%. GSI has entered into an
agreement with Gabelli Securities International to provide investment advisory  
services to GIGFL in return for receiving all investment management fees paid by
GIGFL. Pursuant to such agreement, GSI received investment management fees of   
$127,000, $162,000 and $14,000 in 1995, 1996 and 1997, respectively.            

TRANSACTIONS WITH OTHER RELATED PARTIES                                         

  As required by the Company's Code of Ethics, the Company's staff members
are required to maintain their brokerage accounts at Gabelli & Company unless   
they receive permission to maintain an outside account. Gabelli & Company offers
all of its staff the opportunity to engage in brokerage transactions at         
discounted rates. Accordingly, many of the Company's staff members, including   
senior management, have brokerage accounts at Gabelli & Company and have engaged
in securities transactions through it at discounted rates.                      

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   In connection with the acquisition of a limited partnership interest in a
private fund managed by the Company, Mr. Jamieson executed a demand note with   
respect to a loan of $350,000, which accrues interest at an annual rate of 7%.  

   The Company has an agreement with Mr. Karl Otto Pohl to pay him an annual
retainer fee equal to the difference between $250,000 and the amounts received  
by Mr. Pohl directly from the Mutual Funds for his service on the boards of     
directors of the Mutual Funds.                                                  

DESCRIPTION OF CAPITAL STOCK

    The authorized capital stock of the Company consists of 100,000,000 shares
of Class A Common Stock, 100,000,000 shares of Class B Common Stock, and        
10,000,000 shares of Preferred Stock. No Preferred Stock is outstanding as of   
the date of this Prospectus. Of the 100,000,000 shares of Class A Common Stock  
authorized, the 6,000,000 shares being offered in the Offering (6,900,000 shares
if the Underwriters' over-allotment option is exercised in full) will be        
outstanding, and 1,500,000 shares have been reserved for issuance pursuant to   
certain employee benefits plans. See "Management -- 1999 Stock Award and        
Incentive Plan." Of the 100,000,000 shares of Class B Common Stock authorized,  
24,000,000 will be outstanding and held by GFI upon consummation of the         
Offering. The following is a summary description of all material terms and      
provisions relating to the Company's capital stock, Restated Certificate of     
Incorporation (the "Certificate of Incorporation") and the Amended and Restated 
Bylaws (the "Bylaws"), but is qualified by reference to the Certificate of      
Incorporation and Bylaws, copies of which are filed as exhibits to the          
Registration Statement of which this Prospectus forms a part.                   

COMMON STOCK                                                                    

Voting Rights.  The holders of Class A Common Stock and Class B Common
Stock have identical voting rights except that (i) holders of Class A Common    
Stock are entitled to one vote per share while holders of Class B Common Stock  
are entitled to ten votes per share on all matters to be voted on by            
shareholders and (ii) holders of Class A Common Stock are not eligible to vote  
on matters relating exclusively to Class B Common Stock and vice versa. Holders 
of Shares of Class A Common Stock and Class B Common Stock are not entitled to  
cumulate their votes in the election of directors. Generally, all matters to be 
voted on by shareholders must be approved by a majority (or, in the case of     
election of directors, by a plurality) of the votes entitled to be cast by all  
shares of Class A Common Stock and Class B Common Stock present in person or    
represented by proxy, voting together as a single class, subject to any voting  
rights granted to holders of any Preferred Stock. Except as otherwise provided  
by law, and subject to any voting rights granted to holders of any outstanding  
Preferred Stock, amendments to the Company's Certificate of Incorporation       
generally must be approved by a majority of the combined voting power of all    
Class A Common Stock and Class B Common Stock voting together as a single class.
Amendments to the Company's Certificate of Incorporation that would alter or    
change the powers, preferences or special rights of the Class A Common Stock or 
the Class B Common Stock so as to affect them adversely also must be approved by
a majority of the votes entitled to be cast by the holders of the shares        
affected by the amendment, voting as a separate class. Notwithstanding the      
foregoing, any amendment to the Company's Certificate of Incorporation to       
increase the authorized shares of any class or classes of Stock will be deemed  
not to affect adversely the powers, preferences or special rights of the Class A
Common Stock or Class B Common Stock.                                           

   Dividends.  Holders of Class A Common Stock and Class B Common Stock will
receive an equal amount per share in any dividend declared by the Board of      
Directors, subject to any preferential rights of any outstanding Preferred      
Stock. Dividends consisting of shares of Class A Common Stock and Class B Common
Stock may be paid only as follows: (i) shares of Class A Common Stock may be    
paid only to holders of Class A Common Stock and shares of Class B Common Stock 
may be paid only to holders of Class B Common Stock and (ii) shares will be paid
proportionally with respect to each outstanding share of Class A Common Stock   
and Class B Common Stock.                                                       

  Other Rights.  On liquidation, dissolution or winding up of the Company,
after payment in full of the amounts required to be paid to holders of Preferred
Stock, if any, all holders of Common Stock, regardless of class, are entitled to
share ratably in any assets available for distribution to holders of shares of  
Common                                                                          
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Stock. No shares of Common Stock are subject to redemption or have preemptive   
rights to purchase additional shares of Common Stock. Upon consummation of the  
Offering, all the outstanding Shares of Class A Common Stock and Class B Common 
Stock will be validly issued, fully paid and nonassessable.                     

In the event of any corporate merger, consolidation, purchase or      
acquisition of property or stock, or other reorganization in which any          
consideration is to be received by the holders of Class A Common Stock or the   
holders of Class B Common Stock as a class, the holders of Class A Common Stock 
and the holders of Class B Common Stock will receive the same consideration on a
per share basis; except that, if such consideration shall consist in any part of
voting securities (or of options or warrants to purchase, or of securities      
convertible into or exchangeable for, voting securities), the holders of Class B
Common Stock may receive, on a per share basis, voting securities with up to ten
times the number of votes per share as those voting securities to be received by
the holders of Class A Common Stock (or options or warrants to purchase, or     
securities convertible into or exchangeable for, voting securities with up to   
ten times the number of votes per share as those voting securities issuable upon
exercise of the options or warrants, or into which the convertible or           
exchangeable securities may be converted or exchanged, received by the holders  
of Class A Common Stock). Accordingly, except with respect to voting rights, the
holders of Class B Common Stock will not receive greater value than the holders 
of Class A Common Stock in an extraordinary corporate transaction involving the 
Company. In the event of any corporate merger, consolidation, purchase of       
property or stock or other reorganization to be accounted for under the pooling 
of interests method of accounting, in which the Company issues common stock, the
Company anticipates that it will be required to issue shares of Class B Common  
Stock as consideration for such transaction.                                    

     Preferred Stock.  As of the date of this Prospectus, no shares of Preferred
Stock are outstanding. The Board of Directors may authorize the issuance of     
Preferred Stock in one or more series and may determine, with respect to any    
such series, the powers, preferences and rights of such series, and its         
qualifications, limitations and restrictions, including, without limitation, (i)
the designation of the series; (ii) the number of shares of the series, which   
number the Board of Directors may thereafter (except where otherwise provided in
the designations for such series) increase or decrease (but not below the number
of shares of such series then outstanding); (iii) whether dividends, if any,    
will be cumulative or noncumulative and the dividend rate of the series; (iv)   
the conditions upon which and the dates at which dividends, if any, will be     
payable, and the relation that such dividends, if any, will bear to the         
dividends payable on any other class or classes of Stock; (v) the redemption    
rights and price or prices, if any, for shares of the series; (vi) the terms and
amounts of any sinking fund provided for the purchase or redemption of shares of
the series; (vii) the amounts payable on and the preferences, if any, of shares 
of the series, in the event of any voluntary or involuntary liquidation,        
dissolution or winding up of the affairs of the Company; (viii) whether the     
shares of the series will be convertible into shares of any other class or      
series, or any other security, of the Company or any other corporation, and, if 
so, the specification of such other class or series or such other security, the 
conversion price or prices or rate or rates, any adjustments thereof, the date  
or dates as of which such shares will be convertible and all other terms and    
conditions upon which such conversion may be made; and (ix) the voting rights,  
in addition to the voting rights provided by law, if any, of the holders of     
shares of such series.                                                          

  The Company believes that the ability of the Board of Directors to issue
one or more series of Preferred Stock will provide the Company with flexibility 
in structuring possible future financings and acquisitions and in meeting other 
corporate needs that might arise. The authorized shares of Preferred Stock will 
be available for issuance without further action by the Company's shareholders  
unless such action is required by applicable law or the rules of any stock      
exchange or automated quotation system on which the Company's securities may be 
listed or traded. The NYSE currently requires shareholder approval as a         
prerequisite to listing shares in several circumstances, including where the    
present or potential issuance of shares could result in an increase in the      
number of shares of Common Stock outstanding, or in the amount of voting        
securities outstanding, of at least 20%.                                        

  Although the Board of Directors has no current intention of doing so, it
could issue a series of Preferred Stock that could, depending on the terms of   
such series, impede the completion of a merger, tender offer or other takeover  
attempt. The Board of Directors will make any determination to issue such shares
based on its judgment as to the best interests of the Company and its           
shareholders. The Board of Directors, in so acting,                             
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could issue Preferred Stock having terms that could discourage a potential      
acquirer from making, without first negotiating with the Board of Directors, an 
acquisition attempt through which such acquirer may be able to change the       
composition of the Board of Directors, including a tender offer or other        
transaction that some, or a majority, of the Company's shareholders might       
believe to be in their best interests or in which shareholders might receive a  
premium for their stock over the then current market price of such stock.       

BUSINESS COMBINATION STATUTE                                                    

    Section 912 of the New York Business Corporation Law ("NYBCL") prohibits a
company from entering into a business combination (e.g., a merger,              
consolidation, sale of 10% or more of a company's assets or issuance of         
securities with an aggregate market value of 5% or more of the aggregate market 
value of all of the company's outstanding capital stock) with a beneficial owner
of 20% or more of a company's securities (a "20% shareholder") for a period of  
five years following the date such beneficial owner became a 20% shareholder    
(the "stock acquisition date"), unless, among other things, such business       
combination or the purchase of stock resulting in the 20% shareholder's         
beneficial ownership was approved by the Company's board of directors prior to  
the stock acquisition date or the business combination is approved by the       
affirmative vote of the holders of a majority of the outstanding voting stock   
exclusive of the stock beneficially owned by the 20% shareholder. The Bylaws of 
the Company were amended to provide that the Company will not be governed by    
Section 912 of the NYBCL effective August 2000.                                 

CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS                               

     The summary set forth below describes certain provisions of the Certificate
of Incorporation and Bylaws. The summary is qualified in its entirety by        
reference to the provisions of the Certificate of Incorporation and Bylaws,     
copies of which will be filed as exhibits to the Registration Statement of which
this Prospectus forms a part.                                                   

     Certain of the provisions of the Certificate of Incorporation or the Bylaws
discussed below may have the effect, either alone or in combination with the    
provisions of the NYBCL discussed above, of making more difficult or            
discouraging a tender offer, proxy contest or other takeover attempt that is    
opposed by the Board of Directors but that a shareholder might consider to be in
such shareholder's best interest. Those provisions include (i) restrictions on  
the rights of shareholders to remove or elect directors; and (ii) prohibitions  
against shareholders calling a special meeting of shareholders. In addition, the
Certificate of Incorporation contains provisions relating to the allocation of  
certain corporate opportunities and resolution of certain potential conflicts of
interest. See "-- Overview of Corporate Opportunity and Conflict of Interest    
Policies," "-- Corporate Opportunity Policy" and "-- Conflict of Interests      
Policy."                                                                        

Number of Directors; Removal; Filling Vacancies                             

The Bylaws provide that, subject to any rights of holders of Preferred
Stock to elect directors under specified circumstances, the number of directors 
will be fixed from time to time exclusively pursuant to a resolution adopted by 
directors constituting a majority of the total number of directors that the     
Company would have if there were no vacancies on the Board of Directors (the    
"Whole Board"), with the Whole Board consisting of not more than nine nor less  
than five directors. The Certificate of Incorporation and Bylaws also provide   
that, subject to any rights of holders of Preferred Stock or any other series or
class of Stock, and unless the Board of Directors otherwise determines, any     
vacancies will be filled only by the affirmative vote of a majority of the      
remaining directors, even if less than a quorum. Accordingly, absent an         
amendment to the Bylaws, the Board of Directors could prevent any shareholder   
from enlarging the Board of Directors and filling the new directorships with    
such shareholder's own nominees.                                                

  The Certificate of Incorporation provides that, subject to the rights of
holders of Preferred Stock to elect directors under specified circumstances,    
effective as of the date on which Mr. Gabelli beneficially owns less than a     
majority of the voting power of the Voting Stock (as defined below) (the        
"Trigger Date"), a director may be removed only for cause and only upon the     
affirmative vote of holders of at least 80% of the voting power of all the then 
outstanding shares of Stock entitled to vote generally in the election of       
directors ("Voting                                                              

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Stock"), voting together as a single class. Before the Trigger Date, directors  
may be removed, without cause, with the affirmative vote of the holders of at   
least a majority of the voting power of the then outstanding Voting Stock,      
voting together as a single class.                                              

Special Meetings                                                            

    The Bylaws provide that, subject to the rights of holders of any series of
Preferred Stock to elect additional directors under specified circumstances and 
the rights of shareholders to call a special meeting to elect a sufficient      
number of directors to conduct the business of the Company under specified      
circumstances, special meetings of shareholders can be called only by the Board 
of Directors pursuant to a resolution adopted by a majority of the Whole Board  
or the Chairman of the Board, except that prior to the Trigger Date, special    
meetings can also be called at the request of the holders of a majority of the  
voting power of the then outstanding Voting Stock. Accordingly, effective as of 
the Trigger Date, shareholders will not be permitted to call a special meeting  
or to require that the Board of Directors call a special meeting of shareholders
except under the limited circumstances described in the preceding sentence.     
Moreover, the business permitted to be conducted at any special meeting of      
shareholders is limited to the business brought before the meeting pursuant to  
the notice of meeting given by the Company.                                     

    The provisions of the Bylaws permitting special meetings to be called only
by the Chairman or at the request of a majority of the Whole Board may have the 
effect, after the Trigger Date, of delaying consideration of a shareholder      
proposal until the next annual meeting. Moreover, a shareholder could not force 
shareholder consideration of a proposal over the opposition of the Chairman or a
majority of the Whole Board by calling a special meeting of shareholders prior  
to the time such parties believe such consideration to be appropriate.          

Liability of Directors; Indemnification                                     

  The Company's Certificate of Incorporation provides that, to the fullest
extent permitted by the NYBCL, no director of the Company shall be liable to the
Company or it shareholders for monetary damages for the breach of fiduciary duty
in such capacity. Under the NYBCL, such provision does not eliminate or limit   
the liability of any director (i) if a judgment or other final adjudication     
adverse to such director establishes that his acts or omissions were in bad     
faith or involved intentional misconduct or a knowing violation of law or that  
he personally gained a material profit or other advantage to which he was not   
legally entitled or that his acts violated Section 719 of the NYBCL or (ii) for 
any act or omission prior to the adoption of this provision. As a result of this
provision, the Company and its shareholders may be unable to obtain monetary    
damages from a director for breach of his duty of care. Although shareholders   
may continue to seek injunctive or other equitable relief for an alleged breach 
of fiduciary duty by a director, shareholders may not have any effective remedy 
against the challenged conduct if equitable remedies are unavailable.           

     The Bylaws provide that the Company will indemnify any person who was or is
a party to any threatened, pending, or completed action, suit or proceeding     
because he or she is or was a director, officer, employee or agent of the       
Company, or is or was serving at the request of the Company as a director or    
officer of another corporation, partnership or other enterprise. The Bylaws     
provide that indemnification will be from and against expenses, judgments, fines
and amounts paid in settlement by the indemnitee. However, this indemnification 
will only be provided if the indemnitee acted in good faith and in a manner he  
or she reasonably believed to be in, or not opposed to, the best interests of   
the Company, and, with respect to a criminal action or proceeding, if the       
indemnitee had no reasonable cause to believe that his or her conduct was       
unlawful.                                                                       

Overview of Corporate Opportunity and Conflict of Interest Policies         

 In order to address certain potential conflicts of interest between the
Company and Mr. Gabelli, members of his immediate family and affiliates, Mr.    
Gabelli and members of his immediate family who are currently officers or       
directors of the Company have agreed to limitations on their activities in the  
investment management business other than Permissible Accounts. See "Certain    
Relationships and Related Transactions -- Transactions with Mr. Gabelli and     
Affiliates." In addition, the Certificate of Incorporation contains provisions  
concerning the conduct of certain affairs of the Company as they may involve Mr.
Gabelli,                                                                        

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members of his immediate family and affiliates, and the powers, rights, duties  
and liabilities of the Company and its subsidiaries and their respective        
officers, directors and shareholders in connection therewith.                   

For purposes of these provisions, (i) the "Company" includes its      
subsidiaries and other entities in which it beneficially owns 50% or more of the
outstanding voting securities or comparable interests, and (ii) a "Gabelli"     
includes Mr. Gabelli, any member of his immediate family who is at the time an  
officer or director of the Company and any entity in which one or more Gabellis 
beneficially own a controlling interest of the outstanding voting securities or 
comparable interests. "Corporate opportunities" potentially allocable to the    
Company consist of business opportunities that (i) the Company is financially   
able to undertake; (ii) are, from their nature, in the Company's actual line or 
lines of business and are of practical advantage to the Company; and (iii) are  
ones in which the Company has an interest or reasonable expectancy. "Corporate  
opportunities" do not include transactions in which the Company or a Gabelli is 
permitted to participate pursuant to any agreement between the Company and such 
Gabelli that is in effect as of the time any equity security of the Company is  
held of record by any person other than a Gabelli or is subsequently entered    
into with the approval of the members of the Board of Directors and do not      
include passive investments.                                                    

    Before the Trigger Date, the affirmative vote of the holders of a majority
of the outstanding Voting Stock, voting together as a single class, will be     
required to alter, amend or repeal any of these conflict of interest or         
corporate opportunity provisions in a manner adverse to the interests of any    
Gabelli. After the Trigger Date, such vote will be increased to 80% to alter,   
amend, repeal or replace any of the conflict of interest and corporate          
opportunity provisions.                                                         

Corporate Opportunity Policy                                                

    Except with respect to opportunities that involve Permissible Accounts, if
a Gabelli acquires knowledge of a potential transaction on a matter that is a   
corporate opportunity for both any Gabelli and the Company, such Gabelli will   
have a duty to communicate that opportunity to the Company and may not pursue   
that opportunity or direct it to another person unless the Company declines such
opportunity or fails to pursue it.                                              

If a director or officer of the Company other than a Gabelli acquires 
knowledge of a potential transaction or matter that may be a corporate          
opportunity for both the Company and a Gabelli, the Certificate of Incorporation
requires that such director or officer act in good faith in accordance with the 
following two-part policy.                                                      

    First, a corporate opportunity offered to any person who is a director but
not an officer of the Company and who is also a director (whether or not an     
officer) of an entity which is at the time a Gabelli will belong to such Gabelli
or to the Company, as the case may be, depending on whether the opportunity is  
expressly offered to the person primarily in his or her capacity as an officer  
or director of the entity which is at the time a Gabelli or of the Company,     
respectively. Otherwise, the opportunity will belong to the Company to the same 
extent as if the opportunity came directly to the Company.                      

 Second, a corporate opportunity offered to any person who is an officer
(whether or not a director) of the Company and who is also a director or an     
officer of an entity which is at the time a Gabelli will belong to the Company, 
unless the opportunity is expressly offered to that person primarily in his or  
her capacity as a director or officer of the entity which is at the time a      
Gabelli, in which case the opportunity will belong to such Gabelli to the same  
extent as if the opportunity came directly to a Gabelli.                        

Under the Certificate of Incorporation, a director or officer of the  
Company (other than a Gabelli) who acts in accordance with the foregoing        
two-part policy (i) will be deemed fully to have satisfied his or her fiduciary 
duties to the Company and its shareholders with respect to such corporate       
opportunity; (ii) will not be liable to the Company or its shareholders for any 
breach of fiduciary duty by reason of the fact that a Gabelli pursues or        
acquires such opportunity or directs such corporate opportunity to another      
person or entity or does not communicate information regarding such opportunity 
to the Company; (iii) will be deemed to have acted in good faith and in a manner
he or she reasonably believes to be in the best interests of the Company; and   
(iv) will be deemed not to have breached his or her duty of loyalty to the      
Company or its shareholders and not to have derived an improper benefit         
therefrom.                                                                      

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Under the Certificate of Incorporation, any corporate opportunity that
belongs to a Gabelli or to the Company pursuant to the foregoing policy will not
be pursued by the other (or directed by the other to another person or entity)  
unless and until such Gabelli or the Company, as the case may be, determines not
to pursue the opportunity. If the party to whom the corporate opportunity       
belongs does not, however, within a reasonable period of time, begin to pursue, 
or thereafter continue to pursue, such opportunity diligently and in good faith,
the other party may pursue such opportunity (or direct it to another person or  
entity).                                                                        

Conflict of Interests Policy                                                

The Certificate of Incorporation provides that no contract, agreement,
arrangement or transaction, or any amendment, modification or termination       
thereof, or any waiver of any right thereunder, (each, a "Transaction") between 
the Company and (i) a Gabelli, (ii) any customer or supplier, (iii) any entity  
in which a director of the Company has a financial interest (a "Related         
Entity"), or (iv) one or more of the directors or officers of the Company or any
Related Entity; will be voidable solely because any of the persons or entities  
listed in (i) through (iv) above are parties thereto, if the standard specified 
below is satisfied. Further, no Transaction will be voidable solely because any 
such directors or officers are present at or participate in the meeting of the  
Board of Directors or committee thereof that authorizes the Transaction or      
because their votes are counted for such purpose, if the standard specified is  
satisfied. That standard will be satisfied, and such Gabelli, the Related       
Entity, and the directors and officers of the Company, or the Related Entity (as
applicable) will be deemed to have acted reasonably and in good faith (to the   
extent such standard is applicable to such person's conduct) and fully to have  
satisfied any duties of loyalty and fiduciary duties they may have to the       
Company and its shareholders with respect to such Transaction if any of the     
following four requirements are met:                                            

       (i) the material facts as to the relationship or interest and as to
 the Transaction are disclosed or known to the Board of Directors or the
committee thereof that authorizes the Transaction, and the Board of   
   Directors or such committee in good faith approves the Transaction by the
    affirmative vote of a majority of the disinterested directors on the Board
 of Directors or such committee, even if the disinterested directors are
less than a quorum;                                                   

        (ii) the material facts as to the relationship or interest and as to
the Transaction are disclosed or known to the holders of Voting Stock 
   entitled to vote thereon, and the Transaction is specifically approved by
vote of the holders of a majority of the voting power of the then     
    outstanding Voting Stock not owned by such Gabelli or such Related Entity,
voting together as a single class;                                    

        (iii) the Transaction is effected pursuant to guidelines that are in
 good faith approved by a majority of the disinterested directors on the
  Board of Directors or the applicable committee thereof or by vote of the
 holders of a majority of the then outstanding voting Stock not owned by
    such Gabelli or such Related Entity, voting together as a single class; or

    (iv) the Transaction is fair to the Company as of the time it is
     approved by the Board of Directors, a committee thereof or the shareholders
of the Company.                                                       

  The Certificate of Incorporation also provides that any such Transaction
authorized, approved, or effected, and each of such guidelines so authorized or 
approved, as described in (i), (ii) or (iii) above, will be deemed to be        
entirely fair to the Company and its shareholders, except that, if such         
authorization or approval is not obtained, or such Transaction is not so        
effected, no presumption will arise that such Transaction or guideline is not   
fair to the Company and its shareholders. In addition, the Certificate of       
Incorporation provides that a Gabelli will not be liable to the Company or its  
shareholders for breach of any fiduciary duty that a Gabelli may have as a      
shareholder of the Company by reason of the fact that a Gabelli takes any action
in connection with any transaction between such Gabelli and the Company. For    
purposes of these provisions, interests in an entity that are not equity or     
ownership interests or that constitute less than 10% of the equity or ownership 
interests of such entity will not be considered to confer a financial interest  
on any person who beneficially owns such interests.                             

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 The New York courts have not ruled on the validity or enforceability of
provisions similar to the corporate opportunity and conflicts of interest       
provisions that are included in the Company's Certificate of Incorporation and  
could rule that certain liabilities which they purport to eliminate remain in   
effect.                                                                         

LISTING                                                                         

     The Class A Common Stock has been approved for listing, subject to official
notice of issuance, on the NYSE under the symbol "GBL."                         

TRANSFER AGENT AND REGISTRAR                                                    

    The transfer agent and registrar for the Common Stock is State Street Bank
and Trust Company.                                                              

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SHARES ELIGIBLE FOR FUTURE SALE 

 Immediately after consummation of the Offering, the Company will have 6
million shares of Class A Common Stock issued and outstanding (6.9 million      
shares of Class A Common Stock if the Underwriters' over-allotment option is    
exercised in full) and 24 million shares of Class B Common Stock issued and     
outstanding. All of the shares of Class A Common Stock to be sold in the        
Offering will be freely tradable without restrictions or further registration   
under the Securities Act, except that shares purchased by an "affiliate" of the 
Company (as that term is defined in Rule 144 (an "Affiliate")) will be subject  
to the resale limitations of Rule 144. The 24 million shares of Class B Common  
Stock owned by GFI and two of its subsidiaries are "restricted securities" as   
defined in Rule 144 under the Securities Act, and may not be sold in the absence
of registration under the Securities Act other than pursuant to Rule 144 under  
the Securities Act or another exemption from registration under the Securities  
Act.                                                                            

In general, under Rule 144, as currently in effect, (i) a person (or  
persons whose shares are required to be aggregated) who has beneficially owned  
shares of Common Stock as to which at least one year has elapsed since such     
shares were sold by the Company or by an Affiliate of the Company in a          
transaction or chain of transactions not involving a public offering            
("restricted securities") or (ii) an Affiliate of the Company who holds shares  
of Common Stock that are not restricted securities may sell, within any         
three-month period, a number of such shares that does not exceed the greater of 
1% of the Company's class of Common Stock then outstanding or the average weekly
trading volume in the class of Common Stock during the four calendar weeks      
preceding the date on which notice of such sale required under Rule 144 was     
filed. Sales under Rule 144 are also subject to certain provisions relating to  
the manner and notice of sale and availability of current public information    
about the Company. Affiliates of the Company must comply with the requirements  
of Rule 144, including the one-year holding period requirement, to sell shares  
of Common Stock that are restricted securities. Furthermore, if a period of at  
least two years has elapsed from the date restricted securities were acquired   
from the Company or an Affiliate of the Company, a holder of such restricted    
securities who is not an Affiliate of the Company at the time of the sale and   
has not been an Affiliate of the Company at any time during the three months    
prior to such sale would be entitled to sell such shares without regard to the  
volume limitation and other conditions described above.                         

 For a period of 180 days after the date of this Prospectus, without the
prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and 
Salomon Smith Barney Inc., on behalf of the Underwriters, (i) the Company, GFI  
and two of its subsidiaries have agreed with the Underwriters that they will not
offer, sell or otherwise dispose of any shares of Common Stock or any security  
convertible into or exchangeable or exercisable for shares of Common Stock,     
except for the shares of Class A Common Stock to be sold in the Offering and    
options granted in the ordinary course of business under the Plan or for shares 
of Class B Common Stock transferred among GFI and its two subsidiaries and (ii) 
shareholders of GFI who are also officers and directors of the Company have     
agreed with the Underwriters that they will not offer, sell or otherwise dispose
of any shares of capital stock of GFI or any security convertible into or       
exchangeable or exercisable for shares of capital stock of GFI, except in       
transactions between existing shareholders of GFI and through gifts, in each    
case, to persons who agree to be bound by similar restrictions. See             
"Underwriting." In addition, GFI and two of its subsidiaries have agreed with   
the Company that they will not offer, sell or otherwise dispose of any shares of
Class B Common Stock for a period of three years after the date of this         
Prospectus without the prior written consent of the Company (except for         
transfers among GFI and its two subsidiaries).                                  

The shares of Class A Common Stock authorized for issuance pursuant to
awards that may be granted under the Company's 1999 Stock Award and Incentive   
Plan may be either authorized but unissued shares or treasury shares obtained by
the Company through market or private purchases. See "Management -- 1999 Stock  
Award and Incentive Plan." The Company intends to register under the Securities 
Act the shares of Class A Common Stock issuable upon the exercise of options    
granted pursuant to the 1999 Stock Award and Incentive Plan.                    

   Prior to the Offering, there has been no public market for Class A Common
Stock. Although the Company can make no prediction as to the effect, if any,    
that sales of shares of Class B Common Stock by GFI or two of its subsidiaries  
would have on the market price of Class A Common Stock prevailing from time to  
time, sales of substantial amounts of Class A Common Stock or Class B Common    
Stock, or the perception that such sales could occur, could adversely affect    
prevailing market prices for the Class A Common Stock. See "Risk                
Factors -- Shares Available for Future Sale or Distribution."                   

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UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), 
Salomon Smith Barney Inc. ("Salomon Smith Barney"), and Gabelli & Company are   
acting as representatives (the "Representatives") of each of the Underwriters   
named below (the "Underwriters"). Subject to the terms and conditions set forth 
in a purchase agreement (the "Purchase Agreement") among the Company and the    
Underwriters, the Company has agreed to sell to the Underwriters, and each of   
the Underwriters severally and not jointly has agreed to purchase from the      
Company, the aggregate number of shares of Class A Common Stock set forth       
opposite its name below.                                                        

                                                                [Download Table]

                                                                NUMBER 
                                                                  OF   
UNDERWRITERS                                                    SHARES 
------------------------------------------------------------    ------ 
                                                                       
Merrill Lynch, Pierce, Fenner & Smith                                  
             Incorporated...................................  2,024,000
Salomon Smith Barney Inc. ..................................  2,024,000
Gabelli & Company, Inc. ....................................    450,000
Allen & Company Incorporated................................     65,000
Bear, Stearns & Co. Inc. ...................................     65,000
BT Alex. Brown Incorporated.................................     65,000
CIBC Oppenheimer Corp. .....................................     65,000
Donaldson, Lufkin & Jenrette Securities Corporation.........     65,000
A.G. Edwards & Sons, Inc. ..................................     65,000
Lehman Brothers Inc. .......................................     65,000
Morgan Stanley & Co. Incorporated...........................     65,000
PaineWebber Incorporated....................................     65,000
Prudential Securities Incorporated..........................     65,000
Schroder & Co. Inc..........................................     65,000
Warburg Dillon Read LLC.....................................     65,000
Advest, Inc. ...............................................     38,000
Barrington Research Associates, Inc. .......................     38,000
George K. Baum & Company....................................     38,000
William Blair & Company, L.L.C. ............................     38,000
Burnham Securities Inc. ....................................     38,000
EVEREN Securities, Inc. ....................................     38,000
Ferris, Baker Watts, Incorporated...........................     38,000
Gruntal & Co., L.L.C. ......................................     38,000
Herzog, Heine, Geduld Inc. .................................     38,000
Edward D. Jones & Co., L.P. ................................     38,000
Keeley Investment Corporation...............................     38,000
Legg Mason Wood Walker, Incorporated........................     38,000
Needham & Company, Inc. ....................................     38,000
Putnam, Lovell, de Guardiola & Thornton Inc. ...............     38,000
The Robinson-Humphrey Company, LLC..........................     38,000
Sanders Morris Mundy........................................     38,000
Sandler O'Neill & Partners, L.P. ...........................     38,000
Southwest Securities, Inc. .................................     38,000
C.E. Unterberg, Towbin......................................     38,000
                                                               --------
             Total..........................................  6,000,000
                                                               ========

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 The Underwriters propose to offer the shares of Class A Common Stock in
part directly to the public at the initial public offering price set forth on   
the cover page of this Prospectus and in part to certain securities dealers at  
such price less a concession of $.73 per share. The Underwriters may allow, and 
such dealers may reallow, a concession not in excess of $.10 per share to       
certain brokers and dealers. After the initial offering of the shares to the    
public, the public offering price and such concessions may from time to time be 
varied by the Representatives. Under the terms and conditions of the Purchase   
Agreement, the Underwriters are committed to take and pay for all of the shares 
offered hereby, if any are taken.                                               

     The Company has granted the Underwriters an option, exercisable for 30 days
after the date of this Prospectus, to purchase up to 900,000 additional shares  
of Class A Common Stock at the price to the public set forth on the cover page  
of this Prospectus minus the underwriting discounts and commissions. The        
Underwriters may exercise such option solely for the purpose of covering        
over-allotments, if any, in connection with the offering of the shares offered  
hereby. To the extent such option is exercised, each Underwriter will be        
obligated, subject to certain conditions, to purchase approximately the same    
percentage of such additional shares as the number of shares set forth opposite 
each Underwriter's name in the preceding table bears to the total number of     
shares listed in such table.                                                    

 For a period of 180 days after the date of this Prospectus, without the
prior written consent of Merrill Lynch and Salomon Smith Barney, (i) the        
Company, GFI and two of GFI's subsidiaries have agreed that they will not offer,
sell, contract to sell or otherwise dispose of any Common Stock or any          
securities of the Company which are convertible into or exchangeable or         
exercisable for Common Stock or any such other securities, except for the shares
of Class A Common Stock to be sold in the Offering and options granted in the   
ordinary course of business under the Plan or for shares of Class B Common Stock
transferred among GFI and its two subsidiaries and (ii) shareholders of GFI who 
are also officers and directors of the Company have agreed with the Underwriters
that they will not offer, sell or otherwise dispose of any shares of capital    
stock of GFI or any security convertible into or exchangeable or exercisable for
shares of capital stock of GFI, except in transactions between existing         
shareholders of GFI and through gifts, in each case, to persons who agree to be 
bound by similar restrictions.                                                  

     In connection with the Offering, the Underwriters may purchase and sell the
Class A Common Stock in the open market. These transactions may include         
over-allotment and stabilizing transactions and purchases to cover syndicate    
short positions created in connection with the Offering. Stabilizing            
transactions consist of certain bids or purchases for the purpose of preventing 
or retarding a decline in the market price of the Class A Common Stock; and     
syndicate short positions involve the sale by the Underwriters of a greater     
number of shares of Class A Common Stock than they are required to purchase from
the Company in the Offering. The Underwriters also may impose a penalty bid,    
whereby selling concessions allowed to syndicate members or other broker-dealers
in respect of the Class A Common Stock sold in the Offering for their account   
may be reclaimed by the syndicate if such Class A Common Stock is repurchased by
the syndicate in stabilizing or covering transactions. These activities may     
stabilize, maintain or otherwise affect the market price of the Class A Common  
Stock, which may be higher than the price that might otherwise prevail in the   
open market, and these activities, if commenced, may be discontinued at any     
time. These transactions may be effected on the NYSE, in the over-the-counter   
market or otherwise.                                                            

Gabelli & Company, one of the Underwriters, is an indirect 76.6%-owned
subsidiary of the Company. The Offering is therefore being conducted in         
accordance with the applicable provisions of Rule 2720 to the Conduct Rules of  
the National Association of Securities Dealers, Inc. Rule 2720 requires that the
initial public offering price of the Class A Common Stock not be higher than    
that recommended by a "qualified independent underwriter" meeting certain       
standards. Accordingly, Merrill Lynch is assuming the responsibilities of acting
as the qualified independent underwriter in pricing the Offering and conducting 
due diligence. In connection with the Offering, Merrill Lynch in its role as    
qualified independent underwriter has performed due diligence investigations and
reviewed and participated in the preparation of this Prospectus and the         
Registration Statement of which this Prospectus forms a part. The initial public
offering price of the Class A Common Stock set forth on the cover page of this  
Prospectus is no higher than the price recommended by Merrill Lynch.            

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     Prior to the Offering, there has not been any public market for the Class A
Common Stock of the Company. Consequently, the initial public offering price for
the shares of Class A Common Stock included in the Offering has been determined 
by negotiations between the Company and the Representatives. Among the factors  
considered in determining such price were the history of and prospects for the  
Company's business and the industry in which it competes, an assessment of the  
Company's management and the present state of the Company's development, the    
past and present revenues and earnings of the Company, the prospects for growth 
of the Company's revenues and earnings, the current state of the economy in the 
United States and the current level of economic activity in the industry in     
which the Company competes and in related or comparable industries, and         
currently prevailing conditions in the securities markets, including current    
market valuations of publicly traded companies which are comparable to the      
Company.                                                                        

     The Underwriters do not intend to confirm sales of shares of Class A Common
Stock to accounts over which they exercise discretionary authority.             

     The Class A Common Stock has been approved for listing, subject to official
notice of issuance, on the NYSE under the symbol "GBL." In order to meet one of 
the requirements for listing the Common Stock on the NYSE, the Underwriters have
undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial  
holders.                                                                        

The Company has agreed to indemnify the several Underwriters against  
certain liabilities, including liabilities under the Securities Act.            

     Certain of the Underwriters and their affiliates have in the past provided,
and may in the future from time to time provide, investment banking services to 
the Company and its affiliates for which they may receive customary fees. In    
addition, each of the Representatives of the Underwriters distributes the       
Company's Mutual Funds (and provides shareholder services in connection         
therewith) in the ordinary course of business for which it receives customary   
compensation.                                                                   

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LEGAL MATTERS 

     Certain legal matters with respect to the validity of the shares of Class A
Common Stock offered hereby will be passed upon for the Company by Skadden,     
Arps, Slate, Meagher & Flom LLP, New York, New York. Certain legal matters      
relating to the Offering will be passed upon for the Underwriters by Simpson    
Thacher & Bartlett, New York, New York.                                         

EXPERTS 

     The consolidated financial statements of GFI at December 31, 1996 and 1997,
and for each of the three years in the period ended December 31, 1997, appearing
in this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing       
elsewhere herein, and are included in reliance upon such report given upon the  
authority of such firm as experts in accounting and auditing.                   

AVAILABLE INFORMATION 

    The Company has filed with the Commission a Registration Statement on Form
S-1 (as amended from time to time and together with all exhibits and schedules  
thereto, the "Registration Statement") under the Securities Act with respect to 
the Class A Common Stock to be sold in the Offering. This Prospectus constitutes
a part of the Registration Statement and does not contain all the information   
set forth in the Registration Statement, certain portions of which have been    
omitted as permitted by the rules and regulations of the Commission. Statements 
contained in this Prospectus as to the content of any contract or other document
are summaries of the material terms of such contract or other document. With    
respect to such statements in the Prospectus, reference is made to the copy of  
such contract or other document filed as an exhibit to the Registration         
Statement for a more complete description, each such statement being qualified  
in all respects by such reference. For further information regarding the Company
and the Class A Common Stock, reference is hereby made to the Registration      
Statement, a copy of which may be obtained from the Commission at its principal 
office in Washington, D.C. upon payment of the fees prescribed by the           
Commission.                                                                     

 The Registration Statement, and the reports and other information to be
filed by the Company with the Commission following the Offering in accordance   
with the Exchange Act, can be inspected and copied at the principal office of   
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission: 7 World    
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West 
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
be obtained from the Commission's website, http://www.sec.gov, and from the     
Public Reference Section of the Commission at its principal office at 450 Fifth 
Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed by the
Commission.                                                                     

The Company intends to furnish to its shareholders annual reports     
containing audited consolidated financial statements and quarterly reports for  
the first three quarters of each fiscal year containing unaudited interim       
financial information.                                                          

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
CONSOLIDATED FINANCIAL STATEMENTS OF GABELLI FUNDS, INC. AND      
  SUBSIDIARIES                                                    

Report of Independent Auditors..............................   F-2
Consolidated Statements of Income for the years ended             
  December 31, 1995, 1996 and 1997..........................   F-3
Consolidated Statements of Financial Condition as of              
  December 31, 1996 and 1997................................   F-4
Consolidated Statements of Stockholders' Equity for the           
  years ended December 31, 1995, 1996 and 1997..............   F-5
Consolidated Statements of Cash Flows for the years ended         
  December 31, 1995, 1996 and 1997..........................   F-6
Notes to Consolidated Financial Statements..................   F-7

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS OF            
  GABELLI FUNDS, INC. AND SUBSIDIARIES                            
Unaudited Consolidated Statements of Income for the nine          
  month periods ended September 30, 1997 and 1998...........  F-16
Unaudited Consolidated Statement of Financial Condition as        
  of September 30, 1998.....................................  F-17
Unaudited Consolidated Statement of Stockholders' Equity for      
  the nine month period ended September 30, 1998............  F-18
Unaudited Consolidated Statements of Cash Flows for the nine      
  month periods ended September 30, 1997 and 1998...........  F-19
Notes to Unaudited Consolidated Financial Statements........  F-20

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME AND         
  FINANCIAL CONDITION                                             
Unaudited Pro Forma Consolidated Statements of Income.......  F-22
Unaudited Pro Forma Consolidated Statements of Financial          
  Condition.................................................  F-24
Notes to Unaudited Pro Forma Consolidated Financial               
  Statements................................................  F-25

------------------------

     Gabelli Asset Management Inc. is a holding company that was newly formed in
connection with the Offering and, accordingly, has not previously engaged in any
business operations, acquired any assets or incurred any liabilities other than 
in connection with the Offering. Accordingly, the historical financial          
statements of Gabelli Asset Management Inc. are not included in this Prospectus 
because management has determined that they are not material to an investment   
decision.                                                                       

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders                                         
Gabelli Funds, Inc.                                                             

We have audited the accompanying consolidated statements of financial 
condition of Gabelli Funds, Inc. and subsidiaries as of December 31, 1997 and   
1996 and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997.   
These financial statements are the responsibility of the Company's management.  
Our responsibility is to express an opinion on these financial statements based 
on our audits.                                                                  

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Gabelli Funds, 
Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated       
results of their operations and their cash flows for each of the three years in 
the period ended December 31, 1997, in conformity with generally accepted       
accounting principles.                                                          

                           ERNST & YOUNG LLP

New York, New York                                                              
March 11, 1998                                                                  

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GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME 

                                                        [Enlarge/Download Table]

                                                                 YEAR ENDED DECEMBER 31      
                                                            -------------------------------- 
                                                              1995        1996        1997   
                                                            --------    --------    -------- 
                                                                     (IN THOUSANDS)          
                                                                                             
REVENUES                                                                                     
Investment advisory and incentive fees..................... $ 77,302    $ 84,244    $ 89,684 
Commission revenue.........................................    5,706       6,667       7,496 
Distribution fees and other income.........................    6,302       7,257       8,096 
                                                            --------    --------    -------- 
     Total revenues........................................   89,310      98,168     105,276 
                                                            --------    --------    -------- 
EXPENSES                                                                                     
Compensation costs.........................................   39,384      41,814      45,260 
Management fee.............................................    9,423      10,192      10,580 
Other operating expenses...................................   18,709      19,274      18,690 
                                                            --------    --------    -------- 
     Total expenses........................................   67,516      71,280      74,530 
                                                            --------    --------    -------- 
Operating income...........................................   21,794      26,888      30,746 
                                                            --------    --------    -------- 
OTHER INCOME (EXPENSE)                                                                       
Net gain from investments..................................   10,105       8,783       7,888 
Interest and dividend income...............................    5,853       5,406       4,634 
Interest expense...........................................     (679)       (879)     (1,876)
Other......................................................      147         331        (109)
                                                            --------    --------    -------- 
     Total other income, net...............................   15,426      13,641      10,537 
                                                            --------    --------    -------- 
Income before income taxes and minority interest...........   37,220      40,529      41,283 
Income taxes...............................................    7,769       7,631       3,077 
Minority interest..........................................    2,555       2,727       1,529 
                                                            --------    --------    -------- 
Net income................................................. $ 26,896    $ 30,171    $ 36,677 
                                                            ========    ========    ======== 

See accompanying notes. 
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GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                                [Download Table]

                                                                   DECEMBER 31      
                                                              ----------------------
                                                                1996         1997   
                                                              ---------    ---------
                                                              (IN THOUSANDS, EXCEPT 
                                                                   SHARE DATA)      
                                                                                    
ASSETS                                                                              
Cash and cash equivalents...................................  $ 32,949     $ 12,610 
PCS licenses and deposits...................................    21,661       84,862 
Investments in securities...................................    59,812       56,607 
Investments in partnerships and affiliates..................    35,133       46,972 
Investment advisory fees receivable.........................     7,339        8,484 
Receivables from affiliates.................................    12,353        6,534 
Notes and other receivables.................................     5,230        4,578 
Capital lease...............................................        --        3,679 
Intangible assets, net of accumulated amortization of                               
  $148......................................................        --        1,932 
Other assets................................................     8,047        6,478 
                                                              --------     -------- 
     Total assets...........................................  $182,524     $232,736 
                                                              ========     ======== 
LIABILITIES AND STOCKHOLDERS' EQUITY                                                
Bank loan payable...........................................  $     --     $ 30,000 
Notes payable...............................................     7,011        7,108 
Income taxes payable (including deferred income taxes of                            
  $2,768 in 1996 and $2,818 in 1997)........................     4,372        3,752 
Capital lease obligation....................................        --        3,650 
Compensation payable........................................     3,589        3,456 
Accrued expenses and other liabilities......................     7,978        9,848 
                                                              --------     -------- 
     Total liabilities......................................    22,950       57,814 
                                                              --------     -------- 
Minority interest...........................................    21,041       11,303 
                                                              --------     -------- 
Stockholders' equity:                                                               
  Common Stock, $.01 par value; authorized 1,000,000 shares;                        
     issued and outstanding 174,803 and 185,937 shares,                             
     respectively...........................................         2            2 
  Additional paid-in capital................................     2,967       12,372 
  Retained earnings.........................................   136,690      152,775 
  Notes receivable..........................................    (1,126)      (1,530)
                                                              --------     -------- 
     Total stockholders' equity.............................   138,533      163,619 
                                                              --------     -------- 
Total liabilities and stockholders' equity..................  $182,524     $232,736 
                                                              ========     ======== 

See accompanying notes. 
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GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                   ADDITIONAL                                  
                                           COMMON   PAID-IN    RETAINED     NOTES              
                                           STOCK    CAPITAL    EARNINGS   RECEIVABLE   TOTAL   
                                           ------  ----------  --------   ----------  -------- 
                                                                                               
Balance at December 31, 1994..............   $2     $ 1,367    $106,535    $    --    $107,904 
  Repurchase and retirement of 536                                                             
     shares...............................   --         (39)       (291)        --        (330)
  Issuance of note receivable.............   --          --          --       (235)       (235)
  Issuance of 750 shares..................   --         397          --         --         397 
  Distributions to shareholders...........   --          --     (18,670)        --     (18,670)
  Accretion of stock option...............   --         110          --         --         110 
  Net income..............................   --          --      26,896         --      26,896 
                                             --     -------    --------    -------    -------- 
Balance at December 31, 1995..............    2       1,835     114,470       (235)    116,072 
  Repurchase and retirement of 1,600                                                           
     shares...............................   --          (9)     (1,273)        --      (1,282)
  Issuance of note receivable.............   --          --          --       (891)       (891)
  Issuance of 1,704 shares................   --       1,141          --         --       1,141 
  Distributions to shareholders...........   --          --      (6,678)        --      (6,678)
  Net income..............................   --          --      30,171         --      30,171 
                                             --     -------    --------    -------    -------- 
Balance at December 31, 1996..............    2       2,967     136,690     (1,126)    138,533 
  Repurchase and retirement of 50                                                              
     shares...............................   --         (38)         --         --         (38)
  Net issuances of notes receivable.......   --          --          --       (404)       (404)
  Issuance of 11,184 shares...............   --       9,443          --         --       9,443 
  Distributions to shareholders...........   --          --     (20,592)        --     (20,592)
  Net income..............................   --          --      36,677         --      36,677 
                                             --     -------    --------    -------    -------- 
Balance at December 31, 1997..............   $2     $12,372    $152,775    $(1,530)   $163,619 
                                             ==     =======    ========    =======    ======== 

See accompanying notes. 
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GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                  YEAR ENDED DECEMBER 31      
                                                             -------------------------------- 
                                                               1995        1996        1997   
                                                             --------    --------    -------- 
                                                                      (IN THOUSANDS)          
                                                                                              
OPERATING ACTIVITIES                                                                          
Net income.................................................  $ 26,896    $ 30,171    $ 36,677 
Adjustments to reconcile net income to net cash provided by                                   
  (used in) operating activities:                                                             
  Equity in earnings of partnerships and affiliates........    (5,744)     (5,997)     (7,886)
  Depreciation and amortization............................       339         424         451 
  Deferred income taxes....................................       884        (114)         50 
  Minority interest in net income of consolidated                                             
     subsidiaries..........................................     2,555       2,727       1,529 
  Accretion of stock option................................       110          --          -- 
  Changes in operating assets and liabilities:                                                
     Investments in securities.............................   (11,862)      4,435       3,205 
     Investment advisory fees receivable...................      (533)        526      (1,145)
     Receivables from affiliates...........................        --     (12,353)      5,819 
     Notes and other receivables...........................        --      (5,230)      1,027 
     Due from broker/dealers...............................        --      (1,764)     (1,391)
     Other assets..........................................      (430)     (2,103)      2,837 
     Notes payable.........................................        --          --        (879)
     Income taxes payable..................................    (1,312)      1,470        (670)
     Compensation payable..................................     1,090      (1,933)       (133)
     Accrued expenses and other liabilities................     1,721         366        (920)
                                                             --------    --------    -------- 
Total adjustments..........................................   (13,182)    (19,546)      1,894 
                                                             --------    --------    -------- 
Net cash provided by operating activities..................    13,714      10,625      38,571 
                                                             --------    --------    -------- 
INVESTING ACTIVITIES                                                                          
Purchases of PCS licenses and deposits.....................        --     (21,661)    (63,201)
Distributions from partnerships and affiliates.............     2,128       5,101       2,607 
Investments in partnerships and affiliates.................    (6,241)     (2,832)     (6,560)
Cost of acquisitions.......................................        --          --      (2,175)
                                                             --------    --------    -------- 
Net cash (used in) investing activities....................    (4,113)    (19,392)    (69,329)
                                                             --------    --------    -------- 
FINANCING ACTIVITIES                                                                          
Proceeds from bank loan....................................        --          --      30,000 
Distributions to shareholders..............................   (18,670)     (5,988)    (17,794)
Repayments of subsidiaries' notes receivable...............        95         127           5 
Issuances of subsidiaries' common stock....................       864          --         108 
Purchase of minority stockholders' interest................      (409)         --      (1,864)
Proceeds from issuances of common stock....................       162         738          -- 
Payment for common stock repurchased and retired...........      (331)       (581)        (38)
Repayments of notes receivable.............................        --          --           2 
                                                             --------    --------    -------- 
Net cash provided by (used in) financing activities........   (18,289)     (5,704)     10,419 
                                                             --------    --------    -------- 
Net (decrease) in cash and cash equivalents................    (8,688)    (14,471)    (20,339)
Cash and cash equivalents at beginning of year.............    56,108      47,420      32,949 
                                                             --------    --------    -------- 
Cash and cash equivalents at end of year...................  $ 47,420    $ 32,949    $ 12,610 
                                                             ========    ========    ======== 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                              
Cash paid for interest.....................................  $    679    $    879    $  1,784 
                                                             ========    ========    ======== 
Cash paid for income taxes.................................  $  8,896    $  5,952    $  3,337 
                                                             ========    ========    ======== 
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY                                         
Issuance of note payable for repurchase of subsidiary's                                       
  common stock.............................................  $     --    $     --    $    976 
                                                             ========    ========    ======== 
Issuance of note payable for repurchase of common stock....  $     --    $  1,232    $     -- 
                                                             ========    ========    ======== 
Receipt of note for common stock sold......................  $    235    $    891    $    404 
                                                             ========    ========    ======== 
Receipt of notes for sale of minority interest.............  $     --    $     --    $    375 
                                                             ========    ========    ======== 

See accompanying notes. 
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GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 

A.  SIGNIFICANT ACCOUNTING POLICIES                                             

Basis of Presentation                                                       

   The consolidated financial statements include the assets, liabilities and
earnings of Gabelli Funds, Inc. ("GFI"), its wholly-owned subsidiary GAMCO      
Investors, Inc. ("GAMCO"), and GFI's majority-owned subsidiaries consisting of  
Gabelli Securities, Inc. ("GSI"), Gabelli Fixed Income L.L.C. ("Fixed Income")  
and Gabelli Advisers LLC ("Advisers") (collectively, the "Company").            

   Prior to a reorganization on January 1, 1997, GFI owned approximately 79%
of GAMCO. On that date, all outstanding shares of GAMCO not previously held by  
GFI were either redeemed at book value by GAMCO or exchanged for shares of GFI  
at a predetermined ratio. At December 31, 1995, 1996 and 1997, GFI owned        
approximately 76% of GSI and 41% of Advisers, which, combined with the voting   
interests of affiliated parties, represents voting control. At December 31,     
1997, GFI owned approximately 80% of Fixed Income, which commenced operations on
April 15, 1997. All significant intercompany transactions and balances have been
eliminated.                                                                     

Use of Estimates                                                            

     The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosure of contingent assets and liabilities at the date of the consolidated 
financial statements and the reported amounts of revenues and expenses during   
the reporting period. Actual results could differ from those estimates.         

Nature of Operations                                                        

  GFI, GAMCO, Fixed Income and Advisers are registered investment advisers
under the Investment Advisers Act of 1940. Gabelli & Company, Inc. ("Gabelli &  
Company"), a wholly-owned subsidiary of GSI, is a registered broker-dealer.     
Gabelli & Company acts as an introducing broker and all transactions for its    
customers are cleared through New York Stock Exchange member firms on a fully   
disclosed basis. Accordingly, open customer transactions are not reflected in   
the accompanying statements of financial condition. Gabelli & Company is exposed
to credit losses on these open positions in the event of nonperformance by its  
customers. This exposure is reduced by the clearing brokers' policy of obtaining
and maintaining adequate collateral until the open transaction is completed.    

Cash Equivalents                                                            

Cash equivalents consist of investments in money market mutual funds. 

Investments in Securities                                                   

     Investments in securities are accounted for as "trading securities" and are
stated at quoted market values. Securities which are not readily marketable are 
stated at their estimated fair values as determined by the Company's management.
The resulting unrealized gains and losses are included in net gain from         
investments. Security transactions and any related gains and losses are recorded
on a trade date basis. Realized gains and losses from securities transactions   
are recorded on the identified cost basis.                                      

     The Company periodically enters into short sales. Securities sold short are
stated at quoted market values and represent obligations of the Company to      
purchase the securities at prevailing market prices. The ultimate gains or      
losses recognized are dependent upon the prices at which these securities are   
purchased to settle the obligations under the sales commitments.                

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

Investments in Partnerships and Affiliates                                  

    Investments in partnerships, whose underlying assets consist of marketable
securities, and investments in affiliates are accounted for using the equity    
method, under which the Company's share of net earnings or losses of these      
partnerships and affiliated entities is reflected in income as earned and       
distributions received are reductions of the investments. Investments in        
partnerships for which market values are not readily available are valued at    
fair value as determined by the Company's management.                           

Investment Advisory Fees                                                    

    Investment advisory fees are recognized as revenue as the related services
are performed. Investment advisory fees are based on predetermined percentages  
of the market values of the portfolios under management.                        

Depreciation and Amortization                                               

Fixed assets are depreciated using the straight-line method over their
estimated useful lives. Leasehold improvements are amortized using the          
straight-line method over their estimated useful lives or lease terms, whichever
is shorter.                                                                     

Intangible Assets                                                           

   The cost in excess of net assets acquired is amortized on a straight-line
basis over ten years. The carrying value of cost in excess of net assets        
acquired is reviewed for impairment whenever events or changes in circumstances 
indicate that it may not be recoverable based upon expectations of operating    
income and non-discounted cash flows over its remaining life.                   

Minority Interest                                                           

    Minority interest represents the minority stockholders' ownership of GAMCO
for 1995 and 1996, Fixed Income for 1997 and GSI and Advisers for 1995, 1996 and
1997. With the exception of GSI, these minority stockholders are principally    
employees, officers and directors of the Company.                               

Earnings Per Share                                                          

The Company has not presented historical earnings per share due to the
significant changes in its operations which are not reflected in the historical 
financial statements. (See Note P.) The Company prospectively will apply        
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per     
Share". Basic earnings per common share is calculated by dividing net income    
applicable to common stockholders by the weighted average number of shares of   
common stock outstanding. Diluted earnings per share is computed using the      
treasury stock method. Diluted earnings per common share assumes full dilution  
and is computed by dividing net income by the total of the weighted average     
number of shares of common stock outstanding and common stock equivalents.      

Business Segments                                                           

     The Company has not presented business segment data in accordance with SFAS
No. 131 because it operates predominantly in one business segment, the          
investment advisory and asset management business.                              

Distribution Costs                                                          

The Company incurs certain promotion and distribution costs, which are
expensed as incurred, related to the sale of shares of mutual funds advised by  
the Company (the "Funds").                                                      

Comprehensive Income                                                        

 The Company has adopted SFAS No. 130, "Reporting Comprehensive Income",
which requires companies to report all changes in equity during a period, except
those resulting from investments by owners and distributions to owners. The     
Company has not presented a consolidated statement of comprehensive income      
because it does not have any items of "other comprehensive income".             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

B.  INVESTMENTS IN SECURITIES                                                   

Investments in securities at December 31, 1996 and 1997 consist of the
following:                                                                      

                                                        [Enlarge/Download Table]

                                                    1996                  1997       
                                             ------------------    ------------------
                                                        MARKET                MARKET 
                                              COST       VALUE      COST       VALUE 
                                             -------    -------    -------    -------
                                                          (IN THOUSANDS)             
                                                                                     
U.S. Government obligations................. $16,932    $17,385    $ 6,229    $ 6,352
Common stocks...............................  13,530     20,543     13,551     19,895
Mutual funds................................  13,180     15,057     21,265     25,707
Corporate bonds.............................     198        312         --         --
Preferred stocks............................   1,854      1,960        300      1,038
Other investments...........................   1,492      4,555        862      3,615
                                             -------    -------    -------    -------
                                             $47,186    $59,812    $42,207    $56,607
                                             =======    =======    =======    =======

C.  INVESTMENTS IN PARTNERSHIPS AND AFFILIATES                                  

   The Company is a co-General Partner of various limited partnerships whose
underlying assets consist primarily of marketable securities. As co-General     
Partner, the Company is contingently liable for all of the partnerships'        
liabilities. Summary financial information, including the Company's carrying    
value and income from these partnerships at December 31, 1996 and 1997 and for  
the years then ended, which are accounted for using the equity method, is as    
follows (in thousands):                                                         

                                                                [Download Table]

                                                           1996        1997  
                                                         --------    --------
                                                                             
Total assets...........................................  $125,059    $131,281
Total liabilities......................................    16,630       1,458
Equity.................................................   108,429     129,823
Net earnings...........................................     8,364      12,073
Company's carrying value...............................    11,613      14,479
Company's income.......................................     1,944       3,065

     Income from the above partnerships for the year ended December 31, 1995 was
approximately $2,505,000.                                                       

The Company's income from these partnerships consists of its pro rata 
capital allocation and its share of a 20% incentive allocation from the limited 
partners. The general partners also receive an annual administrative fee based  
on a percentage of each partnership's net assets, excluding the capital accounts
of the general partners and related parties. For the years ended December 31,   
1995, 1996 and 1997, the Company earned administrative fees of approximately    
$836,000, $820,000 and $1,085,000, respectively.                                

At December 31, 1996 and 1997, the Company had various limited partner
interests in unaffiliated limited partnerships aggregating approximately        
$23,065,000 and $32,332,000, respectively. For the years ended December 31,     
1995, 1996 and 1997, the gains recorded by the Company in these investments     
approximated $3,092,000, $3,722,000 and $5,666,000, respectively.               

At December 31, 1996, the Company was a 50% general partner in two    
investment advisory companies, one which managed fixed income mutual funds and  
the other which managed separate accounts. In addition, it had a 49% investment 
in a related broker-dealer. These investments were accounted for using the      
equity method. The carrying value of these entities at December 31, 1996 was    
approximately $450,000. In April 1997, through the acquisition of the general   
partnership interests held by the other general partner and a reorganization    
into Fixed Income, the Company increased its ownership stake in these companies 
to approximately 80%. This transaction resulted in the recognition of           
approximately $2,080,000 of cost in excess                                      

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

of net assets acquired, which is being amortized over a period of 10 years. The 
results of Fixed Income's operations are included in the consolidated statement 
of income effective April 15, 1997. For the years ended December 31, 1995, 1996 
and 1997, the Company recorded equity income (loss) from these entities of      
approximately $147,000, $331,000 and $(109,000), respectively. Pro forma        
information relating to this transaction is not presented because its effect is 
immaterial.                                                                     

D.  NOTES RECEIVABLE                                                            

At December 31, 1996, the Company had a note receivable amounting to  
$11,800,000, which represents a loan made during 1996 to an affiliate, Lynch    
Corporation. The interest rate on the note was 10% per annum. In addition, there
was a one-time commitment fee of 1% and a special fee equal to 10% of the net   
profits of an affiliate of Lynch Corporation. The affiliate was the high bidder 
for Personal Communications Services ("PCS") licenses in the Federal            
Communications Commission's ("FCC") F Block Auction concluded in January 1997.  
In 1997, the affiliate repaid all outstanding principal and interest due on this
loan. Additionally, the Company transferred its 10% net profits interest in     
exchange for an equity ownership in a non-controlled entity which currently     
holds these PCS licenses.                                                       

At December 31, 1996 and 1997, the Company had full recourse notes and
interest receivable from directors of GAMCO in the amount of approximately      
$1,560,000 and $1,666,000, respectively, which are secured by the directors'    
ownership interests in the Company and various affiliates. The notes bear       
interest at an annual rate of 7% and are payable on demand.                     

  At December 31, 1997, the Company had a note receivable of approximately
$603,000 from an affiliated entity in which the Company has a 49.9% ownership   
interest. Under the terms of the note, 15% of the realized net profits of the   
affiliate are payable to the Company. The note is secured by a security interest
in all of the assets of the affiliate, which consist primarily of Wireless      
Communications Service ("WCS") licenses. For the year ended December 31, 1997,  
the Company did not record any income under the terms of the note.              

At December 31, 1997, the Company had a note receivable from an entity
controlled by certain stockholders of the Company in the amount of $3,600,000.  
The note bears interest at an annual rate of 7%. All principal and interest due 
on the note was repaid in 1998.                                                 

The Company has approximately $2,464,000 in various other notes and   
interest receivable outstanding at December 31, 1997 from certain executive     
officers, directors and employees in connection with the acquisition of stock   
and other ownership interests in the Company. Interest rates on these notes     
range from 5% to 10%.                                                           

E.  INCOME TAXES                                                                

     The Company accounts for income taxes under the liability method prescribed
by SFAS No. 109, "Accounting for Income Taxes". Deferred tax assets and         
liabilities are recognized for the future tax consequences attributable to the  
differences between the financial statement carrying amount of existing assets  
and liabilities and their respective tax bases.                                 

 GFI and GSI each file separate income tax returns. Accordingly, the tax
provision represents the aggregate of the amounts provided for all companies.   

   GFI elected to be treated as a Subchapter "S" corporation for federal and
state income tax purposes effective January 1, 1995. On January 1, 1997, the    
Company elected to treat GAMCO as a Qualified Subchapter "S" subsidiary for     
Federal and state income tax purposes. As a result of converting from a taxable 
"C" corporation to a nontaxable "S" corporation, a federal income tax will be   
imposed on any "built-in gain" recognized by the Company on the disposition of  
assets within ten years from the date of conversion. The Company retained its   
existing deferred tax liability at the date of conversion to the extent of the  
estimated built-in gains tax. This tax liability is subject to remeasurement at 
each financial statement date until the end of the ten-year period.             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

   The provision (benefit) for income taxes for the years ended December 31,
1995, 1996 and 1997 consisted of the following:                                 

                                                        [Enlarge/Download Table]

                                                              1995      1996      1997  
                                                             ------    ------    ------ 
                                                                   (IN THOUSANDS)       
                                                                                        
Federal:                                                                                
  Current................................................... $5,667    $6,232    $2,399 
  Deferred..................................................    854       (93)       (8)
State and local:                                                                        
  Current...................................................  1,218     1,514       628 
  Deferred..................................................     30       (22)       58 
                                                             ------    ------    ------ 
                                                             $7,769    $7,631    $3,077 
                                                             ======    ======    ====== 

   The Company's deferred income tax liability at December 31, 1996 and 1997
relates primarily to unrealized gains and losses on investments in securities   
and partnerships.                                                               

    The Company's provision for income taxes differs from the amount of income
tax determined by applying the applicable U.S. federal statutory income tax rate
to income before income taxes and minority interest principally due to GFI's    
status as a Subchapter "S" corporation.                                         

F.  BANK LOAN AND NOTES PAYABLE                                                 

In 1997, the Company, through Rivgam Communicators, LLC ("Rivgam"), a 
wholly-owned subsidiary of GAMCO, entered into a credit facility with The Chase 
Manhattan Bank under which Rivgam has borrowed $30 million. Interest is variable
based upon changes in the London Interbank Offering Rate or the Federal Funds   
Rate. The loan, which is guaranteed by GAMCO, is due in four equal annual       
installments starting May 12, 1998. The Company believes that the fair value of 
the loan approximates its carrying value. Under the terms of the loan, GAMCO is 
required to comply with certain debt covenants, which it complied with through  
December 31, 1997.                                                              

     At December 31, 1996 and 1997, the Company had notes payable outstanding of
approximately $5,779,000 and $4,900,000, respectively, which mature on May 31,  
2003, unless certain circumstances arise which allow for an accelerated         
repayment. The notes accrue interest at 2% over the prime rate, subject to a    
minimum interest rate of 9% and a maximum interest rate of 15%, payable         
quarterly. Interest expense on these notes amounted to approximately $636,000,  
$636,000 and $557,000 for the years ended December 31, 1995, 1996 and 1997,     
respectively.                                                                   

     On September 30, 1996, a note payable amounting to $1,232,000 was issued as
consideration for repurchase of the Company's common stock. The note matured and
was fully paid on January 2, 1998. The note accrued interest at an annual rate  
of 10%, payable quarterly. Interest expense on this note amounted to            
approximately $31,000 and $123,000 for the years ended December 31, 1996 and    
1997, respectively.                                                             

   In connection with the restructuring of GAMCO's ownership, GAMCO issued a
note payable in 1997 of approximately $976,000 to an employee and director of   
the Company and GAMCO, respectively, in consideration for repurchase of GAMCO   
common stock. The note matures on January 2, 2000, unless certain circumstances 
arise which allow for an accelerated repayment. GAMCO also has the option to    
redeem the note at any time prior to maturity at predetermined rates. The note  
accrues interest at an annual rate of 12%, payable quarterly. Interest expense  
on this note amounted to approximately $117,000 for the year ended December 31, 
1997.                                                                           

G.  STOCKHOLDERS' EQUITY                                                        

 Upon their disassociation with the Company, certain stockholders of the
Company are required to sell their shares to the Company at book value          
(approximately $14.5 million at December 31, 1997).                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

H.  CAPITAL LEASE                                                               

In December 1997, the Company signed an agreement to lease new primary
office space from a company owned by stockholders of GFI. The Company has       
recorded a capital lease asset and liability for the fair value of the leased   
property. Amortization of the capital lease is computed on the straight-line    
method over the term of the lease, which expires on April 30, 2013. The lease   
provides that all operating expenses relating to the property (such as property 
taxes, utilities and maintenance) are to be paid by the lessee, the Company.    

     Future minimum lease payments for this capitalized property at December 31,
1997 are as follows:                                                            

                                                                [Download Table]

                                                 (IN THOUSANDS)
                                                               
1998...........................................     $   720    
1999...........................................         720    
2000...........................................         720    
2001...........................................         720    
2002...........................................         720    
Thereafter.....................................       7,896    
                                                    -------    
Total minimum obligations......................      11,496    
Interest.......................................       4,471    
                                                    -------    
Present value of net obligations...............     $ 7,025    
                                                    =======    

Future minimum lease payments have not been reduced by related minimum
future sublease rentals of approximately $1,885,000, of which approximately     
$515,000 is due from an affiliated entity. Lease payments under this agreement  
amounted to approximately $50,000 for the year ended December 31, 1997.         

     Total minimum obligations exclude the operating expenses to be borne by the
Company, which are estimated to be $400,000 per year.                           

I.  COMMITMENTS                                                                 

   The Company rents office space under leases which expire at various dates
through 2001. Future minimum lease commitments under these operating leases as  
of December 31, 1997 are as follows:                                            

                                                                [Download Table]

                                                 (IN THOUSANDS)
                                                               
1998...........................................      $  880    
1999...........................................         756    
2000...........................................         665    
2001...........................................         593    
                                                     ------    
                                                     $2,894    
                                                     ======    

Equipment rentals and occupancy expense amounted to approximately     
$1,729,000, $1,457,000 and $1,644,000, respectively, for the years ended        
December 31, 1995, 1996 and 1997.                                               

J.  RELATED PARTY TRANSACTIONS                                                  

    GFI serves as the investment adviser for the Funds and earns advisory fees
based on predetermined percentages of the average net assets of the Funds. In   
addition, Gabelli & Company has entered into distribution agreements with each  
of the Funds. As principal distributor, Gabelli & Company incurs certain        
promotional and distribution costs related to the sale of Fund shares, for which
it receives a fee or reimbursement from the Funds.                              

The Company had an aggregate investment in the Funds of approximately 
$40,902,000 and $34,464,000 at December 31, 1996 and 1997, respectively, of     
which approximately $27,966,000 and $11,305,000, respectively, is invested in a 
money market mutual fund.                                                       

Gabelli & Company earns a majority of its commission revenue from     
transactions executed on behalf of clients of affiliated companies.             

The Company is required to pay the Chairman of the Board and Chief    
Executive Officer a management fee which is equal to 20% of the pretax profits  
of each of the Company's operating divisions before                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

consideration of this management fee. This fee approximated $9,423,000,         
$10,192,000 and $10,580,000 for the years ended December 31, 1995, 1996 and     
1997, respectively. The Chairman of the Board and Chief Executive Officer also  
received portfolio management compensation and account executive fees of        
approximately $19,533,000, $21,260,000 and $23,005,000 for the years ended      
December 31, 1995, 1996 and 1997, respectively, which have been included in     
compensation costs.                                                             

 The Company contributed approximately $1,628,000 and $1,014,000 for the
years ended December 31, 1996 and 1997, respectively, to an accredited          
charitable foundation, of which the Chairman of the Board and Chief Executive   
Officer of the Company is an officer.                                           

In March 1997, the Company made a secured loan of $10 million to Lynch
Corporation which accrued interest at the prime rate and included a 1%          
commitment fee. The loan and all accrued interest were repaid in June 1997.     

K.  FINANCIAL REQUIREMENTS                                                      

    The Company is required to maintain minimum capital levels with affiliated
partnerships. At December 31, 1997, the minimum capital requirements            
approximated $1,298,000. In addition, at December 31, 1997, the Company had     
commitments to make investments in unaffiliated partnerships of approximately   
$1,600,000.                                                                     

    As a registered broker-dealer, Gabelli & Company is subject to Uniform Net
Capital Rule 15c3-1 (the "Rule") of the Securities and Exchange Commission.     
Gabelli & Company computes its net capital under the alternative method         
permitted by the Rule which requires minimum net capital of $250,000. At        
December 31, 1997, Gabelli & Company had net capital in excess of the minimum   
requirement of approximately $6,300,000.                                        

L.  ADMINISTRATION FEES                                                         

     The Company has entered into administration agreements with other companies
(the "Administrators"), whereby the Administrators provide certain services on  
behalf of several of the Funds. Such services do not include the investment     
advisory and portfolio management services provided by the Company. The fees are
negotiated based on predetermined percentages of the net assets of each of the  
Funds for which such agreements have been entered into.                         

M.  PROFIT SHARING PLAN AND INCENTIVE SAVINGS PLAN                              

   The Company has a qualified contributory employee profit sharing plan and
incentive savings plan covering substantially all employees. Company            
contributions to the plans are determined annually by the Board of Directors but
may not exceed the amount permitted as a deductible expense under the Internal  
Revenue Code. The Company accrued contributions of approximately $102,000,      
$121,000 and $80,000 to the plans for the years ended December 31, 1995, 1996   
and 1997, respectively.                                                         

N.  DERIVATIVE FINANCIAL INSTRUMENTS                                            

During 1997 and 1996, the Company's trading activities included       
transactions in domestic equity index futures contracts. These financial        
instruments represent future commitments to purchase or sell an underlying index
for specified amounts at specified future dates. Such contracts create          
off-balance sheet risk for the Company as the future satisfaction of these      
contracts may be for amounts in excess of the amounts recognized in the         
consolidated statements of financial condition. The amounts disclosed below     
represent the notional amounts outstanding, end of year fair values and average 
fair values of domestic equity index futures contracts sold as of and for the   
years ended December 31, 1996 and 1997:                                         

                                                                [Download Table]

                                         NOTIONAL                     AVERAGE FAIR 
                                         AMOUNTS                      VALUE FOR THE
                                      OUTSTANDING AT   FAIR VALUE AT   YEAR ENDED  
                YEAR                   DECEMBER 31      DECEMBER 31    DECEMBER 31 
                ----                  --------------   -------------  -------------
                                                      (IN THOUSANDS)               
                                                                                   
1997.................................    $33,246           $ 202          $(776)   
1996.................................    $32,877           $(626)         $(425)   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

At December 31, 1996 and 1997, the Company had margin deposits of     
approximately $1,200,000 and $1,470,000, respectively, with a futures broker for
these open futures contracts.                                                   

  In connection with this futures activity, the Company incurred losses of
approximately $3,692,000 and $8,063,000 during the years ended December 31, 1996
and 1997. Such losses are reflected as part of net gain from investments in the 
consolidated statements of income.                                              

O.  PCS LICENSES                                                                

     The Company, through Rivgam, purchased PCS licenses auctioned by the FCC in
1997. The PCS licenses are valued at the lower of their original purchase cost  
or their market value. Market values are determined based upon the most recent  
public auction for similar licenses, or in the absence thereof, fair value      
estimates provided by independent companies that solicit bids for such licenses.

P.  SUBSEQUENT EVENTS (UNAUDITED)                                               

Loan Guarantee                                                              

In February 1998, the Company guaranteed a $30 million loan made by a 
commercial bank to Rivgam LMDS, LLC, an entity for which the Chairman of the    
Board and Chief Executive Officer of the Company is the managing member and in  
which he has a controlling interest. All principal and interest on the loan was 
repaid by Rivgam LMDS, LLC on April 3, 1998, thereby relieving the Company of   
its obligation under the guarantee.                                             

Sale of PCS Licenses                                                        

     During 1998, the Company sold certain of its PCS licenses with a cost basis
of $51,000,000. The Company recorded a pre-tax gain of $17,400,000, net of      
investment banking, management and other related fees of approximately          
$10,700,000 paid principally to related parties, of which $4,196,000 was paid to
the Company's Chairman of the Board and Chief Executive Officer.                

Reorganization and Initial Public Offering (Formation Transactions)         

 Prior to the initial public offering (the "Offering"), the Company will
transfer substantially all of the operating assets and liabilities relating to  
its institutional and retail asset management, mutual fund advisory and         
underwriting business to Gabelli Asset Management Inc. ("GAMI"), in exchange for
24 million shares of GAMI's Class B Common Stock, representing all of its issued
and outstanding shares of Common Stock (the "Reorganization"). GAMI is a newly  
formed company, incorporated in April 1998 in the state of New York with no     
significant assets or liabilities and which has not engaged in any substantial  
business activities prior to the offering. GAMI intends to sell 6 million shares
of Class A Common Stock as part of the Offering, resulting in 30 million shares 
expected to be outstanding immediately after the Offering.                      

   Upon completion of the Offering, the Company will no longer be treated as
an "S" corporation and will be subject to corporate income taxes.               

 Immediately preceding the Offering, the Company and its Chairman of the
Board and Chief Executive Officer will enter into an Employment Agreement. The  
Employment Agreement provides that the Company will pay the Chairman of the     
Board and Chief Executive Officer 10% of the Company's aggregate pre-tax profits
while he is an executive of the Company and devoting the substantial majority of
his working time to the business of the Company. The Employment Agreement       
further provides that the Company will pay the Chairman of the Board and Chief  
Executive Officer $50 million on January 2, 2002, plus interest payable         
quarterly at an annual rate of 6% from the date of the Employment Agreement.    

Stock Award and Incentive Plan                                              

  Immediately prior to the Offering, the Board of Directors will adopt the
1999 GAMI Stock Award and Incentive Plan (the "Plan"), designed to provide      
incentives which will attract and retain individuals key to the success of GAMI 
through direct or indirect ownership of GAMI's common stock. Benefits under the 
Plan may be granted in any one or a combination of stock options, stock         
appreciation rights, restricted stock,                                          

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

restricted stock units, stock awards, dividend equivalents and other stock or   
cash based awards. A maximum of 1,500,000 shares Class A Common Stock has been  
reserved for issuance and the Plan provides that the terms and conditions of    
each award are to be determined by a committee of the Board of Directors charged
with administering the Plan. Under the Plan, the committee may grant 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 Plan vest three years from the date of grant and      
expire after ten years.                                                         

  The Company has elected to account for stock options under the intrinsic
value method. Under the intrinsic value method, compensation expense is         
recognized only if the exercise price of the employee stock option is less than 
the market price of the underlying stock on the date of grant. The estimated pro
forma compensation expense attributable to options granted to employees under   
the Plan is not presented as its effect, if any, is expected to be immaterial.  

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UNAUDITED CONSOLIDATED STATEMENTS OF INCOME 

                                                                [Download Table]

                                                               NINE MONTHS ENDED  
                                                                 SEPTEMBER 30,    
                                                              ------------------- 
                                                                1997       1998   
                                                              --------   -------- 
                                                                (IN THOUSANDS)    
                                                                                  
REVENUES                                                                          
Investment advisory and incentive fees......................  $ 64,107   $ 86,302 
Commission revenue..........................................     5,613      6,197 
Distribution fees and other income..........................     5,100      9,810 
                                                              --------   -------- 
          Total revenues....................................    74,820    102,309 
EXPENSES                                                                          
Compensation................................................    33,138     41,702 
Management fee..............................................     7,425      8,533 
Other operating expenses....................................    13,943     18,072 
                                                              --------   -------- 
          Total expenses....................................    54,506     68,307 
OPERATING INCOME............................................    20,314     34,002 
OTHER INCOME                                                                      
Net gain (loss) from investments............................     6,803     (3,910)
Gain on sale of PCS licenses, net of fees payable to related                      
  parties...................................................        --     17,430 
Interest and dividend income................................     3,168      3,252 
Interest expense............................................    (1,183)    (1,355)
Other.......................................................       (52)        79 
                                                              --------   -------- 
          Total other income, net...........................     8,736     15,496 
                                                              --------   -------- 
Income before income taxes and minority interest............    29,050     49,498 
Income taxes................................................     2,369      3,004 
Minority interest...........................................       759      1,043 
                                                              --------   -------- 
Net income..................................................  $ 25,922   $ 45,451 
                                                              ========   ======== 

See accompanying notes. 
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UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION 

                                                                [Download Table]

                                                              SEPTEMBER 30, 1998
                                                              ------------------
                                                                (IN THOUSANDS,  
                                                              EXCEPT SHARE DATA)
                                                                                
ASSETS                                                                          
Cash and cash equivalents...................................       $ 56,499     
Investments in securities...................................         78,597     
Investments in partnerships.................................         47,081     
PCS licenses................................................         33,985     
Investment advisory fees receivable.........................          9,380     
Receivables from affiliates.................................          3,506     
Notes and other receivables.................................          4,094     
Capital lease...............................................          3,494     
Other assets................................................          4,851     
                                                                   --------     
          Total assets......................................       $241,487     
                                                                   ========     

LIABILITIES AND STOCKHOLDERS' EQUITY                                            
Notes payable...............................................       $  5,876     
Payable to Sub-S shareholders...............................         14,642     
Income taxes payable (including deferred income taxes)......          3,217     
Capital lease obligation....................................          3,621     
Compensation payable........................................         15,692     
Accrued expenses and other liabilities......................          6,583     
                                                                   --------     
          Total liabilities.................................         49,631     
                                                                   --------     
Minority interest...........................................         11,754     
                                                                   --------     

Stockholders' equity:                                                           
  Common Stock, $.01 par value; authorized 1,000,000 shares;                    
     issued and outstanding                                                     
     196,537 shares.........................................              2     
  Class A Common Stock, $.001 par value; authorized,                            
     100,000,000 shares;                                                        
     none issued............................................             --     
  Class B Common Stock, $.001 par value; authorized,                            
     100,000,000 shares;                                                        
     none issued............................................             --     
  Additional paid-in capital................................         21,471     
  Retained earnings.........................................        169,252     
  Notes receivable..........................................        (10,623)    
                                                                   --------     
          Total stockholders' equity........................        180,102     
                                                                   --------     
Total liabilities and stockholders' equity..................       $241,487     
                                                                   ========     

See accompanying notes. 
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GABELLI FUNDS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998

                                                        [Enlarge/Download Table]

                                                   ADDITIONAL                                   
                                           COMMON   PAID-IN     RETAINED     NOTES              
                                           STOCK    CAPITAL     EARNINGS   RECEIVABLE   TOTAL   
                                           ------  ----------   --------   ----------  -------- 
                                                    (IN THOUSANDS, EXCEPT SHARE DATA)           
                                                                                                
Balance at December 31, 1997..............   $2     $12,372     $152,775    $ (1,530)  $163,619 
  Repurchase and retirement of 400           --                                                 
     shares...............................             (345)          --          --       (345)
  Net issuances of notes receivable.......   --          --           --      (9,093)    (9,093)
  Issuance of 10,600 shares...............   --       9,444           --          --      9,444 
  Distributions to shareholders...........   --          --      (28,974)         --    (28,974)
  Net income..............................   --          --       45,451          --     45,451 
                                             --     -------     --------    --------   -------- 
Balance at September 30, 1998.............   $2     $21,471     $169,252    $(10,623)  $180,102 
                                             ==     =======     ========    ========   ======== 

See accompanying notes. 
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GABELLI FUNDS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                                [Download Table]

                                                              NINE MONTHS ENDED   
                                                                SEPTEMBER 30,     
                                                             -------------------- 
                                                               1997        1998   
                                                             --------    -------- 
                                                                (IN THOUSANDS)    
                                                                                  
OPERATING ACTIVITIES                                                              
Net income.................................................. $ 25,922    $ 45,451 
Adjustments to reconcile net income to net cash provided by                       
  operating activities:                                                           
  Equity in earnings of partnerships and affiliates.........   (7,627)      1,934 
  Gain on sale of PCS licenses..............................       --     (29,123)
  Depreciation and amortization.............................      426         662 
  Deferred income taxes.....................................    2,893         162 
  Minority interest in net income of consolidated                                 
     subsidiaries...........................................      759       1,043 
  Changes in operating assets and liabilities:                                    
     Investment in securities...............................  (10,957)    (21,990)
     Investment advisory fees receivable....................      442        (896)
     Receivables from affiliates............................    8,093       3,028 
     Notes and other receivables............................    2,357         484 
     Other assets...........................................    5,444       3,059 
     Notes payable..........................................     (879)     (1,232)
     Income taxes payable...................................   (3,016)       (697)
     Compensation payable...................................    8,655      12,236 
     Accrued expenses and other liabilities.................   (1,641)      1,040 
                                                             --------    -------- 
Total adjustments...........................................    4,949     (30,290)
                                                             --------    -------- 
Net cash provided by operating activities...................   30,871      15,161 
                                                             --------    -------- 
INVESTING ACTIVITIES                                                              
(Purchases) sales of PCS licenses...........................  (63,201)     80,000 
Distributions from partnerships and affiliates..............    2,607       2,746 
Investments in partnerships and affiliates..................   (6,272)     (4,789)
Cost of acquisitions........................................   (2,175)         -- 
                                                             --------    -------- 
Net cash (used in) provided by investing activities.........  (69,041)     77,957 
                                                             --------    -------- 
FINANCING ACTIVITIES                                                              
Proceeds from (repayment of) bank loan......................   30,000     (30,000)
Distributions to shareholders...............................  (12,987)    (18,637)
Repurchases of subsidiaries' common stock...................     (519)       (592)
Purchase of minority stockholders' interest.................   (1,282)         -- 
                                                             --------    -------- 
Net cash provided by (used in) financing activities.........   15,212     (49,229)
                                                             --------    -------- 
Net (decrease) increase in cash and cash equivalents........  (22,958)     43,889 
Cash and cash equivalents at beginning of period............   32,949      12,610 
                                                             --------    -------- 
Cash and cash equivalents at end of period.................. $  9,991    $ 56,499 
                                                             ========    ======== 

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GABELLI FUNDS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

A.  BASIS OF PRESENTATION                                                       

The unaudited interim consolidated financial statements of the Company
included herein have been prepared in accordance with generally accepted        
accounting principles for interim financial information and Rule 10-01 of       
Regulation S-X. Accordingly, they do not include all the information and        
footnotes required by generally accepted accounting principles for complete     
financial statements. In the opinion of management, the unaudited interim       
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 the Company for the interim periods     
presented and are not necessarily indicative of a full year's results.          

In preparing the unaudited interim consolidated financial statements, 
management is required to make estimates and assumptions that affect the amounts
reported in the financial statements. Actual results could differ from those    
estimates.                                                                      

     These financial statements should be read in conjunction with the Company's
audited consolidated financial statements for the year ended December 31, 1997. 

B.  NOTES RECEIVABLE                                                            

During the nine months ended September 30, 1998, the Company issued   
approximately $9 million of common stock to employees and affiliates of the     
Company in return for interest bearing demand notes receivable.                 

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS 

 The following unaudited pro forma Consolidated Statements of Income and
Financial Condition give effect to the Formation Transactions, including the    
assets and liabilities assumed to be distributed and the resulting impact on    
allocated income and expenses; the $50 million deferred payment to the Chairman 
and Chief Executive Officer net of deferred tax benefit; the reduction in the   
management fee from 20% to 10% pursuant to the Employment Agreement; and the    
conversion from an "S" corporation to a "C" corporation.                        

  The unaudited pro forma financial data does not purport to represent the
results of operations or the financial position of the Company which actually   
would have occurred had the Formation Transactions been previously consummated  
or project the results of operations or the financial position of the Company   
for any future date or period.                                                  

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GABELLI FUNDS, INC. 

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME 

YEAR ENDED DECEMBER 31, 1997

                                                        [Enlarge/Download Table]

                                                                                       PRO FORMA    
                                                     YEAR ENDED                          GAMI       
                                                    DECEMBER 31,     PRO FORMA        YEAR ENDED    
                                                        1997        ADJUSTMENTS    DECEMBER 31, 1997
                                                    ------------    -----------    -----------------
                                                          (IN THOUSANDS EXCEPT PER SHARE DATA)      
                                                                                                    
REVENUES                                                                                            
Investment advisory and incentive fees.............   $ 89,684        $                $ 89,684     
Commission revenue.................................      7,496                            7,496     
Distribution fees and other income.................      8,096                            8,096     
                                                      --------                         --------     
          Total revenues...........................    105,276                          105,276     
                                                      --------                         --------     
EXPENSES                                                                                            
Compensation costs.................................     45,260                           45,260     
Management fee.....................................     10,580         (5,290)(a)         4,424     
                                                                         (866)(b)                   
Other operating expenses...........................     18,690         (1,789)(c)        16,901     
                                                      --------                         --------     
          Total expenses...........................     74,530                           66,585     
Operating income...................................     30,746                           38,691     
                                                      --------                         --------     
OTHER INCOME (EXPENSE)                                                                              
Net gain from investments..........................      7,888         (4,884)(d)         3,004     
Interest and dividend income.......................      4,634         (3,519)(d)         1,115     
Interest expense...................................     (1,876)         1,876(d)         (3,000)    
                                                                       (3,000)(e)                   
Other..............................................       (109)           109(d)             --     
                                                      --------                         --------     
          Total other income, net..................     10,537                            1,119     
                                                      --------                         --------     
Income before income taxes and minority interest...     41,283                           39,810     
Income taxes.......................................      3,077         12,658(f)         15,735     
Minority interest..................................      1,529            148(g)          1,677     
                                                      --------                         --------     
Net income.........................................   $ 36,677                         $ 22,398     
                                                      ========                         ========     
NET INCOME PER SHARE:                                                                               
     Basic and diluted.............................                                    $   0.75     
                                                                                       ========     
WEIGHTED AVERAGE SHARES OUTSTANDING:                                                                
     Basic and diluted.............................                                      30,000     
                                                                                       ========     

---------------                                                                 
(a) To adjust the management fee to reflect the Employment Agreement, which     
provides for a reduction in the fee from 20% to 10% of pre-tax profits. 
(b) To adjust the management fee for the impact of the other pro forma          
adjustments.                                                            
(c) To reflect the reallocation of expenses to the new parent company.          
(d) To reflect the effect on income and expenses related to the distribution of 
assets and liabilities.                                                 
(e) To reflect interest expense on the $50 million note payable to the Chairman 
and Chief Executive Officer.                                            
(f) To record additional taxes related to conversion from an "S" corporation to 
a "C" corporation and other pro forma adjustments.                      
(g) To adjust minority interest for the impact of the other pro forma           
adjustments.                                                            

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GABELLI FUNDS, INC. 

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME 

NINE MONTHS ENDED SEPTEMBER 30, 1998

                                                        [Enlarge/Download Table]

                                                                                         PRO FORMA  
                                                                                           GAMI     
                                                        NINE MONTHS                     NINE MONTHS 
                                                           ENDED                           ENDED    
                                                       SEPTEMBER 30,     PRO FORMA     SEPTEMBER 30,
                                                           1998         ADJUSTMENTS        1998     
                                                       -------------    -----------    -------------
                                                           (IN THOUSANDS EXCEPT PER SHARE DATA)     
                                                                                                    
REVENUES                                                                                            
Investment advisory and incentive fees................    $86,302        $                $ 86,302  
Commission revenue....................................      6,197                            6,197  
Distribution fees and other income....................      9,810                            9,810  
                                                          -------                         --------  
          Total revenues..............................    102,309                          102,309  
                                                          -------                         --------  
EXPENSES                                                                                            
Compensation costs....................................     41,702                           41,702  
Management fee........................................      8,533          (4,267)(a)        4,216  
                                                                              (50)(b)               
Other operating expenses..............................     18,072            (531)(c)       17,541  
                                                          -------                         --------  
          Total expenses..............................     68,307                           63,459  
Operating income......................................     34,002                           38,850  
                                                          -------                         --------  
OTHER INCOME (EXPENSE)                                                                              
Net gain from investments.............................     (3,910)          4,666(d)           756  
Interest and dividend income..........................      3,252          (2,647)(d)          605  
Interest expense......................................     (1,355)          1,334(d)        (2,271) 
                                                                           (2,250)(e)               
Gain on sale of PCS licenses, net.....................     17,430         (17,430)(d)           --  
Other.................................................         79             (79)(d)           --  
                                                          -------                         --------  
          Total other income, net.....................     15,496                             (910) 
                                                          -------                         --------  
Income before income taxes and minority interest......     49,498                           37,940  
Income taxes..........................................      3,004          12,043(f)        15,047  
Minority interest.....................................      1,043             185(g)         1,228  
                                                          -------                         --------  
Net income............................................    $45,451                         $ 21,665  
                                                          =======                         ========  
NET INCOME PER SHARE:                                                                               
     Basic and diluted................................                                    $   0.72  
                                                                                          ========  
WEIGHTED AVERAGE SHARES OUTSTANDING:                                                                
     Basic and diluted................................                                      30,000  
                                                                                          ========  

---------------                                                                 
(a) To adjust the management fee to reflect the Employment Agreement, which     
provides for a reduction in the fee from 20% to 10% of pre-tax profits. 
(b) To adjust the management fee for the impact of the other pro forma          
adjustments.                                                            
(c) To reflect the reallocation of expenses to the new parent company.          
(d) To reflect the effect on income and expenses related to the distribution of 
assets and liabilities.                                                 
(e) To reflect interest expense on the $50 million note payable to the Chairman 
and Chief Executive Officer.                                            
(f) To record additional taxes related to conversion from an "S" corporation to 
a "C" corporation and other pro forma adjustments.                      
(g) To adjust minority interest for the impact of the other pro forma           
adjustments.                                                            

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                        [Enlarge/Download Table]

                                                                                         PRO FORMA     
                                                                       PRO FORMA            GAMI       
                                                 SEPTEMBER 30, 1998   ADJUSTMENTS    SEPTEMBER 30, 1998
                                                 ------------------   -----------    ------------------
                                                           (IN THOUSANDS, EXCEPT SHARE DATA)           
                                                                                                       
ASSETS                                                                                                 
Cash and cash equivalents.......................      $ 56,499         $ (26,643)(a)      $ 29,856     
Investments in securities.......................        78,597           (55,364)(a)        23,233     
Investments in partnerships.....................        47,081           (31,918)(a)        15,163     
PCS licenses....................................        33,985           (33,985)(a)            --     
Investment advisory fees receivable.............         9,380                --             9,380     
Receivables from affiliates.....................         3,506              (806)(a)         2,700     
Notes and other receivables.....................         4,094            (1,426)(a)         2,668     
Capital lease...................................         3,494                --             3,494     
Other assets....................................         4,851            20,156 (a)(b        25,007   
                                                      --------                            --------     
          Total assets..........................      $241,487                            $111,501     
                                                      ========                            ========     
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                   
Payable to related party........................      $     --         $  50,000(b)       $ 50,000     
Notes payable...................................         5,876            (5,876)(a)            --     
Payable to Sub-S shareholders...................        14,642           (14,642)(a)            --     
Income taxes payable (including deferred income                                                        
  taxes)........................................         3,217            10,202(c)         13,419     
Capital lease obligation........................         3,621                --             3,621     
Compensation payable............................        15,692            (4,196)(a)        11,496     
Accrued expenses and other liabilities..........         6,583              (202)(a)         6,381     
                                                      --------                            --------     
          Total liabilities.....................        49,631                              84,917     
                                                      --------                            --------     
Minority interest...............................        11,754                              11,754     
                                                      --------                            --------     
Stockholders' equity:                                                                                  
Common Stock, $.01 par value; authorized                                                               
  1,000,000 shares, issued and outstanding                                                             
  196,537.......................................             2                (2)(a)            --     
Class A Common Stock, $.001 par value;                                                                 
  authorized, 100,000,000 shares; none issued...            --                --                --     
Class B Common Stock, $.001 par value;                                                                 
  authorized, 100,000,000 shares; 24,000,000                                                           
  shares issued and outstanding.................            --                24(a)             24     
Additional paid-in capital......................        21,471             1,701(a)         23,172     
Retained earnings...............................       169,252          (177,618)(a)        (8,366)    
Notes receivable................................       (10,623)           10,623(a)             --     
                                                      --------                            --------     
          Total stockholders' equity............       180,102                              14,830     
                                                      --------                            --------     
Total liabilities and stockholders' equity......      $241,487                            $111,501     
                                                      ========                            ========     

---------------                                                                 
(a) To reflect the stock issued, the assets to be distributed and the           
liabilities to be assumed in connection with the Formation Transactions.

(b) To record the $50 million payment, net of $19.8 million deferred tax        
 benefit, to the Chairman and Chief Executive Officer upon consummation of
the Offering, and the related management fee.                           

(c) To record additional taxes related to conversion from an "S" corporation to 
a "C" corporation and the effect of other pro forma adjustments.        
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GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998

A.  REORGANIZATION AND INITIAL PUBLIC OFFERING                                  

Reorganization and Initial Public Offering                                  

 Prior to the initial public offering (the "Offering"), the Company will
transfer substantially all of the operating assets and liabilities relating to  
its institutional and retail asset management, mutual fund advisory and         
brokerage business to Gabelli Asset Management Inc. ("GAMI"), in exchange for 24
million shares of GAMI's Class B Common Stock, representing all of its issued   
and outstanding shares of Common Stock (the "Reorganization"). GAMI is a newly  
formed company, incorporated in April 1998 in the state of New York, with no    
significant assets or liabilities and which has not engaged in any substantial  
business activities prior to the Offering. GAMI intends to sell 6 million shares
of Class A Common Stock as part of the Offering, resulting in 30 million shares 
expected to be outstanding immediately after the Offering.                      

   Upon completion of the Offering, the Company will no longer be treated as
an "S" corporation and will be subject to corporate income taxes. Accordingly,  
the consolidated statements of income include a pro forma adjustment for        
additional income taxes which would have been recorded if the Company had been a
"C" corporation for 1997 based on tax laws then in effect.                      

  For pro forma purposes the financial statements have been prepared as if
the shareholders of GFI formed a newly created parent company (NewCo) and       
transferred their ownership interest in GFI to NewCo as of the beginning of the 
fiscal period. Concurrent therewith, GFI is assumed to have changed its name to 
Gabelli Asset Management Inc. and to have made a dividend to NewCo equal to its 
net equity, with the exception of $45 million in net assets retained by GAMI.   

   The unaudited pro forma data gives effect to the lower management fee and
increase in interest expense as if a new employment agreement with the Company's
Chairman of the Board and Chief Executive Officer, effective immediately        
preceding the Offering, had been in effect at the beginning of each period, and 
the effects of these adjustments on income tax expense and minority interest.   
Under the terms of this agreement, the Company will issue a $50 million note    
payable to the Chairman, payable in 2002, and the Chairman will receive 10% of  
pre-tax profits. Previously the Chairman received 20% of the Company's pre-tax  
profits. The $50 million payment is not reflected in the pro forma income       
statement data because it is a one-time event directly related to the Offering. 
The pro forma adjustments also reflect the income and expenses incurred on the  
net equity assumed to have been distributed in connection with the Formation    
Transactions. Additionally, for purposes of the pro forma basic earnings per    
share calculation for each period, the denominator represents the 30 million    
shares expected to be outstanding immediately after the Offering.               

   For purposes of the pro forma diluted earnings per share calculation, the
denominator has been calculated using the Treasury Stock method to account for  
options granted under the Plan.                                                 

B.  STOCK AWARD AND INCENTIVE PLAN                                              

     The disclosure requirements of Statements of Financial Accounting Standards
No. 123 require the use of an option valuation model to compute a fair value of 
employee stock options. The valuation model used by the Company was not         
developed for use in valuing employee stock options and the Company's employee  
stock option characteristics vary significantly from those of traded options. As
a result, changes in the subjective input assumptions can materially affect the 
fair value estimate.                                                            

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GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED 
FINANCIAL STATEMENTS -- (CONCLUDED) 
SEPTEMBER 30, 1998

 The fair value of each option grant is estimated on the assumed date of
grant using the following assumptions:                                          

                                                                [Download Table]
                                                                             
Risk-free interest rate.....................................          5%     
Dividend yield..............................................          0%     
Volatility..................................................         30%     
Weighted average expected life..............................          8 years

A pro forma summary of the status of the Plan as of the Offering is as
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                                                    NINE MONTHS      
                                                           YEAR ENDED                  ENDED         
                                                       DECEMBER 31, 1997         SEPTEMBER 30, 1998  
                                                       ------------------        ------------------  
                                                                                                     
Options outstanding at Offering date..................      1,200,000             1,200,000          
Weighted average fair value of options granted on                                                    
  Offering date.......................................          $8.49 per share       $8.49 per share
Pro forma net income..................................          $20,798,000           $20,465,000    
Pro forma earnings per share..........................          $0.69                 $0.68          

C.  EARNINGS PER SHARE                                                          

For purposes of the pro forma basic and diluted earnings per share    
calculation, the denominator represents the shares expected to be outstanding   
immediately after the Offering, including the sale of 6 million shares of Class 
A Common Stock.                                                                 

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------------------------------------------------------                          
------------------------------------------------------                          

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY  
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN  
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH 
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE CLASS A COMMON STOCK IN ANY  
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER 
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE      
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS  
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS 
OF THE COMPANY SINCE THE DATE HEREOF.                                           

------------------------

TABLE OF CONTENTS 

                                                                [Download Table]

                                        PAGE
                                        ----
                                            
Prospectus Summary....................    3 
Risk Factors..........................   12 
Special Note Regarding Forward-Looking      
  Information.........................   18 
The Company...........................   19 
Use of Proceeds.......................   21 
Dividend Policy.......................   21 
Dilution..............................   22 
Capitalization........................   23 
Selected Historical and Pro Forma           
  Financial Data......................   24 
Management's Discussion and Analysis        
  of Financial Condition and Results        
  of Operations.......................   27 
Business..............................   34 
Management............................   49 
Ownership of the Common Stock.........   56 
Certain Relationships and Related           
  Transactions........................   56 
Description of Capital Stock..........   60 
Shares Eligible for Future Sale.......   67 
Underwriting..........................   68 
Legal Matters.........................   71 
Experts...............................   71 
Available Information.................   71 
Index to Consolidated Financial             
  Statements..........................  F-1 

UNTIL MARCH 7, 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY    
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS 
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR      
SUBSCRIPTIONS.                                                                  
------------------------------------------------------                          
------------------------------------------------------                          
------------------------------------------------------                          
------------------------------------------------------                          

6,000,000 SHARES

[GABELLI LOGO]

CLASS A COMMON STOCK
------------------------

PROSPECTUS

------------------------

MERRILL LYNCH & CO. 

SALOMON SMITH BARNEY

GABELLI & COMPANY, INC. 

FEBRUARY 10, 1999 
------------------------------------------------------                          
------------------------------------------------------                          

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B1’ Filing		Date		First		Last			Other Filings
		4/30/13		58		83
		1/1/04		58
		12/31/03		58					10-K,  10-Q
		5/31/03		82
		1/1/03		58
		12/31/02		58					10-K,  10-K/A,  4,  5
		1/2/02		9		85
		1/2/00		82
		1/1/00		16		32
		12/31/99		16		33			10-K
		6/15/99		32
		3/7/99		98
		2/17/99		1
Filed on:		2/11/99
		2/10/99		1		98			S-1/A
		1/1/99		50
		12/31/98		2		58			10-K
		9/30/98		3		97
		6/1/98		49
		5/12/98		82
		4/3/98		85
		3/11/98		73
		1/2/98		82
		12/31/97		2		97
		12/15/97		32
		12/5/97		58		59
		9/30/97		9		72
		4/15/97		78		81
		4/14/97		4		35
		1/1/97		30		81
		12/31/96		2		85
		9/30/96		82
		8/12/96		59
		12/31/95		2		84
		1/1/95		81
		12/31/94		2		76
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