ALPHA G INC, S-1/A, 1998-11-24

ALPHA G INC
S-1/A, 1998-11-24
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1998.

REGISTRATION NO. 333-51023
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

GABELLI ASSET MANAGEMENT INC.*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
NEW YORK 6211 13-4007862
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

ONE CORPORATE CENTER
RYE, NEW YORK 10580
(914) 921-3700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

JAMES E. MCKEE, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
GABELLI ASSET MANAGEMENT INC.
ONE CORPORATE CENTER
RYE, NEW YORK 10580
(914) 921-3700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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

COPIES TO:

<TABLE>
<S> <C>
RICHARD T. PRINS, ESQ. GARY S. SCHPERO, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP SIMPSON THACHER & BARTLETT
919 THIRD AVENUE 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017
(212) 735-3000 (212) 455-2000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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

* THE REGISTRANT IS CURRENTLY NAMED ALPHA G, INC. PRIOR TO THE EFFECTIVE DATE OF
THIS REGISTRATION STATEMENT, THE REGISTRANT WILL AMEND ITS CERTIFICATE OF
INCORPORATION TO CHANGE ITS NAME TO "GABELLI ASSET MANAGEMENT INC."
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED NOVEMBER 24, 1998

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. It is currently estimated that the initial public offering price
per share of Class A Common Stock will be between $16.00 and $19.00. For a
discussion of the factors to be considered in determining the initial public
offering price, see "Underwriting." Application will be made to list the shares
of Class A Common Stock on the New York Stock Exchange under the symbol
" ."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 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.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Per Share................................... $ $ $
- ----------------------------------------------------------------------------------------------------------------------
Total(3).................................... $ $ $
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(2) Before deducting expenses payable by the Company estimated at $ .

(3) The Company has granted the several Underwriters an option, exercisable
within 30 days after the date hereof, to purchase up to an additional
900,000 shares of Class A Common Stock 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 $ ,
$ and $ , 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 , 1998.
------------------------
Joint Book-Running Managers
MERRILL LYNCH & CO. SALOMON SMITH BARNEY
------------------

GABELLI & COMPANY, INC.
------------------------
The date of this Prospectus is , 1998.
<PAGE> 3

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 AND THE PURCHASE
OF THE CLASS A COMMON STOCK OF THE COMPANY TO COVER SYNDICATE SHORT POSITIONS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 4

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
immediately preceding the Offering, the Company will issue 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 its operating assets and
liabilities, at which time GFI will be renamed Gabelli Group Capital Partners,
Inc. ("Gabelli Partners"). Unless otherwise indicated, the 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, references to the "Company" mean
Gabelli Asset Management Inc., its predecessors 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. At November 20, 1998, the Company
had approximately $15.5 billion of assets under management, 89% 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 November 20, 1998, the Company had $7.9 billion of assets
under management in open-end mutual funds and closed-end funds, representing
approximately 51% 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 November 20, 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 38% of such assets in open-end
Mutual Funds ranked "five stars" and 40% 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 November 20, 1998, the Company had $7.4 billion of
assets in approximately 950 separate accounts, representing approximately 48%
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 November 20, 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.

- - 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 $149 million of assets, or approximately
1% of total assets under management, at November 20, 1998.

3
<PAGE> 5

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 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. Prior to the consummation of the Offering, the
Company will be 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 a brokerage firm 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
---------------------------------------------------

<TABLE>
<CAPTION>
U.S. EQUITIES: U.S. FIXED INCOME: GLOBAL AND INTERNATIONAL EQUITIES:
-------------- ------------------ ----------------------------------
<S> <C> <C>
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)
</TABLE>

<TABLE>
<CAPTION>
CONVERTIBLE SECURITIES: U.S. BALANCED: ALTERNATIVE PRODUCTS:
----------------------- -------------- ---------------------
<S> <C> <C>
U.S. Convertible Securities Balanced Growth Risk Arbitrage
Global Convertible Securities Balanced Value Merchant Banking
Fund of Funds
</TABLE>

- ---------------
(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.

4
<PAGE> 6

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 more than 20 years, the Company
has consistently 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 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 November 20, 1998, the
Company was actively 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.

5
<PAGE> 7

- - 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 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 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.

6
<PAGE> 8

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. 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.

Proposed NYSE Symbol............
- ---------------
(1) Excludes 1,500,000 shares of Class A Common Stock reserved for issuance
under the 1998 Stock Award and Incentive Plan of the Company, including
1,125,000 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 -- 1998 Stock Award and Incentive Plan."

(2) All of the Class B Common Stock is owned by Gabelli Partners, which is
majority-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 10.

7
<PAGE> 9

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

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
the Company (which have been carved out from the 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 the Company 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
ending December 31, 1998.

The unaudited pro forma income statement data gives effect to the Formation
Transactions, including the lower management fee and increase in interest
expense as if the Employment Agreement (as defined herein) (see Note M to the
Consolidated Financial Statements) had been in effect for the year ended
December 31, 1997 and nine months ended September 30, 1998.

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."

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997(1) 1998(1)
------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
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................. 5,784 6,537 7,530 8,491 9,447 6,502 8,881
Other operating expenses....... 12,342 13,745 16,684 16,339 16,901 12,601 17,542
------- ------- ------- ------- -------- ------- -------
Total expenses............... 49,876 56,517 63,598 66,644 71,608 52,241 68,125
------- ------- ------- ------- -------- ------- -------
Operating income................. 20,505 24,928 25,712 31,524 33,668 22,579 34,184
------- ------- ------- ------- -------- ------- -------
Other income:
Net gain from investments...... 1,990 462 3,197 1,172 3,004 2,585 757
Interest and dividend income,
net.......................... 643 760 1,213 1,268 1,115 842 584
------- ------- ------- ------- -------- ------- -------
Total other income, net...... 2,633 1,222 4,410 2,440 4,119 3,427 1,341
------- ------- ------- ------- -------- ------- -------
Income before charge in lieu of
income taxes and minority
interest....................... 23,138 26,150 30,122 33,964 37,787 26,006 35,525
Charge in lieu of income
taxes........................ 8,813 10,044 11,517 13,402 14,935 10,278 14,089
Minority interest.............. 1,600 1,884 2,214 2,380 1,529 759 1,043
------- ------- ------- ------- -------- ------- -------
Net income....................... $12,725 $14,222 $16,391 $18,182 $ 21,323 $14,969 $20,393
======= ======= ======= ======= ======== ======= =======
Net income per share:
Basic and diluted.............. $ 0.53 $ 0.59 $ 0.68 $ 0.76 $ 0.89 $ 0.62 $ 0.85
======= ======= ======= ======= ======== ======= =======
Weighted average shares
outstanding:
Basic and diluted.............. 24,000 24,000 24,000 24,000 24,000 24,000 24,000
======= ======= ======= ======= ======== ======= =======
</TABLE>

8
<PAGE> 10

<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED
AS OF OR FOR THE YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ -----------------
1993 1994 1995 1996 1997 1997(1) 1998(1)
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT ASSETS UNDER MANAGEMENT)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets.................. $37,769(1) $44,647 $51,648 $57,027 $68,212 $62,490 $91,671
Total liabilities and minority
interest.................... 20,033(1) 26,033 31,875 34,106 37,926 37,960 46,671
------- ------- ------- ------- ------- ------- -------
Total stockholder's equity.... $17,736(1) $18,614 $19,773 $22,921 $30,286 $24,530 $45,000
======= ======= ======= ======= ======= ======= =======
OTHER FINANCIAL DATA (UNAUDITED)
Adjusted EBITDA(2)............ $23,319 $26,317 $30,461 $34,388 $38,238 $26,432 $36,187
======= ======= ======= ======= ======= ======= =======
Assets under management (at
period end, in millions)(3):
Mutual Funds.............. $ 3,684 $ 3,604 $ 4,116 $ 4,209 $ 6,146 $ 5,892 $ 7,034
Separate Accounts......... 4,460 4,275 5,051 5,200 7,013 6,760 6,720
Partnerships.............. 67 103 112 116 138 134 147
------- ------- ------- ------- ------- ------- -------
Total.................. $ 8,211 $ 7,982 $ 9,279 $ 9,525 $13,297 $12,786 $13,901
======= ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998(1)
------------ -------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
UNAUDITED PRO FORMA DATA(4)

Income before charge in lieu of income taxes and minority
interest, as reported................................... $ 37,787 $ 35,525
Pro forma interest expense................................ (3,000) (2,250)
Pro forma management fee adjustment....................... 5,023 4,665
Pro forma provision for income taxes...................... (15,735) (15,047)
Pro forma minority interest............................... (1,677) (1,228)
-------- --------
Pro forma net income...................................... $ 22,398 $ 21,665
======== ========
Pro forma net income per share:
Basic..................................................... $ 0.75 $ 0.72
======== ========
Diluted................................................... $ $
======== ========
Pro forma weighted average shares outstanding:
Basic..................................................... 30,000 30,000
======== ========
Diluted...................................................
======== ========
Pro forma Adjusted EBITDA(2)(4)............................. $ 43,261 $ 40,852
======== ========
</TABLE>

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

(2) Adjusted and pro forma Adjusted EBITDA is defined as earnings before
interest expense, taxes, depreciation and amortization and minority
interest. The Company believes that Adjusted EBITDA is a measure commonly
used by analysts, investors and others interested in the asset management
industry. Accordingly, this information has been disclosed herein to permit
a more complete analysis of the Company's operating performance. Adjusted
and pro forma Adjusted EBITDA should not be considered in isolation or as
substitutes for net income or other financial measurements derived from the
consolidated statements of income or cash flows prepared in accordance with
generally accepted accounting principles as a measure of the profitability
or liquidity of the Company. Adjusted and pro forma Adjusted EBITDA do not
take into account other commitments and, accordingly, are not necessarily
indicative of amounts that may be available for discretionary uses.

(3) Effective April 14, 1997, Gabelli Fixed Income, LLC was restructured such
that the Company's ownership increased from 50% to 80.1%, thereby causing
Gabelli Fixed Income, LLC to become a consolidated subsidiary of the
Company. Accordingly, for periods after April 14, 1997, the assets managed
by Gabelli Fixed Income, LLC are included in the Company's assets under
management. If the assets managed by Gabelli Fixed Income, LLC 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.

(4) The unaudited pro forma income statement data gives effect to the lower
management fee and increase in interest expense as if the Employment
Agreement (see Note M to the Consolidated Financial Statements of the
Company) had been in effect for the year ended December 31, 1997 and nine
months ended September 30, 1998. These adjustments include the effect of the
interest expense on the $50 million payable to Mr. Gabelli in 2002, the
lower management fee payable to Mr. Gabelli of 10% of pre-tax profits and
the effect thereon of the interest expense on the $50 million payable, and
the effects of these adjustments on income tax expense and minority
interest. Under the terms of the Employment Agreement, the Company will pay
Mr. Gabelli $50 million, on January 2, 2002, with interest payable quarterly
at an annual rate of 6%. This payment, net of tax benefit, will amount to
$ per share (based on the expected weighted average number of shares
outstanding in the first quarter of 1999 of million) and is expected to be
charged to the Company's earnings upon the effective date of the Employment
Agreement, which is expected to occur in the first quarter of 1999. If the
Employment Agreement had been effective at September 30, 1998, the total
assets, total liabilities and minority interest, and total stockholder's
equity would have been approximately $111.5 million, $96.7 million and $14.8
million, respectively. 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
stockholder's equity. The unaudited pro forma data presented above gives
effect to the shares issued in the Offering but does not give effect to
proceeds received from the Offering.

9
<PAGE> 11

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 majority
ownership of Gabelli Partners, 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 and members of his immediate family
who are officers or directors of the Company have entered into written
agreements to limit their 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 funds
(consisting solely of investors as of the consummation of the Offering) and
accounts currently managed by Mr. Gabelli outside the Company under performance
fee arrangements and (b) successor funds and accounts which serve the same
investors as the funds and accounts referred to in clause (a), operate according
to an investment style similar to such other accounts or funds and which is not
used at the Company, and are subject to performance fee arrangements. Members of
Mr. Gabelli's immediate family who are officers or directors of the Company have
undertaken that so long as they are officers or directors of the Company, they
shall not provide investment management services for compensation other than in
their capacities as officers or employees of the Company except for (a) those
funds and accounts currently managed by them outside the Company and (b)
successor funds and accounts which serve a similar investor base as the funds
and accounts referred to in clause (a) and operate according to an investment
style similar to such other accounts or funds and which is not used at the
Company. References to the "Permissible Accounts" mean the funds and accounts
managed outside the Company which are permitted under the agreements described
above in this paragraph. To the extent that such activities are not prohibited
under the foregoing agreements, Mr. Gabelli and members of his immediate family
who are officers and directors of the Company intend to continue devoting time
to activities outside the Company, including managing their own assets and their
families' assets, managing or controlling companies in other industries and
managing assets for other investors through the Permissible Accounts
(approximately $ 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 and their affiliates 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 stockholder approval. Pursuant
to the Certificate of Incorporation, purchasers of Class A Common Stock in the
Offering or otherwise will be deemed to have notice of and to have consented to
these provisions. See "Description of Capital Stock --

10
<PAGE> 12

Certificate of Incorporation and Bylaw Provisions -- Overview of Corporate
Opportunity and Conflict of Interest Policies."

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
stockholders, either because such opportunities were not Company opportunities
at the time they arose or 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.

11
<PAGE> 13

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 has approximately 950 Separate Accounts, 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
advisory agreements and distribution arrangements. Investment advisory
agreements and distribution arrangements with the Mutual Funds are terminable
without penalty on 60 days' notice and must be approved and renewed annually by
the disinterested members of each Fund's board of directors or trustees or its
shareholders, as required by law. 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.

12
<PAGE> 14

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
Third-Party Distribution Program net assets in the Gabelli and Gabelli Westwood
families of funds are attributable to two NTF Programs. Further, 88% 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.

13
<PAGE> 15

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 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. The Company has initiated
communications with counterparties, intermediaries, subcontractors and vendors
with whom it has important financial or operational relationships to determine
the extent to which they are vulnerable to the Year 2000 issue. The Company has
not yet received sufficient information from all parties about their remediation
plans to predict the outcome of their efforts.

If 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.

The Company is implementing a plan to prepare its computer systems to be
Year 2000 compliant and expects to complete this process with respect to its
mission critical systems in the first half of 1999. 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 timing
and cost of completing its program will be accurate.

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

14
<PAGE> 16

Common Stock and vice versa. The differential in the voting rights and the
ability of the Company to issue 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 will be 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 $13.83 per share, based on an
assumed 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 -- 1998 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
Gabelli Partners described below, Gabelli Partners could sell any or all of the
shares of Class B Common Stock owned by it from time to time for any reason. See
"Shares Eligible for Future Sale." Gabelli Partners has agreed with the Company
that it 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. In addition, the Company and
Gabelli Partners have agreed with the Underwriters that they will not offer,
sell or otherwise dispose of any shares of Common Stock, other than in the
Offering, or any security convertible into or exchangeable or exercisable for
shares of Common Stock 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. No
prediction can be made as to the effect, if any,

15
<PAGE> 17

that future sales or distributions of Class B Common Stock by Gabelli Partners
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.

16
<PAGE> 18

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. Immediately prior to the closing of the Offering,
the Company will issue 24 million shares of its Class B Common Stock to Gabelli
Partners, formerly known as Gabelli Funds, Inc., in exchange for substantially
all of the operating assets and liabilities of Gabelli Partners. As a result,
Gabelli Partners, which is majority-owned by Mr. Gabelli with the balance owned
by the Company's professional staff and other individuals, will become the sole
stockholder of the Company prior to the consummation of the Offering. At such
time, one of Gabelli Partners' 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, Gabelli Partners 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
Gabelli Partners. See "Management -- Employment Agreements" and "Certain
Relationships and Related Transactions -- The Formation Transactions."

17
<PAGE> 19

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, LLC not held by the
Company is owned by members of senior management of Gabelli Fixed Income,
LLC.

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.

18
<PAGE> 20

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 at an assumed public offering price of
$17.50 per share (the midpoint of the range set forth on the cover page of this
Prospectus) after deducting underwriting commissions and discounts and the
estimated expenses of the Offering, are expected to be approximately $97 million
($112 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.

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."

19
<PAGE> 21

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 (at
an assumed initial public offering price of $17.50 per share (the midpoint of
the range set forth on the cover page of this Prospectus)), 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 $110.1 million, or $3.67 per share, calculated as follows:

<TABLE>
<S> <C> <C>
Assumed 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........................... 3.13
------
As adjusted pro forma net tangible book value per share after the
Offering.......................................................... 3.67
------
Dilution in pro forma net tangible book value per share to new
investors (2)(3).................................................. $13.83
======
</TABLE>

- ---------------
(1) Assumed initial public offering price 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 assumed
initial Class A 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 1,125,000 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 -- 1998
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 $124.9 million
or $4.04 per share, the immediate increase in pro forma net tangible book value
of shares owned by existing shareholders would be $3.50 per share, and the
immediate dilution to purchasers of shares of Class A Common Stock in the
Offering would be $13.46 per share.

20
<PAGE> 22

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
Offering and the Formation Transactions. This table should be read in
conjunction with the Consolidated Financial Statements 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."

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Payable to related party(a)............................... $ -- $ 50,000
Capital lease obligation.................................. 3,621 3,621
------- --------
Total debt............................................. 3,621 53,621
Minority Interest........................................... 11,754 11,754
Stockholders' Equity:
Preferred Stock, $.001 par value; authorized 10,000,000
shares; none issued.................................... -- --
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 24
Additional paid-in capital................................ 23,172 120,166
Retained earnings (accumulated deficit)(a)................ 21,804 (8,366)
------- --------
Total stockholders' equity............................. 45,000 111,830
------- --------
Total capitalization.............................. $60,375 $177,205
======= ========
</TABLE>

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

(a) Reflects 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, is expected to be charged to
the Company's earnings in the first quarter of 1999.

21
<PAGE> 23

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

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 the Company (which have been carved out from the
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 the Company 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 ending December 31, 1998.

The unaudited pro forma income statement data gives effect to the Formation
Transactions, including the lower management fee and increase in interest
expense as if the Employment Agreement (see Note M to the Consolidated Financial
Statements) had been in effect for the year ended December 31, 1997 and nine
months ended September 30, 1998.

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."

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997(1) 1998(1)
------- ------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
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......................... 5,784 6,537 7,530 8,491 9,447 6,502 8,881
Other operating expenses............... 12,342 13,745 16,684 16,339 16,901 12,601 17,542
------- ------- ------- ------- ------- ------- --------
Total expenses....................... 49,876 56,517 63,598 66,644 71,608 52,241 68,125
------- ------- ------- ------- ------- ------- --------
Operating income......................... 20,505 24,928 25,712 31,524 33,668 22,579 34,184
------- ------- ------- ------- ------- ------- --------
Other income:
Net gain from investments.............. 1,990 462 3,197 1,172 3,004 2,585 757
Interest and dividend income, net...... 643 760 1,213 1,268 1,115 842 584
------- ------- ------- ------- ------- ------- --------
Total other income, net.............. 2,633 1,222 4,410 2,440 4,119 3,427 1,341
------- ------- ------- ------- ------- ------- --------
Income before charge in lieu of income
taxes and minority interest............ 23,138 26,150 30,122 33,964 37,787 26,006 35,525
Charge in lieu of income taxes........... 8,813 10,044 11,517 13,402 14,935 10,278 14,089
Minority interest........................ 1,600 1,884 2,214 2,380 1,529 759 1,043
------- ------- ------- ------- ------- ------- --------
Net income............................... $12,725 $14,222 $16,391 $18,182 $21,323 $14,969 $ 20,393
======= ======= ======= ======= ======= ======= ========
Net income per share:
Basic and diluted...................... $ 0.53 $ 0.59 $ 0.68 $ 0.76 $ 0.89 $ 0.62 $ 0.85
======= ======= ======= ======= ======= ======= ========
Weighted average shares outstanding:
Basic and diluted...................... 24,000 24,000 24,000 24,000 24,000 24,000 24,000
======= ======= ======= ======= ======= ======= ========
</TABLE>

22
<PAGE> 24

Total assets.................. $37,769(1) $44,647 $51,648 $57,027 $68,212 $62,490 $91,671
Total liabilities and minority
interest.................... 20,033(1) 26,033 31,875 34,106 37,926 37,960 46,671
------- ------- ------- ------- ------- ------- -------
Total stockholder's equity.... $17,736(1) $18,614 $19,773 $22,921 $30,286 $24,530 $45,000
======= ======= ======= ======= ======= ======= =======
OTHER FINANCIAL DATA (UNAUDITED)
Adjusted EBITDA(2)............ $23,319 $26,317 $30,461 $34,388 $38,238 $26,432 $36,187
======= ======= ======= ======= ======= ======= =======
Assets under management (at
period end in millions)(3):
Mutual Funds............. $ 3,684 $ 3,604 $ 4,116 $ 4,209 $ 6,146 $ 5,892 $ 7,034
Separate Accounts........ 4,460 4,275 5,051 5,200 7,013 6,760 6,720
Partnerships............. 67 103 112 116 138 134 147
------- ------- ------- ------- ------- ------- -------
Total.................. $ 8,211 $ 7,982 $ 9,279 $ 9,525 $13,297 $12,786 $13,901
======= ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998(1)
------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
UNAUDITED PRO FORMA DATA(4)

- ---------------
(1) Unaudited.
(2) Adjusted and pro forma Adjusted EBITDA is defined as earnings before
interest expense, taxes, depreciation and amortization and minority
interest. The Company believes that Adjusted EBITDA is a measure commonly
used by analysts, investors and others interested in the asset management
industry. Accordingly, this information has been disclosed herein to permit
a more complete analysis of the Company's operating performance. Adjusted
and pro forma Adjusted EBITDA should not be considered in isolation or as
substitutes for net income or other financial measurements derived from the
consolidated statements of income or cash flows prepared in accordance with
generally accepted accounting principles as a measure of the profitability
or liquidity of the Company. Adjusted and pro forma Adjusted EBITDA do not
take into account other commitments and, accordingly, are not necessarily
indicative of amounts that may be available for discretionary uses.
(3) Effective April 14, 1997, Gabelli Fixed Income, LLC was restructured such
that the Company's ownership increased from 50% to 80.1%, thereby causing
Gabelli Fixed Income, LLC to become a consolidated subsidiary of the
Company. Accordingly, for periods after April 14, 1997, the assets managed
by Gabelli Fixed Income, LLC are included in the Company's assets under
management. If the assets managed by Gabelli Fixed Income, LLC 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.

(4) The unaudited pro forma income statement data gives effect to the lower
management fee and increase in interest expense as if the Employment
Agreement (see Note M to the Consolidated Financial Statements of the
Company) had been in effect for the year ended December 31, 1997 and nine
months ended September 30, 1998. These adjustments include the effect of the
interest expense on the $50 million payable to Mr. Gabelli in 2002, the
lower management fee payable to Mr. Gabelli of 10% of pre-tax profits and
the effect thereon of the interest expense on the $50 million payable, and
the effects of these adjustments on income tax expense and minority
interest. Under the terms of the Employment Agreement, the Company will pay
Mr. Gabelli $50 million on January 2, 2002, with interest payable quarterly
at an annual rate of 6%. This payment, net of tax benefit, will amount to
$ per share (based on the expected weighted average number of shares
outstanding in the first quarter of 1999 of million) and is expected to be
charged to the Company's earnings upon the effective date of the Employment
Agreement, which is expected to occur in the first quarter of 1999. If the
Employment Agreement had been effective at September 30, 1998, the total
assets, total liabilities and minority interest, and total stockholder's
equity would have been approximately $111.5 million, $96.7 million and $14.8
million, respectively. 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
stockholder's equity. The unaudited pro forma data presented above gives
effect to the shares issued in the Offering but does not give effect to
proceeds received from the Offering.

23
<PAGE> 25

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 the Company and the notes thereto included
elsewhere in this Prospectus. The Consolidated Financial Statements of the
Company (which have been carved out from the consolidated financial statements
of GFI) include the accounts of the following majority-owned or controlled
subsidiaries of the Company: Funds Adviser (100%-owned), Gabelli Asset
Management Company (100%-owned), GSI (76.6%-owned), Gabelli & Company
(76.6%-owned), Gabelli Fixed Income, Inc. (100%-owned), Gabelli Fixed Income,
LLC (80.1%-owned) and Gabelli Advisers, Inc. (40.9%-owned, combined with the
voting interests of affiliated parties, represents voting control).

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. See "Business -- Investment
Management Agreements."

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.

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. Immediately preceding the
consummation of the Offering, the Company and Mr. Gabelli will enter into an
Employment Agreement (the "Employment Agreement"). Pursuant to the Employment
Agreement, 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

24
<PAGE> 26

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." As a result of the Employment
Agreement, the Company expects to incur a non-recurring charge of $50 million,
before a tax benefit of approximately $20 million, in the first quarter of 1999.

Other operating expenses include product distribution and promotion costs,
clearing charges and fees for the Company'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, as well as net gain from investments (which
includes both realized and unrealized gains) is derived from proprietary
investments of the Company's capital in various public and private investments.

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

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 the Company 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 $1.1 billion, or 19%, from September 30,
1997. This increase represents $1.2 billion in net cash inflows offset by $100
million from lower investment performance. 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 margin equity portfolios.

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 results 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 87%, 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 $68.1 million, an
increase of $15.9 million, or 30%, from $52.2 million in the comparable period
of 1997. Total expenses as a percentage of total revenues declined to 66.6% from
69.8% since a significant portion of total expenses are variable in nature and
increase or decrease as revenues grow or decline. Compensation costs 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 $8.9 million for the nine
months ended September 30, 1998, an increase of $2.4 million, or 37%, from $6.5
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 $17.5 million for the nine months ended September 30,
1998, an increase of approximately $4.9 million, or 39%, from $12.6 million for
the comparable period in 1997. Mutual fund administration and distribution

25
<PAGE> 27

expenses accounted for more than $3.7 million, or 76%, of this increase and are
directly related to the Company's growth of assets under management.

Net gain from investments, which is derived from the Company's proprietary
investment portfolio, was approximately $0.8 million for the nine months ended
September 30, 1998 compared to a net gain of $2.6 million for the nine months
ended September 30, 1997. This decline was attributable to lower investment
returns from the Company's investments. Interest and dividend income declined to
$0.6 million for the first nine months of 1998 compared to $0.8 million in the
same 1997 period.

The charge in lieu of income taxes increased to $14.1 million for the nine
months ended September 30, 1998 from $10.3 million for the nine months ended
September 30, 1997 in line with the increase in income before charge in lieu of
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 the Company's 76.6%-owned subsidiary, GSI and the Company's 40.9%
economic interest in Gabelli Advisers, Inc.

Adjusted EBITDA (as defined herein) increased approximately 37%, or
$9.8 million, to $36.2 million for the nine months ended September 30, 1998 as
compared to the first nine months of 1997. This increase is directly related to
the Company's increased operating income which rose 51% to $34.2 million for the
first nine months of 1998 from $22.6 million for the same period in 1997.

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

Total revenues for the Company 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 $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, LLC becoming a consolidated subsidiary on April 14,
1997 when the Company 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, LLC 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 $71.6 million, from $66.6 million in
1996, an increase of $5.0 million, or approximately 7%. Approximately one-third
of this increase was associated with the Company's acquisition of a controlling
interest in Gabelli Fixed Income, LLC in April 1997 and the inclusion of its
expenses in the Company'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

26
<PAGE> 28

profits to $9.4 million in 1997 from $8.5 million in 1996, an increase of
approximately 11%. Other operating expenses were $16.9 million in 1997 compared
to $16.3 million in 1996, an increase of approximately 3%.

Net gain from investments, which is derived from the Company's proprietary
investment portfolio, was approximately $3.0 million in 1997, compared to $1.2
million for 1996, an increase of approximately $1.8 million. Interest and
dividend income decreased by approximately $0.2 million in 1997 to $1.1 million
compared with $1.3 million in 1996. This decrease was primarily a result of the
Company'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.

The charge in lieu of income taxes increased to $14.9 million in 1997 from
$13.4 million in 1996 consistent with the increase in income before charge in
lieu of income taxes and minority interest.

Minority interest declined in 1997 by $0.9 million from $2.4 million in
1996 as a result of Gabelli Asset Management Company becoming a wholly owned
subsidiary of the Company on January 1, 1997. Minority interest of $1.5 million
in 1997 represents income attributable to the minority interests of the
Company's then 76.1% owned subsidiary, GSI, the Company's 80.1% owned
subsidiary, Gabelli Fixed Income, LLC and the Company's then 51.1% economic
interest in Gabelli Advisers, LLC (now Gabelli Advisers, Inc.).

Adjusted EBITDA (as defined herein) increased approximately $3.9 million to
$38.2 million in 1997 from $34.4 million in 1996, both as a result of the
Company's increased operating income and net gain from investments.

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

Total revenues for the Company 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.

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 the Company'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 the
Company 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 $66.6 million, from $63.6 million in
1995, an increase of $3.0 million, or approximately 5%, 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 decreased approximately $0.4 million or 2% to
$16.3 million in 1996 from $16.7 million in 1995.

Net gain from investments, which is derived from the Company's proprietary
investment portfolio, was approximately $1.2 million in 1996 compared to $3.2
million in 1995, a decline of approximately $2.0 million. This decline was
attributable to lower investment and market related gains from the Company's
investments including its investments in affiliated partnerships. Interest and
dividend income remained relatively unchanged at $1.3 million in 1996 compared
to $1.2 million in 1995.

27
<PAGE> 29

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

Adjusted EBITDA (as defined herein) increased approximately $3.9 million,
or approximately 13%, to $34.4 million in 1996 from $30.5 million in 1995 as a
result of the Company's increased operating income.

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,
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 $12.0 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 $97 million ($112 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 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.

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."

28
<PAGE> 30

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 September 30, 1998, the Company
had approximately $13.9 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 September 30, 1998, the Company had $7.0 billion of assets
under management in open-end mutual funds and closed-end funds, representing
approximately 51% 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 September 30, 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 5% of such assets in open-end
Mutual Funds ranked "five stars" and 72% 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 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 has further expanded its product
distribution by offering its open-end Mutual Funds through Third-Party
Distribution Programs, particularly NTF Programs.

- - SEPARATE ACCOUNTS: At September 30, 1998, the Company had $6.7 billion of
assets in approximately 950 separate accounts, representing approximately 48%
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 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 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 September 30, 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 $147 million of assets, or
approximately 1% of total assets under management, at September 30, 1998.

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.

29
<PAGE> 31

As of September 30, 1998, the Company had approximately $13.9 billion of
assets under management, consisting of $7.0 billion in the Mutual Funds, $6.7
billion in the Separate Accounts and $147 million in the Partnerships. The
Company's total assets under management grew from $2.1 billion as of December
31, 1987 to $13.3 billion as of December 31, 1997, which represents an average
annual growth rate of approximately 20% over the corresponding ten year period.
In addition, total assets under management grew by $0.6 billion, or
approximately 5%, for the first nine months of 1998, increasing total assets
under management to $13.9 billion at September 30, 1998. 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 and for the periods shown.

ASSETS UNDER MANAGEMENT

BY PRODUCT TYPE
(Dollars in millions)

<TABLE>
<CAPTION>
JANUARY 1,
1993
AT DECEMBER 31, TO SEPTEMBER 30,
---------------------------------------------------- 1998
SEPTEMBER 30, CAGR(A)
1992 1993 1994 1995 1996 1997 1998 (%)
------ ------ ------ ------ ------ ------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY:
Mutual Funds........ $2,673 $3,501 $3,391 $3,875 $3,969 $ 5,313 $ 6,048 15.3
Separate Accounts... 3,388 4,460 4,275 5,051 5,200 6,085 6,187 11.0
------ ------ ------ ------ ------ ------- ------- ----
Total Equity...... 6,061 7,961 7,666 8,926 9,169 11,398 12,235 13.0
------ ------ ------ ------ ------ ------- ------- ----
FIXED INCOME:
Money Market Mutual
Funds(b).......... 159 183 208 236 235 827 978 37.2
Bond Mutual
Funds(b).......... -- -- 5 5 5 6 8 --
Separate
Accounts(b)....... -- -- -- -- -- 928 533 --
------ ------ ------ ------ ------ ------- ------- ----
Total Fixed
Income.......... 159 183 213 241 240 1,761 1,519 48.0
------ ------ ------ ------ ------ ------- ------- ----
PARTNERSHIPS:
Partnerships........ 76 67 103 112 116 138 147 12.1
------ ------ ------ ------ ------ ------- ------- ----
Total Assets...... $6,296 $8,211 $7,982 $9,279 $9,525 $13,297 $13,901 14.8
====== ====== ====== ====== ====== ======= ======= ====
BREAKDOWN OF TOTAL
ASSETS:
Mutual Funds........ $2,832 $3,684 $3,604 $4,116 $4,209 $ 6,146 $ 7,034 17.1
Separate Accounts... 3,388 4,460 4,275 5,051 5,200 7,013 6,720 12.6
Partnerships........ 76 67 103 112 116 138 147 12.1
------ ------ ------ ------ ------ ------- ------- ----
Total Assets(b)... $6,296 $8,211 $7,982 $9,279 $9,525 $13,297 $13,901 14.8
====== ====== ====== ====== ====== ======= ======= ====
</TABLE>

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

(b) Effective April 14, 1997, the Company increased its ownership of Gabelli
Fixed Income, LLC from 50% to 80.1%, thereby causing Gabelli Fixed Income,
LLC to become a consolidated subsidiary of the Company. Accordingly, for
periods after April 14, 1997, the assets managed by Gabelli Fixed Income,
LLC are included in the Company's assets under management. If the assets
managed by Gabelli Fixed Income, LLC had been included for all periods
presented, assets under management would have been $7,837, $11,132, $9,004,
$10,793 and $11,082 at December 31, 1992, 1993, 1994, 1995 and 1996,
respectively, and the CAGR for total assets would have been 10.5%.

30
<PAGE> 32

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

<TABLE>
<S> <C> <C>
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
</TABLE>

The Mutual Funds have a long-term record of achieving high returns compared
against similar investment products. From December 31, 1987 through September
30, 1998, the Company's assets under management in Mutual Funds have increased
at a compound annual growth rate of approximately 28%. As of September 30, 1998,
one of the Gabelli funds and one of the Gabelli Westwood funds were ranked by
Morningstar as "five stars" (its highest rating) and five of the Gabelli funds
and one 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 September 30, 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
5% of such assets in open-end Mutual Funds ranked "five stars" and 72% 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 a brokerage firm 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:

31
<PAGE> 33

- - DIVERSIFIED PRODUCT OFFERINGS: Since the inception of its investment
management activities, the Company has sought to expand the breadth of it's
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.

BUSINESS STRATEGY

- - 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 September 30, 1998, the Company was actively 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.

32
<PAGE> 34

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.

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, LLC 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, LLC. Certain members of senior management of Gabelli Fixed Income,
LLC own a 19.9% equity interest in it.

33
<PAGE> 35

The following table lists the Mutual Funds, together with the Morningstar
overall rating (where rated, which ratings are not available for the
money-market Mutual Funds and the Mutual Funds containing 18% 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.

Gabelli International Growth Capital appreciation by No-load, 1.00 .25 06/30/95 25.2
Fund, Inc. investing primarily in Open-end,
(GRAPHIC - 5 STARS) equity securities of Diversified
foreign companies with
Caesar M.P. Bryan rapid growth in
revenues and earnings.

The Gabelli Growth Fund Capital appreciation No-load, 1.00 .25 04/10/87 1,405.5
(GRAPHIC - 4 STARS) from companies that Open-end,
have favorable, yet Diversified
Howard F. Ward undervalued, prospects
Donald C. Jenkins for earnings growth.
Invests in equity
securities of companies
that have above-average
or expanding market
shares and profit
margins.

The Gabelli Asset Fund Growth of capital as a No-load, 1.00 .25 03/03/86 1,373.7
(GRAPHIC - 4 STARS) primary investment Open-end,
objective, with current Diversified
Mario J. Gabelli income as a secondary
investment objective.
Invests in equity
securities of companies
selling at a
significant discount to
their private market
value.

The Gabelli Global High level of capital No-load, 1.00 .25 11/01/94 136.5
Telecommunications Fund appreciation through Open-end,
(GRAPHIC - 4 STARS) worldwide investments Non-diversified
in equity securities,
Mario J. Gabelli including the U.S.,
Marc J. Gabelli primarily in the
telecommunications
industry.

The Gabelli Equity Income Fund High level of total No-load, 1.00 .25 01/02/92 79.7
(GRAPHIC - 4 STARS) return with an emphasis Open-end,
on income producing Diversified
Mario J. Gabelli equities with yields
James Foung greater than the S&P
500 average.
</TABLE>

34
<PAGE> 36

The Gabelli Global Interactive High level of capital No-load, 1.00 .25 02/07/94 62.7
Couch Potato(R) Fund appreciation through Open-end,
(GRAPHIC - 4 STARS) investment in a Non-diversified
portfolio of equity
Marc J. Gabelli securities focused on
the entertainment,
media and
communications sectors.

The Gabelli Value Fund Inc. High level of capital Load, Open-end, 1.00 .25 09/29/89 676.5
(GRAPHIC - 3 STARS) appreciation from Non-diversified
undervalued equity
Mario J. Gabelli securities that are
held in a concentrated
portfolio.

The Gabelli Small Cap Growth High level of capital No-load, 1.00 .25 10/22/91 277.8
Fund appreciation from Open-end,
(GRAPHIC - 3 STARS) equity securities of Diversified
smaller companies with
Mario J. Gabelli market capitalization
of $500 million or
less.

The Gabelli ABC Fund Total returns from No-load, 1.00 .25 05/14/93 41.2
(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 Convertible High level of total No-load, 1.00 .25 02/03/94 6.9
Securities Fund return through a Open-end,
(GRAPHIC - 2 STARS) combination of current Non-diversified
income and capital
A. Hartswell Woodson, III appreciation through
investment in
convertible securities
of U.S. and non-U.S.
issuers.

Gabelli Gold Fund, Inc. Seeks capital No-load, 1.00 .25 07/11/94 13.1
(GRAPHIC - 1 STAR) appreciation and Open-end,
employs a value Diversified
Caesar M.P. Bryan approach to investing
primarily in equity
securities of
gold-related companies
worldwide.

Gabelli U.S. Treasury Money High current income Money Market, .30 n/a 10/01/92 314.4
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.
</TABLE>

35
<PAGE> 37

<TABLE>
<CAPTION>
NET ASSETS
AS OF
FUND ADVISORY 12B-1 INITIAL SEPTEMBER 30,
(MORNINGSTAR OVERALL RATING)(1) PRIMARY FUND FEES FEES OFFER 1998
PORTFOLIO MANAGER(S) INVESTMENT OBJECTIVE CHARACTERISTICS (%) (%) DATE ($ IN MILLIONS)
- ------------------------------- ----------------------- --------------- -------- ----- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gabelli Capital Asset Fund Capital appreciation No-load, .75 n/a 05/01/95 134.3
(Not rated) from equity securities Open-end,
of companies selling at Diversified
Mario J. Gabelli a significant discount Variable
to their private market Annuity
value.

The Gabelli Global Opportunity High level of capital No-load, 1.00 .25 05/11/98 5.0
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 Equity Fund Capital appreciation Retail Class: 1.00 .25 01/02/87 177.9
(GRAPHIC - 5 STARS) through a diversified No-load,
portfolio of equity Open-end, .50
Susan M. Byrne securities using a top- Diversified
down approach that Service Class:
begins with an analysis Load,
of the broad, long-term Open-end,
trends in the economy Diversified
and an assessment of
the business cycle
which identifies
sectors that will
benefit from that
environment.

Gabelli Westwood Balanced Fund Both capital Retail Class: .75 .25 10/01/91 142.8
(GRAPHIC - 4 STARS) appreciation and No-load,
current income using Open-end, .50
Susan M. Bryne portfolios containing Diversified
Patricia Fraze stocks, bonds, and cash Service Class:
as appropriate in light Load, Open-
of current economic and end,
business conditions. Diversified

Gabelli Westwood Intermediate Total return and No-load, .60 .25 04/06/93 7.6
Bond Fund current income, while Open-end,
(GRAPHIC - 3 STARS) limiting risk to Diversified
principal. Pursues
Patricia Fraze higher yields than
shorter maturity funds,
and has more price
stability than
generally higher
yielding long-term
funds.

Gabelli Westwood Long-term capital No-load, 1.00 .25 04/15/97 11.7
SmallCap appreciation, investing Open-end,
Equity Fund at least 65% of its Diversified
(Not rated) assets in equity
securities of companies
Lynda Calkin with market
capitalizations of $1
billion or less.
</TABLE>

36
<PAGE> 38

<TABLE>
<CAPTION>
NET ASSETS
AS OF
FUND ADVISORY 12B-1 INITIAL SEPTEMBER 30,
(MORNINGSTAR OVERALL RATING)(1) PRIMARY FUND FEES FEES OFFER 1998
PORTFOLIO MANAGER(S) INVESTMENT OBJECTIVE CHARACTERISTICS (%) (%) DATE ($ IN MILLIONS)
- ------------------------------- ----------------------- --------------- -------- ----- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gabelli Westwood Mighty Long-term capital No-load, 1.00 .25 05/11/98 4.8
Mites(SM) Fund appreciation by Open-end,
(Not rated) investing primarily in Diversified
equity securities with
Mario J. Gabelli market capitalizations
Marc J. Gabelli of $300 million or
Laura K. Linehan less.
Walter K. Walsh

Gabelli Westwood Realty Fund Long-term capital No-load, 1.00 .25 09/30/97 1.8
(Not rated) appreciation as well as Open-end,
current income, Diversified
Susan M. Bryne investing in equity
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, Inc. Current income with No-load, .30 n/a 01/01/88 345.0
- -- Domestic Prime Money Market preservation of Open-end,
Portfolio principal and liquidity Diversified
(Not rated) through investment in
U.S. Treasury
Judith A. Raneri securities and
corporate bonds.

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

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

The Gabelli Equity Trust Inc. Long-term growth of Closed-end, 1.00 n/a 08/14/86 1,212.8
(GRAPHIC - 3 STARS) capital by investing in Non-Diversified
equity securities. NYSE
Mario J. Gabelli Symbol: GAB

The Gabelli Convertible High total return from Closed-end, 1.00 n/a 07/03/89 116.8
Securities Fund, Inc. investing primarily in Diversified
(GRAPHIC - 3 STARS) convertible NYSE
instruments. Symbol: GCV
Mario J. Gabelli

The Gabelli Global Multimedia Long-term capital Closed-end, 1.00 n/a 11/15/94 141.2
Trust Inc. appreciation from Non-Diversified
(Not rated) equity investments in NYSE
global Symbol: GGT
Mario J. Gabelli telecommunications,
media, publishing and
entertainment holdings.
</TABLE>

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

(1) Morningstar proprietary ratings reflect historical risk adjusted performance
as of September 30, 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.

37
<PAGE> 39

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
$481 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.
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. 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 advisory 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 (ii) the Mutual Fund's shareholders and,
in either case, the vote of a majority of the Mutual Fund's directors who are
not parties to the agreement or "interested persons" of any such party. Each
agreement automatically terminates in the event of its "assignment" as defined
in the Investment Company Act or the Investment Advisers Act and may be
terminated without penalty by the Mutual Fund by giving the Company 60 days'
written notice, if the termination has been approved by a majority of the Mutual
Fund's directors or shareholders. The Offering will not constitute an
"assignment" for the purposes of the Investment Company Act or the Investment
Advisers Act. The Company may terminate an investment management agreement
without penalty on 60 days' written notice.

38
<PAGE> 40

SEPARATE ACCOUNTS

Since 1977, the Company has provided investment management services,
through its subsidiary Gabelli Asset Management Company, 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 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 79% 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 client's 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 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.

39
<PAGE> 41

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.

Each Distribution Agreement is subject to approval annually by the
directors or trustees of the applicable Mutual Fund, including a majority of the
directors or trustees who are not "interested persons" of the Mutual Fund or the
Company within the meaning of the Investment Company Act, cast in person at a
meeting called for the purpose of voting on such approval. Each Distribution
Agreement automatically terminates in the event of its assignment, as defined in
the Investment Company Act, and either party may terminate the agreement without
penalty upon 60 days' written notice.

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. Each Distribution
Agreement is subject to annual approval by a majority of the directors who are
not "interested" directors and have no direct or indirect financial interest in
the Distribution Agreement or any agreement under the Distribution Agreement,
cast in person at a meeting called for the purpose of voting on such approval.
Each Mutual Fund may terminate its Distribution Agreement or any agreement under
the Distribution Agreement at any time (if upon 60 days' written notice in the
case of such agreements) by a vote of the majority of the directors cast in
person at a meeting called for the purpose of voting on such termination or by a
vote of the holders of at least a majority of the outstanding voting securities
of the open-end Mutual Funds.

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 $95 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.

40
<PAGE> 42

The market for providing investment management services to institutional
and high net worth Separate Accounts is also highly competitive. Approximately
41% and 44% of the Company's investment management fee revenues for the nine
months ended September 30, 1998 and year ended December 31, 1997 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 all of his rights, title and
interests in and to the "Gabelli" name for use in connection with investment
management services. The Company has taken, and will continue to take, action to
protect its interests in these service marks.

STAFF

At November 15, 1998, the Company had a full-time staff of approximately
133 individuals, of whom 41 served in the portfolio management, research and
trading areas, 47 served in the marketing and shareholder servicing areas and 45
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, 1997, the principal properties leased by the Company for
use in its business were as follows:

<TABLE>
<CAPTION>
LOCATION LEASE EXPIRATION SQUARE FOOTAGE
-------- ---------------- --------------
<S> <C> <C>
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
</TABLE>

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,

41
<PAGE> 43

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 a
broker-dealer 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, LLC and Gabelli Asset Management Company) 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 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

42
<PAGE> 44

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,
Gabelli Asset Management Company 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.

43
<PAGE> 45

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.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
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.... 41 Vice President and Chief Financial Officer
Douglas R.
Jamieson........... 43 Executive Vice President and Chief Operating Officer of
Gabelli Asset Management Company
Bruce N. Alpert...... 46 Vice President and Chief Operating Officer of Funds Adviser
Charles C. Baum...... 56 Director
Richard B. Black..... 65 Director
Marc J. Gabelli...... 30 Director
Matthew R. Gabelli... 28 Director
Eamon M. Kelly....... 62 Director
Karl Otto Pohl....... 69 Director
</TABLE>

MARIO J. GABELLI has served as Chairman, Chief Executive Officer and Chief
Investment Officer of the Company and Gabelli Partners 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 also 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. Mr. Gabelli is the father of Marc J.
Gabelli and Matthew R. Gabelli.

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 Gabelli Asset Management Company, GSI, and Gabelli &
Company and is also 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 Gabelli Asset Management Company 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.

44
<PAGE> 46

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 as its Corporate Controller since 1984. Mr. Zuccaro was previously with
Shearson Lehman 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 Gabelli Asset Management Company 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. 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 is also Chairman and Chief Executive Officer of The Morgan Group, Inc.,
a transportation services company and subsidiary of Lynch Corporation, since
August 1992 as well 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; Chairman of the Board, President and Chief Executive Officer
of Maremont Corporation from 1967 to 1979, an automotive parts manufacturer with
world-wide distribution. 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.

MARC J. GABELLI has served as a director and as a Managing Director of the
Company since March 1996. Mr. Gabelli has served as Portfolio Manager of Gabelli
Asset Management Company and several of the Mutual Funds and has served as Vice
President of Research of Gabelli & Company. Mr. Gabelli also serves as President
of Gabelli Securities International Limited ("Gabelli Securities International")
and Gemini Capital Management Limited, an offshore investment advisor. Prior to
joining the Company in 1993, he worked at Lehman Brothers International from
June 1989 to February 1993, having research and arbitrage responsibilities. Mr.
Gabelli received a B.A. in Economics from Boston College. Marc J. Gabelli is the
son of Mario J. Gabelli and the brother of Matthew R. Gabelli.

MATTHEW R. GABELLI joined the Company's Board of Directors in January 1998
and has served in various capacities in equity capital markets for Gabelli &
Company since April 1998. Prior to joining the Company, Mr. Gabelli served as a
sales trader with the brokerage firm Cantor Fitzgerald & Co. Mr. Gabelli
received a

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<PAGE> 47

B.A. from Boston College in 1994. Matthew R. Gabelli is the son of Mario J.
Gabelli and the brother of Marc J. Gabelli.

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 (NSB) (the governing board of the National Science Foundation); and in
1994 to the National Security Education Board (NSEB). Dr. Kelly received a B.S.
from Fordham University, and his M.S. and PhD. 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.,
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
(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.

COMMITTEES OF THE BOARD OF DIRECTORS

Prior to completion of the Offering, the Company intends to establish an
Audit Committee and a Compensation Committee, each comprised of at least two
independent directors, an Executive Committee and a Nominating Committee. The
Audit Committee 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 will
administer the Company's Stock Option Plan and make recommendations to the Board
of Directors regarding compensation for the Company's executive officers. In the
absence of a meeting of the Board of Directors, the Executive Committee is
empowered to exercise all the powers and authority of the Board of Directors in
the management of the business affairs of the Company, except that the Executive
Committee is not permitted to take any action that committees are expressly
prohibited from taking under the terms of the Certificate of Incorporation, the
Bylaws, or the laws of the State of New York. The Nominating Committee 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 (the
"Non-Employee Directors") do not currently receive a fee for their service as
directors, although the Board of Directors may determine to pay such a fee 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, 1997 (the "Named Executive Officers"), for services rendered in all
capacities to the Company and its subsidiaries during 1997.

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<PAGE> 48

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------
OTHER ANNUAL ALL OTHER
NAMES AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION COMPENSATION
- ----------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Mario J. Gabelli..................... 1997 $ $ $ $
Chairman of the Board, Chief
Executive Officer and Chief
Investment Officer
Douglas R. Jamieson.................. 1997 $ $ $ $
Executive Vice President and Chief
Operating Officer of Gabelli Asset
Management Company
Bruce N. Alpert...................... 1997 $ $ $ $
Vice President and Chief Operating
Officer of Funds Adviser
Stephen G. Bondi..................... 1997 $ $ $ $
Executive Vice President -- Finance
and Administration
James E. McKee....................... 1997 $ $ $ $
Vice President, General Counsel and
Secretary
</TABLE>

EMPLOYMENT AGREEMENTS

Mr. Gabelli has entered into an Employment Agreement with the Company
relating to his service as Chairman of the Board, Chief Executive Officer, Chief
Investment Officer, 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, 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 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.
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%. The deductions for amounts paid under
the Employment Agreement are not expected to be limited by Section 162(m) of the
Code ("Section 162(m)") for federal income tax purposes. 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.

1998 STOCK AWARD AND INCENTIVE PLAN

In General

The Company, subject to the approval of its shareholders, has adopted the
Gabelli Asset Management Inc. 1998 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,

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<PAGE> 49

reorganization, merger, consolidation, spin-off, combination, repurchase, or
share 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 and will be
interpreted in a manner consistent with the requirements thereof.

The Plan will be administered by a committee established by the Board of
Directors, consisting of two or more persons each of whom shall be an "outside
director" within the meaning of Section 162(m) and 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) 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 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.

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, in the case of an incentive stock option, 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,
the 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 or Class B
Common Stock ("Restricted Stock") and a restricted stock unit award is an Award
of the right to receive cash or Class A Common Stock or Class B 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 or thereafter, which restrictions may
lapse separately or in combination at such times, under such circumstances
(including without limitation a specified period of employment or the
satisfaction of preestab-

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<PAGE> 50

lished performance goals), 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.

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.

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 stock options to acquire 1,125,000 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 vest three years from the date of consummation of the Offering.

ANNUAL PERFORMANCE INCENTIVE PLAN

Prior to the consummation of the Offering, the Board will adopt the Gabelli
Asset Management Inc. 1998 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 1998 and each of
calendar years 1999, 2000 and 2001, 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.

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<PAGE> 51

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 from among the following: (i) earnings per share growth; (ii)
revenue growth; (iii) growth in assets under management; (iv) increase in net
income; (v) return on equity; (vi) controlling expenses; and/or (vii) relative
performance versus a peer group of companies. 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.

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.

A portion of a participant's annual incentive bonus may be payable in
Restricted Stock or options. Any such shares of Restricted Stock will generally
vest over three years, and may be awarded at a discount from fair market value
at the time of such award in order to reflect the impact of the restrictions on
the value of such stock and the risk of forfeiture related to such vesting.
Dividends, if declared, will be payable on unvested shares of Restricted Stock.

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
such action will be effective without approval by the stockholders of the
Company to the extent necessary to qualify the amounts payable under the Annual
Plan as deductible under Section 162(m).

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<PAGE> 52

OWNERSHIP OF THE COMMON STOCK

Immediately prior to the consummation of the Offering, Mario J. Gabelli,
One Corporate Center, Rye, New York, through his majority ownership of Gabelli
Partners, will beneficially own all of the outstanding shares of Class B Common
Stock of the Company. Immediately after consummation of the Offering, Gabelli
Partners 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 majority ownership of Gabelli
Partners, 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.

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<PAGE> 53

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

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. Immediately prior to the closing of the
Offering, the Company will issue 24 million shares of its Class B Common Stock
to Gabelli Partners in exchange for substantially all of the operating assets
and liabilities of Gabelli Partners. As a result, Gabelli Partners, which is
majority owned by Mr. Gabelli, will become the sole shareholder of the Company
prior to the consummation of the Offering. At such time, one of Gabelli
Partners'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,
Gabelli Partners 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 majority ownership of Gabelli
Partners 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).

The Company and Mr. Gabelli will enter 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%. The deductions for amounts paid under the
Employment Agreement are not expected to be limited by Section 162(m) for
federal income tax purposes. See "Management -- Employment Agreements."

Effective with the Offering, the Company and Gabelli Partners will be
parties to a Management Services Agreement, renewable annually, under which the
Company will provide certain administrative services for Gabelli Partners,
including portfolio management, tax and accounting services and information
processing. Amounts charged to Gabelli Partners under this agreement approximate
the Company's cost of providing these services and aggregated approximately
$194,000, $140,000 and $187,000 in 1995, 1996 and 1997, respectively.

Effective with the Offering, the Company will enter into an agreement with
Gabelli Partners (the "Tax Indemnification Agreement") to indemnify Gabelli
Partners and the shareholders of Gabelli Partners (the "Tax Indemnitees"),
against certain taxes due and payable by the Tax Indemnitees on or after the
Offering that relate to activities of Gabelli Partners 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 Gabelli Partners 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 Gabelli
Partners to require the Company, and not Gabelli Partners or the shareholders of
Gabelli Partners, 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

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<PAGE> 54

Indemnitee in respect of payments made pursuant to the Tax Indemnification
Agreement only to the extent the payments made to that Tax Indemnitee exceed a
fixed amount. 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 and members of his immediate family who are officers and
directors of the Company intend to continue devoting time to activities outside
of the Company, including managing their own assets and their families' assets,
managing or controlling companies in other industries and managing assets for
other investors through the Permissible Accounts (approximately $
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 and members of his immediate family who are officers or directors of the
Company have undertaken that so long as they are directors or employees of the
Company, they will not provide investment management services for compensation
other than in their capacities as officers or employees 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 specific
guidelines, 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 and
members of his immediate family who are officers and directors of the Company
and their affiliates have only a limited obligation to resolve conflicts in
favor of the Company or to refrain from competing with the Company.

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 their affiliates, 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 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
"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) that Mr. Gabelli engages in, Mr. Gabelli will continue to
serve as Chairman of the Board, Chief Executive Officer and Chief Investment
Officer of Gabelli Partners, 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 $ 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 in which Marc J. Gabelli and Matthew R. Gabelli are limited
partners), and as President and a trustee of the Gabelli Foundation, Inc. (an
accredited charitable foundation in which Marc J. Gabelli and Matthew R. Gabelli
are also trustees). 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.

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<PAGE> 55

Historically, the Company has been required to pay Mr. Gabelli 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 $7,530,000,
$8,491,000 and $9,447,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.

Similarly, Marc J. Gabelli will continue to devote a portion of his time to
activities and interests outside of the Company. In addition to serving as
Director of the Company, Marc J. Gabelli will continue to serve in the following
capacities for the Permissible Accounts: as an adviser to Gabelli International
II Limited and Gabelli Fund, LDC, as President and Chief Investment Officer of
Gemini Capital Management Ltd., which is wholly owned by Marc J. Gabelli and
provides offshore investment advisory services, as a limited partner of MJG IV
Limited Partnership, as a trustee of the Gabelli Foundation, Inc. and as
managing member of M(4)E, LLC, a real estate partnership.

The Company and Gabelli Asset Management Company 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 Messrs. Marc J. Gabelli and Matthew R.
Gabelli and their siblings, 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 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.

Gabelli Asset Management Company 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 Gabelli Asset Management Company $50,000 (excluding reimbursement
of expenses) in 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

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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 Gabelli
Partners, the above-mentioned limited partnership and Messrs. Alpert, Bondi and
Jamieson.

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. Marc J. Gabelli 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 OTHERS

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.

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 -- 1998 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 Gabelli Partners upon consummation of
the Offering. The following summary description of the capital stock of the
Company is qualified by reference to the Restated Certificate of Incorporation
(the "Certificate of Incorporation") and Amended Bylaws of the Company, forms 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

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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 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, 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 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 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). 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

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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, 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, 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

The Certificate of Incorporation of the Company contains a provision
electing not to be governed by Section 912 of the New York Business Corporation
Law ("NYBCL"). Section 912 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.

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 or acting by
unanimous written consent in lieu of a meeting. 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 "-- Corporate Opportunity and Conflict of Interest Policies."

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Number of Directors; Removal; Filling Vacancies

The Certificate of Incorporation provides 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 also
provides 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 of the Company 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 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 of the Company 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

As permitted by the NYBCL, 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. 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.

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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 or officer 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.

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, 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, directly or
indirectly, 50% or more of the outstanding voting securities or interests, and
(ii) a "Gabelli" includes Mr. Gabelli, any member of his immediate family who is
an officer or director of the Company and any subsidiaries and other entities in
which Mr. Gabelli and members of his immediate family beneficially own, directly
or indirectly, a controlling interest of the outstanding voting securities or
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.

The Certificate of Incorporation provides that any person purchasing or
otherwise acquiring any interest in any shares of capital stock of the Company
will be deemed to have notice of and to have consented to these provisions.

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.

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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 controlled by 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 controlled by 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 controlled by 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 controlled by 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.

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.

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 between the Company and a Gabelli or any customer or
supplier or any entity in which a director of the Company has a financial
interest (a "Related Entity"), or between the Company and one or more of the
directors or officers of the Company, or any Related Entity; any amendment,
modification, or termination thereof; or any waiver of any right thereunder,
will be voidable solely because a Gabelli or such customer or supplier, any
Related Entity, or any one or more of the officers or directors of the Company
or any Related Entity are parties thereto, or 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 contract, agreement,
arrangement, transaction, amendment, modification, termination, or waiver (each,
a "Transaction") or solely 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

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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.

LISTING

The Company intends to apply for the listing of the Class A Common Stock on
the NYSE under the symbol .

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is .

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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 Gabelli Partners 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.

The Company and Gabelli Partners have agreed with the Underwriters that
they will not offer, sell or otherwise dispose of any shares of Common Stock,
other than in the Offering, or any security convertible into or exchangeable or
exercisable for shares of Common Stock 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. See "Underwriting." In addition, Gabelli Partners has agreed
with the Company that it 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.

The shares of Class A Common Stock authorized for issuance pursuant to
awards that may be granted under the Company's 1998 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 -- 1998 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 1998 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 Gabelli Partners 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."

62
<PAGE> 64

UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Salomon Smith Barney Inc. ("Salomon Smith Barney"), and Gabelli & Company, Inc.
are acting as representatives (the "Representatives") of each of the
Underwriters named below (the "Underwriters"). Subject to the terms and
conditions set forth in an underwriting agreement (the "Underwriting 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.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Salomon Smith Barney Inc. ..................................
Gabelli & Company, Inc. ....................................

--------
Total.......................................... 6,000,000
========
</TABLE>

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 $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ 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
Underwriting 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.

The Company and Gabelli Partners have agreed, subject to certain
exceptions, that for a period of 180 days after the date of this Prospectus,
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
without the prior written consent of Merrill Lynch and Salomon Smith Barney.

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

63
<PAGE> 65

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, Inc., 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, is assuming the
responsibilities of acting as the qualified independent underwriter in pricing
the Offering and conducting due diligence. In connection with the Offering,
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 .

Rule 312 of the NYSE effectively prohibits Gabelli & Company, Inc. and its
affiliates from effecting any transaction (except on an unsolicited basis) for
the account of any customer in, or making any recommendation with respect to,
the Class A Common Stock.

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.

Application has been made to list the Class A Common Stock on the NYSE
under the symbol " ". 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.

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.

64
<PAGE> 66

EXPERTS

The consolidated financial statements of Gabelli Asset Management Inc. 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.

65
<PAGE> 67

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF GABELLI ASSET
MANAGEMENT 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 Stockholder's 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 ASSET MANAGEMENT INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income for the nine
month periods ended September 30, 1997 and 1998........... F-16
Unaudited Consolidated Statements of Financial Condition as
of September 30, 1998..................................... F-17
Unaudited Consolidated Statements of Stockholder's 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
</TABLE>

F-1
<PAGE> 68

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholder
Gabelli Asset Management Inc.

We have audited the accompanying consolidated statements of financial
condition of Gabelli Asset Management Inc. and subsidiaries as of December 31,
1996 and 1997 and the related consolidated statements of income, stockholder's
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 Asset
Management Inc. and subsidiaries at December 31, 1996 and 1997, 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.

New York, New York
September xx, 1998,
except for Note M, as to which the date is

November xx, 1998

The foregoing report is in the form that will be signed upon the effective
date of the Company's registration of Class A Common Stock on Form S-1 and the
concurrent changes in the Company's operating and legal structure and
finalization of the employment and compensation agreements and Stock Award and
Incentive Plan and related disclosures.

ERNST & YOUNG LLP

New York, New York

November 20, 1998

F-2
<PAGE> 69

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
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............................................. 7,530 8,491 9,447
Other operating expenses................................... 16,684 16,339 16,901
-------- -------- --------
Total expenses........................................ 63,598 66,644 71,608
-------- -------- --------
Operating income........................................... 25,712 31,524 33,668
OTHER INCOME
Net gain from investments.................................. 3,197 1,172 3,004
Interest and dividend income, net.......................... 1,213 1,268 1,115
-------- -------- --------
Total other income, net............................... 4,410 2,440 4,119
-------- -------- --------
Income before charge in lieu of income taxes and minority
interest................................................. 30,122 33,964 37,787
Charge in lieu of income taxes............................. 11,517 13,402 14,935
Minority interest.......................................... 2,214 2,380 1,529
-------- -------- --------
Net income................................................. $ 16,391 $ 18,182 $ 21,323
======== ======== ========
NET INCOME PER SHARE:
Basic and diluted........................................ $ 0.68 $ 0.76 $ 0.89
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted........................................ 24,000 24,000 24,000
======== ======== ========
UNAUDITED PRO FORMA DATA:
Income before charge in lieu of income taxes and minority
interest, as reported................................. $ 37,787
Pro forma interest expense............................... (3,000)
Pro forma management fee adjustment...................... 5,023
Pro forma provision for income taxes..................... (15,735)
Pro forma minority interest.............................. (1,677)
--------
Pro forma net income..................................... $ 22,398
========
PRO FORMA NET INCOME PER SHARE:
Basic.................................................... $ 0.75
========
Diluted.................................................. $
========
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic.................................................... 30,000
========
Diluted..................................................
========
</TABLE>

See accompanying notes to Consolidated Financial Statements.
F-3
<PAGE> 70

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
UNAUDITED
PRO FORMA
1996 1997 1997
-------- -------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 11,472 $ 10,000 $ 10,000
Investments in securities................................... 18,109 18,395 18,395
Investments in partnerships................................. 11,761 15,422 15,422
Investment advisory fees receivable......................... 6,458 8,484 8,484
Receivables from affiliates................................. 4,903 3,089 3,089
Notes and other receivables................................. 1,807 3,583 3,583
Capital lease............................................... -- 3,679 3,679
Other assets................................................ 2,517 5,560 25,390
-------- -------- --------
Total assets............................................ $ 57,027 $ 68,212 $ 88,042
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Payable to related party.................................... $ -- $ -- $ 50,000
Income taxes payable (including deferred income taxes of
$1,531 and $2,569)........................................ 14,166 14,661 14,661
Capital lease obligation.................................... -- 3,650 3,650
Compensation payable........................................ 3,589 3,456 3,456
Accrued expenses and other liabilities...................... 5,597 4,856 4,856
-------- -------- --------
Total liabilities....................................... 23,352 26,623 76,623
-------- -------- --------
Minority interest........................................... 10,754 11,303 11,303
-------- -------- --------
Stockholder's equity:
Preferred Stock, $.001 par value; authorized, 10,000,000
shares; none issued..................................... -- -- --
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 24 24
Additional paid-in capital................................ 18,590 21,862 21,862
Retained earnings (accumulated deficit)................... 4,307 8,400 (21,770)
-------- -------- --------
Total stockholder's equity.............................. 22,921 30,286 116
-------- -------- --------
Total liabilities and stockholder's equity.................. $ 57,027 $ 68,212 $ 88,042
======== ======== ========
</TABLE>

See accompanying notes to Consolidated Financial Statements.
F-4
<PAGE> 71

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------- ---------- -------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1994........................ $ 24 $18,590 $ -- $ 18,614
Net income........................................ -- -- 16,391 16,391
Distributions to stockholder...................... -- -- (15,232) (15,232)
------- ------- -------- --------
Balance at December 31, 1995........................ 24 18,590 1,159 19,773
Net income........................................ -- -- 18,182 18,182
Distributions to stockholder...................... -- -- (15,034) (15,034)
------- ------- -------- --------
Balance at December 31, 1996........................ 24 18,590 4,307 22,921
Net income........................................ -- -- 21,323 21,323
Contribution of capital........................... -- 3,272 -- 3,272
Distributions to stockholder...................... -- -- (17,230) (17,230)
------- ------- -------- --------
Balance at December 31, 1997........................ $ 24 $21,862 $ 8,400 $ 30,286
======= ======= ======== ========
</TABLE>

See accompanying notes to Consolidated Financial Statements.
F-5
<PAGE> 72

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $16,391 $18,182 $21,323
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in earnings of partnerships and affiliates......... (2,505) (1,944) (3,155)
Depreciation and amortization............................. 339 424 451
Deferred income taxes..................................... 112 399 1,038
Minority interest in net income of consolidated
subsidiaries........................................... 2,214 2,380 1,529
Changes in operating assets and liabilities:
Investments in securities.............................. (9,486) (1,364) (286)
Investment advisory fees receivable.................... (28) 826 (2,026)
Receivables from affiliates............................ (754) (2,684) 1,814
Notes and other receivables............................ -- (1,807) (1,270)
Other assets........................................... (175) 15 (1,263)
Income taxes payable................................... 1,047 2,208 (543)
Compensation payable................................... 1,090 (1,933) (133)
Accrued expenses and other liabilities................. 924 (822) (741)
------- ------- -------
Total adjustments........................................... (7,222) (4,302) (4,585)
------- ------- -------
Net cash provided by operating activities................... 9,169 13,880 16,738
------- ------- -------
INVESTING ACTIVITIES
Net distributions from (investments in) partnerships........ 1,100 (498) (506)
------- ------- -------
Net cash provided by (used in) investing activities......... 1,100 (498) (506)
------- ------- -------
FINANCING ACTIVITIES
Distributions to stockholder................................ (15,232) (15,034) (17,230)
Net issuances (repurchases) of subsidiaries' common stock... 455 -- (474)
------- ------- -------
Net cash used in financing activities....................... (14,777) (15,034) (17,704)
------- ------- -------
Net decrease in cash and cash equivalents................... (4,508) (1,652) (1,472)
Cash and cash equivalents at beginning of year.............. 17,632 13,124 11,472
------- ------- -------
Cash and cash equivalents at end of year.................... $13,124 $11,472 $10,000
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes.................................. $ 830 $ 1,138 $ 2,689
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
Contribution of capital..................................... $ -- $ -- $ 3,272
======= ======= =======
Capital lease............................................... $ -- $ -- $ 3,700
======= ======= =======
</TABLE>

See accompanying notes to Consolidated Financial Statements.
F-6
<PAGE> 73

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Gabelli Asset Management Inc. (the "Company") 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 public offering ("Offering") of its shares. Immediately preceding
the Offering, the Company will exchange 24,000,000 shares of its Class B Common
Stock, representing all of its issued and outstanding shares of Common Stock,
with Gabelli Funds, Inc. ("GFI") in consideration for substantially all of the
operating assets and liabilities of GFI (the "Reorganization").

The accompanying consolidated financial statements include certain accounts
of Gabelli Funds, LLC and GAMCO Investors, Inc. ("GAMCO") and formerly GFI
majority-owned subsidiaries Gabelli Securities, Inc. ("GSI"), Gabelli Fixed
Income LLC ("Fixed Income") and Gabelli Advisers, LLC ("Advisers"). These
financial statements reflect historical operations as if the Company had existed
as a separate enterprise during such periods and as if the exchange of shares
described in the preceding paragraph had taken place.

The accompanying consolidated financial statements were prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Company's Form S-1. Prior to the
Offering, these assets were an integral part of GFI and did not constitute a
separate legal or reporting entity for which separate financial statements or
allocations of corporate overhead cost or other corporate level activities such
as cash management and financing were prepared. Management believes that the
allocation of expenses used in the financial statements was reasonable. These
assets and results of operations were previously included in the consolidated
financial statements of their parent company, GFI. Certain adjustments, as
further described in Note M, have been made to historical operations in order to
provide a fair presentation of the financial operations of the Company.

Prior to January 1, 1997, GFI owned approximately 79% of GAMCO, at which
time the remaining shares not owned by GFI were either redeemed or exchanged for
shares of GFI. At December 31, 1995, 1996 and 1997, GFI owned approximately 76%
of GSI and approximately 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 14, 1997. All material 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 periods. Actual results could differ from those estimates.

Nature of Operations

GAMCO, Fixed Income and Advisers are registered investment advisors 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 or counterparties. This exposure is reduced by the clearing brokers'
policy of obtaining and maintaining adequate collateral until the open
transaction is completed.

F-7
<PAGE> 74
GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

Investments in Partnerships

Investments in partnerships, whose underlying assets consist of marketable
securities, are accounted for using the equity method, under which the Company's
share of net earnings or losses of these partnerships 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.

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").

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 and has been included in other assets. 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.

F-8
<PAGE> 75
GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 adopted 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 for stock options. 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.

Stock Award and Incentive Plan

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation", and accordingly, accounts for its
plans in accordance with Accounting Principles Board Opinion No. 25 and related
interpretations.

Business Segments

The Company operates predominantly in one business segment, the investment
advisory and asset management business.

B. INVESTMENTS IN SECURITIES

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

<TABLE>
<CAPTION>
1996 1997
------------------ ------------------
MARKET MARKET
COST VALUE COST VALUE
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government obligations................. $ 6,655 $ 6,803 $ 3,839 $ 3,911
Common stocks............................... 2,225 3,794 2,408 3,593
Mutual funds................................ 1,399 1,312 7,082 7,104
Corporate bonds............................. 189 304 -- --
Preferred stocks............................ 1,644 1,397 104 360
Other investments........................... 1,437 4,499 684 3,427
------- ------- ------- -------
$13,549 $18,109 $14,117 $18,395
======= ======= ======= =======
</TABLE>

F-9
<PAGE> 76
GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

C. INVESTMENTS IN PARTNERSHIPS

GSI is co-general partner to various limited partnerships whose underlying
assets consist primarily of marketable securities. As co-general partner, GSI is
contingently liable for all of these partnerships' liabilities. Summary
financial information at December 31, 1996 and 1997 and for the years then ended
for these partnerships is as follows:

<TABLE>
<CAPTION>
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Total assets........................................... $125,059 $131,281
Total liabilities...................................... 16,630 1,458
Equity................................................. 108,429 129,823
Net earnings........................................... 8,364 12,073
Carrying value......................................... 11,613 14,479
Income................................................. 1,944 3,065
</TABLE>

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

GSI'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
equivalent to 1% 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, GSI earned administrative fees of
approximately $836,000, $820,000 and $1,085,000, respectively.

At December 31, 1996 and 1997, GSI had various limited partner interests in
unaffiliated limited partnerships aggregating approximately $148,000 and
$943,000, respectively. For the year ended December 31, 1997, the Company
recorded gains in these investments of $90,000. There were no gains or losses on
these investments for the years ended December 31, 1995 and 1996.

At December 31, 1996, GFI 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, GFI increased its ownership interest in these companies to
approximately 80%. GFI subsequently contributed this ownership interest to the
Company as part of the Reorganization. This transaction resulted in cost in
excess of net assets acquired of $2,080,000, included in other assets, 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
14, 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 since its effect is immaterial.

D. NOTES RECEIVABLE

At December 31, 1996 and 1997, the Company had full recourse notes and
interest receivable from directors of GAMCO in the amount of approximately
$1,561,000 and $1,666,000, respectively, which are secured by the directors'
ownership interests in GFI and various affiliates. The notes bear interest at an
annual rate of 7% and are payable on demand.

F-10
<PAGE> 77
GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

Upon completion of the Offering, the Company will be subject to corporate
income taxes and accordingly, has computed its income tax provision as if it had
been a C Corporation for 1995, 1996 and 1997 based on tax laws in effect during
those periods. This provision is presented in the consolidated statements of
income as "charge in lieu of income taxes".

The Company and GSI each file separate income tax returns. Accordingly, the
charge in lieu of income taxes represents the aggregate of the amounts provided
for all companies.

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

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current................................................... $ 9,424 $10,609 $11,436
Deferred.................................................. 269 380 902
State and local:
Current................................................... 1,981 2,394 2,461
Deferred.................................................. (157) 19 136
------- ------- -------
$11,517 $13,402 $14,935
======= ======= =======
</TABLE>

The charge in lieu of income taxes differs from the amounts determined by
applying the applicable U.S. statutory federal income tax rate to income before
charge in lieu of income taxes and minority interest as a result of the
following differences:

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Statutory federal income tax rate..................... 35.0% 35.0% 35.0%
Dividends received deduction.......................... (0.2)% (0.3)% (0.2)%
State and local income taxes.......................... 3.9% 4.6% 4.5%
Other items........................................... (0.5)% 0.2% 0.2%
------- ------- -------
Effective income tax rate............................. 38.2% 39.5% 39.5%
======= ======= =======
</TABLE>

The Company's deferred income tax liabilities of approximately $1,531,000
and $2,569,000 at December 31, 1996 and 1997, respectively, relate primarily to
net unrealized gains on investments in securities and partnerships.

The pro forma provision for income taxes reflects the tax effect of the
management fee reduction and increase in interest expense upon completion of the
proposed Offering.

F. CAPITAL LEASE

The Company has a lease for 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 Company.

F-11
<PAGE> 78
GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments at December 31, 1997 are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
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
=======
</TABLE>

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 made by the Company
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 approximately $400,000 per year.

G. 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:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1998........................................... $ 880
1999........................................... 756
2000........................................... 665
2001........................................... 593
------
$2,894
======
</TABLE>

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.

H. RELATED PARTY TRANSACTIONS

The Company serves as the investment advisor 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.

Cash equivalents at December 31, 1996 and 1997 include approximately
$11,451,000 and $9,776,000, respectively, that is invested in money market
mutual funds which are managed by the Company. During the years ended December
31, 1995, 1996 and 1997, the Company earned income of approximately $838,000,
$504,000 and $389,000, respectively, from these investments.

F-12
<PAGE> 79
GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company and its subsidiaries also had aggregate investments of
approximately $1,099,000 and $6,883,000 at December 31, 1996 and 1997,
respectively, in other investment companies for which the Company serves as the
investment advisor.

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

The Company has historically been required to pay the Chairman of the Board
and Chief Executive Officer ("Chairman") of the Company a management fee equal
to 20% of the pre-tax profits of each of the Company's operating divisions,
before consideration of this management fee. This fee approximated $7,530,000,
$8,491,000 and $9,447,000 for the years ended December 31, 1995, 1996 and 1997,
respectively. The Chairman also received portfolio management compensation and
account executive fees of approximately $ , $ and $
in 1995, 1996 and 1997, respectively, which have been included in compensation
costs.

Effective with the Offering, the Company and GFI will be parties to a
Management Services Agreement, renewable annually, under which the Company will
provide certain administrative services for GFI, including portfolio management,
tax and accounting services and information processing. Amounts charged to GFI
under this agreement approximate the Company's cost of providing these services
and aggregated approximately $194,000, $140,000 and $187,000 in 1995, 1996 and
1997, respectively.

I. FINANCIAL REQUIREMENTS

The Company is required to maintain minimum capital levels with affiliated
partnerships. At December 31, 1997, such 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
$750,000.

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.

J. ADMINISTRATION FEES

The Company has entered into administration agreements with certain
unaffiliated 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 paid by the Company and are based on predetermined
percentages of the net assets of each of the Funds which have such agreements.

K. PROFIT SHARING PLAN AND INCENTIVE SAVINGS PLAN

The Company participates in a qualified contributory employee profit
sharing plan and incentive savings plan sponsored by GFI which covers
substantially all of the Company's 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.

F-13
<PAGE> 80
GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

L. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
1995 1996 1997 1997
------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Numerator:
Net income..................... $16,391 $18,182 $21,323 $22,398
======= ======= ======= =======
Denominator:
Denominator for basic and
diluted earnings per
share-weighted-average
shares...................... 24,000 24,000 24,000
======= ======= ======= =======
</TABLE>

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

M. SUBSEQUENT EVENTS

Stock Award and Incentive Plan

Immediately prior to the Offering, the Board of Directors will adopt the
1998 Gabelli Asset Management Inc. Stock Award and Incentive Plan (the "Plan"),
designed to provide incentives which will attract and retain individuals key to
the success of the Company through direct or indirect ownership of the Company's
common stock. Benefits under the Plan may be granted in any one or a combination
of stock options, stock appreciation rights, restricted stock, restricted stock
units, stock awards, dividend equivalents and other stock or cash based awards.
A maximum of 1,500,000 shares 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, except that the exercise price for incentive
stock options may not be less than the fair market value of the Class A Common
Stock on the date of grant. 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.

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 fair value of each option grant was estimated on the date of grant
using the following assumptions:

Risk-free interest rate
Dividend yield
Volatility
Weighted average expected life (in years)
F-14
<PAGE> 81
GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

Options outstanding at Offering date
Weighted average fair value of options granted on Offering date
Pro forma net income
Pro forma earnings per share

Employment Agreement

Immediately preceding the Offering, the Company and its Chairman will enter
into an Employment Agreement. The Employment Agreement provides that the Company
will pay the Chairman 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 $50 million on January 2, 2002, plus
interest payable quarterly at an annual rate of 6% from the date of the
Employment Agreement.

Unaudited Pro Forma Information

The unaudited pro forma data gives effect to the lower management fee and
increase in interest expense as if the Employment Agreement had been in effect
at the beginning of each period, and the effects of these adjustments on income
tax expense and minority interest. 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. 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,
including the sale of 6 million shares of Class A Common Stock.

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.

F-15
<PAGE> 82

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1998
---------- ----------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
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 costs.......................................... 33,138 41,702
Management fee.............................................. 6,502 8,881
Other operating expenses.................................... 12,601 17,542
-------- --------
Total expenses......................................... 52,241 68,125
Operating income............................................ 22,579 34,184
OTHER INCOME
Net gain from investments................................... 2,585 757
Interest and dividend income, net........................... 842 584
-------- --------
Total other income, net................................ 3,427 1,341
Income before charge in lieu of income taxes and minority
interest.................................................. 26,006 35,525
Charge in lieu of income taxes.............................. 10,278 14,089
Minority interest........................................... 759 1,043
-------- --------
Net income.................................................. $ 14,969 $ 20,393
======== ========
NET INCOME PER SHARE:
Basic and diluted......................................... $ 0.62 $ 0.85
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted......................................... 24,000 24,000
======== ========
UNAUDITED PRO FORMA DATA:
Income before charge in lieu of income taxes and minority
interest, as reported.................................. $ 35,525
Pro forma interest expense................................ (2,250)
Pro forma management fee adjustment....................... 4,665
Pro forma provision for income taxes...................... (15,047)
Pro forma minority interest............................... (1,228)
--------
Pro forma net income...................................... $ 21,665
========
PRO FORMA NET INCOME PER SHARE:
Basic..................................................... $ 0.72
========
Diluted................................................... $
========
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic..................................................... 30,000
========
Diluted...................................................
========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.
F-16
<PAGE> 83

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, SEPTEMBER 30,
1998 1998
--------------- ---------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $12,112 $ 12,112
Investments in securities................................... 23,233 23,233
Investments in partnerships................................. 15,163 15,163
Investment advisory fees receivable......................... 9,380 9,380
Receivables from affiliates................................. 20,444 20,444
Notes and other receivables................................. 2,668 2,668
Capital lease............................................... 3,494 3,494
Other assets................................................ 5,177 25,007
------- --------
Total assets................................................ $91,671 $111,501
======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Payable to related party.................................... $ -- $ 50,000
Income taxes payable........................................ 13,419 13,419
Capital lease obligation.................................... 3,621 3,621
Compensation payable........................................ 11,496 11,496
Accrued expenses and other liabilities...................... 6,381 6,381
------- --------
Total liabilities........................................... 34,917 84,917
Minority interest........................................... 11,754 11,754
Stockholder's equity:
Preferred Stock, $.001 par value; authorized 10,000,000
shares; none issued.................................... -- --
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 issued and
outstanding............................................ 24 24
Additional paid-in capital................................ 23,172 23,172
Retained earnings (accumulated deficit)................... 21,804 (8,366)
------- --------
Total stockholder's equity.................................. 45,000 14,830
------- --------
Total liabilities and stockholder's equity.................. $91,671 $111,501
======= ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.
F-17
<PAGE> 84

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 1998

(UNAUDITED)

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1997....................... $ 24 $ 21,862 $ 8,400 $ 30,286
Contribution of capital.......................... -- 1,310 -- 1,310
Distributions to stockholders.................... -- -- (6,989) (6,989)
Net income....................................... -- -- 20,393 20,393
-------- -------- -------- --------
Balance at September 30, 1998...................... $ 24 $ 23,172 $ 21,804 $ 45,000
======== ======== ======== ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.
F-18
<PAGE> 85

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 14,969 $20,393
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in earnings of partnerships and affiliates......... (2,462) (678)
Depreciation and amortization............................. 426 662
Deferred income taxes..................................... 1,155 109
Minority interest in net income of consolidated
subsidiaries........................................... 759 1,043
Changes in operating assets and liabilities:
Investments in securities.............................. (5,976) (4,838)
Investment advisory fees receivable.................... (439) (896)
Receivables from affiliates............................ 112 (17,355)
Notes and other receivables............................ (386) 915
Other assets........................................... 338 (123)
Income taxes payable................................... (4,113) (1,351)
Compensation payable................................... 8,655 8,040
Accrued expenses and other liabilities................. (1,652) 1,525
-------- -------
Total adjustments........................................... (3,583) (12,947)
-------- -------
Net cash provided by operating activities................... 11,386 7,446
-------- -------
INVESTING ACTIVITIES
Net (investments in) distributions from partnerships and
affiliates................................................ (359) 937
-------- -------
Net cash (used in) provided by investing activities......... (359) 937
-------- -------
FINANCING ACTIVITIES
Net repurchases of subsidiaries' common stock............... (519) (592)
Net distributions to stockholder............................ (16,632) (5,679)
-------- -------
Net cash used in financing activities....................... (17,151) (6,271)
-------- -------
Net (decrease) increase in cash and cash equivalents........ (6,124) 2,112
Cash and cash equivalents at beginning of period............ 11,472 10,000
-------- -------
Cash and cash equivalents at end of period.................. $ 5,348 $12,112
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes.................................. $ 1,327 $ 3,070
======== =======
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY
Contribution of capital..................................... $ 3,272 $ --
======== =======
Receipt of notes for sale of minority interest.............. $ 506 $ --
======== =======
</TABLE>

See accompanying notes to unaudited consolidated financial statements.
F-19
<PAGE> 86

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1998

(UNAUDITED)

A. BASIS OF PRESENTATION

The unaudited interim consolidated financial statements of Gabelli Asset
Management Inc. (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. NET CAPITAL REQUIREMENT

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
September 30, 1998, Gabelli & Company had net capital in excess of the minimum
requirement of approximately $12.0 million.

C. EARNINGS PER SHARE

The table below sets forth a reconciliation of the shares used in the basic
and diluted earnings per share computations:

<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED PRO FORMA
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------
1997 1998 1998
------ ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Shares used in computing earnings per share:
Basic.......................................... 24,000 24,000 30,000
Diluted........................................ 24,000 24,000
</TABLE>

F-20
<PAGE> 87

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

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 10
Special Note Regarding Forward-Looking
Information......................... 16
The Company........................... 17
Use of Proceeds....................... 19
Dividend Policy....................... 19
Dilution.............................. 20
Capitalization........................ 21
Selected Historical and Pro Forma
Financial Data...................... 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 29
Management............................ 44
Ownership of the Common Stock......... 51
Certain Relationships and Related
Transactions........................ 52
Description of Capital Stock.......... 55
Shares Eligible for Future Sale....... 62
Underwriting.......................... 63
Legal Matters......................... 64
Experts............................... 65
Available Information................. 65
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

UNTIL , 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 ASSET
MANAGEMENT INC.

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

PROSPECTUS

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

MERRILL LYNCH & CO.

SALOMON SMITH BARNEY

GABELLI & COMPANY, INC.

, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 88

PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table indicates the estimated expenses to be incurred in
connection with the Offering, all of which will be paid by the Company.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 33,925
NASD fee.................................................... 12,000
Listing fee................................................. *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Printing and engraving...................................... *
Transfer Agent's fees....................................... *
Blue Sky fees and expenses (including counsel fees)......... *
Miscellaneous expenses...................................... *
--------
Total............................................. $ *
========
</TABLE>

- ---------------
* To be supplied by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation provides that no director of the
Company will be personally liable to the Company or any of its shareholders for
monetary damages arising from the director's breach of fiduciary duty as a
director, with certain limited exceptions. See "Description of Capital
Stock -- Certificate of Incorporation and Bylaw Provisions -- Liability of
Directors; Indemnification" in the Prospectus.

Sections 721-726 of the New York Business Corporation Law provide that a
corporation may indemnify its officers and directors (or persons who have
served, at the corporation's request, as officers or directors of another
corporation) against the reasonable expenses, including attorneys' fees,
actually and reasonably incurred by them in connection with the defense of any
action by reason of being or having been directors or officers, if such person
shall have acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation, except that if such
action shall be in the right of the corporation, no such indemnification shall
be provided as to any claim, issue or matter as to which such person shall have
been adjudged to have been liable to the corporation unless and only to the
extent that the court in which the action was brought, or, if no action was
brought, any court of competent jurisdiction determines upon application that,
in view of all of the circumstances of the case, the person is fairly and
reasonably entitled to indemnification.

The power to indemnify applies to actions brought by or in the right of the
corporation as well, but only to the extent of defense and settlement expenses
and not to any satisfaction of a judgment or settlement of the claim itself, and
with the further limitation that in such actions no indemnification will be made
in the event of any adjudication of negligence or misconduct unless the court,
in its discretion, believes that in light of all the circumstances
indemnification should apply.

To the extent any of the persons referred to in the two immediately
preceding paragraphs is successful in the defense of such actions, such person
is entitled, pursuant to the laws of New York State, to indemnification as
described above.

The Company's Certificate of Incorporation and Bylaws provide for
indemnification to officers and directors of the Company to the fullest extent
permitted by the New York Business Corporation Law. See "Description of Capital
Stock-Certificate of Incorporation and Bylaw Provisions-Liability of Directors;
Indemnification" in the Prospectus.

II-1
<PAGE> 89

The form of Underwriting Agreement to be filed as Exhibit 1.1 will contain
agreements of indemnity between the Company and the Underwriters and controlling
persons against civil liabilities, including liabilities under the Securities
Act, or will contribute to payments which the Underwriters or any such
controlling persons may be required to make in respect thereof.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Immediately prior to the closing of the Offering, the Company will issue
24,000,000 shares of its Class B Common Stock to Gabelli Partners in exchange
for substantially all of the operating assets and liabilities of Gabelli
Partners. Such transaction will not be registered in reliance upon the exemption
provided by Section 4(2) under the Securities Act of 1933.

ITEMS 16. EXHIBITS

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement.
+3.1 -- Certificate of Incorporation of the Company.
3.2* -- Bylaws of the Company.
3.3* -- Form of Restated Certificate of Incorporation of the
Company.
3.4* -- Form of Amended Bylaws of the Company.
4.1* -- Specimen of Class A Common Stock Certificate.
5.1* -- Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
regarding legality of securities being registered.
10.1* -- Form of Gabelli Asset Management Inc. 1998 Stock Award and
Incentive Plan.
10.2* -- Employment Agreement between the Company and Mario J.
Gabelli.
21.1* -- Subsidiaries of the Company.
23.1* -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP.

+24.1 -- Powers of Attorney (included on page II-4 of this
Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>

- ---------------
* To be filed by amendment.

+ Previously filed.

(b) Financial Statement Schedules:

Financial statement schedules are omitted as not required or not applicable
or because the information is included in the Financial Statements or notes
thereto.

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the underwriting agreements, the
Company's Certificate of Incorporation, Bylaws, New York law or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any

II-2
<PAGE> 90

action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the adjudication of such issue.

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 91

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Rye,
State of New York, on November 24, 1998.

Alpha G, Inc. (to be renamed
Gabelli Asset Management Inc.)

By: /s/ Robert S. Zuccaro
------------------------------------
Name: Robert S. Zuccaro
Title: Vice President and Chief
Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* Chairman of the Board, November 24, 1998
- --------------------------------------------------- Chief Executive Officer
Mario J. Gabelli and Chief Investment Officer
(Principal Executive Officer)

/s/ Robert S. Zuccaro Vice President and Chief November 24, 1998
- --------------------------------------------------- Financial Officer (Principal
Robert S. Zuccaro Financial Officer and
Principal Accounting Officer)

* Director November 24, 1998
- ---------------------------------------------------
Marc J. Gabelli

* Director November 24, 1998
- ---------------------------------------------------
Charles C. Baum

* Director November 24, 1998
- ---------------------------------------------------
Richard B. Black
</TABLE>

II-4
<PAGE> 92

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* Director November 24, 1998
- ---------------------------------------------------
Matthew R. Gabelli

* Director November 24, 1998
- ---------------------------------------------------
Eamon M. Kelly

Director November 24, 1998
- ---------------------------------------------------
Karl Otto Pohl
</TABLE>

* James E. McKee, by signing his name hereto, does hereby execute this Amendment
No. 2 to the Registration Statement on behalf of the director or officer of the
Registrant indicated above by an asterisk, pursuant to a power of attorney duly
executed by such director or officer and included on page II-4 of the
Registration Statement originally filed on April 24, 1998.

By: /s/ James E. McKee
------------------------------------
James E. McKee
Attorney-in-Fact

II-5
<PAGE> 93

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------- DESCRIPTION OF EXHIBIT
<C> <C> <S>
1.1* -- Form of Underwriting Agreement.

+3.1 -- Certificate of Incorporation of the Company.
3.2* -- Bylaws of the Company.
3.3* -- Form of Restated Certificate of Incorporation of the
Company.
3.4* -- Form of Amended Bylaws of the Company.
4.1* -- Specimen of Class A Common Stock Certificate.
5.1* -- Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
regarding legality of securities being registered.
10.1* -- Form of Gabelli Asset Management Inc. 1998 Stock Award and
Incentive Plan.
10.2* -- Employment Agreement between the Company and Mario J.
Gabelli.
21.1* -- Subsidiaries of the Company.
23.1* -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP.

+24.1 -- Powers of Attorney (included on page II-4 of this
Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>

- ---------------
* To be filed by amendment.

+ Previously filed.

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report on the Consolidated Financial Statements of Gabelli Asset
Management Inc. and subsidiaries dated November 20, 1998, in Amendment No. 2 of
this Registration Statement on Form S-1 (No. 333-51023) and the related
Prospectus of Gabelli Asset Management Inc. to be filed on or about November 24,
1998.

New York, New York

The foregoing consent is in the form that will be signed upon the effective
date of the Company's registration of Class A Common Stock in a registration
statement on Form S-1 and the concurrent changes in the Company's operating and
legal structure and finalization of the employment and compensation agreements
and Stock Award and Incentive Plan and related disclosures.

ERNST & YOUNG LLP

New York, New York

November 20, 1998

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<CASH> 12,112
<SECURITIES> 38,746
<RECEIVABLES> 32,632
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 92,161
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 45,000
<TOTAL-LIABILITY-AND-EQUITY> 92,161
<SALES> 0
<TOTAL-REVENUES> 102,309
<CGS> 0
<TOTAL-COSTS> 68,125
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35,525
<INCOME-TAX> 14,089
<INCOME-CONTINUING> 20,393
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,393
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85
<FN>
<F1>UNCLASSIFIED STATEMENT OF FINANCIAL CONDITION.
<F2>TO BE PRESENTED ON A PRO FORMA BASIS.
</FN>

</TABLE>