ALPHA G INC, S-1, 1998-04-24

ALPHA G INC
S-1, 1998-04-24

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<PAGE> 1

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

REGISTRATION NO. 333-
================================================================================

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

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

ALPHA G, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
NEW YORK 6211
(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
ALPHA G, 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
RICHARD T. PRINS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000

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

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. [ ]

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

CALCULATION OF FILING FEE

<TABLE>
<CAPTION>
=====================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, par value $.001 per share...... $115,000,000 $33,925
=====================================================================================================================
</TABLE>

(1) In accordance with Rule 457(o) under the Securities Act of 1933, as amended,
the number of shares being registered and the proposed maximum offering
price per share are not included in this table.

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

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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

================================================================================
<PAGE> 2

THIS PROSPECTUS HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BUT
HAS NOT BEEN AUTHORIZED FOR USE IN FINAL FORM. INFORMATION CONTAINED HEREIN IS
SUBJECT TO COMPLETION OR AMENDMENT. THE SHARES COVERED HEREBY MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE PROSPECTUS IS DECLARED
EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION. THE PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SHARES 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.

PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION DATED APRIL 24, 1998
---------------------

PROSPECTUS

ALPHA G, INC.
CLASS A COMMON STOCK
(PAR VALUE $.001 PER SHARE)

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

All of the shares of Class A Common Stock, par value $.001 per
share (the "Class A Common Stock"), offered hereby (the "Offering") are being
offered by Alpha G, Inc. (the "Company").

Each share of Class A Common Stock entitles its holder to one vote, and
each share of Class B Common Stock, par value $.001 per share (the "Class B
Common Stock" and together with the Class A Common Stock, the "Common Stock"),
of the Company entitles its holder to ten votes. Following the Offering, Mario
J. Gabelli ("Mr. Gabelli") will beneficially own shares of Common Stock having
approximately % of the combined voting power of the outstanding shares of
Common Stock ( % if the Underwriters' over-allotment option is exercised in
full). See "Security Ownership of Certain Beneficial Owners and Management."

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 $ and $ .
For a discussion of the factors to be considered in determining the initial
public offering price, see "Underwriting."

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN RISK FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS A COMMON
STOCK.

Application will be made to list the shares of Class A Common Stock on the
under the symbol " ."

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER FEDERAL AGENCY, OR BY ANY STATE
SECURITIES COMMISSION, NOR HAS SUCH OFFICE, OTHER AGENCY OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

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

<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 Underwriters (as defined herein)
against certain liabilities, including liabilities under the Securities
Act of 1933. See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the Company in
connection with the Offering.
(3) The Company has granted the Underwriters an option for 30 days to
purchase up to an additional shares of Class A Common Stock at
the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. 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 offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
, 1998, against payment therefor in immediately available
funds.

, 1998
<PAGE> 3

CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT THE CLASS A COMMON STOCK IN
CONNECTION WITH THE OFFERINGS AND MAY BID FOR AND PURCHASE THE SHARES OF CLASS A
COMMON STOCK IN THE OPEN MARKET. 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. 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 Alpha G, Inc. and its predecessors and
consolidated subsidiaries and references to "Common Stock" mean the Class A
Common Stock and the Class B Common Stock of the Company.

COMPANY OVERVIEW

Alpha G, Inc. is an investment management and financial services holding
company that through its subsidiaries provides investment advisory and brokerage
services to mutual fund, institutional and high net worth investors primarily in
the United States. The Company provides advisory services to (i) the Gabelli
family of funds, which currently consist of thirteen 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, currently consisting of five open-end mutual funds whose
portfolios are managed on a day-to-day basis by their subadviser, Westwood
Management Corporation ("Westwood Management"), an unaffiliated company
(collectively, the "Mutual Funds"). In addition to the Mutual Funds, the Company
provides investment management services to corporate pension and profit sharing
plans, foundations, endowment funds, jointly trusteed plans, municipalities and
high net worth individuals, and also serves as subadvisor to certain other
third-party investment funds (collectively, the "Separate Accounts"). The
Company manages assets on a fully managed discretionary basis and invests in a
variety of U.S. and international securities, primarily consisting of equities,
fixed-income securities and convertible securities. The Company also provides
alternative investments through its risk arbitrage and merchant banking products
(collectively, the "Partnerships"). 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. ("NASD") that acts as
underwriter and distributor of the open-end Mutual Funds and provides brokerage,
trading, underwriting and research services. As of March 31, 1998, the Company
had approximately $15.5 billion of assets under management, consisting of $7.5
billion in Mutual Funds, $7.9 billion in Separate Accounts and $139 million in
Partnerships. The Company also actively manages a proprietary investment
portfolio, consisting of public and private investments.

For the year ended December 31, 1997, total revenues were $105.3 million
and pro forma EBITDA (as defined herein) was $53.4 million. During 1997, the
Company derived approximately 85% of its revenues from investment management
activities, 7% from securities brokerage activities, and 8% from mutual fund
distribution activities. Of the $89.7 million of investment management revenues,
approximately 94% was from the management of portfolios consisting primarily of
equity securities (including convertible securities), 2% was from the management
of fixed income securities and 4% was from the management of the Partnerships.
Of the $89.7 million of investment management revenues, management of the
open-end Mutual Funds contributed approximately 38%, management of the
closed-end Mutual Funds contributed approximately 15%, management of the
Separate Accounts contributed approximately 43% and management of the
Partnerships contributed approximately 4%. In addition, the Company's
proprietary investment portfolio contributed $12.5 million or approximately 11%
of the total of revenues and other income, net, for 1997.

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.

3
<PAGE> 5

COMPANY BACKGROUND

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-1980's, 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. By the early 1990's, the Company had
continued to expand its investment management capabilities through the addition
of international and global investment products. The Company has now developed
mutual funds which target specific investment and industry sectors where the
Company has expertise, such as telecommunications and multimedia. As part of its
expansion plans, the Company intends to more actively promote its existing
investment products and to continue to develop, expand and promote new
investment strategies in the international and fixed-income investment areas.

BUSINESS DESCRIPTION

The Company currently offers a range of investment products and strategies,
which are summarized in the following table.
------------------------

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)

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

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

MUTUAL FUNDS

4
<PAGE> 6

Manager of the Year for 1997 by Morningstar, Inc. ("Morningstar"). As of March
31, 1998, the Company had a total of three "five star" and five "four star"
funds, as rated by Morningstar, in each case, on an overall basis (i.e. based on
3, 5 and 10-year risk adjusted average returns). As of March 31, 1998,
approximately 93% of such assets under management in those Mutual Funds having a
Morningstar overall rating were ranked four or five stars and 99.7% of such
assets were in Mutual Funds ranked three, four or five stars on an overall
basis. Also for 1997, the Gabelli Global Interactive Couch Potato(R) Fund was
ranked as the "number one global fund" out of 188 global funds ranked by Lipper
Analytical Services, Inc. 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.

SEPARATE ACCOUNTS

Since 1977, the Company has provided investment management services to a
broad spectrum of institutional and high net worth investors. As of March 31,
1998, the Company had approximately 850 Separate Accounts with an aggregate of
approximately $7.9 billion of assets, which represent approximately one-half of
the total assets under management of the Company at March 31, 1998. The Separate
Accounts are invested in U.S. and international equities, U.S. fixed income
securities and convertible securities.

The Company's Separate Accounts business is marketed primarily through the
direct efforts of its in-house sales force. 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 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. 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.

ALTERNATIVE INVESTMENT PRODUCTS

The Company offers alternative investment products 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. The Partnerships had $139 million
of assets at March 31, 1998.

BROKERAGE AND MUTUAL FUND DISTRIBUTION

The Company offers underwriting, execution and trading services through its
subsidiary, Gabelli & Company, a registered broker-dealer. Gabelli & Company's
revenues are derived primarily from the distribution of the Mutual Funds and
securities brokerage activity, including trading commissions on transactions in
equity securities for the Mutual Funds, Separate Accounts and other customers,
and from underwriting fees and market-making activities. During 1997, Gabelli &
Company participated in 35 syndicated underwritings.

5
<PAGE> 7

BUSINESS STRATEGY

The Company believes that by expanding on its competitive asset management
strengths, including its brand name, long-term performance record, diverse
product offerings and experienced research, client service and investment
professionals, that it will be able to increase its assets under management and
profitability. The key elements of the Company's business strategy are as
follows:

- Strengthen and Broaden the Gabelli Brand Name. 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 and broaden its brand name identity by, among other things,
developing additional products and increasing its marketing and
advertising to provide a uniform global image. For example, the Company
intends to launch several new investment products in 1998, including the
Gabelli Global Opportunity Fund, a global equity fund, and the Gabelli
Westwood Mighty Mites(SM) Fund, a micro cap equity fund. As part of its
strategy to strengthen and broaden its Gabelli brand name identity, the
Company plans to promote the strengths of its overall product line.

- Retain and Attract Top Performing Investment Professionals. The
Company's overall long-term strategy is to provide a range of investment
products suitable to meet the diverse requirements of its clients. The
Company has in recent years expanded its portfolio management staff and
believes it has significant capacity for growth in existing products. 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.

- Expand Marketing and Distribution of Mutual Funds. In addition to its
direct response marketing program, the Company intends to continue to
expand its distribution network through Third-Party Distribution Programs,
particularly NTF Programs. As of March 31, 1998, the Company was
participating in 53 Third-Party Distribution Programs, with additional
programs targeted. The Company's objective is to gain access to the
remaining programs that it has already targeted, as well as any new
programs that the Company determines will increase the distribution of the
Mutual Funds. In addition, the Company intends to develop a marketing
strategy to increase its presence in the 401(k) market for its Mutual
Funds. The Company is seeking to add experienced marketing and client
service personnel in order to increase its distribution efforts.

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

- Pursue Strategic Acquisitions and 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.

6
<PAGE> 8

THE OFFERING

Class A Common Stock Offered.... shares

Common Stock to be outstanding
after the Offering.............. shares of Class A Common Stock(1)
and
shares of Class B Common Stock(2)

shares(1)
----------------------------------------------------

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

Use of proceeds................. The Company intends to use the net proceeds
from the Offering for general corporate
purposes.

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 Symbol..........
- ---------------
(1) Excludes shares of Class A Common Stock reserved for issuance
under the 1998 Stock Award and Incentive Plan of the Company, including
shares of Class A Common Stock subject to outstanding options
granted at the initial public offering price of the Class A Common Stock.
See "Management -- 1998 Stock Award and Incentive Plan."

RISK FACTORS

See "Risk Factors" on page 11 for a discussion of certain risks that should
be considered in connection with an investment in the Class A Common Stock
offered hereby.

7
<PAGE> 9

CORPORATE STRUCTURE

Alpha G, Inc. is a holding company that was 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 shares of its Class B Common Stock to all of
the shareholders of Gabelli Funds, Inc. (the "Existing Shareholders") in
exchange for all of the shares of common stock of Gabelli Funds, Inc. As a
result, Gabelli Funds, Inc. will become a wholly owned subsidiary of the
Company, and, immediately following the Offering, the Company will conduct its
business operations through Gabelli Funds, Inc. and its subsidiaries. After the
consummation of the Offering, the Existing Shareholders will own all of the
outstanding shares of Class B Common Stock, which will represent approximately
% of the combined voting power of the outstanding Common Stock ( % if
the Underwriters' over-allotment option is exercised in full). The Company will
continue to be controlled by Mr. Gabelli, who will beneficially own
approximately % of the combined voting power of the Common Stock of the
Company. See "Certain Relationships and Related Transactions -- The Formation
Transactions."

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

[GABELLI & COMPANY ORGANIZATIONAL CHART]
- ---------------
* Of the approximately 23.9% ownership interest of GSI not held by the
Company, approximately 7% is owned by the Company's staff and 17% by
unaffiliated shareholders.

** Gabelli Funds, Inc. 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. All of the Class A Common
Stock of Gabelli Advisers, Inc., representing a 20% economic interest, is
owned by Westwood Management. Gabelli Advisers, Inc. is the adviser and
Westwood Management is the subadviser to 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.

8
<PAGE> 10

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The summary historical financial data presented below under the captions
"Historical Income Statement Data" and "Historical Balance Sheet Data," has been
derived from the audited consolidated financial statements of Gabelli Funds,
Inc. and subsidiaries ("GFI").

The pro forma income statement data gives effect to the income taxes
payable if GFI had been a "C" corporation for federal and state income tax
purposes for all periods presented. In addition, the pro forma income statement
data for each of the three years in the period ended December 31, 1997 gives pro
forma effect to the Offering and the Formation Transactions, exclusive of the
sale of the FCC Licenses, as if they were consummated on January 1, 1995. The
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 GFI which actually would have
occurred had these Offering and the Formation Transactions been consummated on
the aforesaid dates, or project the results of operations or the financial
position of GFI for any future date or period. See "Certain Relationships and
Related Transactions -- The Formation Transactions."

The following summary historical and pro forma financial information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the Consolidated Financial Statements
of GFI and the related notes included elsewhere in this Prospectus.

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

9
<PAGE> 11

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA(5)
Total assets............................................. $155,541 $182,524 $232,736
Total liabilities and minority interest.................. 39,470 43,991 69,117
-------- -------- --------
Total shareholders' equity............................... $116,071 $138,533 $163,619
======== ======== ========
</TABLE>

- ---------------
(1) Pro forma income statement data gives effect to the conversion of the
Company from a subchapter "S" corporation to a "C" corporation as if such
transaction had occurred on January 1, 1995 and to the conversion of the
management fee as if such transaction had occurred on January 1, 1995. See
"Certain Relationships and Related Transactions -- The Formation
Transactions."

(2) The management fee adjustment reflects the conversion of the management fee
for shares of Class B Common Stock, net of pro forma compensation
costs of $ .

(3) Effective April 14, 1997, Gabelli Fixed Income, LLC was restructured with
the Company's ownership increasing 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 1995 and
1996 would have been approximately $10.8 billion and $11.1 billion,
respectively.

(4) EBITDA is defined as earnings before interest expense, taxes, depreciation
and amortization and minority interest. The Company believes that 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. EBITDA should not be considered in isolation or as a substitute
for net income or other consolidated statements of income or cash flows data
prepared in accordance with generally accepted accounting principals as a
measure of the profitability or liquidity of the Company. EBITDA does not
take into account the Company's debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary uses.

(5) Historical Balance Sheet data for 1997 has not been adjusted to reflect the
pro forma impact of the sale of the FCC Licenses described under "Certain
Relationships and Related Parties -- The Formation Transactions." Had the
Historical Balance Sheet data been adjusted to reflect these transactions,
the 1997 pro forma assets would be $202,736,000 and pro forma liabilities
would be $39,117,000. The pro forma effect of the repayment of the Rivgam
Credit Agreement would not have had a material effect on the pro forma
results of operations for 1997.

(6) Pro forma net income per share, pro forma weighted average shares
outstanding and shareholders' equity per share have not been presented since
the number of shares to be exchanged in connection with the conversion of
the management fee has not been determined.

(7) Pro forma EBITDA is defined as earnings before management fee (but after pro
forma compensation of $ ), interest expense, taxes, depreciation and
amortization and minority interest. Pro forma EBITDA has been presented to
show the effect of the conversion of the management fee in consideration for
shares of Class B Common Stock effective upon consummation of the
Offering. This information has been disclosed herein to permit a more
complete analysis of the Company's operating performance. Pro forma EBITDA
should not be considered in isolation or as a substitute for net income or
other consolidated statements of income or cash flows data prepared in
accordance with generally accepted accounting principals as a measure of the
profitability or liquidity of the Company. Pro forma EBITDA does not take
into account the Company's debt service requirements and other commitments
and, accordingly is not necessarily indicative of amounts that may be
available for discretionary uses.

10
<PAGE> 12

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 will beneficially own
approximately % of the Company's outstanding Class B Common Stock,
representing approximately % of the combined voting power of all classes of
voting stock of the Company ( % if the Underwriters' over-allotment option is
exercised in full). As long as Mr. Gabelli 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 to 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."

Mr. Gabelli and members of his family associated with the Company devote
and intend to continue devoting time to activities outside the Company,
including managing assets for other investors through various funds unaffiliated
with the Company (approximately $115 million as of March 31, 1998), managing
their own assets and their families' assets, and managing or controlling
companies in other industries. These activities may present conflicts of
interest or compete with the Company, and the Certificate of Incorporation of
the Company expressly provides in general that Mr. Gabelli and members of his
family have no obligation to resolve conflicts in favor of the Company or to
refrain from competing with the Company. For example, Mr. Gabelli and members of
his family may make private investments for themselves that would also be
attractive to the Company and may manage money for investors other than through
the Company. In order to minimize conflicts and potential competition with the
Company's core business, Mr. Gabelli (but not other members of his family) has
undertaken that so long as he is associated with the Company he will not manage
money, other than through the Company, for any mutual fund that is publicly
offered in the U.S. or abroad and will not manage money for separate accounts or
privately offered funds that invest primarily in publicly traded equity
securities except for those that pay traditional hedge fund performance fees.

The Company will not derive any income from external activities by Mr.
Gabelli or members of his family and may not be able to take advantage of
business and investment opportunities that would prove to be beneficial to the
Company and the shareholders. Where a conflict of interest involves a
transaction between Mr. Gabelli or members of his family 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 -- Corporate
Opportunity and Conflict of Interest Policies."

11
<PAGE> 13

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 a portfolio manager
for the Company's value-oriented equity products, which represent 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. Unusually favorable and
sustained performance of the U.S. securities markets and, in particular, the
U.S. equity market, has attracted substantial inflows of new assets into these
markets and has resulted in significant market appreciation which has led to an
increase in assets under management and revenues for the Company. As of March
31, 1998, approximately 89% of the Company's assets under management was
invested in portfolios consisting primarily of equity securities. A decline in
the securities markets, in general, and the equity markets, in particular, could
reduce the Company's assets under management and consequently reduce the
Company's revenues. Further, any such decline in the equity markets, failure of
these markets to sustain their recent levels of growth, or short-term volatility
in these markets could result in investors withdrawing from the equity markets
or decreasing their rate of investment, either of which could 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.

POOR 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 single 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. The Company has a significant
proprietary investment portfolio. Poor performance of these investments on a
realized and unrealized basis would have an adverse effect on the Company's
income.

12
<PAGE> 14

LOSS OF SIGNIFICANT SEPARATE ACCOUNTS COULD AFFECT REVENUES

The Company has approximately 850 Separate Accounts, of which the ten
largest accounts constitute approximately 8% of the Company's total revenues as
of March 31, 1998. Loss of these accounts would have an adverse effect on the
Company's revenues. In addition, the Company has from time to time lost large
Separate Account clients as a result of corporate mergers and restructurings
despite good performance and the Company could continue to lose accounts under
these 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. Failure to
adhere to these guidelines and requirements that result in client losses can in
some circumstances be recovered from the service providers to such clients or
Mutual Funds, including the Company. Although the Company has installed
procedures and utilizes the services of experienced administrators, accountants
and lawyers to assist it in 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 National Association of Securities Dealers Inc. (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 Company's registration as an
investment adviser or broker-dealer. Changes in laws or regulations or in
governmental policies could materially and adversely affect the business and
operations of 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 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. Investment advisory agreements with the Separate Accounts are
typically terminable by the client without penalty on 30 days' notice or less.
See "Business." Any failure to renew, or termination of a significant number of
these agreements or arrangements would have a material adverse effect on the
Company.

COMPETITION

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, 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. Of the $5.9 billion of assets under management in the
open-end Mutual Funds as of March 31, 1998, approximately 15% was obtained
through NTF Programs. The cost of Third-Party Distribution Programs is higher
than the Company's direct distribution costs, and there can be no assurance that
the costs of Third-Party Distribution Programs will not

13
<PAGE> 15

increase in the future. Any increase would be likely to adversely affect 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 March 31, 1998, approximately 88% of the Third-Party
Distribution Program net assets in the Gabelli and Gabelli Westwood families of
funds are attributable to two NTF Programs. Further, 92% of the total assets in
The Treasurer's Funds are attributable to a single 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 AND TRADING ACTIVITIES

The Company's underwriting and market-making activities are primarily
conducted through its subsidiary, Gabelli & Company, as principal, and subject
the Company's capital devoted to those businesses to significant risks,
including market, credit, leverage, counterparty and liquidity risks.

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 current
levels.

FAILURE TO ACHIEVE YEAR 2000 COMPATIBILITY WOULD CAUSE SIGNIFICANT LOSSES

As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
change. Failure to make these software modifications would have a significant
adverse effect on the Company's ability to service its customers and clients.
Management is in the process of modifying its systems and working with its
software vendors to prepare the Company for the year 2000. Based on information
currently available, management does not anticipate that the Company will incur
significant operating expenses or be required to incur material costs to be year
2000 compliant. The Company is, however, still analyzing and modifying its
systems and requirements. In addition, the Company's businesses are all
dependent on third parties that have computer systems that may not be year 2000
compliant. To the extent the Company's or such third parties' systems are not
fully year 2000 compliant, there can be no assurance that potential systems
interruptions or the cost necessary to update software would not have a material
adverse effect on the Company's business, financial condition, results of
operations, or business prospects.

CLASS A COMMON STOCK MAY BE LESS ATTRACTIVE

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

14
<PAGE> 16

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

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 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, proprietary investments,
upgraded management information systems and strategic acquisitions as
opportunities arise. Accordingly, management will have significant flexibility
in applying the net proceeds of the Offering. 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 $ per share, based on
an assumed initial public offering price of $ 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."

SHARES AVAILABLE FOR FUTURE SALE OR DISTRIBUTION

Immediately after consummation of the Offering, the Company will have
outstanding shares of Class A Common Stock and 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 described
below, the Existing Shareholders could sell any or all of the shares of Common
Stock owned by them from time to time for any reason. See "Shares Eligible for
Future Sale." The Company has requested that each of the Existing Shareholders
agree with the Company not to sell any shares of Class B Common Stock for a
three year period commencing on the date of consummation of the Offering unless
such sale is to either an Existing Shareholder or to the Company. No prediction
can be made as to the effect, if any, that future sales or distributions of
Class A Common Stock or Class B Common Stock by the Existing Shareholders, or
the availability of Class A Common Stock and Class B Common Stock for future
sale or distribution, 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 prevailing market prices
for the Class A Common Stock. See "Shares Eligible for Future Sale."

15
<PAGE> 17

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.

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
$ per share after deducting underwriting commissions and discounts and
the estimated expenses of the Offering, are expected to be approximately $
million ($ 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, proprietary investments, upgraded
management information systems and strategic acquisitions as opportunities
arise.

16
<PAGE> 18

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 (other than funding the
S Corporation Distribution as described under "Certain Relationships and Related
Transactions"). 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."

17
<PAGE> 19

DILUTION

The pro forma net tangible book value of the Class A Common Stock at
December 31, 1997 after giving effect to the Formation Transactions, but before
adjustment for the Offering, was $163.2 million, or $ 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
shares of Class A Common Stock in the Offering at an assumed initial public
offering price of $ per share (before deducting the estimated underwriting
discounts and commissions and estimated offering expenses), 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 December 31, 1997 would have
been $ million, or $ per share, calculated as follows:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share (1)......... $
----
Pro forma net tangible book value per share before the
Offering............................................... $
----
Increase in pro forma net tangible book value per share
attributable to the Offering........................... $
----
As adjusted pro forma net tangible book value per share
after the Offering..................................... $
----
Dilution in pro forma net tangible book value per share
to new investors (2)(3)...................................... $
====
</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, there will be options outstanding to purchase a total of
shares of Class A Common Stock at an exercise price of $ per share.
See "Management-Executive Compensation." 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 December 31, 1997 would be $ million
or $ per share, the immediate increase in pro forma net tangible book value
of shares owned by existing shareholders would be $ per share, and the
immediate dilution to purchasers of shares of Class A Common Stock in the
Offering would be $ per share.

The following table summarizes at December 31, 1997, after giving effect to
the sale of the shares of Class A Common Stock in the Offering at an assumed
initial public offering price of $ per share, (i) the number and percentage
of shares of Class A Common Stock purchased from the Company, (ii)the total cash
consideration paid for the Class A Common Stock, and (iii) the average price per
share of Class A Common Stock paid by Existing Shareholders and by purchasers of
the Class A Common Stock in the Offering:

<TABLE>
<CAPTION>
TOTAL CONSIDERATION
CLASS A SHARES OWNED ----------------------------
-------------------- AMOUNT AVERAGE PRICE
NUMBER PERCENTAGE (IN THOUSANDS) PERCENTAGE PER SHARE
------ ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders % $ % $
New investors
---- ----- ---- ----- ----
Total: 100.0% $ 100.0% $
==== ===== ==== ===== ====
</TABLE>

18
<PAGE> 20

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1997 (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>
DECEMBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Bank loan payable(1)...................................... $ 30,000 $ --
Notes payable............................................. 7,108 7,108
Capital lease obligations................................. 3,650 3,650
-------- -------
Total debt............................................. 40,758 10,758
SHAREHOLDERS' EQUITY:
Preferred Stock, $.001 par value; authorized shares; none
issued and outstanding................................. -- --
Common Stock, $.01 par value; authorized 1,000,000 shares;
issued and outstanding 185,937......................... 2
Class A Common Stock, $.001 par value; authorized shares;
issued and outstanding shares, as adjusted............. --
Class B Common Stock, $.001 par value; authorized
shares; issued and outstanding
shares, as adjusted.................................... --
Additional paid-in capital................................ 12,372
Retained earnings......................................... 152,775
Notes receivable.......................................... (1,530)
-------- -------
Total shareholders' equity............................. 163,619
-------- -------
Total capitalization.............................. $204,377 $
======== =======
</TABLE>

- ---------------
(1) Represents borrowings outstanding under a credit agreement between Rivgam
Communicators, LLC, ("Rivgam"), a subsidiary of Gabelli Asset Management
Company, and The Chase Manhattan Bank (the "Rivgam Credit Agreement"). These
borrowings are guaranteed by Gabelli Asset Management Company. Net proceeds
from the sale of the FCC Licenses (as defined herein) are expected to be
used to repay the Rivgam Credit Agreement. See "Certain Relationships and
Related Transactions -- The Formation Transactions."

19
<PAGE> 21

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The selected historical financial data presented below under the captions,
"Historical Income Statement Data" and "Historical Balance Sheet Data," has been
derived from the audited consolidated financial statements of GFI.

The pro forma income statement data gives effect to the income taxes
payable if GFI had been a "C" corporation for federal and state income tax
purposes for all periods presented. In addition, the pro forma income statement
data for each of the five years in the period ended December 31, 1997 gives pro
forma effect to the Offering and the Formation Transactions, exclusive of the
sale of the FCC Licenses, as if they were consummated on January 1, 1993. The
pro forma adjustments are based upon available information and certain
assumptions that management of GFI 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 GFI which actually would have
occurred had these Offering and Formation Transactions been consummated on the
aforesaid dates, or project the results of operations or the financial position
of GFI for any future date or period. See "Certain Relationships and Related
Transactions -- The Formation Transactions."

The following selected historical and pro forma financial information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the Consolidated Financial
Statements of GFI and the related notes included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT SHARE DATA AND ASSETS UNDER
MANAGEMENT)
<S> <C> <C> <C> <C> <C>
HISTORICAL INCOME STATEMENT DATA
Revenues:
Investment advisory and incentive fees............ $ 61,110 $ 71,759 $ 77,302 $ 84,244 $ 89,684
Commission revenue................................ 5,555 5,003 5,706 6,667 7,496
Distribution fees and other income................ 3,716 4,683 6,302 7,257 8,096
-------- -------- -------- -------- --------
Total revenues.................................. 70,381 81,445 89,310 98,168 105,276
-------- -------- -------- -------- --------
Expenses:
Compensation costs................................ 31,750 36,235 39,384 41,814 45,260
Management fee.................................... 3,618 6,904 9,423 10,192 10,580
Other operating expenses.......................... 12,592 16,435 18,709 19,274 18,690
-------- -------- -------- -------- --------
Total expenses.................................. 47,960 59,574 67,516 71,280 74,530
-------- -------- -------- -------- --------
Operating income.................................... 22,421 21,871 21,794 26,888 30,746
-------- -------- -------- -------- --------
Other income (expense):
Net gain (loss) from investments.................. 9,199 (1,724) 10,105 8,783 7,888
Interest and dividend income...................... 2,596 4,692 5,853 5,406 4,634
Interest expense.................................. (337) (868) (679) (879) (1,876)
Other............................................. 195 119 147 331 (109)
-------- -------- -------- -------- --------
Total other income, net......................... 11,653 2,219 15,426 13,641 10,537
-------- -------- -------- -------- --------
Income before income taxes and minority interest.... 34,074 24,090 37,220 40,529 41,283
Income taxes...................................... 12,831 9,198 7,769 7,631 3,077
Minority interest................................. 1,750 2,060 2,555 2,727 1,529
-------- -------- -------- -------- --------
Net income.......................................... $ 19,493 $ 12,832 $ 26,896 $ 30,171 $ 36,677
======== ======== ======== ======== ========
PRO FORMA INCOME STATEMENT DATA (UNAUDITED)(1)
Income before income taxes and minority interest,
as reported..................................... $ 34,074 $ 24,090 $ 37,220 $ 40,529 $ 41,283
Pro forma management fee adjustment(2)............ 2,818 6,104 8,623 9,392 9,780
Pro forma provision for income taxes.............. (13,894) (11,530) (16,724) (17,880) (19,346)
Pro forma minority interest....................... (2,227) (2,626) (3,318) (3,478) (1,696)
-------- -------- -------- -------- --------
Pro forma net income.............................. $ 20,771 $ 16,038 $ 25,801 $ 28,563 $ 30,021
======== ======== ======== ======== ========
</TABLE>

20
<PAGE> 22

DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA:(5)
Total assets............................ $126,161(8) $141,887 $155,541 $182,524 $232,736
Total liabilities and minority
interest............................. 30,612(8) 33,983 39,470 43,991 69,117
-------- -------- -------- -------- --------
Total shareholders' equity.............. $ 95,549 $107,904 $116,071 $138,533 $163,619
======== ======== ======== ======== ========
</TABLE>

- ---------------
(1) Pro forma income statement data gives effect to the conversion of the
Company from a subchapter "S" corporation to a "C" corporation as if such
transaction had occurred on January 1, 1995 and to the conversion of the
management fee as if such transaction had occurred on January 1, 1993. See
"Certain Relationships and Related Transactions -- The Formation
Transactions."

(2) The management fee adjustment reflects the conversion of the management fee
for shares of Class B Common Stock, net of pro forma compensation
costs of $ .

(3) Effective April 14, 1997, Gabelli Fixed Income, LLC was restructured with
the Company's ownership increasing 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 $11.2 billion, respectively.

(6) Pro forma net income per share, pro forma weighted average shares
outstanding and shareholders equity per share have not been presented since
the number of shares to be exchanged in connection with the conversion of
the management fee has not been determined.

(7) Pro forma EBITDA is defined as earnings before management fee (but not pro
forma compensation of $ ), interest expense, taxes, depreciation and
amortization and minority interest. Pro forma EBITDA has been presented to
show the effect of the conversion of the management fee in consideration for
shares of Class B Common Stock effective upon consummation of the
Offering. This information has been disclosed herein to permit a more
complete analysis of the Company's operating performance. Pro forma EBITDA
should not be considered in isolation or as a substitute for net income or
other consolidated statements of income or cash flows data prepared in
accordance with generally accepted accounting principals as a measure of the
profitability or liquidity of the Company. Pro forma EBITDA does not take
into account the Company's debt service requirements and other commitments
and, accordingly is not necessarily indicative of amounts that may be
available for discretionary uses.

(8) Unaudited.

21
<PAGE> 23

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 GFI
include the accounts of the following majority-owned or controlled subsidiaries
of the Company: Gabelli Asset Management Company (100%-owned), GSI
(76.1%-owned), Gabelli & Company (76.1%-owned), Gabelli Fixed Income, LLC
(80.1%-owned) and Gabelli Advisers, Inc. (40.9%-owned).

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 of the Investment Company Act of 1940
("Rule 12b-1"), 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 Rule 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.

The management fee represents an amount paid to the Chairman of the Board
and Chief Executive Officer of the Company, which is equal to 20% of the pretax
profits of each of the Company's operating divisions, before consideration of
the management fee. Effective as of the date of the consummation of the
Offering, the management fee will be converted for shares of Class B
Common Stock. 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.

22
<PAGE> 24

Interest and dividend income as well as net gain from investments (realized
and unrealized) is derived from proprietary investments of the Company's capital
in various public and private investments. Prior to the Offering, the Company
expects to sell the FCC Licenses (as defined herein) and to record a substantial
gain from such sale. Such gain will be distributed to the Existing Shareholders
as part of the S Corporation Distribution. See "Certain Relationships and
Related Transactions -- The Formation Transactions."

Interest expense is attributable to notes payable, margin interest expense
and borrowings under the Rivgam Credit Agreement obtained in 1997.

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

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

OPERATING RESULTS FOR 1997 AS COMPARED TO 1996

Total operating revenues for the Company in 1997 increased to $105.3
million compared to $98.2 million in 1996, an increase of approximately $7
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 $3.9 billion or 40% to $13.4 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 36% to $7.1 billion at December 31, 1997 from $5.2 billion at
the end of the prior year. Approximately 16% of the increase in total assets
under management for 1997 and 2% 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 24% 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. During 1997, the Rule 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.

Total expenses for 1997 increased to $74.5 million, from $71.3 million in
1996, an increase of $3.2 million, or approximately 5%. Approximately one-half
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, a significant
portion of which are variable in nature and increase or decrease as revenues
grow or decline, rose to $45.3 million in 1997 from $41.8 million in 1996, an
increase of approximately 8%. Other operating expenses, which includes general
operating expenses, as well as marketing, promotion and distribution costs, were
$18.7 million in 1997, compared to $19.3 million in 1996. This decline in other
operating expense was generally due to lower mutual fund distribution and
marketing costs.

Interest and dividend income decreased by approximately $0.8 million in
1997 to $4.6 million compared with $5.4 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

23
<PAGE> 25

private investments which did not provide a current return. Interest expense
increased to $1.9 million in 1997 from $0.9 million in 1996 due to interest
expense related to the Rivgam Credit Agreement. The Rivgam Credit Agreement was
obtained to finance the acquisition of the FCC Licenses by Rivgam Communicators,
LLC. See "Certain Relationships and Related Transactions -- The Formation
Transactions."

Net gain from investments, which is derived from the Company's proprietary
investment portfolio, was approximately $7.9 million, compared to $8.8 million
for 1996, a decline of approximately $0.9 million. This decline was attributable
to higher costs associated with hedging activities.

The provision for income taxes decreased to $3.1 million in 1997 compared
with $7.6 million in 1996. This was primarily a result of Gabelli Asset
Management Company's election of subchapter "S" corporate status effective
January 1, 1997.

Minority interest declined in 1997 to $1.5 million from $2.7 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 76.1% owned subsidiary, Gabelli Securities, Inc., the Company's 80.1%
owned subsidiary, Gabelli Fixed Income, LLC and the Company's controlling
interest in Gabelli Advisers, LLC (now known as Gabelli Advisers, Inc.).

EBITDA (as defined herein) increased approximately $1.8 million to $43.6
million in 1997 from $41.8 million in 1996, primarily as a result of the
Company's increased operating income.

OPERATING RESULTS FOR 1996 AS COMPARED TO 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 Rule
12b-1 plans for the open-end Mutual Funds were structured to reimburse the
Company for distribution expenditures incurred for such funds, subject to a
limitation of .25% of average fund net assets.

Total expenses in 1996 increased to $71.3 million, from $67.5 million in
1995, an increase of $3.8 million, or approximately 6%, primarily as a result of
increased compensation costs and costs associated with the distribution of the
Mutual Funds. Compensation costs, a substantial portion of which are variable in
nature and increase or decrease as revenues grow or decline, rose from $39.4
million in 1995 to $41.8 million in 1996, an increase of $2.4 million or
approximately 6%. Other operating expenses increased approximately $0.6 million
or 3% to $19.3 million in 1996 from $18.7 million in 1995. This increase was
mainly a result of increased distribution and marketing costs associated with
the Mutual Funds.

Interest and dividend income decreased to $5.4 million in 1996 from $5.9
million in 1995, a decrease of approximately 8%. This was primarily a result of
the use of capital for certain private investments in 1996 which did not provide
a current return.

24
<PAGE> 26

Net gain from investments, which is derived from the Company's proprietary
investment portfolio was approximately $8.8 million in 1996 compared to $10.1
million in 1995, a decline of approximately $1.3 million. This decline was
attributable to higher costs associated with hedging activities.

The provision for income taxes for 1996 and 1995 reflect treatment of the
parent company, Gabelli Funds, Inc., as a subchapter "S" corporation. As such,
the liability for a substantial portion of the corporate taxes are the
responsibility of the individual shareholders.

Higher net income reported on a separate company basis by both the
Company's then 79.5% 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. GSI
manages the Partnerships and is the holding company for Gabelli & Company, the
Company's broker-dealer subsidiary and distributor of the Mutual Funds managed
by the Company.

EBITDA increased approximately 9% to $41.8 million from $38.2 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, FCC Licenses 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 met its cash requirements primarily 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 December 31, 1997 and 1996,
the Company had net capital as defined of approximately $6.6 million and $8.1
million, respectively, exceeding the regulatory requirement by approximately
$6.3 million and $7.8 million, respectively. Regulatory net capital requirements
increase when Gabelli & Company is involved in underwriting activities.

At December 31, 1997, the Company had outstanding borrowings of $30 million
under the Rivgam Credit Agreement. Interest is variable based upon changes in
the LIBOR (London Interbank Offered Rate) or the Federal Funds Rate. Principal
repayments under the credit agreement are due in four equal installments
starting May 10, 1998. Rivgam's outstanding borrowings under the Rivgam Credit
Agreement are guaranteed by Gabelli Asset Management Company. Net proceeds from
the sale of the FCC Licenses are expected to be used to repay the Rivgam Credit
Agreement. See "Certain Relationships and Related Transactions -- The Formation
Transactions."

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. The Company
does not expect implementation to have any significant effect on the Company's
reported financial position, results of operations or segment reporting.

SEASONALITY AND INFLATION

The Company does not believe its operations are subject to significant
seasonal fluctuations or inflation.

25
<PAGE> 27

BUSINESS

OVERVIEW

Alpha G, Inc. is an investment management and financial services holding
company that, through its subsidiaries, provides investment advisory and
brokerage services to mutual fund, institutional and high net worth investors
primarily in the United States. The Company provides advisory services to (i)
the Gabelli family of funds, which currently consist of thirteen open-end mutual
funds and three closed-end funds, through its wholly owned subsidiary GFI, (ii)
The Treasurer's Funds, consisting of three open-end money market funds, through
Gabelli Fixed Income, LLC, an 80.1% owned indirect subsidiary, and (iii) the
Gabelli Westwood family of funds, currently consisting of five open-end mutual
funds, whose portfolios are managed on a day-to-day basis by their subadviser,
Westwood Management, an unaffiliated company, and through their advisor, Gabelli
Advisers, Inc., in which the Company owns 51.1% of the Class B common stock
(representing approximately 49.9% of the total voting power and 40.9% of the
economic interest). In addition to the Mutual Funds, the Company provides
investment management services to the Separate Accounts consisting of corporate
pension and profit sharing plans, foundations, endowment funds, jointly trusteed
plans, municipalities and high net worth individuals, as well as other mutual
funds for which the Company serves as subadvisor. The Company manages assets on
a fully managed discretionary basis and invests in a variety of U.S. and
international securities, primarily consisting of equities, fixed income
securities and convertible securities. The Company also provides alternative
investments through the Partnerships. The Company's subsidiary, Gabelli &
Company, is a registered broker-dealer and a member of the NASD that acts as
underwriter and distributor of the Mutual Funds and provides brokerage, trading,
underwriting and research services. The Company also actively manages a
proprietary investment portfolio, consisting of public and private investments.

Through its wholly owned subsidiary, Gabelli Asset Management Company and
through Gabelli Fixed Income, LLC, the Company provides investment management
services to the separate accounts market. GSI, an approximately 76.1% owned
subsidiary, acts as managing general partner or investment manager of each of
the Partnerships and also owns all of the capital stock of Gabelli & Company.
Each of GFI, Gabelli Advisers, Inc., Gabelli Fixed Income, LLC and Gabelli Asset
Management Company are registered investment advisers under the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act").

As of March 31, 1998, the Company had approximately $15.5 billion of assets
under management, consisting of $7.5 billion in Mutual Funds, $7.9 billion in
Separate Accounts and $139 million in the Partnerships. The Company's total
assets under management have grown from $2.1 billion as of December 31, 1987 to
$13.4 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 have grown by $2.1 billion, or 15.7%, for the
first quarter of 1998, thereby increasing total assets under management to $15.5
billion at March 31, 1998. The Company's growth of assets under management has
led to a corresponding increase in operating revenues and pre-tax profitability.

For the year ended December 31, 1997, total revenues were $105.3 million
and pro forma EBITDA was $53.4 million. During 1997, the Company derived
approximately 85% of its revenues from investment management activities, 7% from
securities brokerage activities, and 8% from mutual fund distribution
activities. Of the $89.7 million of investment management revenues,
approximately 94% was from the management of portfolios consisting primarily of
equity securities (including convertible securities), 2% was from the management
of fixed income securities and 4% was from the management of the Partnerships.
Of the $89.7 million of investment management revenues, management of the
open-end Mutual Funds contributed approximately 38%, management of the
closed-end Mutual Funds contributed approximately 15%, management of the
Separate Accounts contributed approximately 43% and management of the
Partnerships contributed approximately 4%. In addition, the Company's
proprietary investment portfolio contributed $12.5 million or approximately 11%
of the total of revenues and other income, net, for 1997.

26
<PAGE> 28

The Mutual Funds have a long-term record of achieving high returns compared
against similar investment products. 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 was named as the Domestic Equity Fund Manager of the
Year for 1997 by Morningstar, Inc. ("Morningstar"). As of March 31, 1998,
Morningstar rated two of the Gabelli funds and one of the Gabelli Westwood funds
"five stars" (its highest rating) and four of the Gabelli funds and one of the
Gabelli Westwood funds "four stars", in each case, on an overall basis (i.e.
based on 3, 5 and 10-year risk adjusted average returns). As of March 31, 1998,
approximately 93% of assets under management in those Mutual Funds having a
Morningstar overall rating were ranked four or five stars and 99.7% of such
assets were in Mutual Funds ranked three, four or five stars on an overall
basis. Also for 1997, the Gabelli Global Interactive Couch Potato(R) Fund was
ranked as the "number one global fund" out of 188 global funds ranked by Lipper
Analytical Services, Inc. and one of the Partnerships, Gabelli Associates
Limited, was ranked in 1997 as a top performer in its risk-adjusted class by
Managed Account Reports Inc. 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-1980's, 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. By
the early 1990's, the Company had continued to expand its investment management
capabilities through the addition of international and global investment
products. The Company has now developed mutual funds which target specific
investment and industry sectors where the Company has expertise, such as
telecommunications and multimedia. As part of its expansion plans, the Company
intends to more actively promote its existing investment products and to
continue to develop, expand and promote new investment strategies in the
international and fixed income investment areas. The Company currently offers a
range of investment products and strategies, which are summarized in the
following table.
------------------------

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

27
<PAGE> 29

The following tables set 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
TO MARCH 31,
AT DECEMBER 31, MARCH 31, 1998
--------------------------------------------------------- --------- ------------
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 $ 6,602 18.8
Separate
Accounts......... 3,388 4,460 4,275 5,051 5,200 6,158 7,208 15.5
------ ------ ------ ------ ------ ------- -------
Total Equity..... 6,061 7,961 7,666 8,926 9,169 11,471 13,810 17.0
------ ------ ------ ------ ------ ------- -------
FIXED INCOME:
Mutual Funds(b).... 159 183 213 241 240 833 875 38.4
Separate
Accounts(b)...... -- -- -- -- -- 928 642 --
------ ------ ------ ------ ------ ------- -------
Total Fixed
Income......... 159 183 213 241 240 1,761 1,517 53.7
------ ------ ------ ------ ------ ------- -------
PARTNERSHIPS:
Partnerships....... 76 67 103 112 116 138 139 12.0
------ ------ ------ ------ ------ ------- -------
Total Assets..... $6,296 $8,211 $7,982 $9,279 $9,525 $13,370 $15,466 18.7
====== ====== ====== ====== ====== ======= =======
BREAKDOWN OF TOTAL
ASSETS:
Mutual Funds....... $2,832 $3,684 $3,604 $4,116 $4,209 $ 6,146 $ 7,477 20.3
Separate
Accounts......... 3,388 4,460 4,275 5,051 5,200 7,086 7,850 17.4
Partnerships....... 76 67 103 112 116 138 139 12.0
------ ------ ------ ------ ------ ------- -------
Total Assets(b).. $6,296 $8,211 $7,982 $9,279 $9,525 $13,370 $15,466 18.7
====== ====== ====== ====== ====== ======= =======
</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 $11,153 at December 31, 1992, 1993, 1994, 1995 and 1996,
respectively, and the CAGR for total assets would have been 13.8%.

BUSINESS STRATEGY

28
<PAGE> 30

things, developing additional products and increasing its marketing and
advertising to provide a uniform global image. For example, the Company
intends to launch several new investment products in 1998, including the
Gabelli Global Opportunity Fund, a global equity fund, and the Gabelli
Westwood Mighty Mites(SM) Fund, a micro cap equity fund. As part of its
strategy to strengthen and broaden its Gabelli brand name identity, the
Company plans to promote the strengths of its overall product line.

- Retain and Attract Top Performing Investment Professionals. The
Company's overall long-term strategy is to provide a range of investment
products suitable to meet the diverse requirements of its clients. The
Company has in recent years expanded its portfolio management staff and
believes it has significant capacity for growth in existing products. 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.

- Expand Marketing and Distribution of Mutual Funds. In addition to its
direct response marketing program, the Company intends to continue to
expand its distribution network through Third-Party Distribution
Programs, particularly NTF Programs. As of March 31, 1998, the Company
was participating in 53 Third-Party Distribution Programs, with
additional programs targeted. The Company's objective is to gain access
to the remaining programs that it has already targeted, as well as any
new programs that the Company determines will increase distribution of
the Mutual Funds. In addition, the Company intends to develop a marketing
strategy to increase its presence in the 401(k) market for its Mutual
Funds. The Company is seeking to add experienced marketing and client
service personnel in order to increase its distribution efforts.

MUTUAL FUNDS

The Mutual Funds include twenty-one open-end Mutual Funds and three
closed-end funds which had total assets as of March 31, 1998 of $7.5 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 New York Stock Exchange ("NYSE"). At March 31, 1998, the open-end funds
had total assets of $5.9 billion and the closed-end funds had total assets of
$1.6 billion. The assets managed in the closed-end funds represent approximately
21% of the assets in the Mutual Funds and 10% of the total assets under
management of the Company at March 31, 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.

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 sub-adviser 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.

29
<PAGE> 31

Gabelli Advisers, Inc. acts as investment adviser to the Gabelli Westwood
family of funds and has retained Westwood Management to act as subadvisor.
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 all of the current Gabelli Westwood family of
funds. The Gabelli Westwood Mighty Mites(SM) Fund, which is expected to be
launched in the second quarter of 1998, however, will be advised solely by
Gabelli Advisers, Inc., using a team investment approach, without any
subadvisors. Westwood Management owns 100% of the Class A common stock of
Gabelli Advisers, Inc. (representing 59.1% of the economic interest), and is not
an affiliate of the Company. Day-to-day investment decisions for the Gabelli
Westwood family of funds are made by Westwood Management. 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.

30
<PAGE> 32

The following table lists the Mutual Funds, together with the Morningstar
overall rating (where available), 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 March 31, 1998.

<TABLE>
<CAPTION>
NET ASSETS
AS OF
ADVISORY 12B-1 INITIAL MARCH 31,
FUND/(MORNINGSTAR PRIMARY FUND FEES FEES OFFER 1998
OVERALL RATING)(1) INVESTMENT OBJECTIVE CHARACTERISTICS (%) (%) DATE ($ IN MILLIONS)
- ------------------------------- ------------------------ --------------- -------- ----- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
GABELLI OPEN-END FUNDS:
The Gabelli Asset Fund Growth of capital as a No-load, 1.00 .25 03/03/86 1,559.2
(*****) primary investment Open-end,
objective, with current Diversified
income as a secondary
investment objective.
Invests in equity
securities of companies
selling at a significant
discount to their
private market value.
The Gabelli Growth Fund Capital appreciation No-load, 1.00 .25 04/10/87 1,400.6
(*****) from companies that have Open-end,
favorable, yet Diversified
undervalued, prospects
for earnings growth.
Invests in equity
securities of companies
that have above-average
or expanding market
shares and profit
margins.
The Gabelli Value Fund High level of capital Load, Open- 1.00 .25 09/29/89 762.8
(****) appreciation from end,
undervalued equity Non-diversified
securities that are held
in a concentrated
portfolio.
The Gabelli Small Cap Growth High level of capital No-load, 1.00 .25 10/22/91 348.5
Fund (****) appreciation from equity Open-end,
securities of smaller Diversified
companies with market
capitalization of $500
million or less.
The Gabelli Equity Income Fund High level of total No-load, 1.00 .25 01/02/92 87.5
(****) return with an emphasis Open-end,
on income producing Diversified
equities with yields
greater than the S&P 500
average.
The Gabelli ABC Fund Total returns from No-load, 1.00 .25 05/14/93 62.0
(***) equity and debt Open-end,
securities that are Non-diversified
attractive to investors
in various market
conditions without
excessive risk of
capital loss.
</TABLE>

31
<PAGE> 33

<TABLE>
<CAPTION>
NET ASSETS
AS OF
ADVISORY 12B-1 INITIAL MARCH 31,
FUND/(MORNINGSTAR PRIMARY FUND FEES FEES OFFER 1998
OVERALL RATING)(1) INVESTMENT OBJECTIVE CHARACTERISTICS (%) (%) DATE ($ IN MILLIONS)
- ------------------------------- ------------------------ --------------- -------- ----- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gabelli U.S. Treasury Money High current income with Money Market, .30 n/a 10/01/92 307.6
Market Fund preservation of Open-end,
(Not rated) principal and liquidity, Diversified
while striving to keep
expenses among the
lowest of all U.S.
Treasury money market
funds.
Gabelli International Growth Capital appreciation by No-load, 1.00 .25 06/30/95 29.1
Fund, Inc. investing primarily in Open-end,
(Not rated) equity securities of Diversified
foreign companies with
rapid growth in revenues
and earnings.
The Gabelli Global High level of capital No-load, 1.00 .25 11/01/94 150.3
Telecommunications Fund appreciation through Open-end,
(***) worldwide investments in Non-diversified
equity securities,
including the U.S.,
primarily in the
telecommunications
industry.
The Gabelli Global Convertible High level of total No-load, 1.00 .25 02/03/94 9.3
Securities Fund return through a Open-end,
(**) combination of current Non-diversified
income and capital
appreciation through
investment in
convertible securities
of U.S. and non-U.S.
issuers.
The Gabelli Global Interactive High level of capital No-load, 1.00 .25 02/07/94 95.6
Couch Potato(R) Fund appreciation through Open-end,
(***) investment in a Non-diversified
portfolio of equity
securities focused on
the entertainment, media
and communications
sectors.
Gabelli Gold Fund, Inc. Seeks capital No-load, 1.00 .25 07/11/94 12.4
(*) appreciation and employs Open-end,
a value approach to Diversified
investing primarily in
equity securities of
gold-related companies
worldwide.
Gabelli Capital Asset Fund Capital appreciation No-load, .75 n/a 05/01/95 138.3
(Not rated) from equity securities Open-end,
of companies selling at Diversified
a significant discount Variable
to their private market Annuity
value.
</TABLE>

32
<PAGE> 34

<TABLE>
<CAPTION>
NET ASSETS
AS OF
ADVISORY 12B-1 INITIAL MARCH 31,
FUND/(MORNINGSTAR PRIMARY FUND FEES FEES OFFER 1998
OVERALL RATING)(1) INVESTMENT OBJECTIVE CHARACTERISTICS (%) (%) DATE ($ IN MILLIONS)
- ------------------------------- ------------------------ --------------- -------- ----- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
GABELLI WESTWOOD OPEN-END FUNDS:
Gabelli Westwood Equity Fund Capital appreciation Retail Class: 1.00 .25 01/02/87 197.0
(*****) through a diversified No-load,
portfolio of equity Open-end, .50
securities using a Diversified
top-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 10/01/91 130.2
(****) appreciation and current No-load,
income using portfolios Open-end, .50
containing stocks, Diversified
bonds, and cash as Service Class:
appropriate in light of Load, Open-
current economic and end,
business conditions. Diversified
Gabelli Westwood Intermediate Total return and current No-load, .60 .25 04/06/93 6.3
Bond Fund income, while limiting Open-end,
(RRR) risk to principal. Diversified
Pursues 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 13.4
SmallCap appreciation, investing Open-end,
Equity Fund at least 65% of its Diversified
(Not rated) assets in equity
securities of companies
with market
capitalizations of $1
billion or less.
Gabelli Westwood Realty Fund Long-term capital No-load, 1.00 .25 09/30/97 2.5
(Not rated) appreciation as well as Open-end,
current income, Diversified
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 01/01/88 285.0
- -- Domestic Prime Money Market preservation of Open-end,
Portfolio principal and liquidity Diversified
(Not rated) through investment in
U.S. Treasury securities
and corporate bonds.
</TABLE>

33
<PAGE> 35

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

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
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
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, the
Company further expanded these efforts to include substantially all of its
open-end Mutual Funds in over 50 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 $5.9 billion of assets
under management in the open-end Mutual Funds as of March 31, 1998,
approximately 15% 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 $385 million for the first and
second halves of 1997 and the first quarter of 1998, respectively. In the first
quarter of 1998, sales (net of redemptions) of the

34
<PAGE> 36

Mutual Funds were $616 million, of which approximately 37% was generated from
direct marketing and approximately 63% was generated from the NTF Programs.

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, including a majority of the directors who
are not parties to the agreements or "interested persons" of any such party, 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.

SEPARATE ACCOUNTS

Since 1977, the Company has provided investment management services to a
broad spectrum of institutional and high net worth investors. As of March 31,
1998, the Company had approximately 850 Separate Accounts with an aggregate of
approximately $7.9 billion of assets, which represent approximately one-half of
the total assets under management of the Company at March 31, 1998. The ten
largest Separate Accounts comprise approximately 36% of the total assets and 22%
of revenues as of March 31, 1998, in the Separate Accounts business. The
Separate Accounts are invested in U.S. and international equity securities and
U.S. fixed-income securities and convertible securities.

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.

The Company's Separate Accounts business is marketed primarily through the
direct efforts of its in-house sales force. 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.

35
<PAGE> 37

ALTERNATIVE INVESTMENT PRODUCTS -- 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 $139 million of assets at March 31,
1998. Gabelli Associates Fund had $112 million of assets under management as of
March 31, 1998 and invests in merger arbitrage opportunities. Merchant banking
activities are carried out through ALCE Partners, L.P., a Delaware limited
partnership ("Alce"), and Gabelli Multimedia Partners, L.P., a Delaware limited
partnership ("Multimedia"), both of which are closed to new investors. Aggregate
assets for Alce and Multimedia as of March 31, 1998 were $10 million and $6
million, respectively. Gabelli Associates Limited, which had $11 million of
assets as of March 31, 1998, is an off shore 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 March 31, 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. Apart from his duties with the Company, Mr. Gabelli
manages, and will continue to manage alternative investment products other than
through the Company, including private and offshore investment funds. See "Risk
Factors -- Control by Mr. Gabelli; Conflicts of Interest," "Certain
Relationships and Related Transactions -- Transactions with Mr. Gabelli and
Affiliates" and "Description of Capital Stock -- Certificate of Incorporation
and Bylaw Provisions -- Corporate Opportunity and Conflict of Interest
Policies."

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. On a limited
basis, Gabelli & Company purchases and sells securities for its own account.
Gabelli & Company's revenues are derived primarily from distribution of the
Mutual Funds, brokerage commissions and selling concessions on transactions in
equity securities for the Mutual Funds, Separate Accounts and other customers,
and from underwriting fees and market-making activities.

The Company distributes the open-end Mutual Funds pursuant to distribution
agreements with each open-end Mutual Fund. Under each Distribution Agreement
with an open-end Mutual Fund, the Company offers and sells such open-end Mutual
Fund's shares on a continual basis and pays all of the costs of marketing and
selling the shares of such open-end Mutual Fund, including printing and mailing
prospectuses and sales literature, advertising and maintaining sales and
customer service personnel and sales and services fulfillment systems, and
payments to the sponsors of Third-Party Distribution Programs, financial
intermediaries and sales personnel of the Company. The Company receives fees for
such services, pursuant to a Distribution Plan adopted under provisions of Rule
12b-1 of the Investment Company Act of 1940. Distribution fees from the open-end
Mutual Funds amounted to $7.5 million, $7.1 million and $6.2 million for the
years ended December 31, 1997, 1996 and 1995, 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 Plans, 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

36
<PAGE> 38

.50% per year) on the average daily net assets of the fund. Each Distribution
Plan 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 Plan or any agreement under the Distribution Plan, cast in person
at a meeting called for the purpose of voting on such approval. Each Mutual Fund
may terminate its Distribution Plan or any agreement under the Distribution Plan
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. During 1997, Gabelli & Company participated in 35 syndicated
underwritings with commitments totaling $51 million for public equity and debt
offerings managed by major investment banks.

CORPORATE INVESTMENTS

As of December 31, 1997, the Company had approximately $201 million of cash
and investments (including investments in securities, investment partnerships,
U.S. government obligations, mutual funds and the FCC Licenses), and derived
approximately 11% of total revenues and other income, net, for 1997 from its
investment portfolio. The portfolio consists of public and private investments,
as well as investments in over 50 non-affiliated entities and investment funds.
The Company's private investments include Rivgam Communicators, LLC, a wholly
owned subsidiary of the Company that was formed to acquire the FCC Licenses
(which will be sold as part of the Formation Transactions); Investors Financial
Group, Inc. an Atlanta-based financial services group with over 500 registered
brokers that is approximately 23% owned by GSI; and GamTree, L.P., a "fund of
funds" of which the Company and a subsidiary of Tremont Advisers, Inc. (an
entity in which Mr. Gabelli has a significant ownership interest) are co-general
partners, which offers a portfolio of interests in private funds managed by
performance fee-based managers.

COMPETITION

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

The market for providing investment management services to institutional
and high net worth Separate Accounts is also highly competitive. Approximately
43% of the Company's investment management fee revenues for the 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.

37
<PAGE> 39

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 "Gabelli
Interactive Coach Potato" name, and (v) the "Mighty Mites" name. The Company has
taken, and will continue to take, action to protect its interests in these
service marks.

STAFF

At March 31, 1998, the Company had a full-time staff of approximately 125
individuals, of whom 35 served in the portfolio management, research and trading
areas, 52 served in the marketing and shareholder servicing areas and 38 served
in the administrative area. The Company employs ten portfolio managers for the
Mutual Funds, Separate Accounts and Partnerships, and Westwood Management
employs an additional three portfolio managers who advise 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 27,256
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. .................................. October 31, 1998 4,177
655 Third Avenue, Suite 1425
New York, New York 10017
</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, 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
by the year 2001. See "Certain Relationships and Related Transactions."

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.

38
<PAGE> 40

The subsidiaries of the Company that are registered with the Commission
under the Investment Advisers Act (GFI, 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 of the
Company and the Mutual Funds by the Commission was in June 1996. The most recent
examination of Gabelli & Company by the NASD was in August 1996. 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 ("ERISA"), and to regulations promulgated thereunder,
insofar as they are "fiduciaries" under ERISA with respect to their clients.
ERISA and applicable provisions of the Internal Revenue Code of 1986, as
amended, 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 March
31, 1998, the Company had five percent or more beneficial ownership with respect
to more than 80 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

39
<PAGE> 41

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.

40
<PAGE> 42

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..... 55 Chairman of the Board, Chief Executive Officer and Chief
Investment Officer, Director
David K. Sandie...... 42 Executive Vice President, Chief Operating Officer and Chief
Financial Officer
Stephen G. Bondi..... 40 Executive Vice President -- Finance and Administration
James E. McKee....... 35 Vice President, General Counsel and Secretary
Douglas R.
Jamieson........... 43 Executive Vice President of Gabelli Asset Management Company
Bruce N. Alpert...... 46 Vice President, Chief Financial Officer and Chief Operating
Officer of Gabelli Funds Division
Charles C. Baum...... 56 Director
Richard B. Black..... 64 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 since November 1976. In connection with those
responsibilities, he serves as Chairman and/ or President of thirteen registered
investment companies managed by Gabelli Funds, Inc. and as Portfolio Manager for
a substantial majority of the Company's value equity products. 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 School of Business.
Mr. Gabelli is the father of Marc J. Gabelli and Matthew R. Gabelli.

DAVID K. SANDIE joined the Company in February 1998 and serves as Executive
Vice President, Chief Operating Officer and Chief Financial Officer of the
Company. In addition, Mr. Sandie serves as a director of each of Gabelli Asset
Management Company, Gabelli Fixed Income, Inc., Gabelli Securities, Inc. and
Gabelli Advisers, Inc. Prior to joining the Company, from 1984 to 1998 Mr.
Sandie was Managing Director and Chief Financial Officer of The TCW Group, Inc.,
Treasurer of its mutual funds and served as a director of TCW Asset Management
Company. Mr. Sandie was an Audit Manager with Price Waterhouse LLP from 1980 to
1984, where he specialized in the financial services industry. Mr. Sandie
received a B.A. degree from the University of California at Los Angeles and an
M.B.A. from the University of Southern California and is a Certified Public
Accountant.

STEPHEN G. BONDI joined the Company in 1982 and serves as Executive Vice
President -- Finance and Administration of the Company. Mr. Bondi also serves as
Vice President of Gabelli Asset Management Company, Gabelli Securities, Inc.,
and Gabelli & Company Inc. and is a director of Gabelli & Company, Inc. Prior to
joining the Company, Mr. Bondi was an accountant with the accounting firm of
Spicer & Oppenheim.

41
<PAGE> 43

He holds a B.B.A. in Accounting from Hofstra University, received an M.B.A. from
Columbia University School of Business and is a Certified Public Accountant.

JAMES E. MCKEE has served as Vice President and 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 U.S. Securities and Exchange 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.

DOUGLAS R. JAMIESON has served as Executive Vice President 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 School of
Business.

BRUCE N. ALPERT has served as Vice President, Chief Financial Officer and
Chief Operating Officer of the Gabelli Funds Division 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 and 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 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., and as President and director of
Oak Technology, Inc., an international supplier of semiconductors. Mr. Black was
Chairman and Chief Executive Officer of AM International, Inc. from 1981 to
1982, and President and Chief Executive Officer of Alusuisse of America (Swiss
Aluminum of America) from 1979 to 1981 and Chairman of the Board, President and
Chief Executive Officer of Maremont Corporation 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
was awarded an Honorary Doctorate of Human 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 GAMCO
Investors, Inc. and several of the Mutual Funds and has served as Vice President
of Research of Gabelli & Company, Inc. Mr. Gabelli also serves as President of
Gabelli Securities International and Gemini Capital Management Limited, an
offshore investment advisor. In addition, Mr. Gabelli has served as President of
Gabelli Asset Management Company International Advisory Services, Ltd., an
advisor to an offshore investment company, since 1995. Prior to joining the
Company in 1993, he worked at Lehman Brothers International from June 1989 to
February 1993, having research and

42
<PAGE> 44

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 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. He
currently serves as President and Chief Executive Officer of Tulane University,
New Orleans since 1981. Dr. Kelly served in numerous positions, including
Officer-in-Charge of Program Related Investments at the Ford Foundation from
1974 to 1979, 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 has been a Partner of Sal Oppenheim Jr., & Cie., private investment bank;
former President of the Deutsche Bundesbank, Germany's Central Bank and Chairman
of its Central Bank Council from 1980 to 1991. Currently Mr. Pohl is a
director/trustee of all of the Mutual Funds and serves as a board member of IBM
World Trade Europe/Middle East/Africa Corp.; Bertelsmann AG; Zurich
Versicherungs-Gesellshaft (Insurance); the International Advisory Board of
General Electric Company; the International Council for JP Morgan & Co.; the
Board of Supervisory Directors of ROBECO Group; and the Supervisory Board of
Royal Dutch (petroleum company); Advisory Director of Unilever N.V. and Unilever
Deutschland. Mr. Pohl also served as German Governor, 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

43
<PAGE> 45

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."

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.

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 of Gabelli
Asset Management Company
Bruce N. Alpert...................... 1997 $ $ $ $
Vice President, Chief Financial and
Operating Officer of Gabelli Funds
Division
Stephen G. Bondi..................... 1997 $ $ $ $
Executive Vice President -- Finance
and Administration
James E. McKee....................... 1997 $ $ $ $
Vice President, General Counsel and
Secretary
</TABLE>

1998 STOCK AWARD AND INCENTIVE PLAN

In General

The Company, subject to the approval of its shareholders, has adopted the
Alpha G, Inc. 1998 Stock Award and Incentive Plan (the "Plan"). A maximum of
shares of Class A Common Stock has been reserved for issuance
under the Plan, generally subject to equitable adjustment upon the occurrence of
any stock dividend or other distribution, recapitalization, stock split, reverse
split, reorganization, merger, consolidation, spin-off, combination, 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
independently of options), restricted stock, restricted stock units, dividend
equivalents and other stock- or cash-based awards ("Awards"). From and after the
consummation of the Initial Public 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 section 162(m) ("Section 162(m)") of the Internal
Revenue Code of 1986, as amended (the "Code") 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

44
<PAGE> 46

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, in 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 (10) 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 preestablished 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.

45
<PAGE> 47

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
continue to comply with Section 162(m), 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

On , 1998, the Company granted, subject to shareholder approval
of the Plan, to stock options to acquire shares of
Class A Common Stock at an exercise price of $ . These stock options
vest years from the date of consummation of the Offering.

46
<PAGE> 48

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth information regarding the beneficial ownership
of the Common Stock by (i) each person known by the Company to be the beneficial
owner of five percent or more of its outstanding Common Stock, (ii) each of the
Named Executive Officers, (iii) each of the individuals who will serve as a
director of the Company following the Offering, and (iv) all of those
individuals who will serve as the Company's directors and officers following the
Offering, as a group, in each case, as adjusted to reflect the sale of the
shares in the Offering and the Formation Transactions. Unless otherwise
indicated, the Company believes that the beneficial owner has sole voting and
investment power over such shares. The information set forth below assumes that
the Underwriters' over-allotment options are not exercised. None of the persons
listed on the table below will, immediately following the consummation of the
Offering, beneficially own any shares of Class A Common Stock.

<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP PERCENTAGE
NUMBER OF SHARES ------------------- OF TOTAL
OF COMMON STOCK PRIOR TO AFTER VOTING POWER
NAME BENEFICIALLY OWNED OFFERING OFFERING AFTER THE OFFERING
---- ------------------ -------- -------- ------------------
<S> <C> <C> <C> <C>
Mario J. Gabelli(a)............................ % % %
Frederick J. Mancheski(b)......................
Douglas R. Jamieson............................
David K. Sandie................................
Stephen G. Bondi...............................
James E. McKee.................................
Bruce N. Alpert................................
Charles C. Baum................................
Richard B. Black...............................
Marc J. Gabelli................................
Matthew R. Gabelli.............................
Eamon M. Kelly.................................
Karl Otto Pohl.................................
All officers and directors as a group (
persons).....................................
</TABLE>

- ---------------
(a) The address for Mario J. Gabelli is One Corporate Center, Rye, New York
10580.

(b) The address for Mr. Mancheski is care of Alpha G, Inc., One Corporate
Center, Rye, New York 10580.

47
<PAGE> 49

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 -- Relationship with Mr.
Gabelli; Conflicts of Interest."

THE FORMATION TRANSACTIONS

Alpha G, Inc. is a newly formed company and, prior to the consummation of
the Offering, has no significant assets. It has not 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,
Alpha G, Inc. will issue shares of its Class B Common Stock to all of
the Existing Shareholders in exchange for all of the shares of common stock of
GFI, which currently owns all of the businesses included in the description of
the Company in this Prospectus. As a result, GFI will become a wholly owned
subsidiary of the Company, and the Company will conduct all of its business
operations through GFI and its subsidiaries. After the consummation of the
Offering, the Existing Shareholders will own all of the outstanding shares of
Class B Common Stock, which will represent approximately % of the combined
voting power of the outstanding Common Stock ( % if the Underwriters'
over-allotment option is exercised in full). The Company will continue to be
controlled by Mr. Gabelli, who will beneficially own approximately % of the
combined voting power of the Common Stock of the Company.

Since January 1995, GFI has been treated for federal and certain state
income tax purposes as a subchapter S corporation under the Internal Revenue
Code of 1986, as amended (the "Code"). Prior to the closing of the Offering (the
"Termination Date"), GFI will terminate its status as an S corporation and
expects to declare a dividend to the Existing Shareholders. The dividend will be
calculated to cover the total amount of federal and state taxes payable by the
Existing Shareholders on the Company's 1998 pre-Termination Date earnings (the
"Tax Amount") plus an additional amount not to exceed the undistributed pretax
income of the Company for 1997 and 1998 prior to the Termination Date, less the
Tax Amount (the "Discretionary Distribution," and together with the Tax Amount,
the "S Corporation Distribution"). Based on the results of operations through
, 1998, the Tax Amount will be $ million and the amount of the
Discretionary Distribution would be $ million for an aggregate S Corporation
Distribution of $
million. The Company expects that the S Corporation Distribution will be payable
to the Existing Shareholders who are shareholders of record on ,
1998. The S Corporation Distribution will be payable from cash and investments
available on the payment date.

Prior to the Offering, the Company was the beneficial owner of all of the
issued and outstanding limited liability company interests of Rivgam
Communicators, LLC ("Rivgam"), which owns certain personal communications
services licenses awarded by the Federal Communications Commission (the "FCC
Licenses"). The Company entered into a license purchase agreement for the sale
of certain of the FCC Licenses owned by Rivgam to an unaffiliated third-party,
subject to the satisfaction of certain conditions, and expects to sell or
otherwise dispose of all of the FCC Licenses prior to the Offering. A
substantial net gain (after expenses related to the sale) is expected to be
recorded from the sale of the FCC Licenses. Such gain will be distributed to the
Existing Shareholders as part of the S Corporation Distribution. Net proceeds
from the sale of the FCC Licenses are expected to be used to repay the Rivgam
Credit Agreement.

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

TRANSACTIONS WITH MR. GABELLI AND AFFILIATES

Mr. Gabelli and certain other members of his family associated with the
Company devote and intend to continue devoting time to activities outside the
Company, including managing assets for other investors in various funds
(approximately $115 million as of March 31, 1998), managing their own assets and
their families' assets, and managing or controlling companies in other
industries. These activities may present

48
<PAGE> 50

conflicts of interest or compete with the Company, and the Certificate of
Incorporation of the Company expressly provides in general that Mr. Gabelli and
members of his family have no obligation to resolve conflicts in favor of the
Company or to refrain from competing with the Company. For example, Mr. Gabelli
and members of his family may make private investments for themselves that would
also be attractive to the Company and may manage money for investors other than
through the Company. In order to minimize conflicts and potential competition
with the Company's core business, Mr. Gabelli (but not other members of his
family) has undertaken that so long as he is associated with the Company he will
not manage money, other than through the Company, for any mutual fund that is
publicly offered in the U.S. or abroad and will not manage money for separate
accounts or privately offered funds that invest primarily in publicly traded
equity securities except for those that pay traditional hedge fund performance
fees.

The Company will not derive any income from external activities by Mr.
Gabelli and members of his family and may not be able to take advantage of
business and investment opportunities that would prove to be beneficial to the
Company and the shareholders. Where a conflict of interest involves a
transaction between Mr. Gabelli and members of his family 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 Interests" and "Description of
Capital Stock -- Certificate of Incorporation and Bylaw Provisions -- Corporate
Opportunity and Conflict of Interest Policies."

Among the existing outside activities that Mr. Gabelli engages in, Mr.
Gabelli will continue to serve 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 March 31, 1998, such entities had assets under
management of approximately $115 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.

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 as an adviser to
Gabelli International II Limited and Gabelli Fund, LDC, as President and Chief
Investment Officer of Gemini Capital Management Ltd. and Gabelli Asset
Management Company International Advisory Services, Ltd., which are wholly owned
by Marc J. Gabelli and provide 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

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$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 Gabelli Securities, Inc. with respect to the
private investment funds managed by each of them. Pursuant to such agreements,
Gabelli Securities, Inc. and MJG Associates, Inc. each paid Gabelli Asset
Management Company $50,000 (excluding reimbursement of expenses) in 1997.

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

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

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

Gabelli Securities International Limited ("Gabelli Securities
International") was formed in 1994 to provide management and investment advisory
services to the Gabelli International Gold Fund Limited ("GIGFL"), an offshore
investment company investing primarily in securities of issuers with
gold-related activities. Marc J. Gabelli owns 55% of Gabelli Securities
International and Gabelli Securities, Inc. owns the remaining 45%. Gabelli
Securities, Inc. 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, Gabelli Securities, Inc. received investment management fees of
$14,000, $162,000 and $127,000 in 1997, 1996 and 1995, respectively.

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TRANSACTIONS WITH OTHER MEMBERS OF SENIOR MANAGEMENT

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.

Prior to a reorganization on January 1, 1997, GFI owned approximately 79%
of Gabelli Asset Management Company. On January 1, 1997, all outstanding shares
of Gabelli Asset Management Company not held by GFI were either repurchased at
book value by Gabelli Asset Management Company or exchanged for shares of GFI at
a predetermined ratio. Shareholders selling their shares back to Gabelli Asset
Management Company were offered the choice of receiving cash or a promissory
note. In connection with this reorganization, Gabelli Asset Management Company
issued a promissory note to Mr. Jamieson of $976,419, which note accrues
interest at the annual rate of 12%, as consideration for the sale of his shares.

Certain executive officers and directors have received loans from the
Company in connection with the acquisition of stock of the Company or of private
funds managed by the Company and have executed demand notes with respect to the
loans. As of March 31, 1998, Dr. Kelly has a loan in the amount of $235,210
which accrues interest at the annual rate of 6%. As of March 31, 1998, Mr. Marc
J. Gabelli has a loan in the amount of $766,278 which accrues interest at the
annual rate of 6%. As of March 31, 1998, Mr. Sandie has a loan in the amount of
$340,992 which accrues interest at the annual rate of 7%. As of March 31, 1998,
Mr. Jamieson has a loan in the amount of $350,000 which accrues interest at the
annual rate of 7%. As of March 31, 1998, Mr. McKee has a loan in the amount of
$165,084 which accrues interest at the annual rate of 6%.

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 shares of
Class A Common Stock, shares of Class B Common Stock, and shares
of Preferred Stock. No Preferred Stock is outstanding as of the date of this
Prospectus. Of the shares of Class A Common Stock authorized,
shares will be outstanding and held by Mr. Gabelli upon consummation of the
Offering and shares are being offered in the Offering ( shares if
the Underwriters' over-allotment option is exercised in full), and shares
have been reserved for issuance pursuant to certain employee benefits plans. See
"Management -- 1998 Stock Award and Incentive Plan." Of the shares of Class
B Common Stock authorized, will be outstanding and held by the Existing
Shareholders upon consummation of the Offering. The following summary
description of the capital stock of the Company is qualified by reference to the
Certificate of Incorporation and Bylaws of the Company, copies of which are
filed as exhibits to the Registration Statement of which this Prospectus forms a
part.

COMMON STOCK

Voting Rights. The holders of Class A Common Stock and Class B Common
Stock have identical voting rights except that (i) holders of Class A Common
Stock are entitled to one vote per share while holders of Class B Common Stock
are entitled to ten votes per share on all matters to be voted on by
shareholders and (ii) holders of Class A Common Stock are not eligible to vote
on matters relating exclusively to Class B Common Stock and vice versa. Holders
of Shares of Class A Common Stock and Class B Common Stock are not entitled to
cumulate their votes in the election of directors. Generally, all matters to be
voted on by shareholders must be approved by a majority (or, in the case of
election of directors, by a plurality) of the votes entitled to be cast by all
shares of Class A Common Stock and Class B Common Stock present in person or
represented by proxy, voting together as a single class, subject to any voting
rights granted to holders of any

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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

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convertible into shares of any other class or series, or any other security, of
the Company or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion price or prices or
rate or rates, any adjustments thereof, the date or dates as of which such
shares will be convertible and all other terms and conditions upon which such
conversion may be made; and (ix) the voting rights, 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 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

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

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

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corporate opportunities and resolution of certain potential conflicts of
interest. See "-- Corporate Opportunity and Conflict of Interest Policies."

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
nor less than 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 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.

No Shareholder Action By Written Consent; Special Meetings

The Certificate of Incorporation provide that, effective as of the Trigger
Date, and subject to the rights of any holders of Preferred Stock to elect
additional directors under specified circumstances, shareholder action can be
taken only at an annual or special meeting of shareholders and shareholder
action may not be taken by written consent in lieu of a meeting. The Bylaws
provide that, subject to the rights of holders of any series of Preferred Stock
to elect additional directors 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. 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. 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 Certificate of Incorporation of the Company
prohibiting shareholder action by written consent and 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. The
provisions would also prevent the holders of a majority of the voting power of
the Voting Stock from unilaterally using the written consent procedure to take
shareholder action. 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 judgement or other
final adjudication adverse to such

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director establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or that he personally
gained a material profit or other advantage to which he was not legally entitled
or that his acts violated Section 719 of the NYBCL, or (ii) for any act or
omission prior to the adoption of this provision. As a result of this provision,
the Company and its shareholders may be unable to obtain monetary damages from a
director for breach of his duty of care. Although shareholders may continue to
seek injunctive or other equitable relief for an alleged breach of fiduciary
duty by a director, shareholders may not have any effective remedy against the
challenged conduct if equitable remedies are unavailable.

The Bylaws provide that the Company will indemnify any person who was or is
a party to any threatened, pending, or completed action, suit, or proceeding
because he or she is or was a director 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.

Corporate Opportunity and Conflict of Interest Policies

In order to address certain potential conflicts of interest between the
Company and Mr. Gabelli (including members of his immediate family and
affiliates), the Certificate of Incorporation contains provisions concerning the
conduct of certain affairs of the Company as they may involve Mr. Gabelli
(including 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. In
general, these provisions recognize that the Company and Mr. Gabelli (including
members of his immediate family and affiliates) may engage in the same or
similar business activities and lines of business and have an interest in the
same areas of corporate opportunities and that the Company and Mr. Gabelli
(including members of his immediate family and affiliates) will continue to have
contractual and business relations with each other. See "Management -- Directors
and Executive Officers."

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) "Mr. Gabelli" includes Mr. Gabelli, members of his immediate family 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.

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 Mr.
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. The Certificate of Incorporation provides
that, except as Mr. Gabelli may otherwise agree in writing, Mr. Gabelli will
have the right (i) to engage in the same or similar business activities or lines
of business as the Company; (ii) to do business with any potential or actual
client, customer, or supplier of the Company; and (iii) to employ or engage any
officer or employee of the Company. Mr. Gabelli will not be liable to the
Company or its shareholders for breach of any fiduciary duty by reason of these
activities.

If Mr. Gabelli acquires knowledge of a potential transaction on a matter
that may be a corporate opportunity for both Mr. Gabelli and the Company, Mr.
Gabelli will have no duty to communicate that opportunity to the Company.
Furthermore, Mr. Gabelli will not be liable to the Company or its shareholders

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because Mr. Gabelli pursues or acquires such corporate opportunity for himself,
directs that corporate opportunity to another person or entity, or does not
present that corporate opportunity to the Company.

If a director or officer of the Company acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for both the Company
and Mr. Gabelli or an entity controlled by Mr. Gabelli, the Certificate of
Incorporation requires that the director or officer of the Company act in good
faith in accordance with the following three-part policy, and a director or
officer so acting will be deemed to have acted reasonably and in good faith and
fully to have satisfied his or her duties of loyalty and fiduciary duties to the
Company and its shareholders with respect to such opportunity.

First, a corporate opportunity offered to any person who is a director but
not an officer of the Company and who is also an officer (whether or not a
director) of an entity controlled by Mr. Gabelli will belong to the entity
controlled by Mr. Gabelli, unless the opportunity is expressly offered to that
person primarily in his or her capacity as a director of the Company, in which
case the opportunity will belong 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 but not an
officer of an entity controlled by Mr. Gabelli will belong to the Company,
unless the opportunity is expressly offered to that person primarily in his or
her capacity as a director of the entity controlled by Mr. Gabelli, in which
case the opportunity will belong to the entity controlled by Mr. Gabelli.

Third, a corporate opportunity offered to any other person who is either an
officer of both the Company and an entity controlled by Mr. Gabelli or a
director of both the Company and an entity controlled by Mr. Gabelli will belong
to the entity controlled by Mr. Gabelli or to the Company, as the case may be,
if the opportunity is expressly offered to the person primarily in his or her
capacity as an officer or director of the entity controlled by Mr. Gabelli or of
the Company, respectively. Otherwise, the opportunity will belong to the entity
controlled by Mr. Gabelli.

Under the Certificate of Incorporation, any corporate opportunity that
belongs to Mr. 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 Mr. 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).

A director or officer of the Company (other than Mr. Gabelli) who acts in
accordance with the foregoing three-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 Mr.
Gabelli pursues or acquires such opportunity for himself 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, "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 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. In addition, "corporate opportunities" do not include transactions
in which the Company or Mr. Gabelli is permitted to participate pursuant to any
agreement between the Company and Mr. Gabelli that is in effect as of the time
any equity security of the Company is held of record by any person other than
Mr. Gabelli or subsequently entered into with the approval of the members of the
Board of Directors.

For purposes of these corporate-opportunity provisions, a director who is
chairman of the Board of Directors (or a committee thereof) or chief executive
officer will not be deemed to be an officer of the Company by reason of holding
such position, unless such person is a full-time employee of the Company.

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Conflict of Interests Policy. The Certificate of Incorporation provides
that no contract, agreement, arrangement, or transaction between the Company and
Mr. 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 Mr. 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 Mr. Gabelli, the Related Entity, and the directors and
officers of the Company, or the Related Entity (as applicable) will be deemed to
have acted reasonably and in good faith (to the extent such standard is
applicable to such person's conduct) and fully to have satisfied any duties of
loyalty and fiduciary duties they may have to the Company and its shareholders
with respect to such Transaction if any of the following four requirements are
met:

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

(ii) the material facts as to the relationship or interest and as to
the Transaction are disclosed or known to the holders of voting Stock
entitled to vote thereon, and the Transaction is specifically approved by
vote of the holders of a majority of the voting power of the then
outstanding Voting Stock not owned by Mr. 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 Mr.
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 Mr. Gabelli will not be liable to the Company or its
shareholders for breach of any fiduciary duty that Mr. Gabelli may have as a
shareholder of the Company by reason of the fact that Mr. Gabelli takes any
action in connection with any transaction between himself and the Company.

LISTING

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

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is .

57
<PAGE> 59

SHARES ELIGIBLE FOR FUTURE SALE

Immediately after consummation of the Offering, the Company will have
shares of Class A Common Stock issued and outstanding (
shares of Class A Common Stock if the Underwriters' over-allotment options are
exercised in full) and 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 shares of Class B Common
Stock owned by the Existing Shareholders 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.

All shares of Class B Common Stock owned by the Existing Shareholders are
expected to be subject to the 3-year lock-up arrangement described below at the
end of which or earlier if the Company so agrees such shares shall be eligible
for sale in the public market pursuant to, and in accordance with the volume,
manner of sale and other conditions of, Rule 144 described above.

The Company and the Existing Shareholders are expected to agree that,
subject to certain exceptions, 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 (i)
in the case of the Class B Common Stock, for a period of three years after the
date of this Prospectus unless such transfer is to an Existing Shareholder or to
the Company and (ii) without the prior written consent of on behalf
of the Underwriters for a period of days after the date of this Prospectus.
See "Underwriting."

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 A Common Stock by the Existing Shareholders would
have on the market price prevailing from time to time, sales of substantial
amounts of Class A Common Stock or the availability of such shares for sale
could adversely affect prevailing market prices. See "Risk Factors -- Shares
Available for Future Sales or Distribution."

58
<PAGE> 60

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below, for whom
, are acting as representatives (the "Representatives"),
has severally agreed to purchase, and the Company has agreed to sell to each
Underwriter, the respective number of shares of Class A Common Stock set forth
opposite the name of such Underwriter:

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF CLASS A COMMON STOCK
- ----------- -----------------------
<S> <C>

-------
=======
</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 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, its executive officers and directors and each of the Existing
Shareholders 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
.

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

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

59
<PAGE> 61

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 representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Class A Common Stock offered by them.

Application has been made to list the Class A Common Stock on the
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.

LEGAL MATTERS

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 in connection with the sale of shares of
Class A Common Stock in the Offering will be passed upon for the Underwriters by
, New York, New York.

EXPERTS

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

ADDITIONAL 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 not necessarily complete, and in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement, 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

60
<PAGE> 62

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.

61
<PAGE> 63

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF GABELLI FUNDS, INC. AND
SUBSIDIARIES

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

F-1
<PAGE> 64

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Gabelli Funds, Inc.

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

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

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

ERNST & YOUNG LLP

New York, New York
March 11, 1998,
except for Note Q, as to which the date is
April 3, 1998

F-2
<PAGE> 65

GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
REVENUES
Investment advisory and incentive fees..................... $ 89,684 $ 84,244 $ 77,302
Commission revenue......................................... 7,496 6,667 5,706
Distribution fees and other income......................... 8,096 7,257 6,302
-------- -------- --------
Total revenues........................................ 105,276 98,168 89,310
-------- -------- --------
EXPENSES
Compensation costs......................................... 45,260 41,814 39,384
Management fee............................................. 10,580 10,192 9,423
Other operating expenses................................... 18,690 19,274 18,709
-------- -------- --------
Total expenses........................................ 74,530 71,280 67,516
-------- -------- --------
Operating income........................................... 30,746 26,888 21,794
-------- -------- --------
OTHER INCOME (EXPENSE)
Net gain from investments.................................. 7,888 8,783 10,105
Interest and dividend income............................... 4,634 5,406 5,853
Interest expense........................................... (1,876) (879) (679)
Other...................................................... (109) 331 147
-------- -------- --------
Total other income, net............................... 10,537 13,641 15,426
-------- -------- --------
Income before income taxes and minority interest........... 41,283 40,529 37,220
Income taxes............................................... 3,077 7,631 7,769
Minority interest.......................................... 1,529 2,727 2,555
-------- -------- --------
Net income................................................. $ 36,677 $ 30,171 $ 26,896
======== ======== ========
Unaudited pro forma data:
Income before income taxes and minority interest, as
reported.............................................. $ 41,283 $ 40,529 $ 37,220
Pro forma provision for income taxes..................... (15,533) (14,518) (13,577)
Pro forma minority interest.............................. (1,411) (2,771) (2,624)
-------- -------- --------
Pro forma net income..................................... $ 24,339 $ 23,240 $ 21,019
======== ======== ========
Pro forma net income per share basic and diluted........... $ 130.87 $ 132.08 $ 120.65
======== ======== ========
Pro forma weighted average shares outstanding.............. 185,974 175,950 174,211
======== ======== ========
Unaudited Supplemental pro forma data:
Pro forma net income..................................... $ 24,339
Supplemental pro forma management fee adjustment......... 9,780
Supplemental adjustment to pro forma provision for income
taxes................................................. (3,813)
Supplemental adjustment to pro forma minority interest... (285)
--------
Supplemental pro forma net income........................ $ 30,021
========
</TABLE>

See accompanying notes.
F-3
<PAGE> 66

GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1997 1996
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 12,610 $ 32,949
FCC licenses and deposits................................... 84,862 21,661
Investments in securities................................... 56,607 59,812
Investments in partnerships and affiliates.................. 46,972 35,133
Investment advisory fees receivable......................... 8,484 7,339
Receivables from affiliates................................. 6,534 12,353
Notes and other receivables................................. 4,578 5,230
Capital lease............................................... 3,679 --
Due from broker/dealers..................................... 3,155 1,764
Goodwill, net of accumulated amortization of $148........... 1,932 --
Other assets................................................ 3,323 6,283
-------- --------
Total assets........................................... $232,736 $182,524
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank loan payable........................................... $ 30,000 $ --
Notes payable............................................... 7,108 7,011
Income taxes payable (including deferred income taxes of
$2,818 in 1997 and $2,768 in 1996)........................ 3,752 4,372
Capital lease obligation.................................... 3,650 --
Compensation payable........................................ 3,456 3,589
Accrued expenses and other liabilities...................... 9,848 7,978
-------- --------
Total liabilities...................................... 57,814 22,950
-------- --------
Minority interest........................................... 11,303 21,041
-------- --------
Stockholders' equity:
Common Stock, $.01 par value; authorized 1,000,000 shares;
issued and outstanding 185,937 and 174,803 shares,
respectively........................................... 2 2
Additional paid-in capital................................ 12,372 2,967
Retained earnings......................................... 152,775 136,690
Notes receivable.......................................... (1,530) (1,126)
-------- --------
Total stockholders' equity............................. 163,619 138,533
-------- --------
Total liabilities and stockholders' equity.................. $232,736 $182,524
======== ========
</TABLE>

See accompanying notes.
F-4
<PAGE> 67

GABELLI FUNDS, INC. AND SUBSIDIARIES

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

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

See accompanying notes.
F-5
<PAGE> 68

GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $36,677 $30,171 $26,896
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Equity in earnings of partnerships and affiliates......... (7,886) (5,997) (5,744)
Depreciation and amortization............................. 451 424 339
Deferred income taxes..................................... 50 (114) 884
Minority interest in net income of consolidated
subsidiaries........................................... 1,529 2,727 2,555
Accretion of stock option................................. -- -- 110
Changes in operating assets and liabilities:
Investments in securities.............................. 3,205 4,435 (11,862)
Investment advisory fees receivable.................... (1,145) 526 (533)
Receivables from affiliates............................ 5,819 (12,353) --
Notes and other receivables............................ 1,027 (5,230) --
Due from broker/dealers................................ (1,391) (1,764) --
Other assets........................................... 2,837 (2,103) (430)
Notes payable.......................................... (879) -- --
Income taxes payable................................... (670) 1,470 (1,312)
Compensation payable................................... (133) (1,933) 1,090
Accrued expenses and other liabilities................. (920) 366 1,721
------- ------- -------
Total adjustments........................................... 1,894 (19,546) (13,182)
------- ------- -------
Net cash provided by operating activities................... 38,571 10,625 13,714
------- ------- -------
INVESTING ACTIVITIES
Purchases of FCC licenses and deposits...................... (63,201) (21,661) --
Net (investments in) distributions from partnerships and
affiliates................................................ (3,953) 2,269 (4,113)
Cost of acquisitions........................................ (2,175) -- --
------- ------- -------
Net cash (used in) investing activities..................... (69,329) (19,392) (4,113)
------- ------- -------
FINANCING ACTIVITIES
Proceeds from bank loan..................................... 30,000 -- --
Distributions to shareholders............................... (17,794) (5,988) (18,670)
Net repayments of subsidiaries' notes receivable............ 5 127 95
Net (repurchases) issuances of subsidiaries' common stock... (474) -- 864
Purchase of minority stockholders' interest................. (1,282) -- (409)
Proceeds from issuances of common stock..................... -- 738 162
Payment for common stock repurchased and retired............ (38) (581) (331)
Net repayments (issuances) of notes receivable.............. 2 -- --
------- ------- -------
Net cash provided by (used in) financing activities......... 10,419 (5,704) (18,289)
------- ------- -------
Net (decrease) in cash and cash equivalents................. (20,339) (14,471) (8,688)
Cash and cash equivalents at beginning of year.............. 32,949 47,420 56,108
------- ------- -------
Cash and cash equivalents at end of year.................... $12,610 $32,949 $47,420
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 1,784 $ 879 $ 679
======= ======= =======
Cash paid for income taxes.................................. $ 3,337 $ 5,952 $ 8,896
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY
Issuance of note payable for repurchase of subsidiary's
common stock.............................................. $ 976 $ -- $ --
======= ======= =======
Issuance of note payable for repurchase of common stock..... $ -- $ 1,232 $ --
======= ======= =======
Receipt of note for common stock sold....................... $ 404 $ 891 $ 235
======= ======= =======
Receipt of notes for sale of minority interest.............. $ 375 $ -- $ --
======= ======= =======
</TABLE>

See accompanying notes.
F-6
<PAGE> 69

GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997

A. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

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

Use of Estimates

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

Nature of Operations

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

Cash Equivalents

Cash equivalents consist of investments in money market mutual funds.

Investments in Securities

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

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

F-7
<PAGE> 70
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Investments in Partnerships and Affiliates

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

Investment Advisory Fees

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

Depreciation and Amortization

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

Minority Interest

Minority interest represents the minority stockholders' ownership of GSI,
Advisers, GAMCO (for 1996 and 1995) and Fixed Income (for 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 the Financial Accounting Standards Board's
Statement of Accounting Standards No. 128, "Earnings Per Share". Basic earnings
per common share is calculated by dividing net income applicable to common
stockholders by the weighted average number of shares of common stock
outstanding. Diluted earnings per share is computed using the treasury stock
method. Diluted earnings per common share assumes full dilution and is computed
by dividing net income by the total of the weighted average number of shares of
common stock outstanding and common stock equivalents.

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").

Reclassification of Prior Years' Financial Statements

Certain items previously reported have been reclassified to conform with
the current year's financial statement presentation.

F-8
<PAGE> 71
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

B. INVESTMENTS IN SECURITIES

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

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

C. INVESTMENTS IN PARTNERSHIPS AND AFFILIATES

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

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

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

The Company's income from these partnerships consists of its pro-rata
capital allocation and its share of a 20% incentive allocation from the limited
partners. The general partners also receive an annual administrative fee
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, 1997, 1996 and 1995, the Company earned administrative fees of
approximately $1,085,000, $820,000 and $836,000, respectively.

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

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

F-9
<PAGE> 72
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approximately 80%. This transaction resulted in the recognition of approximately
$2,080,000 of goodwill, which is being amortized over a period of 10 years. The
results of Fixed Income's operations are included in the consolidated statement
of income effective April 15, 1997. For the years ended December 31, 1997, 1996
and 1995, the Company recorded equity income (loss) from these entities of
approximately $(109,000), $331,000 and $147,000, respectively.

D. NOTES RECEIVABLE

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

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

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

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

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

E. INCOME TAXES

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

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

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

F-10
<PAGE> 73
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

built-in gains tax. This tax liability is subject to remeasurement at each
financial statement date until the end of the ten-year period.

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

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

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

F. PRO FORMA INFORMATION (UNAUDITED)

Upon completion of a proposed capital stock transaction, the Company will
no longer be treated as an S Corporation and will again be subject to corporate
income taxes. Accordingly, the consolidated statements of income include a pro
forma adjustment for additional income taxes which would have been recorded if
the Company had been a C Corporation for 1997, 1996 and 1995 based on tax laws
in effect during those periods.

Pro forma income tax provisions (benefit), calculated on a separate return
basis in conformity with SFAS No. 109, are as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current............................................. $11,073 $10,738 $10,180
Deferred............................................ 2,339 1,751 1,833
State and local:
Current............................................. 1,971 2,024 1,577
Deferred............................................ 150 5 (13)
------- ------- -------
$15,533 $14,518 $13,577
======= ======= =======
</TABLE>

The pro forma provisions for income taxes differ from the amount of income
tax determined by applying the applicable U.S. statutory federal income tax rate
to income before income taxes and minority interest as a result of the following
differences:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Statutory federal income tax rate..................... 35.0% 35.0% 35.0%
Dividends received deduction.......................... (0.4)% (0.6)% (0.6)%
State and local income taxes.......................... 3.3% 3.3% 2.7%
Charitable donation................................... (0.5)% (1.6)% (0.2)%
Other items........................................... 0.2% (0.3)% (0.4)%
------- ------- -------
Effective income tax rate............................. 37.6% 35.8% 36.5%
======= ======= =======
</TABLE>

F-11
<PAGE> 74
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's pro forma deferred income tax liabilities of approximately
$8,700,000 and $6,200,000 at December 31, 1997 and 1996, respectively, relate
primarily to net unrealized gains on investments in securities and partnerships.

The supplemental pro forma management fee adjustment reflects a proposed
conversion of the management fee, net of estimated compensation costs, to shares
of common stock upon completion of the proposed capital stock transaction.

Supplemental pro forma net income per share and pro forma weighted average
shares outstanding for 1997 have not been presented since the number of shares
to be exchanged in connection with the conversion of the management fee has not
been determined.

G. BANK LOAN AND NOTES PAYABLE

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

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

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

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

H. STOCKHOLDERS' EQUITY

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

I. CAPITAL LEASE

In December 1997, the Company signed an agreement to lease new primary
office space from a company owned by stockholders of GFI. The Company has
recorded a capital lease asset and liability for the fair value of the leased
property. Amortization of the capital lease is computed on the straight-line
method over the term

F-12
<PAGE> 75
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of the lease, which expires on April 30, 2013. The lease provides that all
operating expenses relating to the property (such as property taxes, utilities
and maintenance) are to be paid by the lessee, the Company.

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

<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 under this agreement
amounted to approximately $50,000 for the year ended December 31, 1997.

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

J. 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
$1,644,000, $1,457,000 and $1,729,000, respectively, for the years ended
December 31, 1997, 1996 and 1995.

K. RELATED PARTY TRANSACTIONS

GFI 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.

The Company had an aggregate investment in the Funds of approximately
$34,464,000 and $40,902,000 at December 31, 1997 and 1996, respectively, of
which approximately $11,305,000 and $27,966,000, respectively, is invested in a
money market mutual fund.
F-13
<PAGE> 76
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

The Company is required to pay the Chairman of the Board and Chief
Executive Officer a management fee which is equal to 20% of the pretax profits
of each of the Company's operating entities before consideration of this
management fee. This fee approximated $10,580,000, $10,192,000 and $9,423,000
for the years ended December 31, 1997, 1996 and 1995, respectively. Such fee is
in addition to commissions and portfolio management compensation paid to this
individual.

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

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

L. FINANCIAL REQUIREMENTS

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

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

M. ADMINISTRATION FEES

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

N. PROFIT SHARING PLAN AND INCENTIVE SAVINGS PLAN

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

O. DERIVATIVE FINANCIAL INSTRUMENTS

During 1997 and 1996, the Company's trading activities included
transactions in domestic equity index futures contracts. These financial
instruments represent future commitments to purchase or sell an underlying index
for specified amounts at specified future dates. Such contracts create
off-balance sheet risk for the Company as the future satisfaction of these
contracts may be for amounts in excess of the amounts

F-14
<PAGE> 77
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recognized in the consolidated statements of financial condition. The amounts
disclosed below represent the notional amounts outstanding, end of year fair
values and average fair values of domestic equity index futures contracts sold
as of and for the years ended December 31, 1997 and 1996:

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

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

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

P. FCC LICENSES

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

Q. SUBSEQUENT EVENTS

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

On February 6, 1998, the Company made a distribution of approximately $3.7
million to shareholders of record on December 31, 1997.

On March 20, 1998, the Company entered into an agreement to sell certain
PCS licenses with a cost basis of approximately $51 million to an unaffiliated
party. This sale is subject to approval by the FCC and the Board of Directors of
the purchaser. The Company is expected to record a gain on the sale.

F-15
<PAGE> 78

======================================================

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 11
Special Note Regarding Forward-Looking
Information......................... 16
Use of Proceeds....................... 16
Dividend Policy....................... 17
Dilution.............................. 18
Capitalization........................ 19
Selected Historical and Pro Forma
Financial Data...................... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 26
Management............................ 41
Security Ownership of Certain
Beneficial Owners and Management.... 47
Certain Relationships and Related
Transactions........................ 48
Description of Capital Stock.......... 51
Shares of Eligible for Future Sale.... 58
Description of Certain Indebtedness...
Underwriting.......................... 59
Legal Matters......................... 60
Experts............................... 60
Available Information................. 60
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

THROUGH AND INCLUDING , 1998 (THE 25TH DAY 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.
======================================================
======================================================

ALPHA G, INC.

CLASS A COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
--------------------

PROSPECTUS

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

======================================================
<PAGE> 79

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> 80

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
shares of its Class B Common Stock to all of the Existing Shareholders in
exchange for all of the outstanding shares of common stock of Gabelli Funds,
Inc. 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>
DESCRIPTION
EXHIBIT OF
NUMBER 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 Alpha G, Inc. 1998 Stock Award and Incentive Plan.
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.

(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> 81

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> 82

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registration has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rye, State of New York,
on April 23, 1998.
Alpha G, Inc.

By: /s/ DAVID K. SANDIE
------------------------------------
Name: David K. Sandie
Title: Executive Vice President,
Chief Operating
Officer and Chief Financial
Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
David K. Sandie, Stephen G. Bondi and James E. McKee and each of them, his true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and any additional Registration Statements
related to the offerings contemplated by this Registration Statement that are
filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons In the
capacities and on the dates Indicated.

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

/s/ MARIO J. GABELLI Chairman of the Board, April 23, 1998
- --------------------------------------------------- Chief Executive Officer
Mario J. Gabelli and Chief Investment Officer
(Principal Executive Officer)

/s/ DAVID K. SANDIE Executive Vice President, Chief April 23, 1998
- --------------------------------------------------- Operating Officer and Chief
David K. Sandie Financial Officer (Principal
Financial Officer and
Principal Accounting Officer)

/s/ MARC J. GABELLI Director April 23, 1998
- ---------------------------------------------------
Marc J. Gabelli

/s/ CHARLES C. BAUM Director April 23, 1998
- ---------------------------------------------------
Charles C. Baum

/s/ RICHARD B. BLACK Director April 23, 1998
- ---------------------------------------------------
Richard B. Black
</TABLE>

II-4
<PAGE> 83

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MATTHEW R. GABELLI Director April 23, 1998
- ---------------------------------------------------
Matthew R. Gabelli

/s/ EAMON M. KELLY Director April 23, 1998
- ---------------------------------------------------
Eamon M. Kelly

Director April 23, 1998
- ---------------------------------------------------
Karl Otto Pohl
</TABLE>

II-5
<PAGE> 84

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ------------
<C> <C> <S> <C>
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 Alpha G, Inc. 1998 Stock Award and Incentive
Plan. ......................................................
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.

II-6

<PAGE> 1

EXHIBIT 23.1
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 Funds,
Inc. and subsidiaries dated March 11, 1998, except for Note Q, as to which the
date is April 3, 1998, in the Registration Statement (Form S-1) and the related
Prospectus of Alpha G, Inc. to be filed on or about April 23, 1998.

/s/ Ernst & Young LLP
-----------------------------------
Ernst & Young LLP

New York, NY
April 22, 1998

II-7

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 12,610
<SECURITIES> 56,607
<RECEIVABLES> 8,484
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 232,736
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 40,758
0
0
<COMMON> 2
<OTHER-SE> 165,147
<TOTAL-LIABILITY-AND-EQUITY> 232,736
<SALES> 0
<TOTAL-REVENUES> 117,798
<CGS> 0
<TOTAL-COSTS> 74,530
<OTHER-EXPENSES> 109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,876
<INCOME-PRETAX> 41,283
<INCOME-TAX> 3,077
<INCOME-CONTINUING> 41,283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,677
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>UNCLASSIFIED STATEMENT OF FINANCIAL CONDITION.
<F2>TO BE PRESENTED ON A PRO FORMA BASIS.
</FN>

</TABLE>